Pacific Northwest-Pacific Southwest Intertie Project-Rate Order No. WAPA-130

AGENCY:

Western Area Power Administration, DOE.

ACTION:

Notice of Order Concerning Transmission Service Rates.

SUMMARY:

The Deputy Secretary of Energy confirmed and approved Rate Order No. WAPA-130 and Rate Schedules INT-FT4 and INT-NFT3, placing firm and nonfirm transmission service rates for the Pacific Northwest-Pacific Southwest Intertie Project (Intertie) of the Western Area Power Administration (Western) into effect on an interim basis. The provisional rates will be in effect until the Federal Energy Regulatory Commission (FERC) confirms, approves, and places them into effect on a final basis, or until they are replaced by other rates. The provisional rates will provide sufficient revenue to pay all annual costs, including interest expense, and repay required investment within the allowable periods.

DATES:

Rate Schedules INT-FT4 and INT-NFT3 will be placed into effect on an interim basis on the first day of the first full billing period beginning on or after October 1, 2007, and will be in effect until FERC confirms, approves, and places the rate schedules in effect on a final basis ending September 30, 2012, or until the rate schedules are superseded.

FOR FURTHER INFORMATION CONTACT:

Mr. J. Tyler Carlson, Regional Manager, Desert Southwest Customer Service Region, Western Area Power Administration, P.O. Box 6457, Phoenix, AZ 85005-6457, (602) 605-2453, e-mail carlson@wapa.gov or Mr. Jack Murray, Rates Team Lead, Desert Southwest Customer Service Region, Western Area Power Administration, P.O. Box 6457, Phoenix, AZ 85005-6457, (602) 605-2442, e-mail jmurray@wapa.gov.

SUPPLEMENTARY INFORMATION:

The existing Rate Schedules consist of separate firm transmission service rates for the 230/345-kilovolt (kV) and 500-kV transmission systems, and a nonfirm transmission service rate for the 230/345/500-kV transmission system. Rate Schedules INT-FT2 and INT-NFT2, Rate Order No. WAPA-71, were approved for a 56-month period beginning February 1, 1996, and ending September 30, 2000. Rate Schedule INT-FT3, Rate Order No. WAPA-76, superseded Rate Schedule INT-FT2 as it related to firm transmission service on the 230/345-kV transmission system and was approved for a 5-year period beginning January 1, 1999, and ending December 31, 2003. Rate Order No. WAPA-91 extended Rate Schedules INT-FT2 and INT-NFT2 beginning October 1, 2000, through December 31, 2003, as they related to firm transmission service on the 500-kV transmission system and nonfirm transmission service on the 230/345/500-kV transmission system. Rate Order No. WAPA-108 extended Rate Schedules INT-FT2, INT-FT3, and INT-NFT2 beginning January 1, 2004, through December 31, 2006. Western initiated a public process to adjust all three transmission service rates via a notice published in the Federal Register on July 12, 2006, (71 FR 39310). Rate Order No. WAPA-133 extended the public process for the rate adjustment that was initiated on July 12, 2006, and extended the existing rate schedules again beginning January 1, 2007, through December 31, 2007.

The existing firm transmission service Rate Schedules are being superseded by Rate Schedule INT-FT4. Under Rate Schedule INT-FT2, the rate for firm point-to-point 500-kV transmission service is $17.23 per kilowattyear (kWyear). Under Rate Schedule INT-FT3, the rate for firm point-to-point 230/345-kV transmission service is $12 per kWyear. The provisional rate for firm point-to-point 230/345/500-kV transmission service under Rate Schedule INT-FT4 is $15.24 per kWyear. The provisional rate for firm transmission service in Rate Schedule INT-FT4 results in a decrease of about 11.5 percent when compared with the existing rate under Rate Schedule INT-FT2, and an increase of 27 percent when compared with the existing rate under Rate Schedule INT-FT3. The existing nonfirm transmission service Rate Schedule is being superseded by Rate Schedule INT-NFT3. Under Rate Schedule INT-NFT2, the rate for nonfirm point-to-point 230/345/500-kV transmission service is 2.00 mills per kilowatthour (kWh). The provisional rate for nonfirm point-to-point 230/345/500-kV transmission service under Rate Schedule INT-NFT3 is 1.74 mills per kWh. The provisional rate for nonfirm transmission service in Rate Schedule INT-NFT3 results in a decrease of 13 percent when compared with the existing rate under Rate Schedule INT-NFT2.

