[Federal Register Volume 62, Number 228 (Wednesday, November 26, 1997)]
[Notices]
[Pages 63150-63157]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-31074]


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DEPARTMENT OF ENERGY

Western Area Power Administration


Parker-Davis Project Rate Adjustment; Notice of Rate Order No. 
WAPA-75

AGENCY: Western Area Power Administration, DOE.

ACTION: Notice of rate order.

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

SUMMARY: Notice is given of the confirmation and approval by the Deputy 
Secretary of the Department of Energy (DOE) of Rate Order No. WAPA-75 
and Rate Schedules for Wholesale Firm Power Service (PD-F6) , Firm 
Transmission Service (PD-FT6), Firm Transmission Service of Salt Lake 
City Area Integrated Projects Power (PD-FCT6), and Nonfirm Transmission 
Service (PD-NFT6) placing into effect the rate methodology for 
determining rates for existing Parker-Davis Project (P-DP) contractors 
of the Western Area Power Administration (Western) on an interim basis. 
The rate methodology will remain in effect on an interim basis until 
the Federal Energy Regulatory Commission (FERC) confirms, approves, and 
places it into effect on a final basis or until superseded.

DATES: Rate Schedules PD-F6, PD-FT6, PD-FCT6, and PD-NFT6 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, 1997, and will be 
in effect until FERC confirms, approves, and places the rate schedules 
into effect on a final basis for a 59-month period, or until the rate 
schedule is superseded.

FOR FURTHER INFORMATION CONTACT: J. Tyler Carlson, Regional Manager, 
Western Area Power Administration, Desert Southwest Regional Office, 
P.O. Box 6457, Phoenix, AZ 85005, (602) 352-2453, or Joel K. Bladow, 
Assistant Administrator for Power Marketing Liaison, Room 8G-027, 1000 
Independence Avenue, SW., Washington, DC 20585, (202) 586-5581.

SUPPLEMENTARY INFORMATION: The proposed rate methodology is the result 
of Western, the Bureau of Reclamation, and existing P-DP customers 
working together to develop a methodology that would recover the 
project costs and accommodate advance funding for P-DP expenses. The 
changes made to the P-DP rate methodology are outlined as follows. The 
first change concerns the Cost Apportionment Study. The study, which 
demonstrates the distribution of costs between generation and 
transmission, has been changed as follows: (1) the Priority Use Power 
(PUP) contractors' delivery commitments are now included in the total 
amounts reflected in the generation and transmission delivery 
commitment figures; and (2) the amount of funds to be repaid through 
the collection of revenues through rates is now based on the single 
Fiscal Year (FY) projection, instead of a projected 5-year average 
calculation. These changes were required so the PUP contractors can 
demonstrate payment of their portion of generation and transmission 
costs, and to accommodate the yearly reconciliation of expenses under 
the advance funding agreements which have been executed with the PUP 
contractors and are currently being negotiated with the Firm Electric 
Service (FES) contractors.
    The second change concerns the ratesetting methodology. The new 
rate methodology includes the PUP contractors' delivery commitments in 
the calculations of the rates. This was necessary so the PUP 
contractors can demonstrate payment of their portion of generation and 
transmission costs.
    The third change concerns the billing for firm electric service. 
Due to the separation of the transmission component from the Capacity 
Rate, the FES contractors will be billed a Capacity Rate of dollars per 
kilowatt per month, an Energy Rate of mills per kilowatthour, and a 
Firm Transmission Rate of dollars per kilowatt per month.
    The fourth change concerns the updating of the expense and other 
revenue estimates for FY 1997 and the cost evaluation period of FY 1998 
through FY 2002 as a result of better data.
    The final change concerns the significant decrease in the 
transmission contract rate of delivery (CROD) used to calculate the 
Firm Transmission Rate, Firm Transmission Rate of Salt Lake City Area 
Integrated Projects (SLCA/IP) Power, and Nonfirm Transmission Rate. The 
decrease in the CROD resulted primarily from changes in delivery 
commitments.
    A comparison of the existing rates and rates for FY 1998 calculated 
in accordance with the proposed rate methodology are as follows:

