[Federal Register Volume 59, Number 131 (Monday, July 11, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-16709]


[[Page Unknown]]

[Federal Register: July 11, 1994]


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DEPARTMENT OF ENERGY
Western Area Power Administration

 

Revised Provo River Project Marketing Proposal

AGENCY: Western Area Power Administration, DOE.

ACTION: Revised Provo River Project marketing proposal summary.

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SUMMARY: In December 1993, Western Area Power Administration (Western) 
proposed to change the way it markets power and energy produced by the 
Provo River Project (PRP) and to include it as one of the Salt Lake 
City Area/Integrated Projects (Integrated Projects). During the comment 
period on the proposal, comments were received which indicated that 
customers of Western's Integrated Projects would not support inclusion 
of the PRP in the Integrated Projects. Western has decided to modify 
its original proposal to market this power and energy independent of 
the Integrated Projects. Capacity and energy produced by the PRP will 
be allocated to those members of Intermountain Consumers Power 
Association (ICPA) and Utah Municipal Power Agency (UMPA) located in 
Utah and Wasatch Counties in Utah. ICPA and UMPA are hereafter referred 
to as potential contractors. Power would be allocated to these 
potential contractors proportional to their load. Separate power sales 
contracts would be offered to the potential contractors. Potential 
contractors would pay all of the annual powerplant expenses of the PRP 
including an amount to assist the Provo River Water Users Association 
(Water Users) repayment of the United States original investment in the 
PRP. In return, potential contractors would receive all of the 
marketable output of the PRP.

DATES: Comments on Western's revised proposal must be received on or 
before August 10, 1994.
    A similar notice appears in today's Federal Register.

FOR FURTHER INFORMATION CONTACT:

Mr. John Harrington, Acting Area Manager, Salt Lake City Area Office, 
Western Area Power Administration, P.O. Box 11606, Salt Lake City, UT 
84147-0606, (801) 524-5497, or
Mr. Edmond Chang, Assistant Area Manager for Power Marketing, Salt Lake 
City Area Office, Western Area Power Administration, P.O. Box 11606, 
Salt Lake City, UT 84147-0606, (801) 524-5493

SUPPLEMENTARY INFORMATION:

Background

    In a Federal Register notice dated December 13, 1993 (58 FR 65180-
65181), Western proposed to include the PRP with the Integrated 
Projects and to market the power and energy produced by the PRP to 
members of ICPA and UMPA within a marketing area comprised of Utah and 
Wasatch Counties, Utah. Western accepted comments on its proposal until 
January 12, 1994. A public information/comment/scoping meeting was held 
in Spanish Fork, Utah, on January 4, 1994. As a result of comments 
received, at both the meeting and in writing, Western is revising its 
proposed marketing plan for the PRP.

