[Federal Register Volume 59, Number 44 (Monday, March 7, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-5142]


[[Page Unknown]]

[Federal Register: March 7, 1994]


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DEPARTMENT OF ENERGY
Western Area Power Administration

 

Boulder Canyon Project Notice of Rate Order No. WAPA-58-1

AGENCY: Western Area Power Administration, DOE.

ACTION: Notice of rate order--Boulder Canyon Project annual power rate 
adjustment.

-----------------------------------------------------------------------

SUMMARY: Notice is given of the approval by the Administrator of 
Western Area Power Administration (Western) of Rate Order No. WAPA-58-1 
and Rate Schedule BCP-F4/2 placing the proposed decreased power rates 
for the Boulder Canyon Project (BCP) into effect.* The methodology 
utilized in Rate Order WAPA-58 requires that Western modify the BCP 
rates, either an increase or decrease, on an annual basis. These BCP 
rates will remain in effect until they are superseded.
---------------------------------------------------------------------------

    *WAPA's Administrator has been empowered as part of DOE's 1992 
rate filing with FERC to approve the annual rates. See, 57 FR 61076; 
December 23, 1992 and 57 FR 62318 December 30, 1992.
---------------------------------------------------------------------------

    The proposed rates for BCP power are based on a composite rate of 
12.62 mills per kilowatthour (mills/kWh). The composite rate consists 
of an energy charge of 6.31 mills/kWh and a capacity charge of $1.07 
per kilowatt per month ($/kW/month).
    The Assistant Secretary, Conservation and Renewable Energy, United 
States Department of Energy, approved the existing BCP rate methodology 
on an interim basis, effective on January 1, 1993 [57 FR 61074; 
December 23, 1992]. The Federal Energy Regulatory Commission (FERC) 
approved the methodology for the BCP rate on a final basis by Order 
dated November 3, 1993.
    A comparison of the existing and annual BCP rates follows: 

------------------------------------------------------------------------
                                                  Existing      Annual  
                                                 rates (FY    rates (FY 
                                                   1993)        1994)*  
------------------------------------------------------------------------
Rate Schedule.................................     BCP-F4/1     BCP-F4/2
Composite Rate (mills/kWh)....................        14.56        12.62
Energy Rate (mills/kWh).......................         7.28         6.31
Capacity Rate ($/kW/month)....................        $1.28       $1.07 
------------------------------------------------------------------------
*The ratesetting methodology is in effect from January 1, 1993, through 
  September 30, 1997. The BCP rates will be reviewed annually.          

DATES: Rate Schedule BCP-F4/2 will be placed into effect beginning on 
February 1, 1994.

FOR FURTHER INFORMATION CONTACT:

Mr. J. Tyler Carlson, Acting Area Manager, Phoenix Area Office, 
Western Area Power Administration, P.O. Box 6457, Phoenix, AZ 85005-
6457 (602) 352-2521.
Ms. Deborah Linke, Chief, Rates and Statistics Branch, Western Area 
Power Administration, P.O. Box 3402, Golden, CO 80401-0098, (303) 
275-1618.
Mr. Joel Bladow, Assistant Administrator for Washington Liaison, 
Western Area Power Administration, Power Marketing Liaison Office, 
Room 8G-027, Forrestal Building, 1000 Independence Avenue SW., 
Washington, DC 20585-0001, (202) 586-5581.

SUPPLEMENTARY INFORMATION: By Amendment No. 3 to Delegation Order No. 
0204-108, published November 10, 1993 (58 FR 59716), the Secretary of 
Energy delegated: (1) The authority to develop long-term power and 
transmission rates on a nonexclusive basis to the Administrator of 
Western; (2) the authority to confirm, approve, and place power 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 power rates to FERC.
    These power rates are established pursuant to the DOE Organization 
Act (42 U.S.C. 7101 et seq.), the Reclamation Act of 1902 (43 U.S.C. 
372 et seq.), as amended and supplemented by subsequent enactments, 
particularly section 9(c) of the Reclamation Project Act of 1939 (43 
U.S.C. 485h(c)), the Colorado River Basin Project Act of 1968 (43 
U.S.C. 1501 et seq.), the Colorado River Storage Project Act of 1956 
(43 U.S.C. 620 et seq.), the Boulder Canyon Project Act of 1928 (43 
U.S.C. 617 et seq.), the Boulder Canyon Project Adjustment Act of 1940 
(43 U.S.C. 618 et seq.), the Hoover Power Plant Act of 1984 (43 U.S.C. 
619 et seq.), the General Regulations for Power Generation, Operation, 
Maintenance, and Replacement at the Boulder Canyon Project, Arizona/
Nevada (43 CFR Part 431) published in the Federal Register at 51 FR 
23960 on July 1, 1986, and the General Regulations for the Charges for 
the Sale of Power from the Boulder Canyon Project, Final Rule (10 CFR 
Part 904) published in the Federal Register at 51 FR 43124 on November 
28, 1986, the procedures for public participation in rate adjustments 
for power and transmission service marketed by Western (10 CFR Part 
903) published in the Federal Register at 50 FR 37835 on September 18, 
1985, and the DOE financial reporting policies, procedures, and 
methodology (DOE Order No. RA 6120.2 dated September 20, 1979).
    During the 90-day comment period, Western received nine written 
comments. In addition, six speakers commented during the August 31, 
1993, public comment forum. All comments and responses are addressed in 
the rate order.
    Rate Order No. WAPA-58-1 (Rate Schedule BCP-F4/2) approving and 
placing the BCP proposed rates into effect is issued and approved on a 
final basis.

    Issued in Golden, CO, February 4, 1994.
William H. Clagett,
Administrator.

Order Approving and Placing the Boulder Canyon Project Power Rates 
Into Effect

    In the matter of Western Area Power Administration Annual Rate 
Adjustment for Phoenix Area Office Boulder Canyon Project.

[Rate Order No. WAPA-58-1]

February 4, 1994.
    Pursuant to section 302(a) of the Department of Energy (DOE) 
Organization Act, 42 U.S.C. 7152(a), the power marketing functions of 
the Secretary of the Interior and the Bureau of Reclamation under the 
Reclamation Act of 1902, 43 U.S.C. 372 et seq., as amended and 
supplemented by subsequent enactments, particularly section 9(c) of the 
Reclamation Project Act of 1939, 43 U.S.C. 485h(c), and other acts 
specifically applicable to the projects involved, were transferred to 
and vested in the Secretary of Energy (Secretary) acting by and through 
the Administrator of the Western Area Power Administration (Western).
    By Amendment No. 3 to Delegation Order No. 0204-108, published 
November 10, 1993 (58 FR 59716), the Secretary of Energy delegated: (1) 
The authority to develop long-term power and transmission rates on a 
nonexclusive basis to the Administrator of Western; (2) the authority 
to confirm, approve, and place power 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 power rates to the Federal Energy Regulatory Commission. 
Existing DOE procedures for public participation in power rate 
adjustments (10 CFR part 903) became effective on September 18, 1985 
(50 FR 37835).
    The ratesetting methodology used in this rate order was approved 
and confirmed on a final basis by the Federal Energy Regulatory 
Commission on November 3, 1993, in WAPA-58. Western is required to 
modify the Boulder Canyon Project power rate, either an increase or a 
decrease, on an annual basis. This ratesetting methodology uses an 
approved rate formula, along with an annual public participation 
process, for the Boulder Canyon Project through September 30, 1997. As 
long as Western adheres to this rate formula and public process, as 
outlined in WAPA-58, there is no requirement to seek additional 
approval from the Federal Energy Regulatory Commission.

Acronyms and Definitions

    As used in this rate order, the following acronyms and definitions 
apply:

1941 General Regulations: General Regulations for Generation and Sale 
of Power in Accordance with the Boulder Canyon Project Adjustment Act, 
May 20, 1941.
1984 Act: Hoover Power Plant Act of 1984, August 17, 1984 (43 U.S.C. 
619 et seq.).
$/kW/month: Monthly charge for capacity (usage--$ per kilowatt per 
month).
Additions: A unit of property constructed or acquired which enhances or 
improves a project or system and which is properly allocated to power 
or the joint features allocated to power.
Adjustment Act: Boulder Canyon Project Adjustment Act, July 19, 1940 
(43 U.S.C. 618 et seq.).
Annual Rate: A rate revision recommended to the Administrator of 
Western for approval on an annual basis. The Annual Rate adjustments 
are approved by the Administrator of Western.
BCP: Boulder Canyon Project.
BCP Handout: A document prepared for the public information forum.
Capacity Rate: Shown in the PRSS as a $/kW/year charge. Billed on a $/
kW/month basis. Applied each billing period to each kW of rated output 
to which each contractor is entitled by contract.
Colorado River Basin Project Act: The Colorado River Basin Project Act, 
September 30, 1968 (43 U.S.C. 1501 et seq.).
Colorado River Dam Fund (CRDF): A fund established by section 2 of the 
Boulder Canyon Project Act of 1928 which is to be used only for the 
purposes specified in the Boulder Canyon Project Adjustment Act of 
1940, the Colorado River Basin Project Act of 1968, and the Hoover 
Power Plant Act of 1984.
Composite Rate: Combination of an energy rate and a capacity rate, 
which is expressed in mills/kWh.
Conformed Criteria: Conformed General Consolidated Power Marketing 
Criteria or Regulations for Boulder City Area Projects (49 FR 50582, 
December 28, 1984) beginning on June 1, 1987.
Cost Evaluation Period (CEP): The first 5 future years in the PRSS, 
starting with the first future year of costs and revenue estimates.
Contractors: The Boulder Canyon Project Power customers.
Crosswalk: A reconciliation between a project PRSS and the Western and 
Reclamation financial statements.
CSRS: Civil Service Retirement System.
Current PRSS: The PRSS included in this rate order based on the 
existing BCP rates.
DOE: Department of Energy.
DOE Order No. RA 6120.2: An order dealing with power marketing 
administration financial reporting.
E&OC: Engineering and Oversight Committee consisting of members from 
BCP Contractors, Western, and Reclamation. Their function is to 
establish a regular review process of Western's and Reclamation's 
planned O&M, additions, and replacements.
EIS: Environmental Impact Statement.
Energy Rate: Expressed in mills per kWh. Applied to each kWh made 
available to each Contractor.
FY 1992 Ratebase PRSS: FY 1992 Revised PRSS.
FERC: Federal Energy Regulatory Commission.
FY: Fiscal year.
Guide Service: This is service provided to the visitors for tours at 
the Hoover Dam site.
GWh: Gigawatthour.
Hoover Dam: The dam on the Colorado River which forms Lake Mead.
Hoover Rates Committee: The Hoover Power Rates Methodology Review 
Standing Committee made up of BCP Contractors, Western, and Reclamation 
who developed the new proposed ratesetting methodology (Settlement 
Agreement).
Interior: U.S. Department of the Interior.
kW: Kilowatt.
kW/month: The greater of (1) the highest 30-minute demand measured 
during the month, not to exceed the contract obligation, or (2) the 
contract rate of delivery.
kWh: Kilowatthour.
LCRBDF: Lower Colorado River Basin Development Fund--a fund established 
by the Colorado River Basin Project Act of 1968.
Master Schedule: This is an 18-month schedule of projected BCP 
hydrology.
mills/kWh: Mills per kilowatthour.
Multiproject Costs: These are costs for facilities being charged to one 
project that benefit other projects.
MW: Megawatt.
MWh: Megawatthour.
NEPA: National Environmental Policy Act of 1969 (42 U.S.C. 4321 et 
seq.).
OMB: Office of Management and Budget.
O&M: Operations and maintenance.
P-DP: Parker-Davis Project.
Project Act: The Boulder Canyon Project Act authorizing the 
construction of Boulder Canyon Project dated December 21, 1928 (43 
U.S.C. 617 et seq.).
PRSS: Power Repayment Spreadsheet Study.
Reclamation: Bureau of Reclamation, U.S. Department of the Interior.
Reclamation's 1986 General Regulations: General Regulations for Power 
Generation, Operation, Maintenance, and Replacement at BCP, Arizona/
Nevada 43 CFR Part 431 (51 FR 23960, July 1, 1986).
Replacements: A unit of property constructed or acquired as a 
substitute for an existing unit of property for the purpose of 
maintaining the power features of a project or the joint features 
properly allocated to power.
Replacement Study: The cyclical analysis of replacement service lives. 
A high level of replacement activity for a few consecutive years will 
reoccur in future years at a similar high level with years in between 
tending to be at lesser level of replacement.
Secretary: Secretary of Energy.
Schedule A: Boulder Canyon Project Contractors that receive capacity 
and energy. Contractors are Arizona Power Authority (APA), Boulder 
City, Burbank, Colorado River Commission of Nevada (CRC), Glendale, Los 
Angeles Department of Water and Power, Metropolitan Water District of 
Southern California, Pasadena, and Southern California Edison.
Schedule B: Boulder Canyon Project Contractors that receive Hoover 
capacity and energy and who also advanced the funds for the Uprating 
Program. These Contractors include Anaheim, APA, Azusa, Banning, 
Burbank, CRC, Colton, Glendale, Pasadena, Riverside, and Vernon.
Schedule C: Both the Schedule A and Schedule B Contractors (All 
Contractors).
Settlement Agreement: See Hoover Rates Committee.
Treasury: Secretary of the Department of the Treasury.
Uprating Contractors: Contractors who contributed to advance of funds 
for financing the upgrading of the BCP system (see Schedule B 
definition).
Uprating Credits: The payments/credits that are returned to the 
Uprating Contractors in repayment for the advancement of funds.
Uprating Program: Non-federally financed work to increase the capacity 
of the existing generating and associated electrical equipment at the 
BCP.
Western: Western Area Power Administration, DOE.
Western's 1986 General Regulations: General Regulations for the Charges 
for the Sale of Power from the Boulder Canyon Project, 10 CFR Part 904 
(51 FR 43124, November 28, 1986).
Working Capital Fund: Reserve of funds contributed by the Contractors 
to be used when the Colorado River Dam Fund has no money available.

Effective Date

    The existing approved ratesetting methodology is effective January 
1, 1993, through September 30, 1997.
    The rates in Rate Schedule BCP-F4/2 will be in effect on a final 
basis beginning February 1, 1994. The methodology utilized in WAPA-58 
requires that Western modify the BCP rate, either an increase or 
decrease, on an annual basis. For all other FYs of the ratesetting 
methodology approval period (through 1997) the rates will be set in 
accordance with the approved ratesetting methodology and placed into 
effect by the Administrator of Western.

Public Notice and Comment

    The Procedures for Public Participation in Power and Transmission 
Rate Adjustments and Extensions, 10 CFR part 903, have been followed by 
Western in the development of the power rates. It is a major rate 
adjustment as defined at 10 CFR 903.2(e) and 903.2(f)(1). The 
distinction between a minor and a major rate adjustment is used only to 
determine the public procedures for the rate adjustment.
    The following summarizes the steps Western took to ensure 
involvement of interested parties in the rate process:
    1. A Federal Register notice was published on August 17, 1993 (58 
FR 43631), officially announcing the proposed annual BCP power rate 
adjustment, initiating the public consultation and comment period, 
announcing the public information and public comment forums, and 
presenting procedures for public participation.
    2. A letter was mailed to all BCP customers and other interested 
parties on August 10, 1993, providing a copy of the BCP PRSS and 
Supporting Schedules and announcing a public information forum and a 
public comment forum.
    3. At the public information forum held on August 31, 1993, Western 
and Reclamation representatives explained the need for the BCP rate 
adjustment in greater detail and answered questions.
    4. The public comment forum was also held on August 31, 1993, to 
give the public an opportunity to comment for the record. Six people 
representing customers and customer groups made oral comments.
    5. On September 29, 1993, a Federal Register notice was published 
(58 FR 50916) formally announcing that the consultation and comment 
period would be extended through October 18, 1993, for the proposed 
Annual Rate review process for the BCP.
    6. Due to the need for additional time to respond to some of the 
questions asked by the BCP customers in the August 31, 1993, public 
information forum, Western again extended the consultation and comment 
period. On October 26, 1993, a Federal Register notice was published 
(58 FR 57598) formally announcing that the consultation and comment 
period would be extended through November 15, 1993.
    7. A letter was mailed to all BCP customers and other interested 
parties on October 18, 1993, providing a copy of the BCP revised PRSS 
and Supporting Schedules and announcing an informal customer meeting. 
The informal meeting was held on November 4, 1993, in Phoenix, Arizona. 
At this informal meeting, Western and Reclamation representatives 
discussed the revised PRSS, Supporting Schedules, and summary of the 
changes.
    8. Nine written comment letters were received during the 90-day 
consultation and comment period. The consultation and comment period 
ended November 15, 1993.

Project History

    The BCP was authorized for construction by the Project Act. The 
Project Act provided for a dam to be built in the Black Canyon located 
on the Colorado River adjacent to the Arizona/Nevada border. The dam 
was built for the express purposes of: (1) Controlling the flooding in 
the lower regions of the Colorado River drainage system; (2) improving 
navigation of the Colorado River and its tributaries; (3) regulating 
the Colorado River, while providing storage and delivery of the stored 
water for the reclamation of public lands; and (4) generating 
electrical energy as a means of making the BCP a self-supporting and 
financially solvent undertaking. Congress authorized Treasury to 
advance up to $165 million to the Secretary of the Interior to provide 
for the construction of the dam, powerplant, and related features; $25 
million of the $165 million were allocated to flood control.
    Construction of the Hoover Dam, formerly known as Boulder Dam, 
began in 1930, and the first generating unit of the power plant went 
into service in 1937. Upon completion of the project facilities, power 
sales commenced, in accordance with the provisions of the Project Act, 
to Contractors in the States of Arizona, California, and Nevada.
    The Project Act was modified in 1940 by the Adjustment Act. The 
Adjustment Act, among other things, authorized the Secretary of the 
Interior to promulgate and to put into effect power rates based upon a 
repayment period from June 1, 1937, to May 31, 1987; to reduce the 
interest rate from 4 percent to 3 percent per annum on unpaid Treasury 
advances; to require annual payments to the States of Arizona and 
Nevada in lieu of taxes levied; and to defer without interest until 
June 1, 1987, the repayment of the $25 million allocated to flood 
control.
    Subsequently and pursuant to the Adjustment Act, the Secretary of 
the Interior published and implemented the 1941 General Regulations for 
the period ending May 31, 1987.
    As the end of the 50-year term of the original contracts 
approached, controversy developed among the BCP Contractors over 
renewal rights to BCP power, and litigation resulted. Compromises were 
reached and embodied in the 1984 Act.
    The 1984 Act authorized an increase in the capacity of the existing 
generating and associated electrical equipment at the BCP. The work to 
accomplish this increase, referred to as the Uprating Program, was to 
be funded initially by advances from certain BCP Contractors to 
Reclamation. Funds advanced would be returned to these Contractors 
through credits on their monthly power bills. The 1984 Act provided for 
advances from the Treasury for the improvement of visitor facilities at 
the BCP. The 1984 Act also required that an additional charge of 4.5 
mills/kWh be assessed on energy sales to Arizona and an additional 
charge of 2.5 mills/kWh be assessed on energy sales to California and 
Nevada; all revenue resulting from the additional charge is to be 
transferred to the LCRBDF.
    Under the 1984 Act, BCP's power was sold to 15 Contractors located 
in the States of Arizona, California, and Nevada, in accordance with 
the Conformed Criteria.
    Due to the numerous requirements set out in the 1984 Act and the 
earlier division of the Federal responsibilities relating to Hoover Dam 
between Reclamation and Western, both agencies published new 
regulations governing their respective responsibilities at the BCP 
after June 1, 1987. These regulations are cited herein as Reclamation's 
1986 General Regulations and Western's 1986 General Regulations, and 
they supersede the 1941 General Regulations, which terminated on May 
31, 1987.

