Avista 230 kV Upgrade ProjectsStatus Report – May 2005

Bell (BPA)

Cabinet Gorge

Noxon

Benewah

Pinecreek

Westside

Rathdrum

Shawnee

Moscow 230

Hatwai (BPA)

Lolo

N. Lewiston

BeaconBoulder

Dry Creek

SubstationTransmission Line

New or Upgraded

Avista's 230 kV Facilities

230 kV Upgrade Projects

05-20-2005 K. Bachman, D. James

Status Report, May 2005

Executive Summary

At the time of the last general update (June 04), the Beacon-Rathdrum 230 kV transmission line had just been re-energized following an eight-month planned construction outage. The Beacon-Rathdrum line serves as a vital transmission link between the urban areas of Coeur d’ Alene and Spokane. It was the first of five major projects in the 230 kV Upgrade program.

Substation- Since then, the Dry Creek 230 kV Substation is operating commercially (Dec 2004) and its 200 MVar capacitor bank is soon to come on-line (June 2005). In addition, crews have been constructing the Boulder substation for nearly eleven months and are preparing for partial energization of that facility in late June. When fully complete in December 2005, Boulder Substation will join the ranks with Rathdrum and Dry Creek and become Avista’s third, fully redundant 230 kV Substation. In response to more stringent Regional and National Planning and Operating Standards, Avista is constructing critical transmission substations, like Boulder, with redundant physical, protective relay, communication, and monitoring systems.

Palouse 230- Construction of the 60-mile Benewah-Shawnee line is slated to begin in April of 2006 and is scheduled over a two year period (06/07) to avoid winter construction. Construction of this transmission line will culminate nearly three years of project development from public outreach through environmental permitting, engineering, and lands acquisition. When complete in 2007, the Benewah-Shawnee 230 kV project will join ranks with Beacon-Rathdrum as Avista’s highest capacity transmission line (1000 MVA).

Telecom- In order to monitor, control, and protect the one hundred million dollars of transmission investment, fiber optic cable is being attached to several 230 kV transmission lines. In addition, these fiber optic cables support plans to construct Avista’s first remedial action schemes.

1) Noxon/Cabinet generation control

2) Dry Creek capacitor bank

The Western Electric Coordinating Council (WECC) requires that “certified” remedial action schemes contain communication systems that are “redundant and route diverse.” In response to this requirement, Avista plans to install 200 miles of fiber optic cable on transmission lines and upgrade its Mica Peak radio facility. The new digital communication gear will satisfy the immediate need of the overall system and allow migration away from leased telephone circuits and our aging analog microwave systems.

Information Gathering- Between January 2003 and April 2005, more than fifty million dollars have been spent to construct the Beacon-Rathdrum transmission line along with the Rathdrum and Dry Creek Substations and the partial construction of the Boulder project. Upgrading and modernizing Avista’s transmission infrastructure is capital intensive and requires collective stewardship spanning the company from senior management to front line employees.

Documents associated with the planning and execution of the project have been assembled and categorized. These documents support the need assessment, cost assessment, internal communication, and serve to fully document the project.

Several charts, graphs, and tables are included in this report to help illustrate project cost, schedule, and controls. In addition, project specific “poster boards” are included to show the life cost and schedule associated with individual projects. Poster boards also recognize the significant contributions from key project team members. It is through individual commitment and expertise that these projects are transformed from the drawing board into reality.

The following enumerates and describes the illustrations included in this report.

1. Milestone Dates and Estimated Cost – This diagram indicates the geographic location of transmission lines and substations including the in-service dates and the forecasted cost of each project. A separate illustration is used to show the telecom projects.

2. Project Poster Boards – Diagrams that highlight team member contributions and summarize project overall scope, schedule, and expected life cost.

3. Annual Budget and Actual Cost – This chart shows the yearly budget forecast (original budget), the expected budget, and year-end actual spend for the projects

4. Forecast Cost Trend – This table shows expected life cost of each project from early feasibility estimates provided in March and August of 2002 up through March 2005. Latter estimates include a mixture of definitive, capital appropriation, and feasibility cost estimates.

5. Milestone Summary – This table shows the construction milestone dates from June 2004 through the end of 2005.

6. Fiber Optic Control System – This diagram shows the geographic location and cost breakdown of the various fiber optic and digital radio projects that support the development of remedial action schemes and the protection of transmission lines.

7. Project Information Control Summary – This table indicates the various project information control forms (change control) that have been issued and reviewed to communicate “significant changes that impact budget, resources, or schedule.”

