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Central Arizona Project Customer Meeting Overview and Rate Design Discussion

The Central Arizona Project (CAP) customer meeting held on July 12, 2005, focused on reviewing existing and proposed rates, discussing potential options for rate design, and outlining next steps. CAP, authorized by the Colorado River Basin Project Act, plays a crucial role in the comprehensive development of Colorado River water resources. The discussion included an existing rate of $9.83 per kW per year, set to expire at the end of 2005, and proposed modifications aiming to recover all costs associated with CAP transmission. Upcoming public forums were announced for continued engagement and feedback.

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Central Arizona Project Customer Meeting Overview and Rate Design Discussion

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  1. Central Arizona Project Informal Customer Meeting July 12, 2005

  2. Agenda • Rate Review-Existing and Proposed • Potential Option for Rate Design • Next Steps • Open Forum

  3. Central Arizona Project (CAP)Brief History • CAP Authorized by Colorado River Basin Project Act • Act approved for comprehensive development of Colorado River water resources • CAWCD project use beneficiary of CAP • CAP transmission system designed/built to be fully integrated part of Federal system

  4. Central Arizona Project • Western operates & maintains transmission lines & substations that are part of CAP • Western markets transmission capacity in excess of CAP pumping loads (project use) & sets rate for transmission service • Existing rate of $9.83 per kW per year set in 2001 – expires 12/31/2005

  5. Existing Rate Design • Rate Design: Net Revenue Req/total transmission reservations • Calculation includes all reservations, including CAWCD’s system use for pumping loads • Use of this formula resulted in existing rate of $9.83 per kW per year

  6. Existing Rate Design-cont’d • Issue with existing design: CAWCD does not pay as a transmission customer • Since all reservations included in calculations, WAPA not collecting full revenue requirement from rate • Future rate proposals must ensure recovery of all costs associated with CAP transmission

  7. Proposed Rate Design • Mathematically unchanged from existing design (NRR/total reservations) • As spelled out in 7/1/05 FRN, result is a rate of $8.74 per kW per year • Lower rate result of increased reservations (denominator) and relatively stable NRR (numerator) • Details included in handout package

  8. Proposed Rate Design-cont’d • Issue Remains: calculation includes CAWCD use of transmission system for pumping loads • Proposed Resolution: CAWCD pays the equivalent of a transmission bill to serve CAP project use pumping loads • Such an arrangement would ensure all transmission related costs recovered through rate

  9. Potential Rate Design Option(“option B”) • Principle: Western must recover all CAP transmission related costs. • Option B necessary if agreement not reached for CAWCD to pay the equivalent of a transmission bill • “Option B” rate design modification necessary to ensure recovery of revenue requirement

  10. “Option B”- cont’d • Under this option CAWCD use of system removed from denominator • CAWCD pro-rata share of P&I repayment removed from numerator. CAWCD share based on CAWCD use of system as percentage of total use • Any funds received for O&M of CAP transmission system would go into calculation as “revenue credits” to reduce amount needed from rates

  11. “Option B” – cont’d • Design ensures recovery of revenue requirement • Detailed data in handouts – resulting rate using this design: $11.05 per kW per year

  12. Proposal • Regardless of rate design option, plan is to approve a formula or methodology rate • The formula would be approved for the 5-year period – actual rate may fluctuate • Allows Western to review each year to determine adequacy

  13. Next Steps • Public Information Forum scheduled for 7/22/05 at 10:00 a.m. • Public Comment Forum scheduled for 8/22/05 at 1:00 p.m. • Comment period ends 9/29/2005 • Rates effective January 1, 2006

  14. Open Forum • Questions? • Comments

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