10/22/2010 1

Westar Formula Rate and your billWestar Formula Rate and your bill

10/22/2010 2

What we will be going What we will be going over over

• Transferring the results from the Westar Formula Rate to the SPP tariff.

• The SPP Tariff– Basic Cost Recovery– Cash flow through the SPP tariff– Base Plan Funding (BPF)– What goes into a Customer’s bill

• Results from the 2010 projection• Customer bills

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OverviewOverview

WestarATRR

TO 2ATRR

TO 2ATRR

TO 17ATRR

SPPTariff

Each Transmission Owner in the SPP reports its authorized Annual Transmission Revenue

Requirement (ATRR)

SPP bills its customers based upon these ATRRs and its

FERC approved Tariff

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Westar Formula Rate Westar Formula Rate • Annual Transmission Revenue Requirement

Based on a fully projected 2010 Rate Year– Projection based on 13 month average rate base for 2010– Beginning balance: 2008 Form 1 adjusted for projected 2009– Ending Balance: Beginning balance plus 2010 projections– Add in any “True-up” balance (plus interest) from 2008

True-up based on actual 2008 cost vs Projected 2008 ATRR for the period from June 1 to December 31

• Most Projections based on internal formulas– Projected O&M is based upon the change in Net Plant– Other factors held at 2008 levels

• New Capital based on 2010 Construction Budget– Based on Projects required by SPP

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The SPP Tariff - RatesThe SPP Tariff - Rates• SPP is broken up into 17 different Pricing Zones

– The Transmission Rates for each Zone are calculated by SPP

– Annual Transmission Revenue Requirements (ATRR) from each Transmission Owner are used

– Cost of Transmission Service for each Zone are based on the sum of all the ATRR allocated to that Zone (ZATRR)

– Network Customers pay a Load Ratio share of the allocated ATRR

The Load Ratio shares are calculated in January each year based on the previous Calendar year period

(Customer 12 mo. Avg.. Peak / Zonal 12 mo Avg. Peak)

– PTP rates are shown in Attachment T of the SPP TariffTotal Allocated ATRR / Zonal 12 mo Avg. Peak from formula

= Annual Rate.

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SPP Tariff – Cost SPP Tariff – Cost Recovery Recovery

• Zonal chargesTransmission Plant in existence prior to Jan. 1, 2006Reliability Upgrades needed to meet local area criteriaCosts of new transmission projects assigned to the

Zone by SPP• Regional charges

ATRR of each project is allocated to all Zones on a load ratio share basis

– 12 mo. Zonal Avg. Load / (Σ 12 mo. Zonal Avg. Load for all zones)

– Based on previous calendar year load values• Direct Assigned Costs

Costs assigned to specific transmission customers or Transmission Project Sponsors

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SPP Tariff – Cost SPP Tariff – Cost Recovery Recovery

• Certain Transmission Projects can also qualify for Base Plan Funding (BPF)– Costs of BPF projects are recovered: 33% Regionally;

67% Zonally– Zonal costs are primarily allocated to the zone where

the upgrade is builtZonal Costs may be allocated to other Zones based

upon benefit

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SPP Tariff – Cost Recovery SPP Tariff – Cost Recovery of New Transmission of New Transmission

UpgradesUpgrades

• Reliability Projects– Normally BPF– If needed to meet local area reliability criteria that are more strict

that SPP criteria, then its costs are assigned to the specific Zone

• Upgrades related to requests for Transmission Service– Costs may qualify for Base Plan Funding– Otherwise, costs direct assigned to Customer

• Economic Balanced Portfolio Upgrades– Regional

• Sponsored Upgrades– Costs direct assigned to Sponsor

• Generation Interconnection Service– Upgrades assigned to Generator, with credits from Attachment Z

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Regional Charge

33% of Total

Westar’s Total ATRR

Westar Zone

OGE Zone

All Other SPP Price Zones

OGE’s Total ATRR

BPF

Projects

Westar Zonal ATRR

OGE Zonal ATRR

BPF Zonal

Charges 67%

All Other SPP TO’s Total ATRR

Zonal ATRR

SPP Tariff

BPF ATRR

BPF ATRR

BPF ATRR

Revenue Requirements from Revenue Requirements from Transmission Owners to SPP Transmission Owners to SPP