Marketing Issues

    One of the commentors, the Colorado River Energy Distributor's 
Association (CREDA), an organization of many Integrated Projects 
customers, commented that CREDA believes ``the same principles commonly 
used in other Bureau of Reclamation (Reclamation) water projects having 
power generation features should be applied to the extent lawful in the 
instance of PRP.'' Western's review of the appropriate laws shows that 
construction of the PRP and the methods of repaying the United States 
for its investment in the project were first established in 1936, under 
Contract No. Ilr-874 dated June 27, 1936 (1936 Contract). The 1936 
Contract states that surplus revenue from the sale of surplus water and 
power shall be applied to the repayment obligation of the Water Users. 
No distinction was made in the contract that this payment was to be for 
irrigation investment or for investment beyond the irrigators' ability 
to pay as is common in other Reclamation projects. In fact, from the 
beginning, almost three-fourths of the water developed by the project 
was for municipal and industrial use. Western has agreed to pay from 
power revenues $1.623 million toward the Water Users' obligation by 
2008. Of this amount, $191,587 has been paid.
    CREDA also stated that it did not believe Western had adequately 
supported the need to integrate the projects. When Western established 
the Integrated Projects in 1986, it intended to include the Colorado 
River Storage Project (CRSP), the Collbran Project, the Rio Grande 
Project, and the PRP. The PRP was not included because of uncertainty 
associated with commitments to the Water Users. Western's intent was to 
bring PRP into the Integrated Projects on an equal basis with the rest 
of the projects. Western has agreed that it is not necessary to include 
the PRP in the Integrated Projects.
    In a further comment, CREDA objected to all Integrated Projects 
customers paying costs of the Water Users since these constitute 
repayment of municipal and industrial water development costs. CREDA 
had no objection to marketing the PRP resource to ICPA and UMPA under 
separate contracts from the Integrated Projects. In fact, ICPA and UMPA 
are both members of CREDA. Western has determined that it can still 
meet its objectives of beneficially marketing the PRP through separate 
contractual arrangements and has revised its proposal to do so. This 
will require development of power sales contracts with potential 
contractors.
    Since the PRP has only been sold to Western's CRSP, a rate for the 
capacity and energy produced has never been developed. A power 
repayment study (PRS) has been prepared each year to determine the 
revenues needed to meet project repayment, including operation, 
maintenance, and replacement expenses. The CRSP purchased the energy 
produced by the PRP for this amount. Western now proposes that the PRS 
still be used to identify the annual revenue requirements of the PRP. 
Potential contractors would pay their proportional share of one-twelfth 
of the annual amount each month to Western. In addition, the potential 
contractors would pay a total of $102,243.80 each year to Reclamation 
to be applied toward the Water Users' payment obligations.
    Two other Integrated Projects customers in Utah, the Weber Basin 
Water Conservancy District (Weber Basin) and Bountiful City Light and 
Power (Bountiful), operate generating plants on the Weber River. Both 
claimed when water is diverted from the Weber River into the Provo 
River under existing agreements, they incur losses in generation and 
asked to be compensated for these losses. Western has determined that 
the water diversions from the Weber River into the Provo River were 
established before Weber Basin or Bountiful constructed generation on 
the Weber River. Neither entity had a power right to the waters of the 
Weber River. PacifiCorp, which is compensated for generating losses, 
owned an operating generating plant on the Weber River and held power 
rights to the flows of the river prior to the Provo River diversion. 
Discussions with Reclamation and examination of Weber Basin and 
Bountiful contracts have confirmed this position. Weber Basin and 
Bountiful are not entitled to an allocation of PRP power to compensate 
them for harm caused by reduced flows in the Weber River because their 
plants have never been entitled to, or used, the diverted water.
    Another commentor, Reclamation, stated that the marketing criteria 
should consider arrangements for providing assistance to the Water 
Users. Also, the amount of assistance should be included in the PRP 
power marketing contracts, and arrangements made so that payment could 
be made directly to Reclamation on behalf of the Water Users during the 
contract period.
    These issues are still subject to further discussions with the 
Water Users and Reclamation. However, Western has committed to provide 
a means for annual payment to be made toward project repayment on 
behalf of the Water Users by the power purchasers.
    Reclamation also noted that the amount of winter season surplus 
energy is affected by several factors, including the agreement dated 
May 16, 1986, known as the Interim Operating Agreement of Deer Creek 
and Strawberry Exchange of Bonneville Unit Water (Interim Operating 
Agreement), and future agreements on the operation of Deer Creek and 
Jordanelle Reservoirs.
    Reclamation has made it clear that the Interim Operating Agreement 
and future agreements may severely impact the amount of generation 
available from the PRP during the winter season. The Interim Operating 
Agreement anticipated that compensation to PacifiCorp, for energy lost 
when water is diverted from the Weber River into the Provo River, would 
be affected and it provided a remedy. However, the Interim Operating 
Agreement does not address compensation to the Water Users by Central 
Utah Water Conservancy District (Central Utah) for other winter season 
generation which would be lost. Draft language on an agreement for 
joint operation of Deer Creek and Jordanelle Reservoirs provides a 
means for Central Utah to compensate the Water Users for this 
reduction. Drafts of this agreement stipulate that a separate agreement 
among Central Utah, the Water Users, Western, PacifiCorp, and 
Reclamation will be developed to provide for this compensation. It is 
anticipated that this agreement will be completed prior to initial 
service under Western's proposed marketing plan.
    The Water Users commented that Western's criteria for marketing the 
surplus power and energy of the Deer Creek Powerplant must fairly 
compensate the Water Users for the value of the surplus electric power 
and energy in the form of assistance on its repayment obligation.
    Western's criteria specify that the annual revenue requirements, 
including Western's commitment to the Water Users, will be recovered 
from the potential contractors in return for all of the marketable 
power and energy produced by the PRP.
    The Water Users further commented that the rate for nonfirm energy 
should be the same as the blended rate of firm energy. Western's 
revised proposal would eliminate any distinction between firm and 
nonfirm energy. All energy produced by the PRP would be delivered in 
return for the potential contractors paying all of the PRP's annual 
powerplant expenses.
    All of the Water Users' comments are concerned with their claim to 
a contractual obligation that surplus revenue from the sale of power be 
applied toward the repayment obligation of the Water Users for the PRP. 
Western has stated that it will consider $1.623 million by 2008 as a 
repayment assistance to the PRP. The Water Users assert that there is 
an obligation to develop surplus revenue from power sales that can be 
applied to the repayment obligation of the Water Users beyond 2008 
until all repayment obligations have been met. Western knows of no 
legal basis for the Water Users' position. Resolution of these issues 
are outside the scope of this proposed action. These issues have been 
the focus of several meetings between the Water Users, Western, and 
Reclamation. Western's proposal would provide a means to ensure that 
the balance of the $1.623 million commitment is paid in annual 
increments by 2008.