Power Repayment Spreadsheet Studies

    PRSS are prepared each FY to determine if power revenues will be 
sufficient to pay, within the prescribed time periods, all costs 
assigned to the power function. Repayment criteria are based on law, 
policies, and authorizing legislation. DOE Order No. RA 6120.2, section 
12.b, states:

    In addition to the recovery of the above costs (operations and 
maintenance and interest expenses) on a year-by-year basis, the 
expected revenues are at least sufficient to recover: (1) Each 
dollar of power investment at Federal hydroelectric generating 
plants within 50 years after they become revenue producing, except 
as otherwise provided by law; plus, (2) each annual increment of 
Federal transmission investment within the average service life of 
such transmission facilities or within a maximum of 50 years, 
whichever is less; plus, (3) the cost of each replacement of a unit 
of property of a Federal power system within its expected service 
life up to a maximum of 50 years; plus, (4) each dollar of assisted 
irrigation investment within the period established for the 
irrigation water users to repay their share of construction costs; 
plus, (5) other costs such as payments to basin funds, participating 
projects or States.

Existing and Annual Rates

    A comparison of the existing and annual BCP rates follows: 

------------------------------------------------------------------------
                                                  Existing      Annual  
                                                 rates (FY    rates (FY 
                                                   1993)        1994)   
------------------------------------------------------------------------
Power Rate Schedule...........................     BCP-F4/1    BCP-F4/2*
Composite Rate (mills/kWh)....................        14.56        12.62
Energy Rate (mills/kWh).......................         7.28         6.31
Capacity Rate ($/kW/month)....................        $1.28       $1.07 
------------------------------------------------------------------------
*The ratesetting methodology is in effect from January 1, 1993, through 
  September 30, 1997. The BCP rates will be reviewed annually.          

Certification of Rates

    Western's Administrator has certified that the BCP rates placed 
into effect herein are the lowest possible consistent with sound 
business principles, pursuant to the ratesetting methodology agreed to 
by the BCP Contractors, Western, and Reclamation. The BCP rates have 
been developed in accordance with administrative policies and 
applicable laws.

Discussion

    The proposed BCP rates have been updated from the BCP rates 
originally proposed in the customer package sent out on August 10, 
1993, and Federal Register notice dated August 17, 1993. The changes to 
the FY 1993 Ratebase PRSS are as follows:

--The actual figures for FY 1992 were used rather than the projected 
figures. The adjustments for FY 1992 that had been reflected in FY 1994 
were removed.
--FY 1994 Working Capital Fund was adjusted to zero. It was reduced 
because of the current year CRDF carry-over balance.
--The most recent uprater credit schedules received from the 
Contractors were used for FY 1994 and out years.
--FY 1993 figures have been adjusted to actual.
--The Visitor Facilities completion date was moved to FY 1996.
--Circular reference in the supporting schedule LOANS10F.WK1 
eliminated. No change to output.
--The projected Total Energy Sales (MWh) for FY 1999 through the end of 
the study were changed to a constant of 4,527,001 MWh.
--Title on PRSS changed from ``Boulder Canyon Project FY 1993 Power 
Repayment Study Spreadsheet'' to ``* * * Spreadsheet Study.''
--Corrected Column 14 formula for FY 1994 and out-years. It did not 
change any figures.
--Deleted working column to far right of spreadsheet. It did not change 
any figures.
--Corrected the energy and capacity and the FY 1992 adjustment in 
``Other Revenue'' to reconcile with the crosswalk numbers for FY 1992.
--On Supporting Schedule ACTFINAL.WK1 (E-1, E-2), added summary pages 
of principal payments. This will serve as an easy-to-read tool of what 
is being paid off in any particular year.
--On Supporting Schedule LOANS10F.WK1, added an adjustment (page F-1). 
Also, the amortization period was changed back to 10 years instead of 9 
years.
--On Supporting Schedule REQFINAL.WK1 (G-1), the principal payment in 
FY 1993 was corrected and now ties with the PRSS.
--In column 27 in FY 2017, the $5,045,030 adjustment (PRSS to CRDF) was 
credited. (This is reflected in FY 2018 in column 14.) This was done to 
repay the customers at the end of their contract.
--In columns 21 and 25, the formula used to determine the Annual Rate 
for this rate adjusts the rate for FY 1994 over the remainder of FY 
1994. This is assuming the effective date of the rate is February 1, 
1994.
--Changed the file reference title at the bottom of the PRSS to 
[RATEBASE.WK1].
--Revised the CSRS costs as submitted in memorandum dated September 7, 
1993.

    The existing and FY 1994 annual revenue requirements for the BCP 
are as follows: 

------------------------------------------------------------------------
                                               Revenue requirements     
                                         -------------------------------
                                           Existing BCP     Annual BCP  
                                             rates (FY       rates (FY  
                                              1993)           1994)*    
------------------------------------------------------------------------
Revenue Requirements....................     $49,992,504    $47,894,340 
------------------------------------------------------------------------
*The proposed BCP rates are to be in effect beginning February 1, 1994. 

    The methodology utilized in WAPA-58 requires that Western modify 
the BCP rate, either an increase or decrease, on an annual basis.

Statement of Revenue and Related Expenses

    The following table provides a summary of revenue and expense data 
through the 5-year proposed rate approval period. 

  Boulder Canyon Project Comparison of 5-Year Rate Period (FY 1994-98)  
                          Revenues and Expenses                         
                                [$1,000]                                
------------------------------------------------------------------------
                                     FY 1992      FY 1993               
                                    PRSS 1994-   PRSS 1994-  Difference 
                                       98           98                  
------------------------------------------------------------------------
Revenues:                                                               
    Energy Sales.................     $138,790     $133,803     ($4,987)
    Capacity Sales...............      138,790      133,803      (4,987)
    Water Sales..................        2,250        2,250            0
    Other Revenue................        6,360       13,280        6,920
    CRDF Carry-Over Balance......            0        2,803        2,803
                                  --------------------------------------
        Total Revenues...........      286,190      285,939        (251)
Revenue Distribution:                                                   
    Operation & Maintenance......      108,525      113,072        4,547
    Payment to States............        3,000        3,000            0
    Other Expenses...............        9,634       16,488        6,854
    Annual Uprating Payments.....       89,741       80,491      (9,250)
    Annual Replacement...........       17,655       22,740        5,085
    Interest.....................       43,139       39,168      (3,971)
    Principal Payments...........       11,661       11,468        (193)
    Working Capital Fund.........        2,835        (488)      (3,323)
        Total....................      286,190      285,939       (251) 
------------------------------------------------------------------------

Basis for Rate Development--BCP

    The FY 1994 annual BCP rates are designed to maintain a 50/50 split 
between revenue earned from energy and capacity rates. The cost to 
individual customers will vary, because of differences in their 
supplies and loads.
    The BCP Annual Rate consists of a 6.31 mills/kWh energy rate and 
$1.07/kW/month capacity rate effective February 1, 1994. The 
ratesetting methodology approval period is through September 30, 1997.

Comments

    During the 90-day comment period, Western received nine written 
comments. In addition, six speakers commented at the August 31, 1993, 
public comment forum. All comments were reviewed and considered in the 
preparation of this rate order.
    Written comments were received from the following sources:

Arizona Municipal Power Users' Association (Arizona)
Arizona Power Authority (Arizona)
Vernon, City of (California)
Colorado River Commission of Nevada (Nevada)
Irrigation & Electrical Districts' Assoc. of Arizona (Arizona)
Los Angeles, City of, Department of Water and Power (California)
Metropolitan Water District of Southern California (California)
Overton Power District No. 5 (Nevada)/Valley Electric Association 
(Nevada)
Utility Resource Services (Arizona)

    Representatives of the following organizations made oral comments:

Arizona Power Authority (Arizona)
Colorado River Commission of Nevada (Nevada)
Los Angeles, City of, Department of Water and Power (California)
Irrigation & Electrical Districts Association of Arizona (Arizona)
Overton Power District No. 5/Valley Electric Assoc. (Nevada)
Pioneer Chlor Alkali Company (Nevada)

    Most of the comments received at the public meetings and in 
correspondence dealt with the PRSS, capitalized investments, annual 
expenses, working capital, other revenue, ratesetting, capitalized 
deficits, and audits. All comments were considered in developing the 
proposed BCP rates.
    The comments and responses, paraphrased for brevity, are discussed 
below. Direct quotes from comment letters are used for clarification 
where necessary.

