[Federal Register Volume 73, Number 159 (Friday, August 15, 2008)]
[Notices]
[Pages 47945-47947]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-18953]
[[Page 47945]]
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DEPARTMENT OF ENERGY
Western Area Power Administration
Pick-Sloan Missouri Basin Program--Eastern Division--Rate Order
No. WAPA-140
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 Pick-Sloan Missouri Basin Program--Eastern Division
(P-SMBP--ED) firm electric and firm peaking power service. Current
rates, under Rate Schedules P-SED-F9 and P-SED-FP9, extend through
December 31, 2012, but are not sufficient to meet the P-SMBP--ED
revenue requirements. The proposed rates will provide sufficient
revenue to pay all annual costs, including interest expenses, and repay
required investments within the allowable periods. Western will prepare
and make available a brochure that provides detailed information on the
proposed rates. The proposed rates, under Rate Schedules P-SED-F10 and
P-SED-FP10, 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will remain in effect through December 31, 2013, or until superseded.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. Robert
J. Harris, Regional Manager, Upper Great Plains Region, Western Area
Power Administration, 2900 4th Avenue North, Billings, MT 59101-1266,
or e-mail at ugpfirmrate@wapa.gov. Western will post information about
the rate process on its Web site at http://www.wapa.gov/ugp/rates/
2009firmrateadjust. 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. Linda Cady-Hoffman, Rates Manager,
Upper Great Plains Region, Western Area Power Administration, 2900 4th
Avenue North, Billings, MT 59101-1266, telephone (406) 247-7439, e-mail
cady@wapa.gov.
SUPPLEMENTARY INFORMATION: The proposed rates for P-SMBP--ED firm
electric and firm peaking service are designed to recover an annual
revenue requirement that includes investment repayment, interest,
purchase power, operation and maintenance, and other expenses.
Rate Schedules P-SED-F9 and P-SED-FP9 for P-SMBP--ED firm electric
and firm peaking service, respectively, were approved for a 5-year
period beginning on January 1, 2008, and ending December 31, 2012.\1\
Under current Rate Schedule P-SED-F9 effective January 1, 2008, the
composite rate is 24.49 mills per kilowatthour (mills/kWh), the firm
energy rate is 13.99 mills/kWh, and the firm capacity rate is $5.65 per
kilowattmonth (kWmonth). The projected revenue requirement for firm
electric service is allocated equally between capacity and energy.
Under current Rate Schedule P-SED-FP9 effective January 1, 2008, the
firm peaking capacity rate is $5.10/kWmonth. These Rate Schedules are
formula based, providing for an up to 2 mills/kWh increase in the
Drought Adder rate component.
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\1\ WAPA-135 was approved by the Deputy Secretary of Energy on
November 14, 2007 (72 FR ] 64067), and confirmed and approved by
FERC on a final basis on April 14, 2008, through December 31, 2012,
in Docket No. EF08-5031-000 (123 FERC ] 62048).
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This proposed rate adjustment reflects a rate increase based on the
P-SMBP--ED Final Fiscal Year 2007 Power Repayment Study (PRS). The PRS
sets the total annual P-SMBP--ED revenue requirement for 2009 for firm
electric and firm peaking power service at $282.6 million, or a 19.8
percent increase for a composite rate of 29.34 mills/kWh. The current
rates, including a 2 mills/kWh increase provided for under the Drought
Adder formula rate component, are not sufficient to meet the P-SMBP--ED
revenue requirements. 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
rate schedules for firm electric service (P-SED-F10) and firm peaking
service (P-SED-FP10) 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 P-SED-F10 and P-
SED-FP10 are listed in Table 1.
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\2\ Under the current Rate Schedules 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 P-SMBP-ED Firm Electric and Firm Peaking Power Service Revenue Requirement and Rates
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Percent change
Proposed rates (Jan. 1, 2009) from existing
Firm electric service Existing rates as of 2008 \2\ 2008 to
proposed 2009
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Firm and Firm Peaking Revenue $235.9 million............... $282.6 million............... 19.8
Requirement.