8. Documents

a. Valmont Alliance – Summary of the recent alliance agreement with Valmont Industries to procure tubular steel poles for the Benewah-Shawnee 230 kV transmission line.

b. Internal Data Request – Description of the need for and compilation of various documents associated with the project.

c. Palouse 230 Analysis – In light of price escalation in the world steel market, a task force convened to re-examine the need & purpose of the project, to list project alternatives, and to affirm the scope of work associated with the Benewah-Shawnee 230 kV transmission line.

05-20-2005 K. Bachman, D. James

230 kV Upgrade Project Milestone Dates and Estimated Cost

May 2005

Bell (BPA)

Cabinet Gorge

Noxon

Benewah

Westside

Shawnee

Moscow 230

Hatwai (BPA)

Lolo

N. Lewiston

BeaconBoulder

1

Dry Creek

Beacon-Rathdrum 230 (2000 MW), $19.2M25 mile Beacon-Rathdrum Line, Mar 2004 Rathdrum Sub, Reconstruct to DB/DB, Mar/Apr 2004Bea-Ben-Rath 230 Line Energized Mar 31, 2004

Spokane Valley Reinforcement (500 MW), $16.2MBoulder Substation, West 115 kV Bus, Jun 30, 2005Boulder Substation, East 115 kV Bus, Sep 29, 2005All 230 and 115 kV Transmission lines, Oct 30, 2005Complete Construction, Dec 15, 2006

Palouse Reinforcement (1000 MW), $29.4M ($14.6M – 2007)Benewah 230 kV DB/DB Substation, Apr 6, 2006Benewah 200 MVar Capacitor Bank, Apr 5, 200735 mile Rosalia-Shawnee 230 kV Line, Nov 6, 200625 mile Benewah-Rosalia 230 kV Line, Oct 25, 2007

Dry Creek (250 MW / 200 MVar), $12.4MDry Creek 230 kV DB/DB Substation, Dec 14, 2004Hatwai-Lolo Upgrade to 800 MW, May 24, 2005Lolo 230 kV Substation, Hatwai Terminal, May 27, 2005Dry Creek 230 kV Capacitor Bank, Jun 9, 2005Hatwai-N. Lewiston Upgrade to 800 MW, Apr 15, 2006

Pinecreek Substation, $5.7MReconstruct 230 kV SubstationSubstation Complete November 2003

Other 230 kV Upgrade Project CostsRemedial Action Scheme (RAS) $1.7MDigital Comm. Control (Telecom) $7.2M230/115 kV Auto Transformers $4.3M Power Circuit Breakers $5.4MTotal 230 kV Upgrades Through 2006 ------------------------------ $106.4MCosting source: 2005 March Budget Forecast

Rathdrum

SubstationTransmission Line

New or Upgraded

Avista's 230 kV Facilities

Beacon-Bell 230 (1600 MW), $2.4MBell #4 Upgrade to 800 MW, Dec 2005Bell #5 Upgrade to 800 MW, Dec 2006Upgrade Relay equipment at Beaconconcurrent with line construction

Beacon-Rathdrum (April 2004)Purpose: To reconstruct a 50-year old facility that serves as the transmission backbone between the Coeur d’ Alene and Spokane urban areas. This project increases the transfer capability from 300 MW to 1600 MW (2000 MW ultimate) by using new, high temperature conductor and by adding a

second 230 kV circuit. In conjunction, the Rathdrum 230 kV substation is converted from a main/auxiliary to a double breaker/double bus substation. In other words, it becomes Avista’s first fully redundant 230 kV substation. This project modernizes one of Avista’s key transmission lines in order to

meet the current and future demands of local industrial, commercial, and residential customers.

“Pouring Mud” (Concrete)

Steel Support Structure at Rathdrum

Installing Conductor Rathdrum’s 230kV Switchyard

Project Team (Key Contributors)Ken Sweigart - Project Mng & Transmission Dsn

Wilson Construction - Line ContractorTri State Drillers – Tower Foundations

Jerry Collins & Bill Magers – Contract InspectionCatherine Markson – Corp Communications

Claude Kaler – Real EstatePat Gilica – Procurement

Tom Barker – Construction MngJon Harms – Telecom Engr

Laura Isaak – PermittingRathdrum Substation

Terry Dudley & Paul Mason – Substation DesignSteve Wolfe & Crew – Substation Mech/Structural

Mike Fee & Crew – Substation ElectricalDan Gregovich – Transmission Design

Dennis Howey – Protection EngrJeff Marsh – Substation Testing

Clint Laws – Drafting

Beacon-Rathdrum Facts

•2,600 tons of steel, 188 transmission towers

•714 tons of conductor, 25 mi. of new line

•Highest capacity (2000 MVA) and Mechanically strongest line ever constructed by Avista

