[Federal Register Volume 59, Number 223 (Monday, November 21, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-28684]
[[Page Unknown]]
[Federal Register: November 21, 1994]
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DEPARTMENT OF ENERGY
Western Area Power Administration
Final Provo River Project Marketing Plan
AGENCY: Western Area Power Administration, DOE.
ACTION: Final Provo River Project Marketing Plan.
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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 PRP 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. Subsequently, on July 11, 1994,
Western announced its intent to modify its original proposal and market
this power and energy independent of the Integrated Projects. Western
has determined that 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 hereinafter referred to as
the Contractors. Power will be allocated to the Contractors
proportional to their load. Separate power sales contracts will be
offered to each of the Contractors. The term of the contracts will
extend until September 30, 2008. Contractors will 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, the Contractors will
receive all of the marketable output of the PRP. Service to the
Contractor's will begin upon execution of the electric service
contracts.
FOR FURTHER INFORMATION CONTACT:
Mr. Kenneth G. Maxey, 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 65180-65189), 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 revised its proposed marketing plan for the PRP
in a Federal Register notice dated July 11, 1994 (59 FR 35334-35337).
Western accepted comments on its revised proposal until August 10,
1994. Based on the response, Western has decided that the proposal
shall become effective upon execution of the electric service
contracts.
Marketing Issues. Comments on Western's revised proposal were
received from six commentors. These included UMPA, ICPA, Colorado River
Energy Distributors Association (CREDA), the Bureau of Reclamation
(Reclamation), the Water Users, and the Central Utah Water Conservancy
District (CUWCD). Commentors were supportive of Western's revised
proposal. The following addresses the issues that were identified and
explains how they were resolved.
I. Issue: Inclusion of the PRP in the Integrated Projects.
Discussion: This issue had been included in the original proposal
but was objected to by CREDA because the payment of power revenues to
assist the Water Users repayment obligation would help repay investment
in municipal and industrial water. In response to this objection,
Western revised its proposal to market the PRP independently from the
Integrated Projects. UMPA, ICPA, and CREDA commented that they support
Western marketing the PRP independent from the Integrated Projects.
Decision: Western will market the output of the PRP through
contractual arrangements separate from the Integrated Projects.
II. Issue: Marketing area for the PRP.
Discussion: Western proposed to define the marketing area for the
PRP as Utah and Wasatch Counties in Utah, essentially the drainage of
the Provo River. Two entities, Weber Basin Water Conservancy District
(Weber Basin) and the city of Bountiful (Bountiful), Utah, claimed that
since water was diverted from the Weber River into the Provo River
above powerplants that were controlled by them, they were entitled to
an allocation of energy from the PRP to compensate them for energy lost
because of this diversion. Western, through Reclamation, was able to
demonstrate that water rights for the Provo River diversion predated
water rights held by Weber Basin and Bountiful for generation. Neither
Weber Basin nor Bountiful commented on the revised proposal. In
responding to the revised proposal, ICPA was the only entity to comment
on this issue. ICPA supported establishing the Provo River Drainage as
the marketing area for the PRP.
Decision: PRP power will be marketed within Wasatch and Utah
Counties, Utah.
III. Issue: Marketing the output of the Deer Creek Powerplant to
preference entities located in the marketing area.
Discussion: Marketing of the PRP production to preference entities
in the marketing area was supported by the commentors. All of these
entities are members of either ICPA or UMPA, organizations established
as purchasing agents for Federal power. Heber City, Lehi, Springville,
Strawberry Electric Service District, and Payson are members of ICPA.
Provo, Salem, and Spanish Fork are members of UMPA.
Decision: Western will offer firm power sales contracts to ICPA and
UMPA to purchase PRP power and energy in behalf of their members in the
marketing area.
IV. Issue: Relationship of ICPA and UMPA to their members
concerning the allocation of PRP power.
Discussion: In its comments, UMPA requested that language be
included in its power sales contract which would clarify the
relationship of UMPA and its members concerning the allocation of PRP
power. If a member withdraws from either organization, the allocation
of Federal power stays with the member, not UMPA or ICPA.
Decision: Western will include language in both UMPA and ICPA's
contracts to clarify the relationship between the members and the
organization. The language will state that if a member withdraws from
either organization, the percentage entitlement of PRP power remains
with the member and not with UMPA or ICPA.
V. Issue: Payment of all of the PRP's annual costs including an
amount for the Water Users repayment obligation by the Contractors in
return for receiving all of the marketable energy produced by the plant
each year.
Discussion: Generation from Deer Creek Powerplant has varied
considerably from year to year. Without the Integrated Projects to back
up Deer Creek, it is very difficult to determine the amounts of firm
and nonfirm energy and capacity that should be used as marketable
energy in ratesetting. Basing rates on average generation could result
in surplus revenues in some years, and deficits in others. The proposal
which was supported by UMPA, ICPA, CUWCD, and CREDA would eliminate the
need to identify a specific rate for PRP power and would still allow
Contractors to take full advantage of PRP generation.
