Common use of Cost Allocation for Multiple BPTF Thermal Transmission Security Clause in Contracts

Cost Allocation for Multiple BPTF Thermal Transmission Security. Issues If a single solution addresses multiple BPTF thermal transmission security issues, the ISO will calculate weighting factors based on the ratio of the present value of the estimated costs for individual solutions to each BPTF thermal transmission security issue. The present values of the estimated costs for the individual solutions shall be based on a common base date that will be the beginning of the calendar month in which the cost allocation analysis is performed (the “Base Date”). The ISO will apply the weighting factors to the cost allocation calculated for each Subzone for each individual BPTF thermal transmission security issue. The following example illustrates the cost allocation for such a solution: A cost allocation analysis for the selected solution is to be performed during a given month establishing the beginning of that month as the Base Date. The ISO has identified two BPTF thermal transmission security issues, Overload X and Overload Y, and the ISO has selected a single solution (Project Z) to address both BPTF thermal transmission security issues. The cost of a solution to address only Overload X (Project X) is Cost(X), provided in a given year’s dollars. The number of years from the Base Date to the year associated with the cost estimate of Project (X) is N(X). The cost of a solution to address only Overload Y (Project Y) is Cost(Y), provided in a given year’s dollars. The number of years from the Base Date to the year associated with the cost estimate of Project Y is N(Y). The discount rate, D, to be used for the present value analysis shall be the current after-tax weighted average cost of capital for the Transmission Owners. Based on the foregoing assumptions, the following formulas will be used: Present Value of Cost (X) = PV Cost (X) = Cost (X) / (1+D)N(X) Present Value of Cost (Y) = PV Cost (Y) = Cost (Y) / (1+D)N(Y) Overload X weighting factor = PV Cost (X)/[PV Cost (X) + PV Cost (Y)] Overload Y weighting factor = PV Cost (Y)/[PV Cost (X) + PV Cost (Y)] Applying those formulas, if: Cost (X) = $100 Million and N(X) = 6.25 years Cost (Y) = $25 Million and N(Y) = 4.75 years D = 7.5% per year Then: PV Cost (X) = 100/(1+0.075) 6.25 = 63.635 Million PV Cost (Y) = 25/(1+0.075)4.75 = 17.732 Million Overload X weighting factor = 63.635 / (63.635 + 17.732) = 78.21% Overload Y weighting factor = 17.732 / (63.635 + 17.732) = 21.79% Applying those weighing factors, if: Subzone A cost allocation for Overload X is 15% Subzone A cost allocation for Overload Y is 70% Then: Subzone A cost allocation % for Project Z = (15% * 78.21%) + (70% * 21.79%) = 26.99%

Cost Allocation for Multiple BPTF Thermal Transmission Security. Issues If a single solution addresses multiple BPTF thermal transmission security issues, the ISO will calculate weighting factors based on the ratio of the present value of the estimated costs for individual solutions to each BPTF thermal transmission security issue. The present values of the estimated costs for the individual solutions shall be based on a common base date that will be the beginning of the calendar month in which the cost allocation analysis is performed (the “Base Date”). The ISO will apply the weighting factors to the cost allocation calculated for each Subzone for each individual BPTF thermal transmission security issue. The following example illustrates the cost allocation for such a solution:  A cost allocation analysis for the selected solution is to be performed during a given month establishing the beginning of that month as the Base Date.  The ISO has identified two BPTF thermal transmission security issues, Overload X and Overload Y, and the ISO has selected a single solution (Project Z) to address both BPTF thermal transmission security issues.  The cost of a solution to address only Overload X (Project X) is Cost(X), provided in a given year’s dollars. The number of years from the Base Date to the year associated with the cost estimate of Project (X) is N(X).  The cost of a solution to address only Overload Y (Project Y) is Cost(Y), provided in a given year’s dollars. The number of years from the Base Date to the year associated with the cost estimate of Project Y is N(Y).  The discount rate, D, to be used for the present value analysis shall be the current after-tax weighted average cost of capital for the Transmission Owners.  Based on the foregoing assumptions, the following formulas will be used:  Present Value of Cost (X) = PV Cost (X) = Cost (X) / (1+D)N(X)  Present Value of Cost (Y) = PV Cost (Y) = Cost (Y) / (1+D)N(Y)  Overload X weighting factor = PV Cost (X)/[PV Cost (X) + PV Cost (Y)]  Overload Y weighting factor = PV Cost (Y)/[PV Cost (X) + PV Cost (Y)]  Applying those formulas, if: Cost (X) = $100 Million and N(X) = 6.25 years Cost (Y) = $25 Million and N(Y) = 4.75 years D = 7.5% per year Then: PV Cost (X) = 100/(1+0.075) 6.25 = 63.635 Million PV Cost (Y) = 25/(1+0.075)4.75 = 17.732 Million Overload X weighting factor = 63.635 / (63.635 + 17.732) = 78.21% Overload Y weighting factor = 17.732 / (63.635 + 17.732) = 21.79%  Applying those weighing factors, if: Subzone A cost allocation for Overload X is 15% Subzone A cost allocation for Overload Y is 70% Then: Subzone A cost allocation % for Project Z = (15% * 78.21%) + (70% * 21.79%) = 26.99%