1. Westar Formula Rate and Regulatory Update Dennis Reed

2. Transmission Formula Rate

3. What is a Formula Rate? A standard Rate is a fixed charge set in a regulatory process through a rate case –The fixed rates do not change unless another rate case is filed A formula rate is a fixed method for calculating a rate based upon set inputs –The charges to customer update annually –Data input comes from public sources (Form 1) –Recalculation of the charges is done pursuant to a set of protocols

4. Revenue Requirements The sum of the following: Return on Equity (Rate Base * Rate of Return) O&M Depreciation Expense Taxes other than income Income Taxes

5. Westars Formula Rate Revenue Requirements used for billing is for a projected Test Year Changes in costs are projected in all five components of the formula A True-up calculation is done each year to compare the Actual Rev. Req. to the projected Any refund or surcharge is an adjustment to the Rev. Req. for the next Projected Period –Minimizes work by not having to do annual refunds or surcharges

6. Posting & Review Time Line Posting & Review Time Line Jan. 1 Start of Rate Year Apr. 15 Form 1 Released Jun. 15 Post Actual R.R from previous yr Jul. 15 First Customer Meeting Oct. 15 Post Projected R.R for the next Rate Year Oct. 30 Second Customer Meeting Jan. 1 Start of the next Rate Year Oct. 22 Jun. 23 You are here!

7. The Formula Rate Update Phase 1 Inputting Actual Cost data (Complete by June 15) TFR tabs with data: Act. Net Rev Req. Act. Gross Rev Req. Tabs A1-A12 TU (Partial) Phase 2 Inputting Projected Costs (Complete by October 15) TFR tabs with data: Proj. Net Rev Req. Proj. Gross Rev Req. Tabs P1-P5 BPF EPP (No projects) TU (Complete) Form 1 & Acctg. DataBudget information SPP You are here!

8. Other Issues The True-up amount is based upon the results of the TFR effective June 1, 2008 (per settlement in ER08-396) –Rev. Req. is without any true-up value from a previous period (footnote E, TU tab) This years calculation is still part of the transition –Format of June 2008 formula is different from current one –Historic period to a projected period –Change in Rate Year from 12 months ending May to calendar year period

9. Formula Rate Changes Since October, 2008 the following two Dockets were approved that affect the formula –ER08-777/ER08-396 – Storm Damage Amortization Compliance filing modifying footnote S, Actual Gross Revenue Requirement tab. –ER09-481 – Ministerial Filing to correct several footnote and line description errors. Additional footnote errors were discovered in the update process –A subsequent filing is being looked at in the next several months.

10. Protocols Specify how the formula works Gives specific rights to Customers –Review input –Point out input errors –Procedures to handle disputes Posting – Westars OASIS is changing!