ROE Methodology for Interest Calculation

The following are the steps that were used for the ROE Interest Calculation:
Determine the Changes in Charges

Calculate the delta between the current settlement and the previous billed settlement on a pool level . RNS RNSC !IS Reports" Current !onth #$ool Sum $re%&' RNS Charge ( $ost%&) RNS Charge ( O*TT Schedule +", !inus %" $revious -illed !onth #$ool Sum $re%&' RNS Charge ( $ost%&) RNS Charge ( O*TT Schedule +", TO.T TO.TC !IS Reports" #Current !onth $ool Sum TO.T Charge ( O*TT Schedule +", !inus %" #$revious -illed !onth $ool Sum TO.T Charge ( O*TT Schedule +", The delta in charges for RNS and TO.T will be the $rincipal -alance used for the interest rate calculation.
Interest Rate Calculation

Calculate the pool interest value. Interest is calculated using the /ERC0s monthly interest rates compounded 1uarterl2. See lin3 for rates: http:44www.ferc.gov4legal4acct%matts4interest%rates.asp5s3ipnavsub /ERC0s 2ear runs from 6anuar2 through 7ecember therefore the 1uarter%ends are !arch8 6une8 September8 and 7ecember. To calculate interest8 ta3e the $rincipal -alance multiplied b2 the monthl2 interest rate. *t the end of a 1uarter8 add the interest for the months calculated within that 1uarter to the $rincipal -alance $rincipal amount for interest calculation will change each 1uarter". This becomes the new $rincipal -alance for the following 1uarter. -elow is an e9ample: $rincipal -alance % :+;;8;;; Calculation period is *ugust +<th to 7ecember =+st. /ERC !onthl2 Interest Rates: *ug .;;)) Sep .;;)> Oct .;;)& Nov .;;)' 7ec .;;)&

*ugust ? :+;;8;;; @ .;;))"4A+ da2s @ +<da2s B :A+&.A< of interest September ? :+;;8;;; @ .;;)>"4A; da2s @ A; da2s B :)>;.;; September is the end of a 1uarter therefore the interest above is added to the $rincipal -alance for October % :+;;8&<&.A<. October ? :+;;8&<&.A< @ .;;)&"4A+ da2s @ A+ da2s B :)&).)= November ? :+;;8&<&.A< @ .;;)'"4A; da2s @ A; da2s B :)').>A 7ecember ? :+;;8&<&.A< @ .;;)&"4A+ da2s @ =+ da2s B :>'+.&; Total Interest 7ue on 7ecember =+st B :=8C;>.A; The timeline for the ROE interest runs from the previous bill date to the date of the current ROE resettlement.
Interest Rate Allocation

*llocate the Interest to each participant: 7etermine the delta between the current settlement and the previous billed settlement b2 participant for the Charges and the $a2ments. Ne9t8 calculate the interest for Charges and $a2ments b2 prorating the delta of the participants b2 the pool delta times the interest amount. /inall2 net the Interest amount calculated for Charges and $a2ments. RNS

RNSC !IS Reports RNSC delta b2 participant B

Current !onth #Net Regional Networ3 Service 7ollars, !inus %" $revious -illed !onth #Net Regional Networ3 Service 7ollars, RNS pool delta B The sum of participant0s delta RNS Interest allocation b2 participant for RNSC B $ool RNS interest value Times @" $articipant0s 7elta 7ivided b2 4" RNS pool delta"

RNS$ !IS Reports RNS$ delta b2 participant B

Current !onth #Net Regional Networ3 Service 7ollars, !inus %" $revious -illed !onth #Net Regional Networ3 Service 7ollars, RNS pool delta B The sum of participant0s delta RNS Interest allocation b2 participant for RNS$ B $ool RNS interest value Times @" $articipant0s 7elta 7ivided b2 4" RNS pool delta"

RNS Interest B Net of RNSC and RNS$ Interest allocation

TO.T TO.TC !IS Reports TO.TC delta b2 participant B Current !onth #Net TO.T 7ollars, !inus %" $revious -illed !onth #Net TO.T 7ollars, TO.T pool delta B The sum of participant0s delta TO.T Interest allocation b2 participant for TO.TC B $ool TO.T interest value Times @" $articipant0s 7elta 7ivided b2 4" TO.T pool delta"

TO.T$ !IS Reports TO.T$ delta b2 participant B

Current !onth #Net TO.T 7ollars, !inus %" $revious -illed !onth #Net TO.T 7ollars, TO.T pool delta B The sum of participant0s delta TO.T Interest allocation b2 participant for TO.T$ B $ool RNS interest value Times @" $articipant0s 7elta 7ivided b2 4" TO.T pool delta"

TO.T Interest B Net of TO.TC and TO.T$ Interest allocation