[Federal Register Volume 60, Number 225 (Wednesday, November 22, 1995)]
[Notices]
[Pages 57859-57867]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-28534]



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DEPARTMENT OF ENERGY
Western Area Power Administration


Boulder Canyon Project--Notice of Rate Order

AGENCY: Western Area Power Administration, DOE.

ACTION: Notice of rate order.

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SUMMARY: This notice announces the confirmation and approval by the 
Deputy Secretary of the Department of Energy (DOE) of Rate Order No. 
WAPA-70 and Rate Schedule BCP-F5 placing into effect the rate 
methodology for determining the Annual Revenue Requirement, Base 
Charge, Forecast Capacity Rate and Forecast Energy Rate, and Calculated 
Energy Rate for the Boulder Canyon Project (BCP) of the Western Area 
Power Administration (Western) on an interim basis. The rate 
methodology and the charges/rates will remain in effect on an interim 
basis until the Federal Energy Regulatory Commission (FERC) confirms, 
approves, and places them into effect on a final basis or until 
superseded.

DATES: Rate Schedule BCP-F5 will be placed into effect on an interim 
basis on the first day of the first full billing period beginning on or 
after November 1, 1995, and will be in effect until FERC confirms, 
approves, and places the rate schedule in effect on a final basis for a 
5-year period, or until superseded.

FOR FURTHER INFORMATION CONTACT:

Mr. J. Tyler Carlson, Area Manager, Phoenix Area Office, Western Area 
Power Administration, P.O. Box 6457, Phoenix, AZ 85005-6457 and (602) 
352-2453 and
Mr. Joel K. Bladow, Assistant Administrator for Washington Liaison, 
Western Area Power Administration, Room 8G-027, Forrestal Building, 
1000 Independence Avenue, SW., Washington, DC 20585-0001, (202) 586-
5581.

SUPPLEMENTARY INFORMATION: The proposed rate methodology is the result 
of Western, the Bureau of Reclamation (Reclamation), and the BCP 
Contractors\1\ successfully concluding negotiations on the BCP 
Implementation Agreement which became effective February 17, 1995. The 
BCP Implementation Agreement resolved eleven issues (1) Replacements; 
(2) Visitor Facilities; (3) Amendment to Regulations; (4) Multi-Project 
Benefits and Costs; (5) Engineering & Operation Committee (E&OC) and 
Coordinating Committee; (6) Billing and Payment; (7) Operation Amount 
and Working Capital; (8) Audits; (9) Principal Payments; (10) Annual 
Rate Adjustments; and (11) Uprating Credits.

    \1\The BCP Contractors include the Arizona Power Authority; 
Colorado River Commission of Nevada; City of Boulder City, Nevada; 
Department of Water and Power of the City of Los Angeles; The 
Metropolitan Water District of Southern California; Southern 
California Edison Company; and the Cities of Anaheim, Azusa, 
Banning, Burbank, Colton, Glendale, Pasadena, Riverside, and Vernon, 
California.
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    Four major changes are affecting the power rates for the BCP. The 
first change concerns the ratesetting methodology. Under the 
Implementation Agreement of February 17, 1995, the new rate methodology 
provides that the BCP Contractors will pay each year for the Annual 
Revenue Requirement. From the Annual Revenue Requirement, a Base Charge 
for both capacity and energy is calculated. The Base Charge is 
calculated by dividing the Annual Revenue Requirement equally between 
energy (Energy Dollar) and capacity (Capacity Dollar), with an 
adjustment (Capacity Credit) to resolve the historic revenue imbalance 
between energy and capacity. The Contractor's energy Base Charge each 
month will be the Rate Year's Energy Dollar multiplied by the 
Contractor's Firm Energy percentage multiplied by the Contractor's 
Monthly Energy Ratio. The Contractor's capacity Base Charge each month 
will be the Rate Year's Capacity Dollar divided by 12 multiplied by the 
Contractor's Contingent Capacity percentage.
    For each Rate Year, Western will calculate a Forecast Capacity Rate 
and a Forecast Energy Rate. These rates will be applied to services 
such as: excess energy, unauthorized overruns, and water pump energy. 
Within 90 days after, the end of the Rate Year, a Calculated Energy 
Rate shall be calculated.
    The second change concerns reducing the Annual Uprating Payments. 
The Uprating payments are payments due the BCP Schedule B Contractors 
for advancing funds to upgrade the BCP system. The Colorado River 
Commission 

[[Page 57860]]
of Nevada requested and obtained approval from the BCP Engineering & 
Maintenance Committee to reduce their Uprating Credit Carryforward 
balance.
    The third change concerns the projection of a large carryover 
balance in the Colorado River Dam Fund, which is proposed to be applied 
against FY 1996 expenses, reducing the need for FY 1996 revenue. In 
previous rate studies, no carryover balance was assumed available in 
the ratesetting year. However, implementing a provision of the BCP 
Implementation Agreement requires projecting actual FY 1996. This rate 
order assumes the full amount of the carryover is applied against FY 
1996 expenses, offsetting the need for an equal amount of power revenue 
in FY 1996.
    The fourth change affecting the BCP power rate is the assumed 
completion of the Hoover Dam Visitor Facilities in FY 1996. This 
increases the annual interest payment due in FY 1996 and subsequent 
years by nearly $10 million annually. Partially offsetting this 
increased expenses is an increase in revenue from visitors' fees 
assumed to begin in FY 1996. The ``Other revenue'' category is assumed 
to increase from $2.4 million in FY 1995 to $6.0 million in FY 1996.
    The net effect of all these changes is to decrease the revenues 
that need to be collected through power bills in FY 1996 from $49.3 
million to $45.2 million on an 8.4 percent decrease.
    The existing rate, proposed Base Charge, Forecast Energy Rate, and 
Forecast Capacity Rate for the 5-year period are as follows:

----------------------------------------------------------------------------------------------------------------
                                                                                                    Proposed\2\ 
                                             Existing rates                                        charges/rates
                                                (FY 1995)                                            (FY 1996)  
----------------------------------------------------------------------------------------------------------------
Rate Schedule..............................        BCP-F4/2  ...................................          BCP-F5
                                                             Base Charge\3\ ($1,000):                           
                                                                Energy Dollar...................         $23,460
                                                                Capacity Dollar.................         $21,737
 Firm Energy Rate (mills per kilowatthour).            6.31  Forecast Energy Rate (mills per                6.12
                                                              kilowatthour).                                    
Firm Capacity Rate ($ per kilowatt-month)..            1.07  Forecast Capacity Rate ($ per                 $0.93
                                                              kilowatt-month).                                  
Composite Rate (mills per kilowatthour)....           12.62  Composite Rate (mills per                    11.79 
                                                              kilowatthour).                                    
----------------------------------------------------------------------------------------------------------------
2New rates will be determined each year, based upon the proposed new rate setting methodology. These charges and
  rates represent FY 1996 only.                                                                                 
3The monthly charge for each Contractor is calculated as follows: (1) Energy Base Charge=Rate Year Energy Dollar
  multiplied by the Contractor's Firm Energy percentage multiplied by its Monthly Energy Ratio and (2) Capacity 
  Base Charge=Rate Year Capacity Dollar divided by 12 multiplied by the Contractor's contingent Capacity        
  percentage. For FY 1996, upon the determination of the actual October 1995 energy and capacity charges, the   
  monthly Energy Charge and Capacity Charge for the remaining months will be adjusted so the BCP Contractors    
  will not pay more than the FY 1996 Annual Revenue Requirement.                                                

    Upon completion of the written procedures for the Uprating Credit 
Program and receipt of revised Uprating Credit Schedules, the FY 1996 
Energy Dollar and Capacity Dollar will be adjusted by the difference 
over the remaining months of FY 1996 so the BCP Contractors will not 
pay more than the FY 1996 Annual Revenue Requirement.
Statement of Annual Base Charge
    The annual Base Charge for both capacity and energy for the BCP 
will be based upon the estimated Annual Revenue Requirement contained 
in the annual power repayment spreadsheet study (PRSS). The Base Charge 
is comprised of the Energy Dollar (50-percent of the Annual Revenue 
Requirement plus the Capacity Credit) and Capacity Dollar (50-percent 
of the Annual Revenue Requirement minus the Capacity Credit). 
Differences between the estimated and the actual Annual Revenue 
Requirement for the Rate Year will be calculated at the end of each FY 
when final financial data becomes available and will be used in 
adjusting the next years' Annual Revenue Requirement.
    By Amendment No. 3 to Delegation Order No. 0204-108, published 
November 10, 1993 (58 FR 59716), the Secretary of Energy (Secretary) 
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 such rates into effect on an 
interim basis to the Deputy Secretary; and (3) the authority to 
confirm, approve, and place into effect on a final basis, to remand, or 
to disapprove such rates to FERC. Existing DOE procedures for public 
participation in power rate adjustments (10 CFR Part 903) became 
effective on September 18, 1985 (50 FR 37835).
    These power rates are established pursuant to section 302(a) of the 
DOE Organization Act, 42 U.S.C. Sec. 7152(a), through which the power 
marketing functions of the Secretary of the Interior and Reclamation 
under the Reclamation Act of 1902, 43 U.S.C. Sec. 371 et seq., as 
amended and supplemented by subsequent enactments, particularly section 
9(c) of the Reclamation Project Act of 1939, 43 U.S.C. Sec. 485h(c), 
and other acts specifically applicable to the project system involved, 
were transferred to and vested in the Secretary.
    During the 109-day comment period, Western received eight written 
comments. In addition, five speakers commented during the July 13, 
1995, public comment forum. All comments and responses are addressed in 
the rate order.
    Rate Order No. WAPA-70, confirming, approving, and placing the 
proposed rate methodology for determining the Annual Revenue 
Requirement, Base Charge, Forecast Capacity Rate, Forecast Energy Rate, 
and Calculated Energy Rate for the BCP into effect on an interim basis, 
is issued, and the Rate Schedule BCP-F5 will be submitted promptly to 
FERC for confirmation and approval on a final basis.
    Issued in Washington, DC, October 31, 1995.
Charles B. Curtis,
Deputy Secretary.
Department of Energy, Deputy Secretary
Order Confirming, Approving, and Placing the Boulder Canyon Project 
Firm Power Service Rate Into Effect on an Interim Basis 

    In the matter of: Western Area Power Administration Rate 
Adjustment for Boulder Canyon Project
[Rate Order No. WAPA-70]
November 1, 1995.
    The rate methodology is established pursuant to section 302(a) of 
the Department of Energy (DOE) Organization Act, 42 U.S.C. 
Sec. 7152(a), through which the power marketing functions of the 
Secretary of the Interior and the Bureau of Reclamation (Reclamation) 
under the Reclamation