[[Page 63151]]



                        Comparison of Existing Rates and Proposed Rate Methodology Rates                        
----------------------------------------------------------------------------------------------------------------
                                                                Existing Rate    Proposed Rate                  
                                                                  (FY 1995)      (FY 1998) \1\      Difference  
----------------------------------------------------------------------------------------------------------------
Rate Schedule:                                                          PD-F5            PD-F6                  
    Firm Capacity Rate ($/kW-month)..........................           $1.92            $0.56          ($1.36) 
    Firm Energy Rate (mills/kWh).............................            1.95             1.29           (0.67) 
    Composite Rate (mills/kWh)...............................            6.33             2.57           (3.76) 
Rate Schedule:                                                   PD-FT5 & PD-                                   
                                                                            FCT5  PD-FT6 & PD-                  
                                                                                             FCT6               
    Firm Transmission Rate ($/kW-month)......................           $0.96            $1.08            $0.12 
    Firm Transmission Rate for SLCA/IP ($/kW-month)..........           $0.96            $1.08            $0.12 
Rate Schedule:                                                        PD-NFT5          PD-NFT6                  
    Nonfirm Transmission Rate (mills/kWh)....................            2.19             2.47            0.28  
----------------------------------------------------------------------------------------------------------------
 \1\ New rates will be calculated in accordance with the rate schedules each year by September 1. These rates   
  represent FY 1998 only.                                                                                       

    The decrease in the Firm Energy Rate and Firm Capacity Rate for FY 
1998 can be attributed to a large revenue carryover balance from FY 
1997, the removal of the transmission component from the Firm Capacity 
Rate which will be billed separately, and the inclusion of the 
contracted energy and capacity for the PUP contractors. The increase in 
the Firm Transmission Rate, Firm Transmission Rate of SLCA/IP Power, 
and Nonfirm Transmission Rate can be attributed to a significant 
decrease in the CROD used to calculate these rates even though there is 
a large revenue carryover balance from FY 1997.

Statement of Annual Revenue Requirement

    The Annual Revenue Requirement Allocated to Generation and 
Transmission will be based upon the net amount between the estimated 
expenses and other revenue as presented in the Cost Apportionment 
Study. The Power Repayment Study (PRS) will document these expenses and 
other revenue. The difference between the estimated and the actual 
Annual Revenue Requirement Allocated to Generation and Transmission for 
the rate year will be used to adjust the next year's 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 and transmission rates are 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 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, acting by and through 
the Administrator of Western.
    Rate Order No. WAPA-75, confirming, approving, and placing the 
proposed rate methodology for determining rates for existing 
contractors from the P-DP into effect on an interim basis, is issued, 
and the new Rate Schedules PD-F6, PD-FT6, PD-FCT6, and PD-NFT6 will be 
submitted promptly to FERC for confirmation and approval on a final 
basis. Western is developing open access tariffs consistent with FERC 
Order No. 888 and intends to publish short-term rates by November 1997, 
and to submit long-term rates to the FERC by April 1, 1998.

    Dated: November 18, 1997.
Elizabeth A. Moler,
Deputy Secretary.

Department of Energy Deputy Secretary

Order Confirming, Approving, and Placing the Parker-Davis Project Firm 
Power Service Rate, Firm Transmission Service Rate, and Nonfirm 
Transmission Service Rate Into Effect on an Interim Basis

November 1, 1997.
    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 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), 
acting by and through the Administrator of Western.
    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:
    $/kW-month: Monthly charge for capacity. $/kW-season and S/kW-year 
are converted to a monthly rate ($ per kilowatt per month) for billing 
purposes.
    $/kW-season: Seasonal rate for capacity ($ per kilowatt per 
season). This is used with the Firm Transmission Rate of Salt Lake City 
Area Integrated Projects power.