Boulder Canyon Comments

Power Repayment Spreadsheet Study
    Comment: Substitute the real figures for FY 1992 in place of the 
projected figures. You would then have a true carry-forward figure in 
FY 1992 and an estimated carry-forward figure at the end of FY 1993. It 
might have a substantial effect upon the numbers for FY 1994.
    Response: The actual figures for both FY 1992 and FY 1993 have been 
utilized rather than the projected figures. The adjustments for FY 1992 
that were reflected in FY 1994 were removed.
    Comment: The customer believes as a result of the discrepancies we 
saw in the numbers a new PRSS should be run with the best available 
data.
    Response: A revised PRSS was prepared and mailed to the BCP 
Contractors on October 18, 1993. Both a printed copy and diskette copy 
of the PRSS, along with a summary of changes to the original PRSS, were 
provided. On November 4, 1993, Western held an informal workshop with 
the BCP Contractors to discuss this revised PRSS.
    Comment: Concern has been expressed that the PRSS does not reflect 
the most recent budget estimates for BCP operation, maintenance, and 
replacement expenses.
    Response: The PRSS, upon which this rate adjustment is based, 
reflects the most current budget estimates for all costs associated 
with operation, maintenance, and replacement expenses in the BCP.
    Comment: Establish a BCP recordkeeping system to provide a 
correlation between BCP actual and budgeted expenditures to the data 
shown in the PRSS.
    Response: Western is in the process of implementing a recordkeeping 
system to correlate actual expenditures to budgeted expenditures. This 
system will be in place prior to Western revising rates for FY 1995.
    Comment: In FY 1994, column 7, debt service interest expense, and 
column 8, capitalized deficit interest expense, did not sum to column 
9, total interest expense.
    Response: Due to a spreadsheet linking problem, the correct values 
did not properly transfer to the PRSS only in FY 1994. Western made 
corrections to the link between the supporting schedules and the PRSS 
to correct this problem.
    Comment: Some Contractors expressed concern that Western deviated 
from the 5-year moving window methodology for the BCP. Some stated they 
believed the new methodology should operate very much like the rate 
mechanism that was in place prior to June 1, 1987.
    Response: Western believes that it is adhering to the 5-year moving 
window methodology that was set forth in the September 15, 1992, 
Settlement Agreement. At the end of each year, differences between 
projected values and actual values are calculated and reflected in the 
PRSS. Any net differences, either positive or negative, are carried 
forward to the next year, as shown in column 14 of the PRSS.
    The PRSS, upon which this rate adjustment is based, embodies all of 
the principles set forth in the September 15, 1992, Settlement 
Agreement. The new ratesetting methodology, as set out in this 
Settlement Agreement, was never intended to operate in the same fashion 
as the ratesetting process utilized prior to June 1, 1987.
    Comment: There appears to be approximately an $11-million surplus 
that is pure and simple getting averaged out in the 5-year rate window 
process. It bears reminding that WAPA-58 represented an attempt to come 
up with a rate mechanism which was similar to the rate mechanics in the 
pre-1987 era. It is clear that the rate mechanism in that pre-1987 era 
trued up the cost immediately. This mechanism bears no resemblance to 
the pre-1987 process on the true-up mechanics.
    Response: There is no $11-million surplus in the 5-year ratesetting 
period (cost evaluation period) for this rate process. If there was an 
under- or over-collection of revenues in any year, this would be 
carried forward to the next year. Thus, this under/over-collection 
would be numerically reflected in both the next year's rate 
calculation, as well as in the 5-year moving window rate calculation. 
While the WAPA-58 rate mechanism is somewhat similar to the pre-1987 
rate mechanism, it is significantly different, because the WAPA-58 rate 
methodology reflects the 5-year moving window concept, as agreed to by 
the BCP Contractors, Reclamation, and Western in the September 15, 
1992, Settlement Agreement.
    Comment: A customer believes that annual uprater payments of column 
3 should reflect the new debt service schedules that follow the 
uprating bonds used by the Arizona Power Authority and Colorado River 
Commission. The customer is also not so sure that the correct figures 
are being used for the Colorado River Commission and for the Southern 
California Public Power Authority.
    Response: The revised annual uprater schedules are currently 
reflected in FY 1993 and in the out-years in the latest PRSS.
    Comment: Some Contractors have requested that a new PRSS be run 
which would reflect the correction of historical data and the 
correction of mathematical errors.
    Response: The PRSS, upon which this rate adjustment is based, has 
been corrected to fix these identified problems. These issues were all 
addressed in the Public Information Forum data requests which were 
mailed to the BCP Contractors on October 18, 1993. These issues were 
also addressed at length during the informal workshop held on November 
4, 1993.
    Comment: A customer is concerned that the FY 1992 true-up, as 
implemented here, does not reflect the intent of the FY 1992 rate 
formula, much less meet the lowest possible rate standard, which all 
such rates are supposed to meet.
    Response: The FY 1992 projected values have been revised to actual 
values. (The adjustment had previously been shown in FY 1994.)
    Comment: A customer is concerned about the huge variations between 
projected and actual expenditures, as well as significant differences 
between the PRSS and various other sources of data, as officially 
reported by both Reclamation and Western. Also such concerns are 
heightened by the continued failure of Western to comply with the 
independent project audit requirements.
    Response: Over the past several years, various Contractors have 
raised the issue that several actual expenditures (most notably O&M 
expenses) have continually been less than projected. This is 
predominately due to the reduced actual hydrology of the BCP. The BCP 
is an ``available receipts project'' in that it cannot commit or spend 
money that is not in the Colorado River Dam Fund. Because power 
revenues are the only source of revenue to the CRDF, if the actual 
hydrology is less than anticipated, reductions in expenditures are 
necessary to keep from overspending the CRDF. To a large extent, the 
only way to reduce expenditures, without deferring the payment of 
Uprating Credits, is in the reduction of either O&M expenses or in 
annual replacements.
    In regard to the concern over the significant differences between 
the PRSS and various sources of data, as reported by both Reclamation 
and Western, these differences have been explained in the data response 
mailed to the BCP Contractors on October 18, 1993. Although it appeared 
that significant differences did exist in the data, reconciliation data 
sheets that were supplied by Reclamation indicated that all data 
originated from a common data source and that differences were due to 
the particular forum the numbers were prepared for, rather than any 
inherent difference in the data.
    In regard to the concern over the lack of an independent audit, 
Western is conducting an annual audit on BCP, as part of the Western-
wide audit process. FERC specifically addressed the audit issue in its 
Order approving WAPA-58 and found Western's procedures to be in 
compliance with requirements.
Rate Process
    Comment: The authority for final confirmation and approval is 
exclusively reserved for FERC for any proposed change in BCP rates.
    Response: On November 3, 1993, FERC issued an Order Confirming and 
Approving Rates on a Final Basis for the BCP which stated ``As to the 
annual rate adjustments, Western's customers should be able to monitor 
the operation of the formula rate when they take part in Western's 
annual public participation proceedings held when it proposes Annual 
Rate adjustments according to the formula. This annual proceeding 
should provide the customers an opportunity to monitor both compliance 
with the formula rate as well as to voice any concerns about the 
magnitude of the rate adjustment.'' Western has indicated to the BCP 
Contractors that it intends to follow the same rate process as in the 
past, except that the approval process will conclude with the signature 
of Western's Administrator. Informational copies of the BCP rate order 
package will be submitted to DOE and to FERC. The current rate formula 
is approved through September 30, 1997. For BCP rates to become 
effective on or after October 1, 1997, Western will have to seek 
further approval of DOE and FERC.
    Comment: A customer requests acknowledgement that the Annual Rate 
adjustments process is one of a number of issues which is subject to 
resolution by the BCP Implementation Agreement being negotiated.
    Response: The Annual Rate adjustment process is one of the issues 
which is subject to resolution by the BCP Implementation Agreement 
being negotiated. The rate adjustment process filed in WAPA-58 and 
accepted by FERC resulted from the Settlement Agreement of September 
15, 1992, among the BCP Contractors, Reclamation and Western. This same 
group of Contractors is again back at the negotiating table, attempting 
to resolve certain related issues which, if resolved, will possibly 
require modification of the rate methodology implemented in WAPA-58.
    Comment: A customer supports a postponement in the rate process.
    Comment: Desire to delay implementation of a 5-percent rate 
reduction for the BCP.
    Response: As a result of comments made during the August 31, 1993, 
public information forum and public comment forum, Western extended the 
comment and consultation period and has postponed implementation of the 
Annual Rates until February 1, 1994.
    Comment: A customer recommends that Western strictly adhere to the 
requirements of 10 CFR Part 903 by noticing the place, time, and date 
of the required public comment forum in the Federal Register at least 
30 days in advance of the meeting.
    Comment: The customer suggests for future Annual Rate adjustments 
and thereafter, Western should provide a public comment period that is 
longer than 30 days, as presented in the August 17, 1993, Federal 
Register notice. The customer suggests a 90-day public comment period 
for all future Annual Rate adjustments.
    Response: Western acknowledges that the BCP Contractors were 
provided only 21 days advance written notice of the public comment 
forum that concerned the BCP rate process. However, the BCP Contractors 
were orally informed on July 30, 1993, of the proposed August 31, 1993, 
BCP public comment forum. This announcement was made and the proposed 
meeting date was discussed with the BCP Contractors at a BCP Settlement 
Negotiations meeting in Las Vegas at McCarran Airport. Representatives 
of all the BCP Contractors were in attendance.
    Western is in the process of preparing a schedule of all the 
various activities that comprise a rate process, along with the timing 
of said events. This schedule is targeted for completion in early 1994 
and will be provided to all Western's customers when completed. Because 
the BCP rates will be modified on an annual basis, at least until 
September 30, 1997, the BCP Contractors will know well in advance when 
various activities concerning the BCP rate process will occur.
    Comment: A customer suggests that public information forums and 
public comment forums for future Annual Rate adjustments not be 
scheduled on the same day.
    Response: In the future, Western will not conduct public 
information forums and public comment forums on the same day.
    Comment: A customer requests that Western prepare a decision 
document summarizing all comments received during the public comment 
period and Western's and Reclamation's responses to those comments. 
This decision document should be distributed to all BCP Contractors and 
interested parties before implementing the proposed Annual Rate 
adjustment.
    Response: As part of Western's rate process, a rate order package 
is prepared which, among other items, contains a summary of all of the 
comments received during both the public comment forum and the 
consultation and comment period. Western's responses to these comments 
are also part of this rate order package. This package is presented to 
Western's Administrator, and to DOE and FERC for informational 
purposes. This information is also published in the Federal Register 
and a copy of the material is sent by Western to its customers. This 
entire process takes place prior to implementation of the revised 
rates. In the future, distribution to the BCP Contractors will take 
place once Western's Administrator approves the annually revised rates, 
which will normally be prior to the implementation of said rates.
Ratesetting
    Comment: A uniform, predictable program for the development of 
databases and rate studies in support of Annual Rate adjustments should 
be prepared, complete with the dates by which specific information will 
be provided to the Contractors, with reference to the specific sources 
of information to be used for all data presented in the power repayment 
study.
    Response: As previously indicated, Western is in the process of 
preparing a schedule of all the various activities that comprise a rate 
process, along with the timing of said events. This schedule is 
targeted for completion in early 1994 and will be provided to all 
Western's customers when completed. Because the BCP rates will be 
modified on an annual basis, at least until September 30, 1997, the BCP 
Contractors will know well in advance when various activities 
concerning the BCP rate process will occur.
    As also previously indicated, Western is in the process of 
developing a record-keeping system to correlate actual expenditures to 
budget projections. The combination of the detailed schedule and the 
proposed record-keeping system should provide both: (i) Advance notice 
to the BCP Contractors of all BCP rate activity and (ii) continuity and 
consistency of data.
    Comment: Some Contractors have requested that the rate study be 
revised to recognize that the rate over the first 4 months of FY 1994 
was equal to the Rate Order No. WAPA-58 rate, resulting in an increase 
in forecast revenues in FY 1994.
    Response: Western has revised the rate as appropriate to reflect: 
(i) A February 1, 1994, implementation date and (ii) the rate 
methodology specified in WAPA-58. The effect was to further reduce the 
Annual Rate in recognition of higher revenues for the first 4 months of 
FY 1994.
    Comment: The third to the last paragraph of the Federal Register 
notice implies that the Delegation Order No. 0204-108 addresses not 
only rates but also ratesetting methodology. Western's paraphrase of 
the delegation order in the Federal Register notice is not correct 
since the delegation order only uses the word ``rates'' and not the 
words ``ratesetting methodology.'' Customer raises this point now 
because of the importance it places on the need to ensure that the 
process authorized under Delegation Order No. 0204-108 is not construed 
to constitute a change in regulations governing a setting of rate 
without being accompanied by appropriate steps which must precede any 
change of regulations governing the establishments of rates by a power 
marketing administration.
    Response: The customer is correct in that the words ``ratesetting 
methodology'' are not specifically referenced in Delegation Order No. 
0204-108. However, 10 CFR 903.2(l) states that ``rate means the 
monetary charge or formula for computing such a charge for any electric 
service provided by the PMA, including but not limited to charges for 
capacity (or demand), energy, or transmission service; * * *.'' 
Additionally, in the context of the BCP Settlement Agreement among the 
BCP Contractors, Reclamation, and Western, the rates being proposed for 
the BCP are dependent upon the methodology. There has been no change in 
regulations, or implied change in regulations, concerning the 
establishment of rates by Western.
    Comment: Some Contractors indicate that because they do not 
participate in the budget formulation process, they believe that the 
formalization of the E&OC is necessary to assure them an opportunity to 
provide input prior to the development of the Western and Reclamation 
budgets.
    Response: Both Western and Reclamation are committed to work with 
the Contractors through the E&OC to ensure that all entities are 
informed and have the opportunity to review budgetary expenditures, 
along with providing input on the project activities and costs that 
will impact the BCP rates. Additionally, Western is currently working 
with the customers in the development of its Ten-Year Engineering Plan. 
At the December 15, 1993, Ten-Year Engineering Plan meeting, 
Reclamation's representative indicated she would recommend that a 
similar process be initiated by Reclamation's management.
    Comment: One customer is concerned that BCP rates are not the 
lowest possible rate to consumers consistent with sound business 
practice as required under the prescribed standards. And the use of 
such a formulary rate adjustment mechanism will not provide, and has 
not provided, the proper incentives to assure efficient and economic 
operation of the project. This formulary rate adjustment mechanism is 
similar to the prior pinch-point methodology, which also did not 
provide incentive for efficient and economic operations at the BCP.
    Response: As indicated in a response to a similar comment in the 
WAPA-58 Rate Order, Western is of the opinion that the approved rate 
methodology sets rates at the lowest possible cost consistent with both 
sound business principles and with the principles outlined by the BCP 
Settlement Agreement of September 15, 1992. The Annual Rate covered in 
this rate order reflects a significant decrease in costs and suggests 
that the Annual Rate process and the EO&C are in fact promoting strong 
incentives for efficient and economic operations.
    Comment: The subject ratemaking methodology constitutes an 
automatic adjustment clause within the meaning of and as governed by 
PURPA and that such automatic adjustment clause has not been 
implemented in accordance with the very precise and prescribed 
procedures established by PURPA.
    Response: The Public Utility Regulatory Policies Act of 1978 
(PURPA) states at 16 U.S.C. 2612(a) that:

    This chapter applies to each electric utility in any calendar 
year, and to each proceeding relating to each electric utility in 
such year if the total sales of electric energy by such utility for 
purposes other than resale exceeded 500 million kilowatthours during 
any calendar year beginning after December 31, 1975, and before the 
immediately preceding calendar year.

    Electric utility is defined to include Federal agencies which sell 
electric energy. Of the 15 BCP Contractors, the Metropolitan Water 
District, purchases more than 500 million kWh during any calendar year 
which is for purposes other than resale. As a result, the BCP is 
subject to PURPA.
    With regard to automatic adjustment clauses, the PURPA states at 16 
U.S.C. 2623(b)(2), that ``[n]o electric utility may increase any rate 
pursuant to an automatic adjustment clause unless such clause meets the 
requirements of section 2625(e) of this title.''
    Section 2625(e) states that:

    (1) An automatic adjustment clause of an electric utility meets 
the requirements of this subsection if--
    (A) Such clause is determined, not less often than every 4 
years, by the State regulatory authority (with respect to an 
electric utility for which it has ratemaking authority) or by the 
electric utility (in the case of a nonregulated electric utility), 
after an evidentiary hearing, to provide incentives for efficient 
use of resources (including incentives for economical purchase and 
use of fuel and electric energy) by such electric utility, and
    (B) Such clause is reviewed not less often than every 2 years, 
in the manner described in paragraph (2), by the State regulatory 
authority having ratemaking authority with respect to such utility 
(or by the electric utility in the case of a nonregulated electric 
utility), to insure the maximum economies in those operations and 
purchases which affect the rates to which such clause applies.
    (2) In making a review under subparagraph (B) of paragraph (1) 
with respect to an electric utility, the reviewing authority shall 
examine and, if appropriate, cause to be audited the practices of 
such electric utility relating to costs subject to an automatic 
adjustment clause, and shall require such reports as may be 
necessary to carry out such review (including a disclosure of any 
ownership or corporate relationship between such electric utility 
and the seller to such utility of fuel, electric energy or other 
items).
    (3) As used in this subsection and section 2623(b) of this 
title, the term ``automatic adjustment clause'' means a provision of 
a rate schedule which provides for increases or decreases (or both), 
without prior hearing, in rates reflecting increases or decreases 
(or both) in costs incurred by an electric utility. Such term does 
not include an interim rate which takes effect subject to a later 
determination of the appropriate amount of the rate.