[[Page 57861]]

Act of 1902, 43 U.S.C. Sec. 371 et seq., as amended and supplemented by 
subsequent enactments, particularly section 9(c) of the Reclamation 
Project Act of 1939, 43 U.S.C. Sec. 485h(c), and other acts 
specifically applicable to the project system involved were transferred 
to and vested in the Secretary of Energy (Secretary).
    By Amendment No. 3 to Delegation Order No. 0204-108, published 
November 10, 1993 (58 FR 59716), the Secretary delegated (1) the 
authority to develop long-term power and transmission rates on a 
nonexclusive basis to the Administrator of the Western Area Power 
Administration (Western); (2) the authority to confirm, approve, and 
place such rates into effect on an interim basis to the Deputy 
Secretary; and (3) the authority to confirm, approve, and place into 
effect on a final basis, to remand, or to disapprove such rates to the 
Federal Energy Regulatory Commission. Existing DOE procedures for 
public participation in power rate adjustments (10 CFR Part 903) became 
effective on September 18, 1985 (50 FR 37835).

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.
    1984 Act: Hoover Power Plant Act of 1984, August 17, 1984 (43 
U.S.C. 619 et seq.).
    Adjustment Act: Boulder Canyon Project Adjustment Act, July 19, 
1940 (43 U.S.C. 618 et seq.).
    Annual Capacity Credit: The dollar amount used to adjust the Energy 
Dollar and Capacity Dollar in order to resolve the historic revenue 
imbalance between energy and capacity.
    Annual Rate: A rate revision recommended to and approved by the 
Deputy Secretary of Energy for approval on an annual basis for the 
interim years of the 5-year period.
    Annual Revenue Requirement: An amount used to calculate the 
Capacity Dollar and Energy Dollar equal to the estimated actual 
expenses for the Rate Year less the sum of (1) multi-project benefits; 
(2) carryover of funds from the prior FY; (3) estimated BCP water 
revenue; (4) estimated User Fees; and (5) funds from other sources, 
except revenue from the sale of capacity and energy.
    Base Charge: The total charge paid by a Contractor for capacity and 
energy based on the Annual Revenue Requirement, pursuant to Section 13 
of the BCP Implementation Agreement effective February 17, 1995. The 
Base Charge shall be composed of a capacity component and an energy 
component.
    BCP: Boulder Canyon Project.
    BCP Contractors: The BCP Contractors include the Arizona Power 
Authority; Colorado River Commission of Nevada; City of Boulder City, 
Nevada; Department of Water and Power of the City of Los Angeles, 
California; the Metropolitan Water District of Southern California; 
Southern California Edison Company; and the Cities of Anaheim, Azusa, 
Banning, Burbank, Colton, Glendale, Pasadena, Riverside, and Vernon, 
California.
    BCP Implementation Agreement: An agreement which became effective 
February 17, 1995. The agreement resolved eleven issues (1) 
Replacements; (2) Visitor Facilities; (3) Amendment to Regulations; (4) 
Multi-Project Benefits and Costs; (5) Engineering & Operating Committee 
(E&OC) and Coordinating Committee; (6) Billing and Payment; (7) 
Operating Amount and Working Capital; (8) Audits; (9) Principal 
Payments; (10) Annual Rate Adjustments; and (11) Uprating Credits.
    Calculated Energy Rate: This rate equals fifty percent (50%) of the 
Annual Revenue Requirement for each FY divided by the Energy Deemed 
Delivered in such FY.
    Capacity Dollar: The amount of revenue to be billed for Project 
capacity sales for each Fiscal Year. Such amount shall be fifty percent 
(50%) of the Annual Revenue Requirement, adjusted for the Annual 
Capacity Credit in accordance with Section 13.9 of the BCP 
Implementation Agreement.
    Colorado River Basin Project Act: The Colorado River Basin Project 
Act, September 30, 1968 (43 U.S.C. 1501 et seq.).
    Contribution Charge: LCRBDF surcharge is part of the rate schedule 
and is expressed in mills per kWh; required by law to be included in 
the BCP rates.
    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.
    CRDF: Colorado River Dam Fund. A fund established by Section 2 of 
the Project Act which is to be used only for the purposes specified in 
the Adjustment Act, Colorado River Basin Project Act of 1968, and the 
1984 Act.
    DOE: Department of Energy.
    DOE Order RA 6120.2: An order related to power marketing 
administration financial reporting.
    $/kW-month: Dollars per kilowatt-month.
    E&OC: Engineering and Operating Committee, consisting of members 
from BCP Contractors, Western, and Reclamation. Its function is to 
establish a regular review process of Western's and Reclamation's 
planned O&M, additions, and replacements.
    Energy Deemed Delivered: The amount of energy scheduled, delivered, 
metered and calculated to be delivered to each Contractor, including 
ML and SL.
    Energy Dollar: The amount of revenue to be billed for BCP energy 
sales for each FY. Such amount shall be fifty percent (50%) of the 
Annual Revenue Requirement, adjusted for the Annual Capacity Credit in 
accordance with Section 13.9 of the BCP Implementation Agreement.
    FERC: Federal Energy Regulatory Commission.
    Forecast Capacity Rate: This rate equals the Capacity Dollar 
divided by 1,951,000 kW.
    Forecast Energy Rate: This rate equals the Energy Dollar divided by 
the lesser of the Total Master Schedule or 4,501.001 MWh.
    FY: Fiscal Year.
    Hoover Dam: The dam on the Colorado River which forms Lake Mead.
    kW: Kilowatt.
    kWh: Kilowatthour.
    LCRBDF: Lower Colorado River Basin Development Fund--a fund 
established by the Colorado River Basin Project Act of 1968.
    Ml and Sl: Motoring losses and system losses.
    Master Schedule: This is an 18-month schedule of projected BCP 
hydrology.
    mills/kWh: Mills per kWh.
    Monthly Energy Ratio: The estimated amount of energy each 
Contractor is to receive each month in accordance with the final Master 
Schedule divided by the total energy that Contractor is to receive in 
that FY under the final Master Schedule.
    NEPA: National Environmental Policy Act of 1969.
    OMB: Office of Management and Budget.
    O&M: Operation and maintenance.
    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.
    Rate Year: The FY in which the Base Charge, Forecast Capacity Rate, 
and Forecast Energy Rate are determined and effective.
    Reclamation: Bureau of Reclamation, U.S. Department of the 
Interior.
    Replacements: A unit of property constructed or acquired as a 
substitute 