•Rathdrum sets the “standard” for new 230 kV Substations

•New double breaker design

•New protective relay scheme

•Rated to 3000A (1200 MVA)

•Provides “design” template for Dry Creek, Boulder, Lolo, and Benewah Substations

Steel Pole FoundationH1-2002 H2-2002 H1-2003 H2-2003 H1-2004 H2-2004

Public Outreach

Construct 230 Xsmn

Bea/Cab Relay Upgrades

522

Engr Design

Rathdrum Sub

1,906LTD Costs ($k)Total ER

208 15,418 18,667 19,179 Aerial View at Rathdrum Steel Tower Base Section

Dry Creek Substation (June 2005)Purpose: To form a “ring” of 230 kV transmission lines around the Lewiston-Clarkston Valley, to add 250 MVA of transformation capability, and 200 MVar of reactive resource to customers in the Valley region. In conjunction with the construction of Dry Creek, capacity upgrades on

two of the four area transmission lines ensure that transmission supply is adequate to meet growing customer demand. Prior to these upgrades, outages to key substation or transmission facilities would likely result in forced curtailment of customer demand.

Project Team (Key Contributors)Dan Weiler & Electric Crew

Steve Wolfe, Rick Ray and Mechanic CrewRick Wilkins, Relay Technician

Bill Choma & Scott Wilson, Substation DesignKathy Kendall, Grading Inspector

Clarice Garcia, PermittingPat Gilica and Sandy Friedlander, Procurement

Atlas Sand & Gravel CompanySteelman-Duff Excavating

ECI, Engineering ConsultantsL/C 230 kV Transmission Line Upgrades

Wilson ConstructionMountain Power

Clarkston Division Line CrewsPat Clevenger & Ross Taylor, Project Engr

Jerry Collins and Don Marte, InspectionItron & Pondera Engineering, TL-Pro

Dry Creek Facts

•100 tons of substation steel support structures

•1000 cubic yards of concrete

•10,000 wired connections (panel house)

•1-mile of Al. Pipe Bus, 12 Gas Ckt Breakers

•First 230 kV Capacitor Bank designed & constructed by Avista

•135 Avista Employees, 5 Contract Companies

•L/C 230 kV Upgrades

•Uprate (2) lines from 400 to 800 MVA

•Construct 35-mile “communication loop” using fiber optic cable on transmission lines

Dry Creek Sub200 MVar Cap Bank

Dry Creek Sub H2-2003 H1-2004 H2-2004 H1-2005 H2-2005 H1-2006

Site Prep (Grading)

G&P Elect Cap Bank

Hatwai-Lolo

Hatwai-N. Lewiston

3,495

G&P Mech Crew

G&P Elect 230 Sub

7,627LTD Costs ($k) (actual/forecast)Total ER

777 11,384 12,365

Project Celebration, August 2004

Site Grading Mechanical/Structural Work

Boulder Substation (December 2005)Purpose: To serve the growing demand for electricity in the Spokane Valley. Power transformer sources at Rathdrum and Beacon have

reached their limit to serve the rapidly developing communities of Liberty Lake, Greenacres, and the newly incorporated, City ofSpokane Valley. Boulder adds 500 MVA of 230/115 kV transformation to the supply customers in the Valley.

H1-2003 H2-2003 H1-2004 H2-2004 H1-2005 H2-2005

Public Outreach

Phase I Sub (N 230 & W 115 kV Bus)

Phase II Sub (S 230 & E 115 kV Bus)

Transmission line

412

Engineering

Site Grading

1,429LTD Costs ($k) (actual/forecast)Total ER

173 4,475 12,369 16,233

Boulder Facts

• 198 Concrete Foundations, 1000 Cu. Yds of Concrete

• 17 Power Ckt Breakers

•6,900 feet Al. Pipe Bus

•Dual, 250 MVA 230 kV Transformers

•8.3 Acres of Fenced Area

•Integrates nine (9) 230 and 115 kV Lines

•Transmission Line Project

•135 Steel Towers- 1,060 Tons of Steel

•285,000 feet of conductor

•8 months to construct

Grading Complete

200 MVar Cap Bank

Boulder under Development, April 2005

“Is it Plumb, Brad?”

