Daily Rules, Proposed Rules, and Notices of the Federal Government
The Acting Deputy Secretary of Energy approved existing Rate Schedule L-F8 for firm electric service on an interim basis on January 8, 2009 (74 FR 3015, January 16, 2009), for a 5-year period beginning on February 1, 2009, and ending December 31, 2013.
The current rate, including a 2 mills/kWh increase provided for under the Drought Adder rate component, is not sufficient to meet the LAP revenue requirement. As a result, the LAP firm electric service rates must be increased mostly due to the financial impacts of the drought. The drought is causing a decrease in hydro-power generation, leading to an increase in purchase power expenses and a decrease in revenue from non-firm energy sales. Additional increases are being driven by slight increases in operation and maintenance costs, as well as the inclusion of additional transmission costs associated with the wheeling of Mt. Elbert generation in the Fryingpan-Arkansas Power Repayment Study.
Rate Schedule L-F8 is being superseded by Rate Schedule L-F9. Under Rate Schedule L-F9, the provisional rates for firm electric service will result in a composite rate of 41.42 mills/kWh. The firm energy rate will be 20.71 mills/kWh (a Base component of 12.54 mills/kWh and a Drought Adder component of 8.17 mills/kWh) and the capacity rate will be $5.43/kWmonth (a Base component of $3.29/kWmonth and a Drought Adder component of $2.14/kWmonth). This is an 11.2 percent increase when compared to the LAP firm electric rates under Rate Schedule L-F8.
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 the Administrator of Western; (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 FERC. Existing Department of Energy procedures for public participation in power rate adjustments (10 CFR part 903) were published on September 18, 1985.
Under Delegation Order Nos. 00-037.00 and 00-001.00C, 10 CFR part 903, and 18 CFR part 300, I hereby confirm, approve, and place Rate Order No. WAPA-146, the proposed LAP firm electric service rates, into effect on an interim basis.
The new Rate Schedule L-F9 will be promptly submitted to FERC for confirmation and approval on a final basis.
These rates for the Loveland Area Projects were established in accordance with section 302 of the Department of Energy (DOE) Organization Act (42 U.S.C. 7152). This Act transferred to and vested in the Secretary of Energy the power marketing functions of the Secretary of the Department of the Interior and the Bureau of Reclamation under the Reclamation Act of 1902 (ch. 1093, 32 Stat. 388), as amended and supplemented by subsequent laws, particularly 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 project 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 the Administrator of Western; (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 Federal Energy Regulatory Commission. Existing DOE procedures for public participation in power rate adjustments (10 CFR part 903) were published on September 18, 1985.
As used in this Rate Order, the following acronyms and definitions apply:
The provisional rates will take effect on the first day of the first full billing period beginning on or after January 1, 2010, and will remain in effect until December 31, 2014, pending approval by FERC on a final basis.
Western followed the Procedures for Public Participation in Power and Transmission Rate Adjustments and Extensions, 10 CFR part 903, in developing these rates. The steps Western took to involve interested parties in the rate process were as follows:
1. The proposed rate adjustment process began March 17, 2009, when Western's Rocky Mountain Region mailed a notice announcing informal meetings to all LAP preference Customers and interested parties.
2. The informal meetings were held on April 15, 2009, in Sioux Falls, South Dakota, and on April 16, 2009, in Northglenn, Colorado. At these informal meetings, Western explained the rationale for the rate adjustment, presented rate designs and methodologies, and answered questions.
4. On July 14, 2009, Western mailed letters to all LAP preference Customers and interested parties transmitting the FRN published on July 14, 2009.
5. On August 18, 2009, at 9 a.m. (MDT), Western held a public information forum at the Ramada Plaza Hotel in Northglenn, Colorado. Western provided updates to the proposed firm electric service rates for LAP and P-SMBP—ED. Western also answered questions and gave notice that more information was available in the Rate Brochure.
6. On August 18, 2009, at 11 a.m. (MDT), following the public information forum, a public comment forum was held. The comment forum gave the public an opportunity to comment for the record. No oral or written comments were received at this forum.
7. Western provided a Website with all of the letters, time frames, dates and locations of forums, documents discussed at the information meetings, FRNs, Rate Brochure, and all other information about this rate process. The Web site is located at h
8. Western received one comment letter and no oral comments during the consultation and comment period, which ended October 13, 2009. All formally submitted comments have been considered in preparing this Rate Order.
Written comments were received from the following organization:
Mid-West Electric Consumers Association
The Post-1989 General Power Marketing and Allocation Criteria, published in the
The P-SMBP—WD and Fry-Ark retain separate financial status. For this reason, separate PRSs are prepared annually for each project. These PRSs are used to determine the sufficiency of the firm electric service rate to generate adequate revenue to repay project investment and costs during each project's prescribed repayment period. The revenue requirement of the Fry-Ark PRS is combined with the P-SMBP—WD revenue requirement, derived from the P-SMBP PRS, to develop one rate for LAP firm electric sales.