[[Page 57862]]
for a existing unit of property for the purpose of maintaining the 
power features of a project or the joint features properly allocated to 
power.
    Schedule B Contractors: The BCP Contractors that advanced funds to 
upgrade the BCP System.
    Secretary: Secretary of Energy.
    Treasury: Secretary of the Department of the Treasury.
    Uprating Program: A program nonfederally financed by eleven (11) of 
the BCP Contractors. The purpose was to increase the capacity of the 
existing generating and associated electrical equipment at the BCP.
    Western: Western Area Power Administration, U.S. Department of 
Energy.
    Western's 1986 General Regulations: General Regulations for the 
Regulations: Charges for the Sale of Power from the Boulder Canyon 
Project, 10 CFR Part 904.
    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 proposed rate methodology for determining the Annual Revenue 
Requirement, Base Charge, Forecast Capacity Rate, Forecast Energy Rate, 
and Calculated Energy Rate, will become effective on an interim basis 
beginning November 1, 1995, and remain in effect pending FERC's 
approval on a final basis for a 5-year period, or until superseded.

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 developing the method of determining the Annual Revenue 
Requirement, Base Charge, Forecast Capacity Rate, Forecast Energy Rate, 
and the Calculated Energy Rate.
    The following summarizes the steps Western took to ensure 
involvement of interested parties in the rate process:
    1. Discussion of the proposed rate methodology was initiated at an 
informal BCP Contractor meeting held on April 13, 1995, in Phoenix, 
Arizona. At this informal meeting, Western and Reclamation 
representatives explained the need for a change in the Annual Revenue 
Requirements, Forecast Capacity Rate, Forecast Energy Rate, and 
answered questions from those persons attending.
    2. A Federal Register notice was published on May 8, 1995 (60 FR 
22575), officially announcing the proposed firm power rate adjustment 
process, initiating the public consultation and comment period, 
announcing the public information and public comment forums, and 
presenting procedures for public participation.
    3. On May 18, 1995 a letter was mailed from Western's Phoenix Area 
Office to all Boulder Canyon Project customers and other interested 
parties providing a copy of the Boulder Canyon Project Rate Brochure, 
dated May 1995, which included a copy of the Federal Register notice of 
May 8, 1995.
    4. At the public information forum held on June 15, 1995, Western 
and Reclamation representatives explained the proposed rate 
methodology, a change in the proposed billing procedure, and outlined 
the reasoning for the overall decrease in the Annual Revenue 
Requirement for Rate Year 1996 in greater detail and answered 
questions.
    5. On August 4, 1995, a letter was mailed from Western's Phoenix 
Area Office to all Boulder Canyon Project customers and other 
interested parties announcing the extension of the consultation and 
comment period through August 25, 1995.
    6. A public comment forum was held on July 13, 1995, to give the 
public an opportunity to comment for the record. Five persons 
representing customers and customer groups made oral comments.
    7. A Federal Register notice was published on August 21, 1995, 
announcing the extension of the consultation and comment period through 
August 25, 1995.
    8. Eight comment letters were received during the 109-day 
consultation and comment period. The consultation and comment period 
ended August 25, 1995. All formally submitted comments have been 
considered in the preparation of this rate order.

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 expressed 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 the 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 was allocated to flood control.
    Construction of the Hoover Dam, formerly known as Boulder Dam, 
began in 1930, and the first generating unit of the powerplant 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.
    Subsequent 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 the 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 
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 Contribution Charge is to be 
transferred to the LCRBDF.
    Under the 1984 Act, the BCP's power was sold to 15 contractors 
located in the states of Arizona, California, and

[[Page 57863]]

Nevada, in accordance with the Conformed Criteria.
    Due to the numerous requirements set out in the 1984 Act and the 
earlier separation 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

    A PRSS is prepared each FY to determine the power revenues required 
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 RA 6120.2, section 12b, requires 
that:

    In addition to the recovery of the above costs (operation 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.

    The BCP PRSS has been used to determine the Annual Revenue 
Requirement, which includes the net of expenses (OM&R, payment to 
states, uprating credit payments, interest and principal payments, 
working capital) minus other revenue (prior year carryover balance, 
water revenue, and other revenue).