By Delegation Order No. 00-037.00, effective December 6, 2001, the Secretary of Energy delegated: (1) The authority to develop power and transmission rates to Western's Administrator, (2) the authority to confirm, approve, and place such rates into effect on an interim basis to the Deputy Secretary of Energy, and (3) the authority to confirm, approve, and place into effect on a final basis, to remand, or to disapprove such rates to FERC. Existing DOE procedures for public participation in power rate adjustments (10 CFR part 903) were published on September 18, 1985.

Under Delegation Order Nos. 00-037.00 and 00-001.00C, and in compliance with 10 CFR part 903, and 18 CFR part 300, I hereby confirm, approve, and place Rate Order No. WAPA-130 and the proposed rates for Intertie transmission service into effect on an interim basis. The new Rate Schedules INT-FT4 and INT-NFT3 will be submitted promptly to FERC for confirmation and approval on a final basis.

Department of Energy, Deputy Secretary

In the Matter of: Western Area Power Administration Rate Adjustment for the Pacific Northwest-Pacific Southwest Intertie Project; Order Confirming, Approving, and Placing the Pacific Northwest-Pacific Southwest Intertie Project Transmission Service Rates Into Effect on an Interim Basis

These rates were established in accordance with section 302 of the Department of Energy (DOE) Organization Act (42 U.S.C. 7152). This Act transferred to and vested in the Secretary of Energy, the power marketing functions of the Secretary of the Department of the Interior and the Bureau of Reclamation under the Reclamation Act of 1902 (ch. 1093, 32 Stat. 388), as amended and supplemented by subsequent laws, particularly section 9(c) of the Reclamation Project Act of 1939 (43 U.S.C. 485h(c)), and other Acts that specifically apply to the project involved.

By Delegation Order No. 00-037.00, effective December 6, 2001, the Secretary of Energy delegated: (1) The authority to develop power and transmission rates to Western's Administrator, (2) the authority to confirm, approve, and place such rates into effect on an interim basis to the Deputy Secretary of Energy, and (3) the authority to confirm, approve, and place into effect on a final basis, to remand, or to disapprove such rates to FERC. Existing DOE procedures for public participation in power rate adjustments (10 CFR part 903) were published on September 18, 1985.

Acronyms and Definitions

As used in this Rate Order, the following acronyms and definitions apply:

Administrator: The Administrator of the Western Area Power Administration.

Capacity: The electric capability of a generator, transformer, transmission circuit, or other equipment. It is expressed in kilowatts.

CROD: Contract Rate of Delivery. The maximum amount of capacity made available to a customer for a period specified under a contract or service agreement.

Customer: An entity with a contract or service agreement that is receiving service from Western's Desert Southwest Region.

Deficits: Deferred or unrecovered annual expenses.

DOE: United States Department of Energy.

DOE Order RA 6120.2: An order outlining power marketing administration financial reporting and ratemaking procedures.

Desert Southwest Region: The Desert Southwest Customer Service Region of Western.

Energy: Measured in terms of the work it is capable of doing over a period of time. It is expressed in kilowatthours.

FERC: Federal Energy Regulatory Commission

Firm: type of product and/or service that is available at the time requested by the customer.

FRN: Federal Register notice.

FY: Fiscal year; October 1 to September 30.

Intertie: Pacific Northwest-Pacific Southwest Intertie Project.

kV: Kilovolt—the electrical unit of measure of electric potential that equals 1,000 volts.

kW: Kilowatt—the electrical unit of capacity that equals 1,000 watts.

kWh: Kilowatthour—the electrical unit of energy that equals 1,000 watts in 1 hour.

kWmonth: Kilowattmonth—the electrical unit of the monthly amount of capacity.

kWyear: Kilowattyear—the electrical unit of the yearly amount of capacity.

mill: A monetary denomination of the United States that equals one tenth of a cent or one thousandth of a dollar.

mills/kWh: Mills per kilowatthour—a unit of charge.

NEPA: National Environmental Policy Act of 1969 (42 U.S.C. 4321, et seq.).

Nonfirm: A type of product and/or service not always available at the time requested by the customer.

O&M: Operation and Maintenance.

Proposed Rate: A rate that has been recommended by Western to the Deputy Secretary of Energy for approval.

Provisional Rate: A rate that has been confirmed, approved, and placed into effect on an interim basis by the Deputy Secretary of Energy.