[[Page 63152]]

    $/kW-year: Yearly rate for capacity ($ per kilowatt per year). This 
is used with the Firm Transmission Rate and the Capacity Rate.
    Annual Revenue Requirement: The revenue that Western needs to meet 
repayment criteria, which serves as the basis for allocation between 
generation and transmission.
    Annual Revenue Requirement Allocated to Generation: The dollar 
amount that has been allocated to Generation. This amount is used to 
calculate the Energy Rate, Capacity Rate, and Composite Rate.
    Annual Revenue Requirement Allocated to Transmission: The dollar 
amount that has been allocated to Transmission. This amount is used to 
calculate the Firm Transmission Rate, Firm Transmission Rate of Salt 
Lake City Area Integrated Projects, and Nonfirm Transmission Rate.
    Annual Energy: The total annual energy entitlement for the PUP and/
or FES contractors.
    Capacity Rate: Expressed in $/kW-month and applied to each kW of 
the FES contractor's seasonal CROD and each kW over the FES 
contractor's seasonal CROD, as applicable.
    Energy Rate: Expressed in mills per kilowatthour (mills/kWh) and 
applied each billing period to each kWh of the FES contractor's monthly 
energy entitlement, each kWh over the FES contractor's monthly energy 
entitlement, and to each kWh of excess energy sold, as applicable.
    CIA: Compound Interest Amortization.
    Cost Apportionment Study: A study which allocates P-DP's total 
costs and other revenue between generation and transmission.
    CROD: Contract Rate of Delivery.
    Customer Brochure: A document prepared for public distribution 
explaining the background of the rate proposal contained in this rate 
order.
    DOE: Department of Energy.
    DOE Order RA 6120.2: An order dealing with power marketing 
administration financial reporting.
    FERC: Federal Energy Regulatory Commission.
    FES: Firm Electric Service.
    FY: Fiscal Year.
    Interior: U.S. Department of the Interior.
    kW: Kilowatt.
    kW-month: Kilowatt-month.
    kW-season: Kilowatt-season.
    kW-year: Kilowatt-year.
    kWh: Kilowatthour.
    mills/kWh: Mills per kilowatthour--the unit of charge for energy.
    NEPA: National Environmental Policy Act of 1969.
    O&M: Operation and Maintenance.
    P-DP: Parker-Davis Project.
    Proposed Rate: A rate adjustment that the Administrator of Western 
recommends to the Deputy Secretary.
    Provisional Rate: A rate which has been confirmed, approved, and 
placed into effect on an interim basis by the Deputy Secretary.
    PRS: Power Repayment Study.
    PUP: Priority Use Power.
    Reclamation: Bureau of Reclamation, U.S. Department of the 
Interior.
    Seasonal CROD: The CROD that FES contractors are entitled to during 
winter season and summer season. P-DP winter season is October through 
February and summer season is March through September. SLCA/IP winter 
season is October through March and summer season is April through 
October.
    SLCA/IP: Salt Lake City Area Integrated Projects.
    Western: Western Area Power Administration, U.S. Department of 
Energy.