Existing and Provisional Rates

    A comparison of the existing and provisional charges and rates 
follows:

----------------------------------------------------------------------------------------------------------------
                                                Existing                                            Proposed\5\ 
                                              charges/rates                                        charges/rates
                                                (FY 1995)                                            (FY 1996)  
----------------------------------------------------------------------------------------------------------------
Rate Schedule..............................        BCP-F4/2                                               BCP-F5
                                                             Base Charge\6\ ($1,000):...........                
                                                                Energy Dollar...................         $23,460
                                                                Capacity Dollar.................         $21,737
Firm Energy Rate (mills per kilowatthour)..            6.31  Forecast Energy Rate (mills per                6.12
                                                              kilowatthour).                                    
Firm Capacity Rate ($ per kilowatt-month)..            1.07  Forecast Capacity Rate ($ per                 $0.93
                                                              kilowatt-month).                                  
Composite Rate (mills per kilowatthour)....           12.62  Composite Rate (mills per                    11.79 
                                                              kilowatthour).                                    
----------------------------------------------------------------------------------------------------------------
\5\New rates will be determined each year, based upon the proposed new rate setting methodology. These charges  
  and rates represent FY 1996 only.                                                                             
\6\The monthly charge for each Contractor is calculated as follows: (1) Energy Base Charge = Rate Year Energy   
  Dollar multiplied by the Contractor's Firm Energy percentage multiplied by its Monthly Energy Ratio and (2)   
  Capacity Base Charge = Rate Year Capacity Dollar divided by 12 multiplied by the Contractor's contingent      
  Capacity percentage. For FY 1996, upon the determination of the actual October 1996 energy and capacity       
  charges, the monthly Energy Charge and Capacity Charge for the remaining months will be adjusted so the BCP   
  Contractors will not pay more than the FY 1996 Annual Revenue Requirement.                                    

Certification of Rate

    Western's Administrator has certified that the rate methodology for 
determining the BCP Annual Revenue Requirement, Base Charge, Forecast 
Energy Rate, Forecast Capacity Rate, and Calculated Energy Rate placed 
into effect on an interim basis herein are the lowest possible, 
consistent with sound business principles. The rate methodology has 
been developed in accordance with administrative policies and 
applicable laws.

Discussion

    Western is requesting approval to place into effect a new rate 
methodology. Each year the contractors will pay the BCP the total 
estimated Annual Revenue Requirement in return for up to 1,951,000 kW 
of capacity and 4,501.001 MWh of energy at the BCP. The capacity and 
energy, produced up to the above limits at the BCP, have been allocated 
to the contractors on a percentage basis. Western will prepare an 
annual PRSS which will identify the estimated annual revenue 
requirements for the next FY. The annual operation, maintenance, and 
replacement budgets will be presented to and approved by the BCP E&OC.
    Upon completion of the Uprating Credit Procedures and receipt of 
revised Uprating Credit Schedules, the FY 1996 Energy Dollar and 
Capacity Dollar will be adjusted by the difference between the 
originally projected Annual Uprating Credit Payments and the revised 
Annual Uprating Credit Payments and spread over the remaining months of 
FY 1996 so the BCP Contractors will not pay more than the revised FY 
1996 Annual Revenue Requirement.

Revenue Requirements

    The existing and proposed Annual Revenue Requirements for the BCP 
are as follows:

------------------------------------------------------------------------
                                                    Estimated   FY 1996 
                                                    existing    proposed
------------------------------------------------------------------------
Annual Revenue Requirements (rounded to nearest                         
 $1,000).........................................     $57,720    $45,197
------------------------------------------------------------------------

    The methodology for determining the Annual Revenue Requirement will 
satisfy the cost-recovery criteria set forth in DOE Order RA 6120.2.

Statement of Revenue and Related Expenses

    The Annual Revenue Requirement for the BCP is based upon Ratebase 
PRSS estimates of the Rate Year's annual costs less other revenues. 
Each FY's estimated Annual Revenue Requirement will be adjusted when 
actual financial data becomes available. The following table provides a 
summary of the revenue and related expenses through the 5-year 
provisional rate approval period.

                                                                        

[[Page 57864]]
                    Boulder Canyon Project Projections of 5-Year Period Revenues and Expenses                   
                                            [In thousands of dollars]                                           
----------------------------------------------------------------------------------------------------------------
                                                               Provisional     Existing annual                  
                                                             annual revenue        revenue                      
                                                            requirement PRSS  requirement PRSS     Difference   
                                                                1996-2000         1996-2000                     
----------------------------------------------------------------------------------------------------------------
Total Revenues............................................          $276,261          $269,702            $6,559
                                                           -----------------------------------------------------
Revenue Distribution:                                                                                           
    O&M...................................................           131,051           110,664            20,387
    Payment to States.....................................             3,000             3,000                 0
    Other Expenses........................................            23,201            18,950             4,251
    Annual Uprating Payments..............................            74,699            76,888            -2,189
    Annual Replacements...................................            20,402            10,577             9,825
    Working Capital Fund..................................               653                 0               653
    Interest..............................................            62,577            53,996             8,581
    Principal Payments....................................            13,255            12,887               368
    CRDF Carry-Over Balance...............................          (13,317)                 0           -13,317
    Water Sales...........................................           (2,650)           (2,250)              -400
    Other Revenue.........................................          (36,610)          (15,010)           -21,600
                                                           -----------------------------------------------------
      Annual Revenue Requirement (rounded to the nearest                                                        
       $1,000)............................................           276,261           269,702             6,559
----------------------------------------------------------------------------------------------------------------
Note: The difference between the Annual Revenue Requirements for the existing rates and the provisional rates is
  because the existing rates are based upon the FY 1993 budget and the provisional rates are based upon the FY  
  1996 budget.                                                                                                  