PRS: Power Repayment Study.

Rate Brochure: Documents prepared for public distribution explaining the rationale and background for the rate proposal contained in this rate order dated July 2006 and February 2007.

Ratesetting PRS: The PRS used for the rate adjustment proposal.

Revenue Requirement: The revenue required to recover annual expenses (such as O&M, purchased transmission capacity, interest and deferred expenses) and repay Federal investments and other assigned costs.

Supporting Documentation: A compilation of data and documents that support the Rate Brochure and the rate proposal.

Western: United States Department of Energy, Western Area Power Administration.

Effective Date

The new provisional rates will take effect on the first day of the first full billing period beginning on or after October 1, 2007, and will remain in effect until September 30, 2012, pending approval by FERC on a final basis.

Public Notice and Comment

Western followed the Procedures for Public Participation in Power and Transmission Rate Adjustments and Extensions, 10 CFR part 903, in developing these rates. The steps Western took to involve interested parties in the rate process were:

1. On May 15, 2006, Western's Desert Southwest Region mailed a notice announcing an informal meeting to all Intertie customers and interested parties. The informal meeting was held June 15, 2006, in Phoenix, Arizona. At this informal meeting, Western explained the rationale for the rate adjustment, presented proposed rates and answered questions.

2. A FRN was published on July 12, 2006, (71 FR 39310) officially announcing the proposed rates for transmission service, initiating a public consultation and comment period, and announcing the public information and public comment forums.

3. On July 28, 2006, Western's Desert Southwest Region mailed letters to all Intertie customers and interested parties transmitting a copy of the published FRN (71 FR 39310).

4. On August 17, 2006, Western's Desert Southwest Region held a public information forum in Phoenix, Arizona. Western explained the proposed rates and potential changes to the proposed rates, answered questions, and provided rate brochures and presentation handouts.

5. On August 24, 2006, Western's Desert Southwest Region held a public comment forum in Phoenix, Arizona to give the public an opportunity to comment for the record. There were no comments at this forum.

6. Western received no comment letters during the consultation and comment period, which ended October 10, 2006.

7. A FRN was published on December 28, 2006 (71 FR 78189), extending the public process for the rate adjustment and announcing additional public information and public comment forums.

8. On December 29, 2006, Western's Desert Southwest Region mailed letters to all Intertie customers and interested parties transmitting a copy of the published FRN (71 FR 78189).

9. On February 8, 2007, Western's Desert Southwest Region held an additional public information forum in Phoenix, Arizona. Western explained alternatives to the proposed rates, answered questions, and provided presentation handouts.

10. On February 26, 2007, Western's Desert Southwest Region sent written responses to customers' questions that were remaining from the additional public information forum.

11. On February 27, 2007, Western's Desert Southwest Region held an additional public comment forum in Phoenix, Arizona to give the public an opportunity to comment for the record. There were no comments at this forum.

12. Western received one comment letter during the extended consultation and comment period, which ended March 28, 2007. All formally submitted comments have been considered in preparing this Rate Order.

13. Western provided a Web site for information about this rate adjustment process. The Web site is located at http://www.wapa.gov/dsw/pwrmkt/Intertie/RateAdjust.

Comments

Written comments were received from the following organization: Arizona Power Authority.

Project Description

The Intertie was authorized by Section 8 of the Pacific Northwest Power Marketing Act of August 31, 1964 (16 U.S.C. 837g). The basic purpose of the Intertie was to provide, through transmission system interconnections among certain Federal and non-Federal power systems, maximum utilization of power resources to meet growing demands. This purpose was to be accomplished through the exchange of summer-winter surplus peaking capacity between the northwest and southwest to reduce capital expenditures for new generating capacity; the sale of northwest secondary energy to the southwest; the sale of southwest energy to the northwest to “firm” peaking hydroelectric sources during critical water years; conservation of significant amounts of fuel through the use of surplus hydroelectric energy; and increased efficiency in the operation of hydroelectric and thermal resources. As authorized, the Intertie was to be a cooperative construction venture by Federal and non-Federal entities, incorporating the capability for alternating current (AC) and direct current (DC) transmission service.