Project Team (Key Contributors)Brad Pederson & Electric Crew

Steve Wolfe and Mechanic CrewAndy Anderson, Substation DesignBruce Westover, Relay Technician

Robin Bekkedahl, PermittingPat Gilica and Sandy Friedlander, Procurement

ECI, Engineering Consultants Commercial Grading

230 kV Transmission LineInternational Line Builders, Line ConstructionWoodward Construction, Tower Foundations

Ken Sweigart & Tim Carlberg, Dsn & Cnst MngJerry Collins and Bill Magers, Contract Inspection

Catherine Markson, Corp CommKen Carlson, Real Estate

Steel Xsmn Tower

Site Grading

Palouse 230 (2007)Purpose: To provide an alternate transmission path connecting Avista’s North and South urban areas. Linking the Benewah and Shawnee

Substations with a 60-mile transmission line ensures an adequate supply of electricity to the Moscow, Pullman, Lewiston, and Clarkston areas. In addition, rebuilding Benewah as a fully redundant substation safeguards a vital facility in the Palouse delivery system.

2003 2004 2005 2006 2007

Route Selection

Benewah to Rosalia Line Construction

Benewah 230 Sub

Benewah 200 MVar Capacitor Bank

1,765

Engineering & R/W Acquisition

Rosalia to Shawnee Line Construction

8,894LTD Costs ($k) (actual/forecast)Total ER

513 29,408 43,963

Palouse Facts

• 2003-Route selection “study area” encompasses 147 square miles and requires 9 months of analysis

•Jan 5, 2004-Preferred route selection minimizes the development of a new transmission corridor.

•May, 2005-Alliance with Valmont Industries helps to mitigate the volatility in the world steel market. Avista to purchase 6.3 million pounds of steel.

•Benewah Substation

•Convert Benewah Substation from Main/Aux to DB/DB April 05-April 06

•Construct 200 MVar Cap Bank

Working with Power Engs

Proposed Steel Tower

Route near Spokane/Whitman Co. Line

Grading Complete

Project Team (Key Contributors)Dan Walsh & Randy Daniels, Real Estate

Pat Gilica and Sandy Friedlander, ProcurementRobin Bekkedahl & Laura Isaak, Permitting

Ken Sweigart & Tim Carlberg, Dsn & ConstructCatherine Markson & Hugh Imhof, Corp Comm

Power Engineers, Design ConsultantMeckel & Ruen Yeager, Survey

ETG, Aerial Photography & SurveyValmont Industries, Steel Poles

Benewah SubstationMike Fee & Electric Crew

Steve Wolfe & Mechanic CrewJim Farby & Scott Wilson, Substation Design

Woodard Construction (Grading)

2004-Benewah Sub

Woodard Construction at Benewah

Fiber Optic & Digital Radio Control (various 2004-2006)Purpose: To provide high speed digital communications for the protection and operation of Avista’s 230 kV transmission grid. This system

will also be used in conjunction with remedial action schemes to control Noxon/Cabinet Generation and the Dry Creek capacitor bank. The latter are subject to WECC regulations with respect to the routing and operation of communication systems.

H1-2004 H2-2004 H1-2005 H2-2005 H1-2006

Hatwai-N Lew

Mica Digital Radio

5,752

Benewah-Boulder

Noxon-Pinecreek

H2-2006

Dry Ck-Lolo

964 2,048

Dry Ck-N Lew

Hatwai-Lolo

LTD Costs ($k) (actual/forecast)Total ER

750 4,279 7,225

Fiber Optic Facts

• Creates 100-mile Northern and 35-mile Southern Fiber Optic “ring network”.

•Forming fiber rings satisfies the WECC requirement for redundant, diverse path communication.

•Supports certified RAS at Noxon/Cabinet “required” for the flexible operation of those facilities.

•Use of Digital Microwave between Benewah, Mica Pk, and Pinecreek, saves $800k over fiber optic.

•Allows for Telecom migration away from again analog microwave to digital fiber.

Project Team (Key Contributors)Ross Taylor & Jon Harms, Telecom Engr

Dick Schatzka, Digital Radio DsnRay Burggraaf & Comm Shop Staff

OFS & Philips Fitel, Fiber Optic CablePat Clevenger, Transmission Design

Wilson, ILB, and Mt. Power Line ContractorsTim Carlberg & Tammie Miller, G&P Contracts

Deb Mortlock, BPA ContractsPat Gilica, Procurement

Steve Shink, BPA Dry Creek-Lolo FiberMica Pk Radio Tower

Wilson Construction near Dry Creek Sub

ADSS Fiber Optic Cable

Concrete Pumper Truck at Mica Peak

16,8

57 22,0

45

31,7

06

32,0

78

15,3

67

20,4

96

29,0

52

20,5

89

10,4

7521,4

44

20,9

96

$0

$10,000

$20,000

$30,000

2003 2004 2005 2006 2007

Budget ForecastExpected BudgetActual Spend

Beacon-RathdrumDry Creek

BoulderPalouse 230

Project resources accelerated in late 03 to close variance gap in overall CapX

Some materials arrive earlier than expected. Booked in 04, budgeted in 05

Palouse 230 Foundation work deferred until 2006

Reconstruct Benewah Sub and begin Benewah-Shawnee transmission line

Complete 25-mile segment of Benewah-Shawnee 230 kV Transmission Line

Budget Forecast - Original annual budget as approved by the Capital Budget Committee. Finalized in the October/November timeframe prior to the budget calendar year (e.g. 2003 annual budget final and approved in October of 2002).

