[Federal Register Volume 73, Number 159 (Friday, August 15, 2008)]
[Notices]
[Pages 47942-47944]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-18949]


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DEPARTMENT OF ENERGY

Western Area Power Administration


Loveland Area Projects--Rate Order No. WAPA-142

AGENCY: Western Area Power Administration, DOE.

ACTION: Notice of proposed power rates.

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SUMMARY: The Western Area Power Administration (Western) is proposing 
revised rates for Loveland Area Projects (LAP) firm electric service. 
LAP consists of the Fryingpan-Arkansas Project (Fry-Ark) and the Pick-
Sloan Missouri Basin Program (Pick-Sloan)--Western Division, which were 
integrated for marketing and rate-making purposes in 1989. Current 
rates, under Rate Schedule L-F7, expire on December 31, 2012, but are 
not sufficient to meet LAP revenue requirements. The proposed rates 
will provide sufficient revenue to pay all annual costs, including 
interest expenses, and repay the required investment within the 
allowable period. Western will prepare and make available a brochure 
that provides detailed information on the proposed rates. The proposed 
rates, under Rate Schedule L-F8, are scheduled to go into effect on 
January 1, 2009, and will remain in effect through December 31, 2013, 
or until superseded. Publication of this Federal Register notice begins 
the formal process for the proposed rate adjustment.

DATES: The consultation and comment period begins today and will end 
November 13, 2008. Western will present a detailed explanation of the 
proposed rates at public information forums. Public Information forum 
dates are:
    1. September 9, 2008, 9 a.m. to 10:30 a.m. MDT, Denver, CO.
    2. September 10, 2008, 8 a.m. to 9:30 a.m. CDT, Sioux Falls, SD.
    Western will accept oral and written comments at public comment 
forums. Public comment forums will be held on the following dates:
    1. September 9, 2008, 11:30 a.m. to 12:30 p.m. MDT, Denver, CO.
    2. September 10, 2008, 10:30 a.m. to 12 p.m. CDT, Sioux Falls, SD.
    Western will accept written comments any time during the 
consultation and comment period.

ADDRESSES: Written comments and/or requests to be informed of Federal 
Energy Regulatory Commission (FERC) actions concerning the rates 
submitted by Western to FERC for approval should be sent to Mr. James 
D. Keselburg, Regional Manager, Rocky Mountain Region, Western Area 
Power Administration, 5555 East Crossroads Boulevard, Loveland, CO 
80538-8986, or e-mail at <a href="/cdn-cgi/l/email-protection#a2cec3d2c4cbd0cfc3c6c8e2d5c3d2c38cc5cdd4"><span class="__cf_email__" data-cfemail="315d50415758435c50555b71465041501f565e47">[email protected]</span></a>. Western will post 
information about the rate process on its Web site at http://www.wapa.gov/rm/ratesRM/2009/default.htm. Western will post comments 
received via letter and e-mail to its Web site after the close of the 
comment period. Western must receive written comments by the end of the 
consultation and comment period to ensure they are considered in 
Western's decision process.
    Public information and comment forum locations are:
    1. Denver--Ramada Plaza Hotel, 10 East 120th Avenue, Northglenn, 
CO.
    2. Sioux Falls--Holiday Inn, 100 West 8th Street, Sioux Falls, SD.