Other Issues

    UMPA states that use of PRP energy in Utah County, Utah, will 
result in reduced reliance on fossil fuels and will enhance the 
environment, especially air quality.
    This issue will be addressed in the environmental assessment which 
will be done on the proposed action. However, because of the quantities 
of energy involved in the proposal, it is unlikely that the action will 
have a significant impact on air quality in Utah County.
    The Stonefly Society (Society), a local environmental organization, 
commented that operation of the PRP on the Provo, Duchesne, and Weber 
Rivers has produced devastating impacts on these river systems. Among 
these are: (1) Destruction of the Provo's natural channel and riparian 
areas, (2) anoxic water discharge from Deer Creek Reservoir, (3) 
dewatering of the Weber River, and (4) dewatering of the Duchesne 
River. They state that three actions should be taken: (1) studies of 
the environmental impacts of the PRP should be conducted immediately; 
(2) funds should be allocated from Deer Creek Power revenues to correct 
these serious problems; and (3) no funds should be allocated to the PRP 
until these environmental impacts have been both assessed and 
corrected.
    Western's proposal is to only change the way power from the PRP is 
marketed. It will have no effect on how the PRP is operated. The 
Society's issues are concerned with the way the project is operated and 
not on how power is marketed. Therefore, their comments are outside the 
scope of this proposal.
    The Society asked ``if the PRP were included in the Integrated 
Projects, will the powerplant at Deer Creek Reservoir be operated 
independently or will the operation be integrated with other Western 
generating facilities? If its operation is integrated, will there be 
environmental impacts at these other facilities?'' Western's proposal 
is to market the PRP independently of the Integrated Projects. There 
would be no operation connection between the projects. Furthermore, 
since Deer Creek Powerplant is not controlled by Western, delivery of 
power and energy to the customer would be, as always, on a run-of-the-
river basis.

Marketing Criteria

a. Applicability

    Congress granted to the Secretary of Energy acting by and through 
Western's Administrator the authority to market Federal power. In 
response to requests from UMPA and ICPA to receive power produced by 
the PRP, Western has examined the merits of reorganizing the marketing 
of the PRP resource. Western believes these proposed marketing changes 
will benefit both the potential contractors and the Water Users.

b. Marketable Resource

    A contract among Reclamation, the Water Users, the Weber River 
Water Users Association, and PacifiCorp dated December 20, 1938 (1938 
Contract), provides for diversion of water from the Weber River into 
the Provo River for storage in Deer Creek Reservoir and for use by the 
Water Users. Because PacifiCorp operated generating units on the Weber 
River below the point of diversion to the Provo River, PacifiCorp's 
ability to generate was reduced when water was diverted. The 1938 
Contract provides that PacifiCorp is to receive all of the electrical 
generation of the PRP during the period of time that water is diverted. 
This means that for up to 6 months, from October 15 to April 15 of each 
year, there may be no marketable energy generated by the PRP. 
Historically however, marketable energy has averaged 23,000,000 
kilowatthours (kWh), with 15,000,000 kWh generated during summer 
months, and the remaining 8,000,000 kWh from winter surplus energy. 
Typically, about 3,000,000 kWh are available in each of the 3 peak 
summer months of June, July, and August; approximately 1,000,000 kWh 
are available in April; 2,500,000 kWh in May; and another 2,500,000 kWh 
in September. ICPA and UMPA would receive all of the marketable energy 
generated by the PRP each year in return for paying all of the PRP 
powerplant expenses.

c. Marketing Area

    Because of the size of the resource, Western proposes to limit the 
marketing of this resource to preference entities within the drainage 
area of the Provo River. All eligible utilities are members of ICPA and 
UMPA, and are located in Utah and Wasatch Counties. Members of ICPA are 
the cities of Heber City, Lehi, Payson, Springville, and the Strawberry 
Electric Service District (Strawberry). Affected members of UMPA are 
the cities of Provo, Salem, and Spanish Fork. It is anticipated that 
marketing of the PRP resource to these potential contractors would 
assure that each would receive a beneficial amount of power.