Expected Budget - YE budget forecasts are updated throughout the year. Expected budget is used to manage projects within the overall CapX process.

Actual Spend - YE actual as derived from the Financial Data Warehouse (2003, 2004) and the Oracle Financial System (2005). The 2005 figure reflects actual spend through March 31, 2005.

Data inclusive of all project budget items as shown on the "230 kV Upgrade - Forecast Cost Trend" sheet.

5-18-05

230 kV Upgrade Project - Forecast Cost Trend

$ 000's (1) (2) (3) (4) (5) (6) (6) Mar 2002(Forecast)

Aug 2002Forecast)

Oct 2002(03 Budget)

Oct 2003(04 Budget)

Jun 2004(Update)

Nov 2004(05 Budget)

Mar 2005(Update)

230 kV Upgrade 2002-2006 (Baseline) 64,327 85,507 87,488 105,158 105,317 108,043 106,427

West of Hatwai 2002-2006 (Baseline) 54,020 63,404 65,794 76,825 76,831 79,040 75,539

Wecc/Nerc Compliance 2002-2006 10,307 22,103 21,694 28,334 28,486 29,002 30,889

Beacon-Rathdrum ER 2100 13,800 15,055 15,303 18,495 18,495 18,957 19,179 25 Mile Transmission Line (2x1000 MW) 10,160 11,615 12,303 14,915 14,915 15,689 15,806 Rathdrum Substation (Convert to DB/DB) 2,315 2,315 1,904 2,905 2,905 2,931 3,040 Beacon Substation (Upgrade Relays) 1,125 1,125 1,096 675 675 337 333 Loop 230 to Lancaster (Avoided) 200

Dry Creek ER 2102 10,425 16,130 12,493 13,684 11,809 11,900 12,365 Dry Creek 230 Sub & Cap Bank 6,125 6,125 5,157 9,089 7,911 7,735 7,736 North Lewiston (R-413 relay upgrade) 500 6,205 3,305 189 189 189 188 Lolo (Hatwai DB/DB) 1,100 1,100 1,206 1,813 1,024 1,036 1,342 Dry Creek - N. Lewiston (Uprate to 500 MW) 1,000 1,000 680 206 206 80 144 Hatwai-Lolo (Recond to 800 MW) 1,000 1,000 980 1,031 1,031 1,037 1,006 Hatwai - N. Lewiston (Recond to 800 MW) 700 700 980 1,032 1,032 1,019 1,007 Transmission (230 Integration @ DC) 55 163 163 280 417 230/115 kV Xfmr (Temp Storage at N. Lew) 129 69 161 159 159 Dry Creek - Lolo (Make Ready for F/O) 92 92 230 236 Relocate 1266 FDR (DC-Lolo) 135 130

Palouse 230 ER 2105 29,795 32,219 30,902 33,288 33,288 33,761 29,408 33 Mile "South Rbld" Transmission (1000 MW) 25,700 25,700 25,349 25,235 25,235 25,929 21,320 Benewah 230 Sub & Cap Bank 3,770 6,200 5,234 7,524 7,524 7,571 7,828 Shawnee (Add Benewah Ln Position) 325 319 319 319 319 50 50 Moscow 230 (Upgrade R-373 Relay) 210 210 210 210 ECL 221 FDR (relocate for 230 line) 50 50 Pinecreek (Upgrade R-355 Relays) 210 210

RAS ER 2101 1,702 1,710 1,710 1,610 1,719

Telecom ER 2103 5,138 6,100 7,225 7,279 Northern Ring (Noxon-Benewah) - 144 miles 2,070 2,817 2,817 Southern Ring (Hatwai-DC) - 35 miles 1,233 1,191 1,255 Mica Radio & Kellogg Fiber 730 1,208 1,208 RAS & EE 927 859 859 Benewah-Shawnee - 60 miles OPGW 1,140 1,140 1,140