Basis for Rate Methodology--Boulder Canyon Project

    The proposed rate methodology is the result of Western, 
Reclamation, and the BCP Contractors successfully concluding 
negotiations on the BCP Implementation Agreement which became effective 
February 17, 1995.
    The FY 1996 Energy Dollar and Capacity Dollar are designed to 
maintain a 50/50 split between revenue earned from energy and revenue 
earned from capacity. The Capacity Credit revenue adjustment resolves 
the historic imbalance between revenues collected from capacity and 
energy. The cost to individual BCP Contractor will vary because of the 
differences in each BCP Contractor's entitlement.
    Each Contractor shall be billed monthly a Base Charge comprised of 
(1) an energy charge equal to the Rate Year Energy Dollar multiplied by 
the Contractor's Firm Energy percentage multiplied by their Monthly 
Energy Ratio and (2) a capacity charge equal to the Rate Year Capacity 
Dollar divided by 12 multiplied by the Contractor's Contingent Capacity 
percentage. The FY 1996 Rate Year's Energy Dollar and Capacity Dollar 
will be adjusted over the remaining 11 months of FY 1996, so that the 
BCP Contractors will not pay more than the estimated Annual Revenue 
Requirement for FY 1996. The monthly energy and capacity charge will be 
due and payable regardless of the amount of power and energy produced 
by the BCP.
    In addition to the Contractor's monthly base charge, a Forecast 
Energy Rate and a Forecast Capacity Rate shall be calculated and will 
be applied, for (1) excess energy, (2) unauthorized overruns, and (3) 
water pump energy.
    Within 90 days after the end of the FY and the Energy Deemed 
Delivered has been determined, Western shall determine the Calculated 
Energy Rate. If the Energy Deemed Delivered is greater than 4,501.001 
MWh, Western shall then apply the Calculated Energy Rate to each 
Contractor's Energy Deemed Delivered to determine the Contractor's 
actual energy charge. Western shall then establish a credit or debit 
for each Contractor based on the difference between the Contractor's 
Energy Dollar and the Contractor actual energy charge. Such credit or 
debit shall be issued by Western against the Contractor in the month 
following the calculation or as soon as possible thereafter.
    The preparation of each FY's PRSS shall include adjustments from 
estimates to actuals in the previous year's PRSS. Any adjustments 
required, whether resulting in an increase or decrease of the annual 
revenue requirement, will be carried forward and included in the 
estimated revenue requirement for the calculation of the next Rate 
Year.

Comments

    During the 109-day comment period, Western received eight written 
comments either requesting information or commenting on the rate 
adjustment. In addition, five persons commented during the July 13, 
1995, public comment forum. All comments were reviewed and considered 
in the preparation of this rate order.
    Written comments were received from the following sources:

Colorado River Commission of Nevada (Nevada)
Irrigation & Electrical Districts Association of Arizona (Arizona)
Mr. Northcutt Ely for Los Angeles, City of, Department of Water and 
Power and Southern California Edison Company (California) (2)
Metropolitan Water District of Southern California (California)
Overton Power District No. 5 and Valley Electric Association (Nevada)
R.W. Beck for the Arizona Power Authority (Arizona)
Vernon, City of (California)

    Representatives of the following organizations made oral comments:

Arizona Power Authority (Arizona) (3 speakers)
Overton Power District No. 5 and Valley Electric Association (Nevada)
Los Angeles, City of, Department of Water and Power and Southern 
California Edison Company (California)

    Most of the comments received at the public meetings and in 
correspondence dealt with the proposed rates, hydrology, cost 
containment, and working capital fund. 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.

[[Page 57865]]