FOR FURTHER INFORMATION CONTACT: Ms. Sheila D. Cook, Rates Manager, 
Rocky Mountain Region, Western Area Power Administration, 5555 East 
Crossroads Boulevard, Loveland, CO 80538-8986, telephone (970) 461-
7211, e-mail <a href="/cdn-cgi/l/email-protection#a6cac7d6c0cfd4cbc7c2cce6d1c7d6c788c1c9d0"><span class="__cf_email__" data-cfemail="81ede0f1e7e8f3ece0e5ebc1f6e0f1e0afe6eef7">[email protected]</span></a> or <a href="/cdn-cgi/l/email-protection#7201111d1d1932051302135c151d04"><span class="__cf_email__" data-cfemail="0172626e6e6a41766071602f666e77">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION: The proposed rates for LAP firm electric 
service are designed to recover an annual revenue requirement that 
includes investment repayment, interest, purchase power, operation and 
maintenance, and other expenses. The projected annual revenue 
requirement for firm electric service is allocated equally between 
capacity and energy.
    Rate Schedule L-F7 for firm electric service was approved for a 5-
year period beginning January 1, 2008, and ending December 31, 2012.\1\ 
Under the current Rate Schedule L-F7 for 2008, the composite rate is 
32.42 mills per kilowatthour (mills/kWh), the firm energy rate is 16.21 
mills/kWh, and the firm capacity rate is $4.25 per kilowattmonth 
(kWmonth). This Rate Schedule is formula based, providing for an 
increase in the Drought Adder

[[Page 47943]]

rate component of up to 2 mills/kWh without a formal public process.
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    \1\ WAPA-134 was approved by the Deputy Secretary of Energy on 
November 1, 2007 (72 FR ] 64,061), and confirmed and approved by 
FERC on a final basis on May 16, 2008, in Docket No. EF08-5181-000 
(123 FERC ] 62,137).
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    This proposed rate adjustment reflects a rate increase based on the 
Fry-Ark and Pick-Sloan--Western Division (P-SMBP--WD) revenue 
requirements derived from the Fiscal Year 2007 Power Repayment Studies 
(PRSs). The PRSs set the LAP revenue requirement for 2009 for firm 
electric service at $75.9 million, which is a 14.9 percent increase. 
The current firm composite rate, including a 2 mills/kWh increase 
provided for under the Drought Adder formula rate component, is not 
sufficient to meet the LAP revenue requirement. Given the need for a 
Base rate component increase and the size of the Drought Adder rate 
component increase, Western is required to initiate a formal public 
process.\2\ Western has prepared the proposed rate schedule for firm 
electric service (LF-8) for consideration and comment during this 
public process. A comparison of the existing revenue requirement and 
rates and the proposed revenue requirement and rates under L-F8 are 
listed in Table 1.
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    \2\ Under the current Rate Schedule, Western had the option of 
increasing the Drought Adder rate component by up to 2 mills/kWh 
outside of a formal public process, and only initiating the formal 
public process for the Base rate component increase and the 
incremental increase of the Drought Adder rate component above 2 
mills/kWh. Instead, Western has opted to initiate the formal public 
process for this rate increase.

                    Table 1--Proposed LAP Firm Electric Service Revenue Requirement and Rates
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                                       Existing rates as of 2008      Proposed rates \1\
        Firm electric service                     L-F7              (January 1, 2009) L-F8      Percent change
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Revenue Requirement..................  $66.1 million              $75.9 million              14.9
Composite Rate.......................  32.42 mills/kWh            37.24 mills/kWh            14.9
Firm Energy Rate.....................  16.21 mills/kWh            18.62 mills/kWh            14.9
Firm Capacity Rate...................  $4.25/kWmonth              $4.88/kWmonth              14.9
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\1\ The proposed rates are subject to adjustment prior to publication in the final Notice of Order Concerning
  Power Rates. Adjustments, if any, would be based on revisions to the Drought Adder rate component due to
  changes in hydrological conditions.