Pricing ZonesPricing Zones

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$4.80 (20%)

$8.00 (100%)

$1.20 (5%)

BPF Projects

Project 1

33% Regional

67% Zonal Allocation

Project 2

33% Regional

67% Zonal Allocation

Westar PricingZone

LRS=20%

Regional RateRev. Req. AllocatedBy Load Ratio Share

Zonal RateRev. Req. Allocated

By Zonal Benefit(This is Done

by Project)

SPP PricingZone 2

LRS=30%

SPP PricingZone 3

LRS=50%

Zonal RateRev. Req. Allocated

By Zonal Benefit(This is Done

by Project)

BPF ATRR=$12

BPF ATRR=$36

$4

$12

$16

$3.20 (20%)

$4.80 (30%)

$8.00 (50%)

$8

$24$18.00 (75%)

$3.20$8.00$1.20-------

$12.40

Total BPFAllocated Costs

$4.80$4.80-------$9.60

$8.00$18.00

-------$26.00

Total BPF ATRR for all Projects = $48.00 Sum of Allocated BPF ATRR = $48.00

Example of BPF Cost Allocation

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TotalWestarZonalATRR

Customer Bill Make up

Customer 1

WestarRetail = Acct. 566.0011Other Whsle. bus. =

Acct. 565.

SPP Admin Charge (Schedule 1A)

Ancillary 4 - EIS

Ancillary 2 - RV

Ancillaries 3, 5 & 6Supplied on

behalf of SPP by Westar

as necessary

Ancillaries Supplied by SPP

SPPSPP

WestarGenerationAncillaryServices

WestarTransmission

CostRecovery

BPFATRR

AllocatedTo Westar

Zone

Westar’s Share of BPF

Schedule 11

Schedule 9

SPP pays suppliers for

Ancillaries 2 & 4

SPP keeps Admin fees to support

the RTO (Anc. 1A)

Other Transmission

Owners in SPP

Other TO’s Share of BPF

Ancillary 1 - SC

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Looking at 2010 . . .Looking at 2010 . . .

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Comparison of Transmission Formula Rate Results

2009(Proj) 2010(Proj)Change from 2009 to 2010

Rate Base 516,089,141$ 640,910,500$ 24.19%

O&M 35,776,626$ 36,577,947$ 2.24%Dep. Expense 25,511,853$ 25,969,421$ 1.79%Taxes Other than Inc. 13,463,304$ 12,959,043$ -3.75%Income Taxes 18,574,132$ 22,551,336$ 21.41%Return 42,355,852$ 52,428,290$ 23.78%Incentive Return 488,817$ 531,471$ 8.73%Gross Rev. Req. 136,170,584$ 151,017,508$ 10.90%

Rev. Credits 15,227,764$ 17,939,732$ 17.81%True-up Adj(3) (3,034,975)$ (1,120,609)$ -63.08%Net Rev. Req. 117,907,845$ 131,957,167$ 11.92%

BPF Rev. Req. 10,932,138$ 19,256,992$ 76.15%BPF True up (122,136)$ (2,803,356)$ 2195.27%Zonal Rev. Req. 107,097,843$ 115,503,531$ 7.85%

Notes:(1) Current collected ATRR from TFR posted Feb. 17, 2009(2) 2010 ATRR posted October 15, 2009.(3) Total True up value is : Adjustment Interest Total True-up

Zonal 1,594,109$ 88,638$ 1,682,747$ BPF (2,550,745)$ (252,611)$ (2,803,356)$ Total (956,636)$ (163,973)$ (1,120,609)$

Total True up value is only for the months of June 2008 through December 2008.