The Lower Colorado Region, Bureau of Reclamation (Reclamation), U.S. Department of the Interior, was assigned construction jurisdiction for: (i) The Celilo-Mead 750-kV DC transmission line from the Oregon-Nevada border to Mead Substation; (ii) Mead Substation; and (iii) all facilities south of Mead Substation. Several delays in construction funding for the Celilo-Mead 750-kV DC transmission line revised its estimated in-service date to the point that potential users withdrew their interest. This, and the subsequent lack of congressional funding, resulted in the May 1969 indefinite postponement of the Celilo-Mead 750-kV DC transmission line construction. The only facilities constructed were Mead Substation and all facilities south of Mead Substation, which provide AC transmission service. Pursuant to section 302 of the Department of Energy Organization Act (42 U.S.C. 7152), dated August 4, 1977, these Reclamation constructed facilities were transferred to Western.

Western's Desert Southwest Region administers these facilities as a stand-alone transmission project for operational, financial, and repayment purposes. The transmission facilities consist of a 256-mile, 500-kV transmission line from Mead Substation (Nevada) to Perkins Substation (Arizona); a 202-mile, 500-kV transmission line from Mead Substation to Adelanto Switching Substation (California); a 238-mile, 345-kV transmission line from Mead Substation to Liberty Substation (Arizona); a 19-mile, 230-kV transmission line from Liberty Substation to Westwing Substation (Arizona); and a 22-mile, 230-kV transmission line from Westwing Substation to Pinnacle Peak Substation (Arizona).

Power Repayment Study—Transmission Service Rates

Western prepares a PRS each FY to determine if revenues will be sufficient to repay, within the required time, all costs assigned to the Intertie revenues. Repayment criteria are based on law, policies, including DOE Order RA 6120.2, and authorizing legislation. To meet the Cost Recovery Criteria outlined in DOE Order RA 6120.2, a revised study and rate adjustment have been developed to demonstrate that sufficient revenues will be collected to meet future obligations.

The provisional rates for Intertie will become effective on an interim basis on the first day of the first full billing period beginning on or after October 1, 2007. Under Rate Schedule INT-FT4, the provisional rate for Intertie 230/345/500-kV firm transmission service will result in a rate decrease of approximately 11.5 percent when compared to the existing rate for Intertie 500-kV firm transmission service in Rate Schedule INT-FT2, and a rate increase of 27 percent when compared to the existing rate for Intertie 230/345-kV firm transmission service in Rate Schedule INT-FT3. The current rate for Intertie 500-kV firm transmission service under Rate Schedule INT-FT2 is $17.23 per kWyear. The current rate for Intertie 230/345-kV firm transmission service under Rate Schedule INT-FT3 is $12 per kWyear. The provisional rate for Intertie 230/345/500-kV firm transmission service is $15.24 per kWyear. Under Rate Schedule INT-NFT3, the provisional rate for Intertie 230/345/500-kV nonfirm transmission service will result in a rate decrease of 13 percent. The current rate under Rate Schedule INT-NFT2 is 2.00 mills/kWh. The provisional rate is 1.74 mills/kWh.

Existing and Provisional Rates

A comparison of the existing and provisional rates for Intertie transmission service follows:

Certification of Rates

Western's Administrator certified that the provisional rates for Intertie transmission service under Rate Schedules INT-FT4 and IN-NFT3 are the lowest possible rates consistent with sound business principles. The provisional rates were developed following administrative policies and applicable laws.

Intertie Transmission Rate Discussion

According to Reclamation Law, Western must establish transmission rates sufficient to recover operation, maintenance, purchased transmission and interest expenses, and repay transmission investment.

The Intertie transmission rates are insufficient due to higher-than-expected costs for O&M and purchased transmission and lower-than-projected sales of 500-kV transmission service that have occurred since the existing rates were established. Future cost estimates for O&M and purchased transmission have increased in the Ratesetting PRS. In addition, sales forecasts of 500-kV transmission service over the next five years have been adjusted to allow Western additional time to market this service.

The lower-than-projected sales of 500-kV transmission service and higher-than-expected costs for O&M and purchased transmission have created deficits in the Intertie PRS and these conditions are expected to continue through FY 2010. These deficits are scheduled to be repaid within the allowable period under the provisional rates.

The existing rates for Intertie transmission service under Rate Schedules INT-FT2, INT-FT3, and INT-NFT2 expire December 31, 2007. Effective October 1, 2007, Rate Schedules INT-FT2, INT-FT3, and INT-NFT2 will be superseded by the new rates in Rate Schedules INT-FT4 and INT-NFT3. The provisional rates for Intertie transmission service consist of a firm point-to-point rate and a nonfirm point-to-point rate. The provisional firm point-to-point rate is $15.24 per kWyear, and the provisional nonfirm point-to-point rate is 1.74 mills/kWh.