Decision: PRP power sales contracts will include provisions for
Contractors to pay all of the PRP's annual operation, maintenance, and
replacement (OM&R) expenses as well as an annual payment to Reclamation
for application toward the Water Users' annual repayment obligation. In
return, the Contractors will receive the total annual output of
marketable energy produced by the Deer Creek Powerplant. Every year
Western will prepare a power repayment study (PRS) that will identify
the OM&R costs to be collected in the upcoming year.
VI. Issue: Effect of operation of Jordanelle Reservoir on Deer
Creek generation.
Discussion: Jordanelle Reservoir is intended to store surplus water
from high flow years and the winter flows of the Provo River and
release it in dry years and in the late summer. Prior to Jordanelle,
the winter flow of the Provo River was released from Deer Creek through
the generators. Under the Deer Creek/Jordanelle Operating Agreement,
only enough water to meet minimum stream flow requirements will be
released. The result is that winter generation is greatly reduced.
However, there is the potential for generation to be enhanced when the
water is released during the summer months.
Reducing winter generation levels creates a problem in providing
enough energy to repay PacifiCorp for its foregone generation when the
Water Users are operating under the December 20, 1938, Power Contract
(1938 Contract) (see discussion below under section II of Marketing
Criteria). In the Deer Creek/Jordanelle Operating Agreement, the CUWCD
agreed to make up any shortfalls in repaying PacifiCorp. On the other
hand, CUWCD releases should augment summer generation levels. CUWCD has
requested that this energy be applied toward the deficit it creates in
the winter. Both Reclamation and the Water Users support this position.
Discussions have been held with the Contractors, and they have
agreed that the increase in summer energy attributable to CUWCD
releases should be available to offset reductions in the winter.
Decision: A separate agreement among Western, Reclamation, CUWCD,
PacifiCorp, the Water Users, and the Contractors will be developed
which will provide for the increase in summer energy to offset deficits
in winter generation. Negotiations are continuing on the methodology
used to verify the impact to generation and on the best method to
deliver the energy to PacifiCorp.
VII. Issue: Application of net power revenues from the Contractors
toward the obligation of the Water Users to repay the Federal
Government for its investment in the PRP.
Discussion: Several commentors, including UMPA, ICPA, Reclamation,
and the Water Users, commented on this issue. Both the Water Users and
Reclamation support the claim that there is a contractual obligation
for this payment and document the level of annual payments as
$102,243.80 through 2008, and $76,520 thereafter until the obligation
is liquidated. UMPA stated that it supports the level of the annual
payments. ICPA stated that it supports the payment through 2008 but
objected to the payment beyond that date. However, the Water Users and
Reclamation have demonstrated that the contractual obligation extends
until the Water Users' repayment obligation is liquidated. Reclamation
has documented that the net revenues available to the Water Users
beyond 2008 should be $76,520 annually.
Decision: Include provisions in the power sales contracts which
would pay $102,243.80 through 2008 toward the Water Users' repayment
obligation. Any contracts for the sale of power thereafter would
include annual assistance payments of $76,520 until the obligation is
liquidated. After the obligation is repaid, the net revenue of $76,520
will need to be paid to Western to be disposed of as Congress directs.
VIII. Issue: Term of Contracts.
Discussion: UMPA, Reclamation, and the Water Users commented that
the term of the power sales contracts should be extended long enough to
ensure that the obligation to use net power revenues to assist the
Water Users is completed. Reclamation stated that this should be
through FY 2032 to ensure that the Water Users' contract will be paid
off. Both Reclamation and the Water Users have established that there
is a contractual obligation that binds the Federal Government to make
surplus revenue from the sale of power available to help repay the
Water Users' obligation. Also, both assert that commitments were made
by Reclamation that this amount should be $76,520 per year after 2008.
Decision: Contractors will be given the option of extending the
contracts at least 3 years before the contracts expire. Adjustments to
contract provisions could be made at that time, including provisions
for new customers. The contracts will provide for annual payments of
$102,243.80 through 2008; extended contracts would include annual
assistance payments of $76,520 thereafter to be made by the Contractors
to Reclamation for application to the Water Users' annual repayment
obligation until the Water Users' repayment obligation is liquidated.
IX. Issue: Power revenues should not be used to subsidize the
repayment of municipal and industrial water developments.
Discussion: ICPA noted that it supported the position of CREDA that
power revenues should not be used to subsidize the repayment of
municipal and industrial water developments. As discussed above, both
Reclamation and the Water Users have demonstrated that even though a
majority of the water developed by the PRP is used for municipal and
industrial uses, the contracts between the Water Users and Reclamation
establish a commitment for net power revenues to be used to help the
Water Users meet their annual repayment requirements.