Boulder Canyon Comments

Rates

    Issue: Some customers are requesting a delay in the BCP rate 
process in order to allow the customers, Western, and Reclamation 
sufficient time to complete their current efforts; in particular, 
efforts of the uprating credits committee.
    Response: Western and Reclamation believe a 30-day delay in the 
implementation of the proposed rate methodology until November 1, 1995, 
would be in the best interest of the BCP Contractors. The 30-day delay 
allowed the Colorado River Commission of Nevada (CRC) to obtain the 
August 16, 1995, approval by the BCP E&OC of a request concerning CRC's 
uprating credit carryforward balance and allow Western to incorporate 
the resulting changes from CRC's request into the PRSS. Also, in 
addition, the delay is taken in response to public comments for 
additional review and comment time and the delay in the enactment of 
the BCP Implementation Agreement. Upon completion of the current 
efforts on the uprating credit committee, Western believes that further 
changes to the uprating credit schedules can be incorporated into the 
PRSS and the FY 1996 Rate Year Annual Revenue Requirement can be 
adjusted accordingly at that time.
    Issue: A customer suggested that if sufficient revenue reductions 
are achieved through the efforts of the current committees to 
potentially warrant a rate reduction for FY 96, Western should, 
instead, consider carrying these revenues over into FY 1997 in order to 
mitigate the effect of the Hoover Visitor Facilities on that year's 
rates.
    Response: As under the existing rate methodology, the proposed rate 
methodology provides that any revenue over or under the Annual Revenue 
Requirement is carried forward into the next year and increases or 
decreases that year's Annual Revenue Requirement. The revenue carried 
forward in any given year lowers the total Annual Revenue Requirement 
for the next year, and does not act as a credit for any one specific 
item, such as the visitor facilities. Western cannot deviate from the 
methodology as agreed to by all the BCP Contractors in the BCP 
Implementation Agreement.
    Issue: A customer does not agree that the savings which may come 
about as a result of an increase in generation of energy or a reduction 
in costs should be carried over into FY 1997.
    Response: Western agrees. As indicated previously, any savings in 1 
year, which result in excess revenue being collected, is automatically 
carried forward to the next year.
    Issue: Some customers believe there is no need for a rate increase; 
instead, there should be a reduction for FY 1996. It is believed that 
Reclamation and Western can safely operate and maintain the BCP for FY 
1996 using the rates currently in effect.
    Response: Western agrees that a rate increase is not justified for 
FY 1996. Under the proposed rate methodology, Base Charge and 
forecasted rates will be a reduction to the existing rates. The FY 1995 
Ratebase PRSS projects the FY 1996 Rate Year Base Charge to be less 
than the total energy and capacity revenues to be collected in FY 1995.
    Issue: A customer asks the question whether it is necessary to 
calculate or display rates in view of the requirement introduced by the 
BCP Implementation Agreement that the amount collected for energy shall 
equal one-half of revenue requirements with adjustments to offset past 
imbalances irrespective of the quantities of energy produced. It 
believes that the calculation and promulgation of rates continues to be 
necessary as a consequence of provision of the regulations and 
contracts as well as for practical reasons.
    Response: Western agrees that the calculation of rates should 
continue. The proposed rate methodology requires Western to calculate 
the Annual Revenue Requirement, Base Charge, Forecast Energy Rate, 
Forecast Capacity Rate, and Calculated Energy Rate. The forecasted or 
calculated rates would be applied to services such as unauthorized 
overruns, ML and SL, and excess energy.
    Issue: Some customers support the proposal to adjust the rate upon 
the completion of the Uprating credit discussions.
    Response: Western anticipates that the Uprating credits for FY 1996 
will decrease upon completion of the Uprating credits discussions. The 
reductions are a result of the Uprating Program being declared 
complete, which releases excess bond funds and a revision to the 
calculation of the weighted average interest rate, used to determine 
the non-bonding contractors' Uprating credits. Western believes that 
the FY 1996 Base Charge can be adjusted upon completion of the Uprating 
credit discussions and receipt of the revised Uprating schedules.
    Issue: Some customers request that the proposed rates be 
implemented as soon as possible.
    Response: Western agrees that the new rate methodology needs to be 
implemented as soon as possible. It is Western's intention to proceed 
with the rate process and have the proposed rate methodology effective 
November 1, 1995, on an interim basis.
    Issue: Some customers support the option where the Uprating credit 
carryforward balances are paid over a 3-year period.
    Response: Western has incorporated this request into the FY 95 Rate 
Base PRSS. The process to request the FY 1995 payments has been 
initiated. It is to be noted that the payments incorporated in the PRSS 
do not address the issue of interest on the Uprating carryforward 
balance.
    Issue: One customer believes that the proposed charges and rates 
should provide for repayment of all overdue Uprating credits payments 
with accrued interest.
    Response: The Uprating credit procedures have not been completed. 
Western believes upon completion of the procedures and receipt of 
revised Uprating credit schedules this issue will be resolved.
    Issue: One customer has offered to provide Western with expertise 
and assistance in the light of Western's reorganization, changes in 
budgets, and turnover.
    Response: Western appreciates the offer for assistance. Western 
recognizes there are opportunities for developing partnerships with our 
customers and will be looking for opportunities through the 
transformation process.
    Issue: A customer comments that existing legal requirements, if 
followed strictly, would result in an over collection of revenue as a 
result of increased energy generation, requiring a mid-year adjustment.
    Response: The BCP Implementation Agreement provides that Western 
bill the BCP Contractors a monthly Base Charge, collecting no more than 
the Total Annual Revenue Requirement. Under the new methodology, 
revenue actually collected is not dependent upon the amount of energy 
generated or the rate charged. Western is reviewing the regulations to 
determine whether the customer's interpretation of the regulations is 
valid. Upon completion of the review, Western will followup with the 
Bureau of Reclamation and the BCP Contractors for further discussions 
on this issue.

Hydrology

    Issue: A customer believes the Master Schedule distributed on June 
15, 1995, should be corrected since it has no operative effect until 
October 1, 1995, as the power contracts provide in Section 5.58 for the 
revision of the Master Schedule. 

[[Page 57866]]

    Response: The BCP Implementation Agreement provides that Western 
will use the final Master Schedule, dated June of each year, to 
calculate the Forecast Energy Rate and provide each contractor's 
Monthly Energy Ratio used in calculating its monthly energy charge. 
Western believes that any deviation from the June final Master Schedule 
would have to be agreed to by all BCP Contractors, Western, and 
Reclamation. The agreement would require an amendment to the BCP 
Implementation Agreement.