d. Class of Service

    PRP generation is dependent upon water releases that are dictated 
by minimum stream flow requirements and the Water Users' needs. No load 
following ability exists. Since April 1, 1994, the PRP has been 
included in Western's Upper Colorado Missouri Basin control area. With 
the PRP in Western's control area, Western is able to enhance the 
usability of the product and to allow it to be scheduled, even though 
it has no control over PRP generation. Western provides control area 
and regulating services for several other customers and has a developed 
methodology to share the expenses of operating a control area and 
providing for regulating capacity. Under the revised proposal, the PRP 
would be required to pay for its share of these services. These costs 
will be included in the PRS as an operating expense.
    Energy will be scheduled to the potential contractors in megawatts 
in accordance with anticipated generation levels from the PRP. When 
variations occur, the hourly schedules will be adjusted to reflect 
actual operation.
    Western will maintain an energy deviation account between the PRP 
and the Integrated Projects. At the end of each year, an accounting of 
scheduled and generated energy will be made. Differences between the 
two projects will be made up by adding to or subtracting from the 
following year's schedules to the potential contractors. The potential 
contractors will be responsible for reserves in accordance with Inland 
Power Pool requirements.

e. Resource Allocation

    Western proposes to allocate PRP resources in proportion to the 
historical sales of each of the ICPA and UMPA members. UMPA members 
serve approximately 70 percent of the load in the marketing area, and 
the city of Provo is by far the largest member. ICPA members serve 
approximately 30 percent of the marketing area load. Proportional 
allocation of the PRP's average annual output of 23,000,000 kWh would 
mean UMPA members could expect an average of 16,100,000 kWh and 3,500 
kilowatts (kW) of contingent capacity, and ICPA members could expect an 
average of 6,900,000 kWh and 1,500 kW of contingent capacity. Of ICPA 
members' 30 percent, Heber City would receive 6 percent, Lehi 2.7 
percent, Springville 12.9 percent, Payson 4.8 percent, and Strawberry 
3.6 percent. Of UMPA members' 70 percent, Provo would receive 60.9 
percent, Salem 1.4 percent, and Spanish Fork 7.7 percent. Western would 
develop firm power sales contracts with ICPA and UMPA on behalf of 
their members which would specify the terms and conditions of receiving 
PRP power. The power sales contracts would be structured such that if a 
member withdraws from either ICPA or UMPA, it would be able to retain 
its entitlement of PRP power.

f. Contract Terms

    ICPA and UMPA would pay the PRP's total annual powerplant expenses 
in return for the total marketable PRP production. Each would pay its 
proportional share of the operation, maintenance, and replacement 
expenses identified in the PRS in 12 monthly installments. In addition, 
before January 1 of each year, ICPA would pay $30,685.71 and UMPA 
$71,600.00 to Reclamation to be applied toward the Water Users annual 
payment.

g. Term of Contract

    The power sales contracts would become effective on October 1, 
1994, and terminate on September 30, 2008.

Process

    Western will accept comments on its proposed revised marketing plan 
until August 10, 1994. Following this comment period, Western will 
prepare the appropriate contracts and other agreements that may be 
necessary to implement its proposal. A notice in the Federal Register 
will announce Western's final decisions on marketing PRP power. The 
marketing plan will be effective 30 days following publication of that 
notice. Western intends to begin initial service under these contracts 
on October 1, 1994.

ENVIRONMENTAL COMPLIANCE: Western will comply with the National 
Environmental Policy Act of 1969 through preparation of an 
environmental assessment (EA) on the impacts of the proposed marketing 
changes.
    Western has no operational control over the PRP. Deer Creek Dam is 
operated primarily for the benefit of water storage and delivery. Power 
production is a secondary benefit and does not influence dam operations 
in any manner. Therefore, the proposed PRP marketing changes will have 
no effect on dam operations.

REGULATORY FLEXIBILITY ANALYSIS: Pursuant to the Regulatory Flexibility 
Act of 1980 (5 U.S.C. 601 et seq.), each agency, when publishing a 
proposed rule, is further required to prepare and make available for 
public comment an initial regulatory flexibility analysis to describe 
the impact of the rule on small entities. Western has determined that: 
(1) This rulemaking relates to services offered by Western and, 
therefore, is not a rule within the purview of the Act, and (2) the 
impacts of an allocation from Western would not cause an adverse 
economic impact to such entities.

DETERMINATION UNDER EXECUTIVE ORDER 12866: DOE has determined 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 the Office of 
Management and Budget is required.

    Issued in Golden, Colorado, June 22, 1994.
William H. Clagett,
Administrator.
[FR Doc. 94-16709 Filed 7-8-94; 8:45 am]
BILLING CODE 6450-01-P