Western intends to modify its billing practices for Intertie long-term firm transmission service. Existing billing practices require customers to pay for long-term firm transmission service after the fact, usually one month after the service is provided. In today's business and economic environment, a customer's financial and credit status can change quickly, and under existing billing practices, Western can experience up to four months of uncollectible revenue before it becomes apparent that a customer is unable to pay its transmission service bills. On more than one occasion, Western has dealt with uncollectible revenue due to a customer's bankruptcy or credit rating change. Western's risk of non-payment is further increased by the fact that several of the Intertie long-term firm transmission service customers are not traditional preference customers. Many are independent power producers and other entities whose financial status can significantly and rapidly change due to the volatile energy market. Uncollectible revenue places all ratepayers at risk, since Western assumes full collection of all revenue when developing rates for long-term firm transmission service. To the extent that revenue is uncollectible, the rate will be insufficient to recover revenue requirements, which will result in upward pressure on rates for long-term transmission service.

To mitigate the credit risk exposure and the uncollectible revenue vulnerability, Western will require Intertie customers to pay for long-term firm transmission service one month in advance. This requirement is incorporated into Rate Schedule INT-FT4 and will be implemented upon the appropriate revision to Western's Open Access Transmission Tariff and notice to long-term firm transmission service customers.

Statement of Revenue and Related Expenses

The following table provides a summary of projected revenue and expense data for the Intertie firm transmission rate through the 5-year provisional rate approval period.

Basis for Rate Development

The existing rates for Intertie transmission service under Rate Schedules INT-FT2, INT-FT3, and INT-NFT2 expire December 31, 2007. The existing rates no longer provide sufficient revenues to pay all annual costs, including interest, and repayment of investment within the allowable period. The adjusted rates reflect cost increases primarily in O&M, purchased transmission, and interest. The provisional rates will provide sufficient revenue to pay all annual costs, including interest, and repayment of investment within the allowable periods. The provisional rates will take effect on October 1, 2007, to correspond with the start of the Federal fiscal year, and will remain in effect through September 30, 2012.

Comments

The comments and responses regarding the firm transmission rate, paraphrased for brevity when not affecting the meaning of the statement(s), are discussed below. Direct quotes from comment letters are used for clarification where necessary.

Comment: A customer supports Western's rate adjustment proposal which includes having all deficits paid by FY 2017 and commends Western for exploring methods to control costs and stabilize rates.

Response: Western appreciates the support it has received during the public process for this rate adjustment proposal. Western will continue to work with customers to control costs and maintain stable transmission service rates.

Comment: A customer supports Western's proposal to modify its existing billing practices and require payment in advance for Intertie long-term firm 230/345/500-kV transmission service.

Response: Western acknowledges the comment in support of the modification in billing practices for Intertie long-term firm 230/345/500-kV transmission service. Western will proceed with implementing the change as specified in this rate order.

Availability of Information

Information about this rate adjustment, including PRSs, comments, letters, memorandums, and other supporting material made or kept by Western and used to develop the provisional rates, is available for public review in the Desert Southwest Regional Office, Western Area Power Administration, 615 South 43rd Avenue, Phoenix, Arizona.

Ratemaking Procedure Requirements

Environmental Compliance

In compliance with the National Environmental Policy Act (NEPA) of 1969 (42 U.S.C. 4321, et seq.); Council on Environmental Quality Regulations for implementing NEPA (40 CFR parts 1500-1508); and DOE NEPA Implementing Procedures and Guidelines (10 CFR part 1021), Western has determined that this action is categorically excluded from preparing an environmental assessment or an environmental impact statement.

Determination Under Executive Order 12866

Western has an exemption from centralized regulatory review under Executive Order 12866; accordingly, no clearance of this notice by the Office of Management and Budget is required.

Submission to the Federal Energy Regulatory Commission

The provisional interim rates herein confirmed, approved, and placed into effect, together with supporting documents, will be submitted to FERC for confirmation and final approval.

Order

In view of the foregoing and under the authority delegated to me, I confirm and approve on an interim basis, effective October 1, 2007, Rate Schedules INT-FT4 and INT-NFT3 for the Pacific Northwest-Pacific Southwest Intertie Project of the Western Area Power Administration. The rate schedules shall remain in effect on an interim basis pending FERC's confirmation and approval of them or substitute rates on a final basis through September 30, 2012.