The P-SMBP was authorized by Congress in Section 9 of the Flood Control Act of December 22, 1944, commonly referred to as the Flood Control Act of 1944. This multipurpose program provides flood control, irrigation, navigation, recreation, preservation and enhancement of fish and wildlife, and power generation. Multipurpose projects have been developed on the Missouri River and its tributaries in Colorado, Montana, Nebraska, North Dakota, South Dakota, and Wyoming.
In addition to the multipurpose water projects authorized by Section 9 of the Flood Control Act of 1944, certain other existing projects have been integrated with the P-SMBP for power marketing, operation, and repayment purposes. The Colorado-Big Thompson, Kendrick, and Shoshone Projects were combined with the P-SMBP in 1954, followed by the North Platte Project in 1959. These projects are referred to as the “Integrated Projects” of the P-SMBP.
The Flood Control Act of 1944 also authorized the inclusion of the Fort Peck Project with the P-SMBP for operation and repayment purposes. The Riverton Project was integrated with the P-SMBP in 1954, and in 1970 was reauthorized as a unit of P-SMBP.
The P-SMBP is administered by two regions. The Rocky Mountain Region, with a regional office in Loveland, Colorado, markets the Western Division power of P-SMBP through LAP. The Upper Great Plains Region, with a regional office in Billings, Montana, markets power from the Eastern Division of P-SMBP. Eastern Division power is marketed in western Iowa, western Minnesota, Montana, east of the Continental Divide, North Dakota, South Dakota, and the eastern two-thirds of Nebraska. P-SMBP power is marketed to approximately 54 firm power Customers by the Rocky Mountain Region and approximately 300 firm power Customers by the Upper Great Plains Region.
Fry-Ark is a trans-mountain diversion development in southeastern Colorado authorized by the Act of Congress on August 16, 1962 (Pub. L. 87-590, 76 Stat. 389, as amended by Title XI of the Act of Congress on October 27, 1974 (Pub. L. 93-493, 88 Stat. 1486, 1497)). The Fry-Ark diverts water from the Fryingpan River and other tributaries of the Roaring Fork River in the Colorado River Basin on the West Slope of the Rocky Mountains to the Arkansas River on the East Slope. The water diverted from the West Slope, together with regulated Arkansas River water, provides supplemental irrigation and MI water supplies, and produces hydroelectric power. Flood control, fish and wildlife enhancement, and recreation are other important purposes of Fry-Ark. The only generating facility in Fry-Ark is the Mt. Elbert Pumped-Storage powerplant on the East Slope.
Western prepares PRSs each FY to determine if revenues will be sufficient to repay, within the required time, all costs assigned to the LAP. Repayment criteria are based on Western's applicable laws and legislation, as well as policies including DOE Order RA 6120.2. To meet Cost Recovery Criteria outlined in DOE Order RA 6120.2, revised studies and rate adjustments have been developed to demonstrate that sufficient revenues will be collected under the proposed rates to meet future obligations.
A comparison of the existing and provisional rates for LAP firm electric service follows:
Western's Administrator certified that the provisional rates for LAP firm electric service under Rate Schedule L-F9 are the lowest possible rates consistent with sound business principles. The provisional rates were developed following administrative policies and applicable laws.
According to Reclamation Law, Western must establish power rates sufficient to recover OM, purchased power and interest expenses, and repay power investment and irrigation aid.
The Criteria, published in the
The adjustment to the P-SMBP—ED revenue requirement is a separate formal rate process which is documented in Rate Order No. WAPA-147. Rate Order No. WAPA-147 is also scheduled to go into effect on the first day of the first full billing period on or after January 1, 2010.
The Fry-Ark portion of the revenue requirement for LAP firm electric service rates was developed from the revenue requirement calculated in the Fry-Ark Ratesetting PRS. The Fry-Ark revenue requirement increased approximately 5 percent due to increased transmission expenses and the financial impact of the drought. The revenue requirements for Fry-Ark are as follows:
The following table compares LAP existing revenue requirements to the proposed revenue requirements:
Under Rate Schedule L-F9, Western will continue to identify its firm electric service revenue requirement using Base and Drought Adder components. The Base component is a fixed revenue requirement for each project that includes annual OM expenses, investment repayment and associated interest, normal timing power purchases, and transmission costs. Normal timing power purchases are purchases due to operational constraints (
The Drought Adder component for each project is a formula-based revenue requirement that includes costs attributable to the drought conditions in the Regions. The Drought Adder component includes costs associated with future non-timing power purchases to meet firm electric service contractual 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 the drought, and the interest associated with the previously incurred and future drought debt. The Drought Adder component is designed to repay the 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 FY 2008 will be repaid by FY 2018.