Decision: Western's contract should be consistent with the
provisions of the contracts between Reclamation and the Water Users.
The obligation to provide for payments to the Water Users until their
repayment obligation is liquidated will be reflected in the contracts.
X. Issue: What happens in the event of a major equipment failure at
the Deer Creek Powerplant?
Discussion: Reclamation commented that Western's proposal does not
address what would happen in the event of a major equipment failure at
the Deer Creek Powerplant, and that ``the contract terms should be
sufficiently flexible to address this and other significant issues.''
Given the age of the powerplant, it is necessary to take this into
consideration.
Decision: Include language in the power sales contracts which
provides that in the event extraordinary replacement costs are incurred
at the Deer Creek Powerplant, the payment thereof shall take precedence
over the application of net power revenues toward the Water User's
repayment obligation, and may result in a reduction or deferral of such
payment until the replacement costs are fully recovered. This language
has been agreed to by the Water Users and is included in the Deer
Creek/Jordanelle Operating Agreement.
Marketing Criteria
I. 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 marketing
the PRP resource. Western believes these marketing criteria will
benefit the Contractors, the Water Users, Reclamation, and Western.
II. Marketable Resource. The 1938 Contract among Reclamation, the
Water Users, the Weber River Water Users Association, and PacifiCorp
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 for PacifiCorp 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 three 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.
III. Establishment of Rate Methodology. Western, through a separate
public process, will establish a rate methodology for the PRP. Western
will prepare an annual PRS which will identify the anticipated OM&R
expenses. Minor replacements and additions shall be included in the
annual OM&R expenses. However, if major replacements or additions which
cost more than $5,000 are needed, the Contractors will be given the
option of financing their individual share of the cost or of having the
cost capitalized at the Department of Energy's current interest rate
and amortized over the life of the replacement or addition. Rather than
set a specific rate for power and energy, the Contractors will pay the
PRP's total annual powerplant expenses in return for the total
marketable PRP production. Each will pay its proportional share of the
OM&R expenses identified in the PRS in 12 monthly installments. In
addition to the annual OM&R expenses, before January 1 of each year,
each Contractor will pay its share of net power revenues to Reclamation
to be applied toward the Water Users' annual payment. Through 2008, the
total annual payment will be $102,243.80. Thereafter, until the Water
Users' obligation is liquidated, the total annual payment will be
$76,520. After the Water Users' repayment obligation is liquidated, the
annual payment of $76,520 will continue to be paid to Western to be
disposed of as Congress directs.
IV. Marketing Area. Because of the size of the resource, Western
has limited marketing of this resource to preference entities within
the drainage area of the Provo River. All of the eligible utilities are
members of ICPA and UMPA and are located in Utah and Wasatch Counties,
Utah. The cities of Heber City, Lehi, Payson, Springville, and the
Strawberry Electric Service District (Strawberry) are members of ICPA.
The cities of Provo, Salem, and Spanish Fork are members of UMPA. It is
anticipated that marketing of the PRP resource to these Contractors
would assure that each would receive a beneficial amount of power.
V. Class of Service. PRP generation is dependant 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. The PRP
will 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 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 Contractors. The Contractors will be
responsible for reserves in accordance with Inland Power Pool
requirements.
VI. Resource Allocation. Western will 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, while ICPA members serve approximately 30 percent.
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.
The following table shows the percentage entitlement of ICPA and
UMPA and each of their members.
Percentage Entitlement of ICPA and UMPA and Their Members
------------------------------------------------------------------------
Percentage
Entity entitlement
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ICPA Total............................. .................. 30.0
Heber City........ 6.0
Lehi.............. 2.7
Springville....... 12.9
Payson............ 4.8
Strawberry........ 3.6
UMPA Total............................. .................. 70.0
Provo............. 60.9
Salem............. 1.4
Spanish Fork...... 7.7
------------------------------------------------------------------------
Western will offer firm power sales contracts to ICPA and UMPA on
behalf of their members which specify the terms and conditions of
receiving PRP power. The power sales contracts will be structured so
that if a member withdraws from either ICPA or UMPA, the member retains
its entitlement of PRP power.
VII. Term of Contract. The power sales contracts will become
effective upon execution and shall terminate on September 30, 2008.
ENVIRONMENTAL COMPLIANCE: Western has complied with the National
Environmental Policy Act of 1969 through preparation of an
environmental assessment on the impacts of the proposed marketing
changes and has issued a Finding of No Significant Impact on November
8, 1994.
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, November 8, 1994.
J.M. Shafer,
Administrator.
[FR Doc. 94-28684 Filed 11-18-94; 8:45 am]
BILLING CODE 6450-01-P