    The current formula for sales from the BCP was agreed to by all of 
the Contractors, Western, and Reclamation in a Settlement Agreement 
dated September 15, 1992. The methodology set out in this Agreement was 
approved by FERC on November 3, 1993.
    The stated PURPA purpose of automatic adjustment clauses in 
sections 2625(e)(1) (A) and (B) is to provide incentives for efficient 
use of resources (including incentives for economical purchase and use 
of fuel and electric energy) by such electric utility, and to insure 
the maximum economies in those operations and purchases which affect 
the rates to which such clause applies. In this particular case, the 
initial reason that annual review and adjustment was determined to be 
the preferred methodology was that the Contractors wanted Western to be 
able to react on an annual basis to any over- or under-collections of 
revenues. The methodology set out in the September 15, 1992, Settlement 
Agreement establishes that Western look at the higher of the 5-year 
average or the first year of revenue requirements on an annual basis 
and make appropriate adjustments. As a result, sections 2625(e)(1) (A) 
and (B) do not apply in our case.
    Section 2625(e)(3) applies in cases where an increase or decrease 
comes about without prior hearing. In our case, there have been 
numerous information and comment forums allowing for the presentation 
of both written and oral comments. BCP Contractors were provided an 
opportunity to be heard and many of their comments caused Western to 
make changes to some of the calculations that were used in determining 
the rate. Paragraph (3) does not require an evidentiary hearing as does 
paragraph (e)(1)(A). As a result, section 2625(e)(3) is inapplicable, 
because the BCP Annual Rate adjustment is not an automatic adjustment 
pursuant to an ``automatic adjustment clause''.
    FERC stated in its Order Confirming and Approving Rates on a Final 
Basis that ``[r]ather than rely on a stated rate to recover the costs 
projected in a power repayment study, Western now proposes a formula 
rate which will compute project costs annually and revise the BCP 
capacity and energy charges accordingly. In implementing the formula 
rate, Western will present annually to Reclamation and the BCP power 
purchasers (Contractors) * * * its analysis of the revenue that the 
then-effective BCP capacity and energy charges would produce for the 
next FY as compared to the forecasted annual revenue requirement for 
the next FY. If such revenues are greater or less than the forecasted 
annual revenue requirement, Western will adjust the capacity and energy 
charges * * *. Western will hold public participation proceedings prior 
to implementing any rate adjustment required by these annual reviews.''
    In summary, the annual adjustment clause of the new methodology was 
negotiated among Western, Reclamation, the Contractors, and other 
interested parties; the Settlement Agreement and the new methodology 
were approved by FERC with comment by the Contractors and other 
interested parties; and Western has had and will continue to have 
annual public processes which allow for review and input by the 
Contractors and other interested parties prior to implementation of any 
Annual Rate adjustments. PURPA is not applicable to the BCP annual 
adjustment because the purpose of the adjustment is not the purpose 
established by PURPA, and the Contractors and the public at large have 
been provided with the opportunity to be heard.
WAPA-58 Concerns/Issues
    Comment: One customer requests that its intervention protest in 
WAPA-58 be a continuation of preservation of those issues in this 
proceeding.
    Response: These comments have been responded to in the record for 
WAPA-58.
    Comment: A customer would like its oral comments made on September 
10, 1992, its written comments submitted on September 25, 1992, and its 
motion to intervene and protest filed under Docket EF 93-5091-000 
considered a part of these comments today as if set out here in full.
    Response: These comments have been responded to in the record for 
WAPA-58.
    Comment: A concern was expressed that the August PRSS contained 
some data which had changed since the PRSS was prepared in support of 
Rate Order WAPA-58. Specifically, the August PRSS shows a significant 
reduction in the projected generation output for the BCP.
    Response: Reclamation prepares a generation forecast each year to 
be used in support of the BCP PRSS. The generation forecast prepared 
for the 5-year ratesetting period is based upon the most current 
hydrological information available at the time the forecast is made. 
The data presented in the August PRSS reflects the impact upon project 
generation resulting from the water release limitation imposed as a 
result of the flooding in Arizona and the most recent water scheduling 
changes for the Central Arizona Project. The average annual generation 
for the 5-year ratesetting period reported in the PRSS prepared in 
support of Rate Order WAPA-58 was 4,083 GWh. The average annual 
generation for the 5-year ratesetting period reported in the August 
PRSS was 4,033 GWh. This represents an annual reduction of 
approximately 50 GWh per year, or about 1 percent.
Capitalized Deficit
    Comment: Some Contractors have requested Western to amortize the 
capitalized deficit expense over the remainder of the current contract 
period, which ends in FY 2017, rather than over the 10-year period 
utilized in the PRSS.
    Response: Western addressed this issue in Rate Order WAPA-58. In 
that rate order response, Western noted that standard practice is to 
repay capitalized deficits over a 5-year period. Due to the size of the 
deficit, Western believed it was appropriate to extend the payment over 
a 10-year period.
    In FERC's Order confirming and approving WAPA-58 it stated:

    The agreement speaks broadly about ``item(s) of debt'' and does 
not speak directly to capitalized deficits. Thus, the claim that 
Western has violated the terms of the agreement does not appear to 
be justified. * * * The choice of the Administrator to amortize 
capitalized deficits over ten years is a reasonable approach to 
accommodate a phase-in of the formula rate that Western has proposed 
here.
Hydrology--S
    Comment: Western has continued to fail to account for unloaded 
synchronized generation. Customer believes that is a component that 
needs to be addressed at some point and would like to see that included 
in the PRSS.
    Response: Western addressed this issue in the WAPA-58 Rate Order. 
Both Western and Reclamation believe that unloaded synchronized 
generation has been properly addressed in the PRSS. Both Western and 
Reclamation are agreeable to meeting with the Contractors to resolve 
this issue.
Capitalized Investments
    Comment: A Contractor inquired about the repayment period 
associated with the flood control debt, in light of the fact that a 
Bureau of Reclamation Inspector General audit report recommended use of 
a repayment period of 30 years.
    Response: For the purposes of this PRSS, and pending the final 
resolution of Reclamation audit recommendations, Western believes the 
repayment period for flood control should remain at 50 years.
    Comment: Some Contractors have indicated that they believe Western 
has erred in the application of revenue toward the repayment of 
investment, specifically with regard to the repayment of the highest 
interest bearing investments.
    Response: The application of revenue toward repayment of the 
highest interest bearing debt, as portrayed in the PRSS, is in complete 
agreement with the ratesetting methodology established by the September 
15, 1992, Settlement Agreement.
    During the development of the ratesetting methodology, the 
Contractors were adamant about the amount of investment to be repaid 
and the order in which these investments were to be repaid. As a 
result, amortization schedules were developed for each investment which 
depicted the portion of the investment to be repaid by the end of the 
current contract period FY 2017. To satisfy the concern expressed by 
the Contractors that they would not pay more than their share of each 
specific investment, it was agreed that repayment would be limited to 
the amount shown on the amortization schedule. Therefore, repayment was 
to be accomplished by applying revenues toward the retirement of the 
highest interest bearing investment, up to the limit established by the 
amortization schedule for the investment.
    In FERC's Order confirming and approving WAPA-58 it stated:

    Western adopted the formula rate at the behest of its customers, 
whose rights to Boulder Canyon Project power expire in 2017. The 
formula rate is designed to ensure that these customers pay only 
their fair share of the cost of the facilities whose service lives 
extend past that year. Rather than prioritize repayment by interest 
rate, the formula rate amortizes repayment of each financial 
obligation over the service life of its associated facility. Western 
and the Contractors state, and we agree, that this method assures 
intergenerational equity, whereas repayment by interest rate alone 
could result in the entirety of some Federal investments being paid 
by pre-2017 customers.