Ben-Bld make ready F/O ER 2111 210 210

Power Circuit Breakers ER 2001 5,395 4,510 5,430 5,378 5,378

Power Transformers ER 2000 2,100 3,900 4,263 4,263 4,263 4,323 Pinecreek ER 2281 (Rebuild 230 Sub) 5,583 5,569 5,692 5,692 4,728 4,745 Lolo non WoH ER 2360 (DC & Oxbow DB/DB) 2,000 2,100 2,100 Dry Creek 115 kV ER 2346 1,098 1,098 Beacon-Bell #4 ER 2104 (Recond to 800 MW) 1,700 1,700 1,107 1,107 1,062 1,041 Beacon-Bell #5 ER 2108 (Recond to 800 MW) 1,700 1,700 1,275 1,275 1,349 1,349

Boulder Substation ER 2106 10,307 11,020 8,825 15,997 14,150 14,403 16,233 Boulder 230/115 Sub (500 MW) - - - 11,504 7,071 7,318 7,228 18 Ckt Mile Transmission (230 & 115 kV) - - - 4,494 6,079 6,686 8,605 Boulder Park (Revise per new Sub) 200 200 Otis Orchards Sub & Transmission (avoided) 10,307 11,020 8,825 Salvage Otis Orchards 1,000 200 200

662 15,756 15,317

Lolo non WoH (Connect Autos) E114 662 762 762

Palouse 230 ER 2105 14,994 14,555 27 Mile "New Build" Transmission (1000 MW) 14,725 14,286 Shawnee Add Line Position 269 269 (pending Telecom potion of B-S)

West of Hatwai Contract with BPA

Wecc/Nerc Compliance & Load Service

Deferred to 2007

5-18-05 Revised Mar 1, 2005 D. James

230 kV Upgrade Project - Milestone Summary

2004 2005Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

GPSS Ground Breaking at Boulder Substation 14

Auto Transformer #1 Delivered to Boulder 19

Light Fiber Optic Cable Dry Ck-Lolo 30

Begin Grading Benewah Substation 11

Energize Dry Ck-Lolo 230 kV Transmission Line 18

Energize Dry Ck 230 kV Substation 14

Begin Transmission Line Integration at Boulder (ILB Contract)

17

Light Fiber Optic Cable Dry Ck-N Lewiston 18

Begin Hatwai-Lolo Reconductor (Mt. Power Contract)

10

GPSS Ground Breaking at Benewah Substation 18

Re-energize Hatwai-Lolo 230 kV Transmission line 27

Energize Dry Creek 200 MVar Capacitor Bank 10

Energize Boulder Substation North 230 & West 115 kV Busses

30

Energize Boulder Substation East 115 kV Bus 29

Energize Boulder Substation South 230 kV Bus 15

Scheduled Target Date

Actual Start/End Date

5-18-05

230 kV Upgrade ProjectFiber Optic Control System

May 2005

Bell (BPA)

Cabinet Gorge

Noxon

Benewah

PinecreekWestside

Rathdrum

Shawnee

Moscow 230

Hatwai (BPA)

Lolo

BeaconBoulder

Avista HQ

SubstationTransmission LineFiber Optic CableDig Microwave

Avista's 230 kV FacilitiesDry Creek

Mica, Idaho

Beacon-RathdrumInstall 25 mi OPGW

In-Service since May 2004

Noxon-PinecreekInstall 43 miles of ADSS/OPGW

Scheduled Completion Oct 20, 2006

Mica Peak Digital RadioIncluding Equipment installation at Pinecreek,Kellogg Office, Kellogg Pk, and Benewah Sub.

Scheduled Completion Nov, 2005

Benewah-ShawneeInstall 60 miles of OPGW

Scheduled Completion Oct 25, 2007

Southern RingInstall 35 miles of ADSS/OPGW

Scheduled CompletionApr 15, 2006

Boulder-BenewahInstall 26 miles of ADSSScheduled Completion

Oct 27, 2005

Feasibility cost estimates for the engineering, procurement, and installation of Fiber Optic cable on 230 kV transmission. Does not include associated costs such as transmission make-ready, permitting, real-estate, and contingency factors.

BPA Leased Fiber

Cost Estimates March 2005

Northern Ring (Nox-Ben) 2.8M

Southern Ring (Hat-DC) 1.2M

Mica Radio 1.2M

Ben-Shawnee 1.1M

RAS and EE 0.9M

Total Telecom $7.2MN. Lewiston

Northern Ring

Southern Ring

Tracking ID Date Description Incremental $ Impact

2105-04 4/Mar/05Defer $2,000k of Benewah-Shawnee 2005 to 2006. Combines foundation work with 2006 line construction but allows for the procurement of some steel poles in 2005.