Composite Rate.................... 24.49 mills/kWh.............. 29.34 mills/kWh.............. 19.8
Firm Capacity Rate................ $5.65/kWmonth................ $6.80/kWmonth................ 20.4
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Firm Energy Rate.................. 13.99 mills/kWh.............. 16.71 mills/kWh.............. 19.4
Firm Peaking Capacity Rate........ $5.10/kWmonth................ $6.20/kWmonth................ 21.6
Firm Peaking Energy Rate \1\...... 13.99 mills/kWh.............. 16.71 mills/kWh.............. 19.4
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\1\ Firm peaking energy is normally returned. This will be assessed in the event firm peaking energy is not
returned.
\2\ 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 P-SED-F10, Western is proposing to continue to
identify its firm electric service revenue requirement using Base and
Drought Adder rate components and provide up to a 2 mills/kWh increase
in the Drought Adder rate component. 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 past and present
drought conditions within the Pick-Sloan Program. The Drought Adder
rate component includes costs associated with future non-timing
purchases of additional power to 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 P-SMBP-ED annual revenue
requirement equals $293.7 million and is comprised of a Base revenue
requirement of $163.5 million plus a Drought Adder revenue requirement
of $130.2 million. Both the Base and Drought Adder rate components
recover portions of the firm power revenue requirement, firm peaking
power, and associated five percent discount revenue necessary to equal
the P-SMBP-ED revenue requirement. A comparison of the current and
proposed rate components are listed in Table 2.
Table 2--Summary of P-SMBP--ED Rate Components
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Existing rates as of 2008 Proposed rates (effective January 1,
----------------------------------------- 2009) \2\
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Base rate Drought adder Total Base rate Drought adder
component rate component component rate component Total
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Firm Capacity Rate (/kWmonth). $3.65 $2.00 $5.65 $3.80 $3.00 $6.80
Firm Energy Rate (mills/kWh).. 8.93 5.06 13.99 9.27 7.44 16.71
Firm Peaking Capacity Rate (/ $3.25 $1.85 $5.10 $3.40 $2.80 $6.20
kWmonth).....................
Firm Peaking Energy Rate 8.93 5.06 13.99 9.27 7.44 16.71
(mills/kWh) \1\..............
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\1\ Firm peaking energy is normally returned. This will be assessed in the event firm peaking energy is not
returned.
\2\ 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.
As set forth in Table 2 above, under proposed Rate Schedule P-SED-
FP10, the firm peaking capacity rate will increase to $6.20/kWmonth, or
a 21.6 percent increase for the proposed January 1, 2009, rate
adjustment. Peaking energy is either returned to Western or paid for in
accordance with the terms of the contract between Western and the
peaking power customer.
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 within the
Pick-Sloan Program, demonstrate repayment of the drought related costs
in the PRS, 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
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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 advance 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 rate 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 costs that would be entered into the PRS from the
FY 2010 work plans. Western has reevaluated the benefits of a two-step
rate adjustment and concluded with 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 continuing below normal hydropower generation in the P-
SMBP--ED, Western may need to use the Continuing Fund (Emergency Fund)
to pay for unanticipated purchase power and wheeling expenses necessary
to meet its contractual obligations for the sale and delivery of power
to its customers. Should Western use 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 rate 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 and peaking rates for
P-SMBP--ED 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, 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 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, or other
documents that Western initiates or uses to develop the proposed rates
are available for inspection and copying at the Upper Great Plains
Regional Office, located at 2900 4th Avenue North, Billings, Montana.
Many of these documents and supporting information are also available
on Western's Web site under the ``2009 Firm Rate Adjustment'' section
located at http://www.wapa.gov/ugp/rates/2009firmrateadjust.
Ratemaking Procedure Requirements
Environmental Compliance
In compliance with the National Environmental Policy Act of 1969
(NEPA) (42 U.S.C. 4321, et seq.); Council on Environmental Quality
Regulations (40 CFR parts 1500-1508); and DOE NEPA Regulations (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: July 31, 2008.
Timothy J. Meeks,
Administrator.
[FR Doc. E8-18953 Filed 8-14-08; 8:45 am]
BILLING CODE 6450-01-P