    Both Western and Reclamation believe that the application of 
principal is consistent with the language contained in the Settlement 
Agreement. Following development of the PRSS, which was based upon the 
language contained in the Settlement Agreement, Western made a 
presentation to the BCP Contractors which included a point-by-point 
analysis of each item in the Settlement Agreement and how the item had 
been implemented in the PRSS. The application of principal was 
thoroughly discussed and agreed to. The only disagreement to the 
application methodology was expressed by a consultant to the Arizona 
Power Authority (APA)--who was not present during the settlement 
negotiations (other representatives of the APA who were present during 
these discussions were in agreement with the methodology proposed by 
Western).
    Comment: Some Contractors have expressed concern that the increase 
in the weighted average interest for the Visitor Facilities is in 
error.
    Response: Reclamation has verified that the weighted average 
interest rate used for the Visitor Facilities is correct.
    Comment: A customer requests leveling expenditures as much as 
possible.
    Response: Both Western and Reclamation believe that expenditures 
should be levelized to the extent possible. Reclamation has taken an 
extensive look at its O&M and replacements program and in the future 
will be proposing a more levelized expenditure for these two items. 
Also, as indicated previously, Reclamation is investigating utilization 
of a process similar to Western's Ten-Year Engineering Plan process to 
allow more participative input from the BCP Contractors.
Programmable Master Supervisory Control System
    Comment: Some Contractors have expressed a concern over the 
methodology used to allocate the costs associated with the programmable 
master supervisory control installed at Hoover.
    Response: Optimization modeling studies conducted by Reclamation 
indicated that the majority of the improvement in operating efficiency 
will benefit the Contractors at Hoover. Generators at Parker-Davis (P-
DP) are rarely, if ever, used for load following; therefore, there will 
be only a moderate improvement in the efficiency of the P-DP system. 
The major share of plant improvement will benefit Hoover. The 
allocation of costs among Hoover, Parker, and Davis is reflective of 
the benefits received at each installation.
Annual Expense--O&M
    Comment: Some Contractors have requested an explanation of 
Reclamation's cost item captioned A&GE (nonutility water).
    Response: The Administrative and General Expense budget line 
includes such items as general expenses (i.e., salaries, surcharges, 
travel, materials, and supplies); some Regional and Denver 
administrative charges; services; a portion of security charges; union 
activities; and equal employment opportunity activities. These items 
are all associated with BCP administrative activities.
    Comment: Some Contractors expressed concern over the apparent 
discrepancy in the data presented in the August PRSS, the April 15, 
1993, letter by Reclamation, and in material presented to the E&OC.
    Response: These issues have been discussed in-depth by Western in 
its public information data responses. The nature of the documents are 
such that they cannot be directly comparable. For example, the O&M 
figures used in the April 15th letter do not include the Civil Service 
Retirement costs. However, the April 15th letter does include the 
undelivered orders associated with O&M. The information presented at 
the E&OC does not include these costs as they are necessary for 
repayment purposes only, but are not the type of data normally 
presented for E&OC purposes.
    Comment: Some Contractors have expressed concern that the O&M 
budget estimates are consistently higher than the actual cost incurred.
    Response: Reclamation has reduced the budget line for Operation by 
approximately $1 million beginning in FY 1994. This reduction was made 
because of a reanalysis of historical costs and future requirements. 
All line items included in the estimated O&M budget will be closely 
monitored and adjusted, if necessary.
    Comment: An interested party requested an explanation of the 
reallocation of O&M costs by Reclamation as they relate to the security 
costs at Hoover.
    Response: This issue was dealt with in detail in the data response 
prepared following the public information forum. Briefly, that response 
indicated that all security costs had historically been charged to 
operations. As a result of the reallocation, beginning in FY 1992, 
security costs were distributed to Uprating, Visitor Facilities, and 
Guide Service. The reallocation of the expense associated with the 
security cost occurred in FY 1992 and therefore, had no impact on any 
other historical year. The effect of the reallocation has been included 
in the budget documents which support the FY 1993 PRSS.
Annual Expense--Replacements
    Comment: Some Contractors have expressed concern over the variation 
in the projected replacement costs presented in the PRSS.
    Response: This issue has been discussed with the Contractors in 
detail at both the public information forum and at the most recent E&OC 
meeting. This issue was also addressed in Rate Order WAPA-58. In 
addition, both Reclamation and Western are making every effort to 
stabilize fluctuations in projected replacement costs for the 5-year 
moving window (cost evaluation period). The constant replacement cost 
shown after the 5-year window reflects an average of all replacement 
costs forecasted by Western's replacement study through the end of FY 
2045.
    Western and Reclamation have agreed to use the replacements study 
average for the out years in the PRSS. The replacement study represents 
higher replacement costs at the beginning and end of the repayment 
period with the in-between years having lower replacement costs.
    Comment: A question was asked as to why undelivered orders for 
replacements were included in the PRSS and excluded for operations.
    Response: Actual FY 1992 expenditures for the Replacement Program 
were $5,884,561. For purposes of the PRSS, it was necessary to add the 
change in Undelivered Orders of $1,651,592 for a total of $7,536,153. 
The recording of Undelivered Orders (costs incurred with the completion 
of a material, supplies or services contract, which have not totally 
been billed to or paid by Reclamation) is consistent with standard 
governmental accounting practices. When the Undelivered Orders are 
satisfied, any over/under expenditure of funds will be reflected as a 
change in future years' Undelivered Orders amount. This process assures 
that the costs subject to repayment remain accurate without the 
potential for duplication or omission.
    Comment: The question was asked why contributions for replacements 
of $659,000 were removed from PRSS revenues and effectively capitalized 
when actual expenditures for replacements are expensed and not 
capitalized.
    Response: Because the historical years' data displayed in the PRSS 
reflects actual generation, revenues, and costs, Reclamation and 
Western are continuing to correlate the data reflected in the 
historical years with the actual financial data. As this process has 
continued, certain adjustments have been and are being made either to 
the financial records, the PRSS, or to both, to accomplish this 
correlation. This process is commonly referred to as the ``Crosswalk.'' 
The adjustment to the PRSS reflects Reclamation's and Western's 
continuing effort to correlate the data reflected in the historical 
years to the actual historical financial records.
    Comment: One Contractor indicated that for the purposes of 
projecting the annual cost associated with future replacements, Western 
should assume that Reclamation is successful in receiving 
appropriations, and that the annual cost for replacements should be 
equal to the amortized cost of replacements beginning with FY 1995.
    Response: With the exception of the investment made for ``air 
slots,'' Reclamation has historically been unable to obtain 
appropriations for replacements. To assume that such appropriations 
could be obtained in the future, when they could not be obtained in the 
past, would not reflect prudent fiscal responsibility on the part of 
either Western or Reclamation. Western is required to establish rates 
which will assure the repayment to Treasury of all costs which are 
incurred by the project. Therefore, until instructed otherwise by 
Reclamation, Western will continue to portray the costs associated with 
replacements as an annual expense.
    Comment: One Contractor submitted a report to Reclamation 
specifically addressing the levelization of replacement spending at the 
BCP by Reclamation.
    Response: Reclamation discussed the issue of stabilizing 
replacement costs at the most recent E&OC meeting held during November 
1993. Reclamation and Western are making every effort to stabilize the 
fluctuations in the projected replacement costs.
Expenses--Other Expenses
    Comment: Some Contractors requested further explanation of the 
increases from the prior PRSS in both Other Revenues, column 16, and 
Other Expenses, column 3.
    Response: Other Revenues, column 16, reflects revenues collected 
through the guide service (tours), and must be sufficient to recover 
the costs of providing that service. On January 1, 1993, Reclamation 
increased the fee for guide service from $1 to $2. Further increases in 
guide service fees are anticipated in conjunction with the new Visitor 
Facilities.
    Other Expenses, column 3, also reflect the costs of unfunded Civil 
Service Retirement, multiproject costs, as well as increased costs in 
providing the guide service. Considerable detail has been provided to 
the BCP Contractors on all of these issues. In addition, the issue of 
multiproject costs is one of the items being discussed in the current 
draft Settlement Agreement negotiations. As part of the Settlement 
Agreement, which is yet unsigned, Western has agreed to prepare 
detailed procedures for the calculation of multiproject costs and to 
prepare and present to the BCP E&OC all revisions to multiproject 
costs, prior to their insertion into future PRSS. In addition, 
Western's Phoenix Area Office (PAO), as part of a quality improvement 
initiative, formed a Process Improvement Team which has recently 
prepared a report on the multiproject cost process. Once the report has 
been reviewed by the PAO Quality Council, any accepted recommendations 
will be reflected in future calculations of multiproject costs.
    Comment: A Contractor contends that multiproject costs for FY 1993 
and FY 1994 should be removed from the revenue requirements for the BCP 
because agreed-upon procedures, analyses, and justification have yet to 
be developed. Also, new rates for the other projects have not been 
implemented to reflect additional revenues from BCP and the financial 
records for the BCP do not indicate that monies collected were actually 
transferred to P-DP or Pacific-Northwest Pacific-Southwest Intertie 
Project in FY 1993.
    Comment: Regarding column 3, Other Revenues, a Contractor believes 
Western's estimate of multiproject costs of $442,016 for FY 1993 should 
be deleted since the P-DP and the Pacific-Northwest Pacific-Southwest 
Intertie Project will not begin to reflect multiproject benefits in 
their rates until FY 1994.
    Response: Column 3 is entitled Other Expenses, not Other Revenues. 
Western believes that the FY 1993 expenditure of $442,016 is proper, 
because the current P-DP and Pacific-Northwest Pacific-Southwest 
Intertie Project's rate studies reflect revenue transfers of this 
amount from BCP in FY 1993. The appropriate revenue transfers have been 
made in all three projects, beginning in FY 1993.
Working Capital
    Comment: In Rate Order No. WAPA-58, Western and Reclamation agreed 
to make the sum of column 6, Working Capital, and the carry-over 
balance of FY 1992, equal to $7.5 million. The sum of Working Capital 
and the carry-over balance in the August PRSS equals $7,846,238. The 
customer believes that a $346,238 reduction is in order.
    Comment: Several questions have been raised with regard to the 
issue of working capital already recovered by Western and Reclamation.
    Comment: Several Contractors asked if the working capital fund 
would be returned to the Contractors at the end of the contract period. 
They also requested that the $5 million PRSS to CRDF adjustment be 
treated as part of the working capital balance.
    Response: Western will make adjustments to the PRSS to ensure that 
the sum of the ``carry-over balance'' and ``working capital'' equals 
$7.5 million. Western has always intended that all working capital 
would be returned to the BCP Contractors and the PRSS has been revised 
accordingly.
    While Western and Reclamation are not in agreement with the BCP 
Contractors that the $5 million PRSS to CRDF adjustment is part of the 
working capital balance, they are both in agreement that any monies 
left over in the Colorado River Dam Fund at the end of the current 
contract period will be refunded to the current BCP Contractors. The 
issue related to this adjustment should tend to resolve itself as the 
lag between the delivery of power and subsequent billing and collection 
for the power sale is reduced. The adjustment is necessary to prevent 
the PRSS from applying revenues toward repayment which are not 
available to the CRDF as a result of the lag in collection. This 
adjustment is unrelated to the working capital fund.
    Comment: A working capital allowance is not needed to operate the 
project.
    Response: The February 13, 1992, letter sent to Western and 
Reclamation by the Colorado River Commission of Nevada, on behalf of 
all the BCP Contractors indicated that a working capital fund of $7.5 
million should be created. Western and Reclamation created a mechanism 
whereby this fund would be created through rates in 1993 and 1994. This 
mechanism was modified by the BCP Contractors, Western, and Reclamation 
and incorporated into Rate Order WAPA-58, which recently received 
approval from FERC.
Engineering and Oversight Committee
    Comment: Several Contractors maintain that it is critical that the 
E&OC continue to function and thrive and that Western, Reclamation, and 
the BCP Contractors continue to strengthen the communication processes 
of the E&OC in order to provide the BCP Contractors the opportunity and 
means to provide input to Western and Reclamation on issues relating to 
BCP.
    Response: Western and Reclamation agree that the E&OC should 
continue to function and provide a meaningful communication process 
among the BCP Contractors, Reclamation and Western. The continuation of 
the E&OC, along with an expansion of functions to be undertaken by the 
E&OC, is one of the issues being negotiated in the Settlement Agreement 
negotiations among the BCP Contractors, Western and Reclamation.
    Comment: A Contractor has indicated that the E&OC could be a forum 
to discuss ways to handle Hoover's resources in a changing operating 
environment and that a real effort could be made towards developing 
principles of a rate process that are mutually agreeable to all 
parties.
    Response: Several BCP Contractors have made statements, both at 
rate forums and E&OC meetings, that the E&OC is not meant to be a 
substitute for the review of data in a rate process. While Western and 
Reclamation support the efforts of the E&OC and are willing to work 
with the BCP Contractors to improve the operation and to lower the 
costs of the BCP, they are both in agreement that the efforts of the 
E&OC should be complementary and supportive to the rate process, and 
not a part of the rate process.
Uprating Credits
    Comment: The proposed PRSS does not address the credit carry 
forward incurred after May 19, 1992. The mechanism for repaying such 
credit carry forward should be established and expressed in the PRSS. 
(In reference to amount financed by the APA bond issue * * *) Western 
will be paying interest on the APA bond issue which covered credit 
carry forward. It would be inequitable to pay such interest to APA and 
not to the other Schedule B Contractors.
    Response: The proposed PRSS does address the credit carry forward 
incurred after May 19, 1992. The ``Group 3'' debt that was created in 
order to pay ``Group 1'' and ``Group 2'' debt is reflected in the 
Uprating Credits for FY 1995, 1996, and 1997. One third of this ``Group 
3'' debt will be recovered in each of the years 1995, 1996, and 1997. 
The ``Group 4'' debt, which is the amount of Uprating Credits that 
certain of the Schedule B Contractors cannot take because their billed 
amount for electric service is less than their Uprating Credits, is 
reflected in the annual Uprating Credit amounts. (The amount of 
Uprating Credits shown in column 4 of the PRSS is exactly equal to the 
total of all the Uprating Credit schedules submitted by the Schedule B 
Contractors--which is exactly equal to the Uprating Credits applied to 
power bills plus monies retained by Reclamation to satisfy ``Group 4'' 
debt.)
    In regard to the amount financed by the APA bond issue, or any 
other bond issue, Western is bound by contract to issue credits in the 
amounts submitted by the Contractors for Uprating Credits. While it is 
true that Western is in effect paying interest on credit-carry-forward 
debt for APA and not for other Schedule B Contractors, the other 
Schedule B Contractors who issued bonds could go through the same 
refinancing process that APA did and obtain interest on their carry-
forward debt. The Schedule B Contractors who did not issue bonds could 
not utilize this mechanism to obtain interest on their portion of 
carry-forward debt.
    In order to obtain and proceed with a unified position, in regard 
to the payment of interest on credit-carry-forward debt, Western issued 
a position paper on December 17, 1993, which proposed a methodology for 
payment of interest on credit-carry-forward debt. Once all BCP 
Contractors have responded, Western will issue either a final unified 
position statement (if all BCP Contractors are in agreement) or a 
summary of position statements (if one or more of the BCP Contractors 
are not in agreement).
    Comment: Review and make adjustments as appropriate to the future 
uprate credit payments.
    Response: According to section 6.5.5 of the BCP contracts, by 
October 1 of each year, the Schedule B Contractors are to provide 
Western and Reclamation with a credit schedule with respect to each 
billing period for the remaining term of the contract. The Uprating 
Credit payments utilized in the PRSS are a summation of the individual 
schedules sent to Western by the Schedule B Contractors and are the 
same schedules utilized by Western in determining the credits to apply 
to the individual monthly power bills.
    Comment: Western should follow through with the establishment of 
procedures which assure that the determination and application of 
Uprating Credits is consistent with the electric service contract.
    Response: Western believes that it is currently adhering to the 
provisions of the electric service contracts in regard to the 
determination of Uprating Credits, the application of said credits, and 
the overall administration of the Uprating Credit program.
Total Energy Sales
    Comment: What is the rationale for the increase from an annual 
constant of 4,062,000 MWh to 4,552,000 MWh for the period 1999-2045?
    Response: The generation shown during the cost evaluation period is 
based upon the most current hydrology studies conducted in support of 
the PRSS. The generation shown beyond the cost evaluation period 
reflects the contract amount of 4,527,001 MWh. The generation level of 
4,552,000 MWh was given to Western in error.
Visitor Facilities
    Comment: A recommendation was made that Reclamation develop and 
implement plans to obtain additional funds from sources other than the 
BCP Contractors.
    Response: Reclamation is continuing to explore and evaluate a 
variety of options which may provide additional revenue that could be 
used to aid in the repayment of the Visitor Facilities costs.
    Comment: A recommendation was made that the amount included in the 
estimated completion cost of the Visitor Facilities for anticipated 
claims by the construction Contractor be removed from the repayment 
obligation of the BCP Contractor.
    Response: Reclamation instructions require that the total estimated 
cost of the project be shown. This includes such items as anticipated 
claims and modifications. Reclamation's Commissioner has requested a 
full audit of the Visitor Facilities costs. Once that audit is 
completed, Western will evaluate appropriate changes, if any, to those 
costs.
Environmental Evaluation
    In compliance with the National Environmental Policy Act of 1969, 
42 U.S.C. 4321 et seq.; Council on Environmental Quality Regulations 
(40 CFR Part 1500-1508); and DOE NEPA Regulations (10 CFR part 1021), 
Western has determined that this action is categorically excluded from 
the preparation of an environmental assessment or EIS.