Cost Containment

    Issue: Reclamation's operation and maintenance, other expenses, and 
replacements costs have been steadily increasing. The BCP 
Implementation Agreement now ensures complete recovery of these costs. 
What is Reclamation doing to reduce these costs and to improve its 
efficiency?
    Response: Reclamation is committed to improving its efficiency and 
minimizing the costs associated with operation and maintenance, other 
expenses, and replacements. To achieve this goal Reclamation is working 
closely with the Budget Review Subcommittee of the E&OC.
    Issue: There are an inordinate number of supervisors and 
administrative employees in relation to the number of actual workers. 
What is Reclamation doing to reduce these administrative and overhead 
costs?
    Response: Since the beginning of FY 1994, Reclamation has reduced 
layering from as many as five layers in some areas of the organization, 
to no more than two layers between any employee and the Regional 
Director in the Regional office, and no more than three layers between 
any employee and the Regional Director in the Area Offices. 
Supervisory-to-employee positions have been reduced from one supervisor 
to every 8 employees to one supervisor for every 15 employees. Several 
positions and functions have been eliminated. The Lower Colorado Region 
has reduced its FTE by 307 as of July 7, 1995, which represents an 
overall 22-percent reduction.
    Issue: One customer requests that Western and Reclamation agree to 
not increase the total Annual Revenue Requirements for FY 1997 and FY 
1998 above FY 1996 levels and set the goal to stabilize the charges 
over the next 3-years.
    Response: The BCP Implementation Agreement provides for a 
collaborative budgetary review process through the E&OC. Western and 
Reclamation believe that this is the appropriate forum to address 
budgetary review by the BCP Contractors. When comparing the Annual 
Revenue Requirement for FY 1996 with FY 1997 and FY 1998, note that a 
$13 million carryover balance from FY 1995 is figured in the FY 1996 
estimate. If the FY 1996 Annual Revenue Requirement (without adjustment 
for the carryover balance) was used as the ceiling for FY 1997 and FY 
1998, Western and Reclamation would have to postpone replacements that 
are critical to operation of the project.

Working Capital

    Issue: A customer believes there is no justification to have the 
working capital fund and should be eliminated from the PRSS.
    Response: The BCP Implementation Agreement provides for the Working 
Capital to be adjusted to $3 million for the FY 1996 Rate Year. Under 
Section 14.7 of the BCP Implementation Agreement, the Coordinating 
Committee shall have the authority, pursuant to Section 11.4.3, to 
increase or decrease the Working Capital.

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 Parts 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 an environmental 
impact statement.

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 PRSSs, 
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 85009-5313; Western 
Area Power Administration, Division of Power Marketing, 1627 Cole 
Boulevard, Golden, Colorado 80401; and Western Area Power 
Administration, Office of the Assistant Administrator for Washington 
Liaison, Room 8G-027, Forrestal Building, 1000 Independence Avenue SW., 
Washington, DC 20585.

Submission to Federal Energy Regulatory Commission

    The charges and rates herein confirmed, approved, and placed into 
effect on an interim basis, together with supporting documents, will be 
submitted to FERC for confirmation and approval on a final basis.

Order

    In view of the foregoing and pursuant to the authority delegated to 
me by the Secretary of Energy, I confirm and approve on an interim 
basis, effective November 1, 1995, Rate Schedule BCP-F5 for the Boulder 
Canyon Project. The rate schedule shall remain in effect on an interim 
basis, pending Federal Energy Regulatory Commission confirmation and 
approval of it or a substitute rate on a final basis, through September 
30, 2000.

    Issued in Washington, DC, October 31, 1995.
Charles B. Curtis,
Deputy Secretary.

Boulder Canyon Project Schedule of Rates for Firm Power Service

    Effective: The first day of the first full billing period beginning 
on or after November 1, 1995, and remaining in effect through September 
30, 2000, or until superseded.
    Available: In the marketing area serviced 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 Condition of Service: Alternating current at 60 
hertz, three-phase, delivered and metered at the voltages and points 
established by contract.
    Base Charge: Energy Charge: Each Contractor shall be billed monthly 
an energy charge equal to the Rate Year Energy Dollar multiplied by the 
Contractor's Firm Energy percentage multiplied by the Contractor's 
Monthly Energy Ratio as provided by contract.
    Capacity Charge: Each Contractor shall be billed monthly a capacity 
charge equal to the Rate Year Capacity Dollar divided by 12 multiplied 
by the Contractor's Contingent Capacity percentage as provided by 
contract.
    Forecast Rates: Energy: Shall be equal to the Rate Year Energy 
Dollar divided by the lesser of the Total Master Schedule Energy or 
4,501.001 megawatthours. This rate is to be 

[[Page 57867]]
applied for use of excess energy, unauthorized overruns, and water pump 
energy.
    Capacity: Shall be equal to the Rate Year Capacity Dollar divided 
by 1,951,000 kilowatts, to be applied for use of unauthorized overruns.
    Calculated Energy Rate: Within 90 days after the end of each Rate 
Year, a Calculated Energy Rate shall be calculated. If the Energy 
Deemed Delivered is greater than 4,501.001 megawatthours, then the 
Calculated Energy Rate shall be applied the each Contractor's Energy 
Deemed Delivered. A credit or debit shall be established based on the 
difference between the Contractor's Energy Dollar and the Contractor's 
Actual Energy Charge, to be applied the following month calculated or 
as soon as possible thereafter.
    Lower Basin Development Fund Contribution Charge: The 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 Forecast Energy Rate and Forecast Capacity Rate. The 
Contribution Charge shall be applied also to each kWh of overrun.
    Adjustments: None.

[FR Doc. 95-28534 Filed 11-21-95; 8:45 am]
BILLING CODE 6450-01-P