None

0283-04 4/Mar/05

Project review by Telecom revises scope of work to install fiber optic cable between Pinecreek and Kellogg Office. Using "lashed fiber" on existing distribution circuits is generally, less costly than installing ADSS on transmission.

Undetermined, downward cost

pressure.

2000-01 4/Mar/05To balance the 2005 budget for Boulder (i.e. increased cost of transmission poles and contract labor), the 2nd 230/115 kV autotransformer delivery was deferred until Q2/06.

$59k

2105-03 17/Jan/05Outcome of Value Engineering study by Power Engineers combined with internal "Round the Wheel" efforts to reduce forecasted cost of the Benewah-Shawnee transmission line.

($4,827k)

0283-03 13/Jan/05Documenting special provisions of Wilson Construction contract to install fiber optic cable on the Dry Creek-North Lewiston 230 kV Transmission Line.

$0-50k

0948-03 3/Jan/05The ILB contract to integrate Boulder Substation with area transmission lines exceeds Avista estimates. The increase in transmission related construction across the U.S. is driving labor escalation.

$1,600k

0255-02 21/Dec/04Avista agrees to pay an extra work order to Wilson Construction for the rental of specialized equipment in order to keep the Beacon-Rathdrum line project on schedule.

$100k

0283-02 28/Oct/04Cost estimates to install fiber optic cable revised from feasibility to engineered estimates. Previous estimates were understated with respect to the procurement and installation of ADSS type fiber optic cable.

$1,962k

0594-02 22/Oct/04Power Engineers provides the first design based cost estimate to construct the 60-mile Benewah-Shawnee transmission line. Earlier Avista estimates based on steel and labor pricing prior to 03/04 market escalation.

$14,641k

0271-03 23/Sep/04 Defer Hatwai-North Lewiston reconductor and fiber optic project from Q4/05 to Q1/06. None

0594-01 23/Sep/04 Extend in-service date for Benewah-Shawnee project until November 2007. Relieves $10M on 2005 capital budget. None

0948-02 16/Sep/04Cost to procure steel poles for the Boulder transmission project exceeds engineered estimates. Steel market escalation drives pricing from Valmont.

$552k

0255-01 2/Aug/04 Unresolved change order request with Wilson Construction on Beacon-Rathdrum project (see 0255-02) $0-363k

0114-01 2/Aug/04Project scope review for Lolo Substation. Structural analysis requires reconstruction of busswork supports. Substantial change to the project scope.

$1,873k

0283-01 2/Aug/04Telecom revises forecast estimates in response to the actual cost of installing ADSS fiber optic cable on the Dry Creek-Lolo 230 kV transmission line.

$962k

0948-01 2/Aug/04

The forecast cost estimate to construct Boulder substation is reduced reflecting the avoided cost of purchasing land. These cost savings are partially offset by the increased cost and complexity of routing transmission lines into Boulder Sub.

($1,847k)

0271-02 2/Aug/04 Budget review of Dry Creek projects results in net decrease to ER 0271 ($3,367k)

Project Information Control Summary

5-18-05

Cost Control ~ Steel Pole Alliance Agreement

Steel poles purchased for both the Beacon-Rathdrum and Boulder projects were competitively bid to a number of potential suppliers. In both cases, Valmont Industries was the successful bidder. In response to the volatile steel market in 2003 and especially in 2004, Avista’s Procurement department developed an alternate strategy to bidding the Palouse 230 steel order. Pat Gilica, Senior Buyer initiated an alliance agreement with Valmont for the purchase of 6,300,000 pounds of steel. Both companies have agreed to develop a mutually beneficial business strategy. In fact, Valmont has agreed to help Avista develop a least-cost design for Palouse steel towers. The alliance allows Valmont greater flexibility in the production of steel poles and spreads production over a longer time frame. This enables Valmont to levelize their shop resources and lower the unit conversion costs. On January 19, 2005, Avista met with Valmont to discuss strategy, purpose and intent of the Alliance. Both parties in pursuit of a contractual relationship have signed a Letter of Intent. Engineers from Valmont and Avista are collaborating to design a steel pole that reduces overall weight, minimizes scrap steel, and requires fewer hours to fabricate. Through negotiations by Ken Sweigart, Senior Transmission engineer, Avista and Valmont agreed on an average price per structure of $1.274 per pound. This price is a sizeable savings as compared to preliminary estimates of $1.40 per pound. The following are other factors that will be worked into our purchasing agreement:

1. Valmont will provide fixed pricing for the conversion of plate steel to finished poles F.O.B. destination (fixed)

2. The price for raw steel will be based on ISG index at the time of purchase from the mill (variable).

3. Invoicing will itemize conversion costs separately from the cost of plate steel. In addition to the pole order, foundation support anchor bolts are a potential source of cost savings. Again, Avista and Valmont are working to establish the most cost effective bolt design and application. Six standard anchor bolt sizes have been identified each with a unique concept of color-coding to aid construction. Valmont is leveraging a rebate program offered by their steel supplier on orders exceeding 1100 tons. By aggregating Avista’s order with other commitments, Valmont is positioned to drive down the cost of these anchor bolts.