Executive Order 12866

    DOE has determined that this is not a significant regulatory action 
because it does not meet the criteria of Executive Order 12866, 58 FR 
51735. Western has an exemption from centralized regulatory review 
under Executive Order 12866; accordingly, no clearance of this notice 
by OMB is required.

Availability of Information

    Information regarding this rate adjustment, including PRSS, 
comments, letters, memorandums, and other supporting material made or 
kept by Western for the purpose of developing the power rates, is 
available for public review in the Phoenix Area Office, Western Area 
Power Administration, Office of the Assistant Area Manager for Power 
Marketing, 615 South 43rd Avenue, Phoenix, Arizona 89009; Western Area 
Power Administration, Division of Marketing and Rates, 1627 Cole 
Boulevard, Golden, Colorado 80401; and Western Area Power 
Administration, Office of the Assistant Administrator for Washington 
Liaison, Power Marketing Liaison Office, Room 8G-027, Forrestal 
Building, 1000 Independence Avenue SW., Washington, DC 20585.

Submission to Federal Energy Regulatory Commission

    The BCP rates herein are approved and placed into effect by the 
Administrator of Western. An informational copy will be submitted to 
FERC.

Order

    In view of the foregoing and pursuant to the authority delegated to 
me by the Secretary, I confirm and approve, effective February 1, 1994, 
Rate Schedule BCP-F4/2.

    Issued in Golden, CO, February 4, 1994.
William H. Clagett,
Administrator.

    Approved for Legal Sufficiency.
Michael S. Hacskaylo,
General Counsel.

Boulder Canyon Project; Schedule of Rates for Power Service

    Effective (In accordance with approved ratesetting methodology): 
February 1, 1994, that being the first day of the February 1994 billing 
period.
    Available: In the marketing area served by the Boulder Canyon 
Project (BCP).
    Applicable: To power customers served by the BCP supplied through 
one meter at one point of delivery, unless otherwise provided by 
contract.
    Character and Conditions of Service: Alternating current at 60 
hertz, three-phase, delivered and metered at the voltages and points 
established by contract.
    Monthly Rate: The base charge capacity rate is $1.07/kW/month for 
each kW of rated capacity to which each contractor is entitled by 
contract during the billing period.
    The base charge energy rate is 6.31 mills/kWh for each kWh measured 
or scheduled at the point of delivery during the billing period, except 
for purchased power.
    Lower Basin Development Fund Contribution Charge: The Lower Basin 
Development Fund Contribution Charge is 4.5 mills/kWh for each kWh 
measured or scheduled to an Arizona purchaser and 2.5 mills/kWh for 
each kWh measured or scheduled to a California or Nevada purchaser, 
except for purchased power.
    Billing for Unauthorized Overruns: For each billing period in which 
there is a contract violation involving an unauthorized overrun of the 
contractual power obligations, such overruns shall be billed at 10 
times the above base charge energy and capacity rates. The Lower Basin 
Development Fund Contribution Charge shall be applied also to each kWh 
of overrun.
    Adjustments: None.

[FR Doc. 94-5142 Filed 3-4-94; 8:45 am]
BILLING CODE 6450-01-P