Comparison between Comparison between 2010 and 20092010 and 2009

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BPF Transmission BPF Transmission ProjectsProjects

• Westar– 41 BPF Projects totaling over $19.3 million (Rev. Req.) $126 million

E&C.– Second phase of Wichita-Reno-Summit 345 kV line $101.4 million

• AEP– 17 BPF Projects, Total=$12.6 million– Westar’s direct Zonal share, $0

• OGE– 10 BPF Projects, Total = $3.3 million – Westar’s direct Zonal Share, $296,630

• SPS, NPPD– 6 BPF Projects, Total = $2.0 million – Westar’s direct Zonal Share, $0

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Zonal Total $115,503,530BPF Total $19,256,992

Regional Westar Zonal Westar Zone33% * Total LRS % Allocation

Westar $6,354,807 12% $762,577All Others 5,875,701 12% $705,084Total Regional $1,467,661

AllocatedZonal BPF Cost to WR

67% * TotalWestar $12,902,185 $11,611,967All Others $296,630

$11,908,597

Estimated Westar Zonal Estimated Westar Zonal Costs for 2010Costs for 2010

2009 Zonal ATRR

$115,050,240

2010 Zonal ATRR

$128,879,788

Estimated 12% Increase

Wholesale CustomerEstimate of Transmission Service Costs based on SPP OATT

Peak LoadLine Description Calculation (MW)

1 City Peak Load (Note 6) 13.3332 Average Peak Load (est) (12 mo loss comp. avg with trans pk) 10.0003 Annual Energy (MWH) (Note 5) 66288

4 Average Network Transmission Peak Demand (MW) 3751.6675 Load Ratio Share (line 2 / line 4 ) 0.002665482

Transmission charges - SPP OATT CalculationRevenue

Requirements6 Schedule 9 SPP OATT-Attachment H 115,503,530$ 7 Schedule 11-Zonal SPP OATT-Schedule 11 11,908,597$

7A Schedule 11 - Regional SPP OATT-Schedule 11 1,467,661$ 8 Total Rev. Req. 128,879,788$

Estimated Annual Transmission Charges Calculation Rates Percentage Annual Costs9 Transmission Charge (Sched. 9 & 11) (line 8 * line 5) See Rev Reqm 100.00% 343,526.76$ 10 Schedule 1 - Westar Scheduling [Note 1] (line 2 * rate/yr) 752.09$ 100.00% 7,520.90$ 11 Schedule 1A - SPP Scheduling (line 2 * 730 hrs * rate/MW*12 mos) 0.195$ 100.00% 17,082.00$ 12 Schedule 2 - Reactive (SPP Billing-est only) (Note 2) 122.63$ 100.00% 1,226.30$ 13 Schedule 3 - Regulation [Note 1] (line 2 * rate * 1.35%) 53,358.74$ 1.35% 7,203.43$ 14 Schedule 4 - Imbalance (Based on Market) (varies)(Note 3)15 Schedule 5 - Spinning Reserves [Note 1] (line 2 * rate * 1.67%) 53,358.74$ 1.67% 8,910.91$ 16 Schedule 6 - Supplemental Reserves [Note 5] (line 2 * rate * 1.65%) 39,134.61$ 1.65% 6,457.21$ 17 Schedule 10 - Distribution Facilities Charge (Note 4) (rate per month) 1,000.00$ 100.00% 12,000.00$ 18 Schedule 12 - FERC Fees (line 3 * rate/MWH) 0.054908392$ 100.00% 3,639.77$ 19 Total of all Annual Charges (sum lines 9 to 18) 407,567.28$

Note 1: Pricing comes from the Westar Open Access Transmission Tariff (OATT)Note 2: Price fluctuates. Cost was estimated by taking about 10% of Westar's OATT price.Note 3: Charge varies depending on the market and if the supplier takes on the charge from SPP.Note 4: Distribution facilities charge is based upon the pro-rated costs of any distribution facitlies used by the city to obtain power.Note 5: Source WEN Form 1 Page 311 Column G (this is only energy sold by WRGS to City, doesn't include any other resources)Note 6: Peak Load based at Westar Transmission Peak. Loss Compensated based on SPP Transmission Service.

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