Rate Schedule INT-FT4

(Supersedes Rate Schedules INT-FT2 and INT-FT3)

United States Department of Energy; Western Area Power Administration

Pacific Northwest-Pacific Southwest Intertie Project

Schedule of Rates for Long-Term and Short-Term Firm Point-to-Point 230/345/500-KV Transmission Service

Effective: The first day of the first full billing period beginning on or after October 1, 2007, and will remain in effect through September 30, 2012, or until superseded by another rate schedule, whichever occurs first.

Available: In the area served by the Pacific Northwest-Pacific Southwest Intertie Project (Intertie) 230/345/500-kV transmission system.

Applicable: To firm point-to-point transmission service customers where capacity and energy are supplied to the Intertie 230/345/500-kV transmission system at points of interconnection with other systems and transmitted and delivered, less losses, to points of delivery on the Intertie 230/345/500-kV transmission system.

Character and Conditions of Service: Alternating current at 60 hertz, three-phase, delivered and metered at the voltages and points of delivery established by service agreement or contract.

Long-Term Rate: For transmission service one year or longer, the rate is $15.24 for each kilowatt (kW) per year, payable monthly at the rate of $1.27 for each kW per month.

Short-Term Rates: For transmission service up to one year, the maximum rate for each kW is as follows:

Monthly: $1.27

Weekly: $0.2931

Daily: $0.0418

Hourly: 1.74 mills

Discounts may be offered from time-to-time in accordance with Western's Open Access Transmission Tariff (OATT).

Billing: Western will bill firm point-to-point transmission service customers monthly by applying the rates listed above to the amount of capacity reserved. Upon the appropriate revision to Western's OATT and notification to long-term firm transmission customers, payment for service will be required one month in advance of said service.

Adjustments for Reactive Power: There shall be no entitlement to transfer of reactive kilovolt-amperes at delivery points, except when such transfers may be mutually agreed upon by the customer and Western or their authorized representatives.

Adjustments for Losses: Capacity and energy losses incurred in connection with the transmission and delivery of capacity and energy under this rate schedule shall be supplied by the customer in accordance with the service agreement or contract.

Overrun of Capacity Reserved: Western will assess a charge for unauthorized use of transmission service at a rate equal to two (2) times the applicable rate for the service at issue. The charge will be applied to use in excess of the reservation amount (“the overrun”), which shall be the difference between the amount of transmission service actually used by the customer less the amount of transmission service the customer has reserved. The customer will incur the charge for an overrun during the calendar month or for the period of transmission service if such service is for a term of less than one month.

Rate Schedule INT-NFT3

(Supersedes Rate Schedule INT-NFT2)

United States Department of Energy; Western Area Power Administration

Pacific Northwest-Pacific Southwest Intertie Project

Schedule of Rate for Nonfirm 230/345/500-kV Transmission Service

Effective: The first day of the first full billing period beginning on or after October 1, 2007, and will remain in effect through September 30, 2012, or until superseded by another rate schedule, whichever occurs first.

Available: In the area served by the Pacific Northwest-Pacific Southwest Intertie Project (Intertie) 230/345/500-kV transmission system.

Applicable: To nonfirm transmission service customers where capacity and energy are supplied to the Intertie 230/345/500-kV transmission system at points of interconnection with other systems and transmitted and delivered, less losses, to points of delivery on the Intertie 230/345/500-kV transmission system.

Character and Conditions of Service: Interruptible transmission service on a three-phase alternating current at 60 hertz, delivered and metered at the voltages and points of delivery established by service agreement or in advance by Western. Curtailment conditions shall be determined by Western and in accordance with Western's Open Access Transmission Tariff (OATT).

Rate: The nonfirm transmission service rate is 1.74 mills for each kilowatt per hour. Discounts may be offered from time-to-time in accordance with Western's OATT.

Billing: Western will bill nonfirm transmission service customers monthly by applying the rate listed above to the amount of capacity reserved.

Adjustments for Reactive Power: There shall be no entitlement to transfer of reactive kilovolt amperes at delivery points, except when such transfers may be mutually agreed upon by the customer and Western or their authorized representatives.

Adjustment for Losses: Capacity and energy losses incurred in connection with the transmission and delivery of capacity and energy under this rate schedule shall be supplied by the customer in accordance with the service agreement or contract.