    Under Rate Schedule L-F8, Western is proposing to continue to 
identify its firm electric service revenue requirement using Base and 
Drought Adder rate components and provide for an annual increase in the 
Drought Adder rate component of up to 2 mills/kWh. The Base rate 
component is a revenue requirement that includes annual operation and 
maintenance expenses, investment repayment and associated interest, 
normal timing power purchases, and transmission costs. Western's normal 
timing power purchases are purchases due to operational constraints 
(e.g., management of endangered species habitat, water quality, 
navigation, etc.) and are not associated with the current drought. The 
Drought Adder rate component is a formula-based revenue requirement 
that includes costs attributable to the present drought conditions. The 
Drought Adder rate component includes costs associated with future non-
timing purchases of additional power to meet firm obligations not 
covered with available system generation due to the drought, previously 
incurred deficits due to purchased power debt that resulted from non-
timing power purchases made during this drought, and the interest 
associated with the previously incurred and future drought debt. The 
Drought Adder rate component is designed to repay Western's drought 
debt within 10 years from the time the debt was incurred, using 
balloon-payment methodology. For example, the drought debt incurred by 
Western in 2007 will be repaid by 2017.
    The annual revenue requirement calculation will continue to be 
summarized by the following formula: Annual Revenue Requirement = Base 
Revenue Requirement + Drought Adder Revenue Requirement. Under this 
proposal, effective January 1, 2009, the LAP revenue requirement equals 
$75.9 million and is comprised of a Base revenue requirement of $49.9 
million plus a Drought Adder revenue requirement of $26 million. A 
comparison of the current rate components and the proposed rate 
components are listed in Table 2.

                                     Table 2--Summary of LAP Rate Components
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                                      Existing rates as of 2008 L-F7      Proposed rates \1\ (January 1, 2009) L-
                                -----------------------------------------                   F8
                                                                         ---------------------------------------
                                     Firm energy         Firm capacity        Firm energy        Firm capacity
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Base...........................  11.92 mills/kWh      $3.13/kWmonth       12.23 mills/kWh     $3.21/kWmonth
Drought Adder..................  4.29 mills/kWh       $1.12/kWmonth       6.39 mills/kWh      $1.67/kWmonth
Total LAP......................  16.21 mills/kWh      $4.25/kWmonth       18.62 mills/kWh     $4.88/kWmonth
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\1\ The proposed rates are subject to adjustment prior to publication in the final Notice of Order Concerning
  Power Rates. Adjustments, if any, would be based on revisions to the Drought Adder rate component due to
  changes in hydrological conditions.


[[Page 47944]]

    Continuing to identify the firm electric service revenue 
requirement using Base and Drought Adder rate components will assist 
Western in the presentation of the impacts of the drought, demonstrate 
repayment of the drought related costs in the PRSs, and allow Western 
to be more responsive to changes in drought related expenses. Western 
will continue to charge and bill its customers firm electric service 
rates for energy and capacity, which are the sum of the Base and 
Drought Adder rate components.
    Western reviews its firm electric service rates annually. Western 
will review the Base rate component after the annual PRS is completed, 
generally in the first quarter of the calendar year. If an adjustment 
to the Base rate component is necessary, Western will initiate a public 
process pursuant to 10 CFR part 903 prior to making an adjustment.
    In accordance with the original implementation of the Drought Adder 
rate component, Western will continue to review the Drought Adder rate 
component each September to determine if drought costs differ from 
those projected in the PRS, and, if so, whether an adjustment, either 
incremental or decremental, to the Drought Adder rate component is 
necessary. Western will notify customers by letter each October of the 
planned incremental or decremental adjustment and implement the 
adjustment in the January billing cycle. Although decremental 
adjustments to the Drought Adder rate component will occur as drought 
costs are repaid, the adjustments cannot result in a negative Drought 
Adder rate component. To give customers advanced notice, Western will 
conduct a preliminary review of the Drought Adder rate component in 
early summer and notify customers by letter of the estimated change to 
the Drought Adder rate component for the following January, with the 
final Drought Adder component adjustment verified with notification in 
the October letter to the customers. Implementing the Drought Adder 
rate component adjustment on January 1 of each year will help keep the 
drought deficits from escalating as quickly, will lower the interest 
expense due to drought deficits, will demonstrate responsible deficit 
management, and will provide prompt drought deficit repayments.
    As a part of the current and proposed rate schedules, Western 
provides for a formula-based adjustment of the Drought Adder rate 
component of up to 2 mills/kWh. The 2 mills/kWh cap is intended to 
place a limit on the amount the Drought Adder formula can be adjusted 
relative to associated drought costs without having to go through a 
public process to recover costs attributable to the Drought Adder 
formula rate for any one-year cycle.
    During informal discussions with its customers prior to the 
commencement of this rate adjustment process, Western discussed the 
possibility of implementing a two-step rate adjustment for the Base 
rate component to address operational and maintenance costs as well as 
normal inflationary cost that would be entered into the PRSs from the 
FY 2010 work plans. Western has reevaluated the benefits of the two-
step rate adjustment and concluded that due to the unpredictability of 
the hydrological conditions, rising fuel costs and proposed changes in 
the electric transmission industry, it is more prudent to forego a two-
step rate adjustment and continue the annual customer consultations and 
possible annual rate adjustments. Therefore, Western is not proposing a 
two-step rate adjustment in this public process.
    Due to continued below normal hydropower generation, Western may 
need to use the Continuing Fund (Emergency Fund) to pay for 
unanticipated purchased power and wheeling expenses necessary to meet 
its contractual obligations for the sale and delivery of power to its 
customers. Should Western utilize this funding mechanism, Western will 
replenish the Continuing Fund (Emergency Fund) in accordance with law 
and Western's associated repayment policy, dated March 15, 2007.\3\
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    \3\ Western's Continuing Fund (Emergency Fund) Policy can be 
found at http://www.wapa.gov/powerm/pdf/repaypolicy.pdf.
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Legal Authority