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 provisional rate, the LAP annual revenue requirement is $84.5 million and is comprised of a Base revenue requirement of $51.2 million plus a Drought Adder revenue requirement of $33.3 million.
A comparison of the current and proposed rate components are listed in the following table:
Continuing to identify the firm electric service revenue requirement using Base and Drought Adder components will assist Western in presenting the effects of the drought within the Regions, demonstrating repayment of the drought related costs, and allow Western to be more responsive to changes in drought related expenses. Western will continue to charge and bill Customers firm electric service rates for energy and capacity, which are the sum of the Base and Drought Adder components.
Western reviews its firm electric service rates annually. Western will review the Base rate component after the annual PRSs are complete, 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 component, Western will review the Drought Adder component each September to determine if drought costs differ from those projected in the PRSs. If drought costs differ, Western will determine whether an adjustment to the Drought Adder component is necessary. Western will notify Customers by letter each October of the planned incremental or decremental adjustment and implement the adjustment in the following January billing cycle. Although decremental adjustments to the Drought Adder will occur as drought costs are repaid, the adjustments cannot result in a negative Drought Adder rate component. To give customers advance notice, Western will conduct a preliminary review of the Drought Adder in early summer and notify Customers by letter of any estimated change to the Drought Adder for the following January. Western will verify final Drought Adder rate component adjustment by 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.
Western's current and provisional rate schedules provide 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 initiating a public process to recover costs attributable to the Drought Adder formula rate for any one-year cycle.
The following table provides a summary of projected revenue and expense data for the Fry-Ark firm electric service revenue requirement through the 5-year provisional rate approval period:
The summary of P-SMBP—WD revenues and expenses for the 5-year provisional rate approval period is included in the P-SMBP Statement of Revenue and Related Expenses that is part of Rate Order No. WAPA-147.
The existing rates for LAP firm electric service in Rate Schedule L-F8, which expire December 31, 2013, no longer provide sufficient revenues to pay all annual costs, including interest expense, and repay investments and irrigation aid within the allowable period. The adjusted rates reflect increases due to the financial impact of the drought, increased annual expenses, increased investments, and increased interest expense associated with investments and drought deficits. The provisional rates will provide sufficient revenue to pay all annual costs, including interest expenses, and repay investments and irrigation aid within the allowable periods. The provisional rates will take effect on the first day of the first full billing period beginning on or after January 1, 2010, and will remain in effect on an interim basis, pending FERC's confirmation and approval of them or substitute rates on a final basis, through December 31, 2014.
The comment and response below regarding the firm electric service rates is paraphrased for brevity when not affecting the meaning of the statement(s).
Information about this rate adjustment, including the PRSs, comments, letters, memorandums and other supporting materials, that was used to develop the provisional rates is available for public review in the Rocky Mountain Regional Office, Western Area Power Administration, 5555 E. Crossroads Boulevard, Loveland, Colorado.
In compliance with the National Environmental Policy Act (NEPA) of 1969 (42 U.S.C. 4321-4347); Council on Environmental Quality Regulations (40 CFR parts 1500-1508); and DOE NEPA Regulations (10 CFR part 1021), Western has determined that this action is categorically excluded from preparing an environmental assessment or an environmental impact statement.
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.
The Provisional Rates herein confirmed, approved, and placed into effect, together with supporting documents, will be submitted to FERC for confirmation and final approval.
In view of the foregoing and under the authority delegated to me, I confirm and approve on an interim basis, effective on the first full billing period on or after January 1, 2010, Rate Schedule L-F9 for the Loveland Area Projects of the Western Area Power Administration. The rate schedule shall remain in effect on an interim basis, pending FERC's confirmation and approval of them or substitute rates on a final basis through December 31, 2014.
The first day of the first full billing period beginning on or after January 1, 2010, through December 31, 2014.
Within the marketing area served by the Loveland Area Projects.
To the wholesale power Customers for firm electric service supplied through one meter at one point of delivery, or as otherwise established by contract.
Alternating current, 60 hertz, three phase, delivered and metered at the voltages and points established by contract.
Capacity Charge: $5.43 per kilowatt of billing capacity.
Energy Charge: 20.71 mills per kilowatthour (kWh) of monthly entitlement.
Billing Capacity: Unless otherwise specified by contract, the billing capacity will be the seasonal contract rate of delivery.
Any proposed change to the Base component will require a public process. The Drought Adder component may be adjusted annually using the above formulas for any costs attributed to drought of less than or equal to the equivalent of 2 mills/kWh to the LAP composite rate. Any planned incremental adjustment to the Drought Adder component greater than the equivalent of 2 mills/kWh to the LAP composite rate will require a public process.