A final purchase contract between Valmont and Avista is pending ratification.

05-20-2005

Internal Data Request

It is estimated that the 230 kV Upgrade projects will require an investment of over 100 million dollars between 2003 and 2006. Information was gathered to document the planning, communication, control, estimating, analysis, justification, and schedule for the projects. Information specific to these transmission upgrades was collected in the following categories:

1. Documentation & Retention 2. Management Communication, Review and Control 3. Need Assessment 4. Cost Assessment

Hard copy files were binned into System Planning (alternative development, analysis, need, justification, and feasibility estimating) and Project Specific groupings (public outreach, engineering, budgeting, internal and external communication). All hardcopy files were sorted to remove duplicates and to arrange documents in chronological order. Soft copy, electronic files, were reviewed, sorted by category, and printed for inclusion with other hard copy information. To date, there are nine bound volumes of information. During the next two and a half years, additional information will be added as it becomes available.

Photo Library A number of digital photographs have been taken during the project life. These photos are available upon request.

05-20-2005

Palouse 230 Analysis

In light of the escalation in cost of steel and contract labor, a task force was formed to evaluate the need for and the alternatives to constructing the Benewah-Shawnee 230 kV transmission line. The group, which included Liz Andrews, Kay Bachman, Dave DeFelice, Hugh Imhof, David James and Scott Waples, drafted a report and made recommendations that Avista continue to plan, design, finance, and construct the Benewah-Shawnee 230 kV transmission line. The following is a summary from that report. Excerpts from the March 2005 Palouse 230 review.

In March 2002, a feasibility estimate to construct the Benewah-Shawnee 230 kV line was $25.7 million. At that time, a number of factors were unknown including definitive transmission line routing between Rosalia and Benewah substations. The project was not conceptually designed and the impacts of steel and contract labor escalation were unknown. These unknown factors included: • Number of steel tower structures • Exact routing and distance of the line • Market forces soon to impact the world steel market • Pending escalation in the contract labor market • Exact types and weights of steel tower structures • Specifications for overhead shield and optical ground wire In October of 2004, project consultant, Power Engineers, completed the preliminary design along the 60-mile transmission route. Their estimate, totaling $39.8 million, revealed a variance of $14.1 million as compared to the March 2002 feasibility estimate. The greatest change in the project cost estimate is the price of steel. The International Steel Group (ISG) index price for hot-rolled steel in May of 2002 stood at $260/ton. In October of 2004, the ISG index was $725/ton or 280% above the original feasibility estimate. $8.7 million of the $14.1 million variance is due to the escalation in steel, or 62%. $1.2 million of the variance is due to the escalation in aluminum, or 8.5%. Therefore, over 70% of the increase in estimated costs for this project can be attributed to the escalation in steel and aluminum materials. In addition, contract labor costs attribute $1.6 million or 11% of the overall variance. Each of these costs is discussed in detail in this report. In response to recent material and labor cost escalations, this report re-evaluates the need and justification for the Benewah-Shawnee 230 kV transmission line.

In this report, three project alternatives were considered:

1. No-build 2. Additional 500 kV Hatwai transformer & Moscow-Shawnee 230 kV line 3. Benewah-Shawnee – including scope reductions (currently, the approved project)

Construction and operating expense are summarized below. Alternative Construction

($M) Annual

Operating Cost ($M)

Comment

No Build Null 13.9 Breach WoH Contract Numerous NERC/WECC Compliance Issues Requires wheeling through BPA at Hatwai

2nd Hatwai Transformer

37.5-44.5 13.9 Overload problems persist on Benewah-Moscow Breach WoH Contract Continued reliance on BPA at Hatwai

Benewah-Shawnee (Including cost containment strategies)

35.6 Null Provides backup source to Shawnee Mitigates Benewah-Moscow overloads Supports L/C Load Service and Exports to Idaho Power & PacifiCorp

In addition, this report will summarize the cost containment strategies that are forecasted to reduce project cost by 4.2 million dollars. The March 2005 forecasted project cost (including scope reductions) as computed by Power Engineers is 35.6 million dollars. After comparing these options with respect to cost, schedule, and performance, the Palouse transmission task force recommends that Avista management continue support for the Benewah-Shawnee transmission project.