    Since the proposed rates constitute a major adjustment as defined 
by 10 CFR part 903, Western will hold public information forums and 
public comment forums. Western will review all timely public comments 
and make amendments or adjustments to the proposal as appropriate. 
Proposed rates will be forwarded to the Deputy Secretary of Energy for 
approval on an interim basis.
    Western is establishing firm electric service rates for LAP under 
the Department of Energy Organization Act (42 U.S.C. 7152); the 
Reclamation Act of 1902 (ch. 1093, 32 Stat. 388), as amended and 
supplemented by subsequent laws; section 9(c) of the Reclamation 
Project Act of 1939 (43 U.S.C. 485h(c)); section 5 of the Flood Control 
Act of 1944 (16 U.S.C. 825s); and other acts that specifically apply to 
the projects involved.
    By Delegation Order No. 00-037.00, effective December 6, 2001, the 
Secretary of Energy delegated: (1) The authority to develop power and 
transmission rates to Western's Administrator; (2) the authority to 
confirm, approve, and place such rates into effect on an interim basis 
to the Deputy Secretary of Energy; and (3) the authority to confirm, 
approve, and place into effect on a final basis, to remand, or to 
disapprove such rates to the FERC. Existing Department of Energy (DOE) 
procedures for public participation in power rate adjustments (10 CFR 
part 903) were published on September 18, 1985.

Availability of Information

    All brochures, studies, comments, letters, memorandums, e-mail, or 
other documents that Western initiates to develop the proposed rates 
are available for inspection and copying at the Rocky Mountain Regional 
Office, located at 5555 East Crossroads Boulevard, Loveland, Colorado. 
Many of these documents and supporting information are also available 
on Western's Web site under the ``Rates'' section located at http://www.wapa.gov/rm/ratesRM/2009/default.htm.

Ratemaking Procedure Requirements

Environmental Compliance

    In compliance with the National Environmental Policy Act of 1969 
(NEPA) (42 U.S.C. 4321, et seq. ); the Council on Environmental Quality 
Regulations for implementing NEPA (40 CFR parts 1500-1508); and DOE 
NEPA Implementing Procedures and Guidelines (10 CFR part 1021), Western 
is in the process of determining whether an environmental assessment or 
an environmental impact statement should be prepared or if this action 
can be categorically excluded from those requirements.

Determination Under Executive Order 12866

    Western has an exemption from centralized regulatory review under 
Executive Order 12866; accordingly, no clearance of this notice by the 
Office of Management and Budget is required.

    Dated: August 5, 2008.
Timothy J. Meeks,
Administrator.
[FR Doc. E8-18949 Filed 8-14-08; 8:45 am]
BILLING CODE 6450-01-P


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