Effective Date

    The new rate methodology for determining the rates for existing P-
DP contractors will become effective on an interim basis beginning 
November 1, 1997, and remain in effect pending FERC's approval on a 
final basis for a 59-month 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 for determining the total Annual 
Revenue Requirement, Annual Revenue Requirement Allocated to 
Generation, Annual Revenue Requirement Allocated to Transmission, 
Energy Rate, Capacity Rate, Firm Transmission Rate, Firm Transmission 
Rate of SLCA/IP Power, and Nonfirm Transmission Rate.
    The following summarizes the steps Western took to ensure 
involvement of interested parties in the rate process:
    1. Review and discussion of the rate methodology and allocating 
factors were conducted at several meetings with the contractors and 
interested parties. These meetings were held October 24, 1996, November 
18, 1996, January 16, 1997, April 21, 1997, and August 8, 1997.
    2. Discussion of the changes to the proposed rate methodology and 
resulting rates were initiated at an informal P-DP contractor meeting 
held on May 7, 1997, in Phoenix, Arizona. At this informal meeting, 
Western explained the need for a change in the estimates and 
methodology used to calculate the charges and rates.
    3. A Federal Register notice was published on May 23, 1997 (62 FR 
28465), officially announcing the proposed firm power rate, firm 
transmission rate, and nonfirm transmission rate adjustment, initiating 
the public consultation and comment period, announcing the public 
information and public comment forums, and presenting procedures for 
public participation.
    4. On June 3, 1997, a letter was mailed from Western to all P-DP 
firm power, firm transmission, and nonfirm transmission customers and 
other interested parties providing a copy of the P-DP Rate Brochure 
dated May 1997 which included a copy of the Federal Register notice of 
May 23, 1997.
    5. At the public information forum held on June 10, 1997, Western 
and Reclamation representatives explained the proposed rate 
methodology, a change in the proposed billing procedures, and outlined 
the changes in the Annual Revenue Requirement for Rate Year 1998 in 
greater detail and answered questions.
    6. The comment forum was held on July 14, 1997, to give the public 
an opportunity to comment for the record. Six persons representing 
customers and customer groups made oral comments.
    7. On August 14, 1997, a letter was mailed from Western to all P-DP 
firm power, firm transmission, and nonfirm transmission customers and 
other interested parties providing a copy of the revised PRS and 
related tables. The letter stated the final proposed rates and reminder 
of the coming close of the comment period.
    8. Six comment letters were received during the 90-day consultation 
and comment period. The consultation and comment period ended August 
21, 1997. All formally submitted comments have been considered in the 
preparation of this rate order.

Project History

    The Parker Dam Power Project was authorized by Section 2 of the 
Rivers and Harbors Act of August 30, 1935 (49 Stat. 1039), and the 
Davis Dam Project was authorized April 26, 1941, by the Acting 
Secretary of the Interior under provisions of the Reclamation Project 
Act of 1939 (43 U.S.C. 485, et seq.). The P-DP was formed by the 
consolidation of the two Projects under the terms of the Act of May 28, 
1954 (68 Stat. 143).
    Davis Dam, which creates Lake Mohave, provides regulation, both 
hourly and seasonally, of the water releases from Lake Mead (through 
Hoover Dam and Powerplant) to

[[Page 63153]]

facilitate water delivery for downstream irrigation requirements and 
for water delivery beyond the boundary of the United States as required 
by the Mexican Water Treaty. Operation of the powerplant began in 
January 1951 with a generating capacity of 225,000 kW. During the 
period 1974-1978 the generator nameplate capacity was increased to 
240,000 kW by rewinding the generator stators.
    Construction of Parker Dam was authorized for the purposes of 
controlling floods, improving river navigation, regulating the flow of 
the Colorado River, providing for storage and for the delivery of the 
stored waters thereof, for the reclamation of public lands and Indian 
reservations, and for other beneficial uses, and for the generation of 
electric energy as a means of making the P-DP a self-supporting and 
financially solvent undertaking.
    Parker Dam was constructed by the Bureau of Reclamation 
(Reclamation) with funds advanced by the Metropolitan Water District of 
Southern California (MWD). Lake Havasu, the reservoir created behind 
Parker Dam, serves as the forebay from which water is diverted into the 
MWD aqueduct. The aqueduct delivers a major portion of California's 
entitlement of Colorado River water to southern California and is the 
diversion point for delivering Central Arizona Project water to 
Arizona. The reservoir operation is limited to minor storage 
fluctuations. The dam provides a head of approximately 75 feet for the 
Parker Powerplant. Reclamation began operation of Parker Powerplant in 
December 1942. Although the total generator nameplate capacity is 
120,000 kW, the powerplant capacity is essentially limited to 104,000 
kW because of operating constraints of downstream physical structures, 
primarily Headgate Rock Dam. Under contract, MWD is entitled to one-
half of the net energy generated by Parker Powerplant at any given 
time.
    All facilities of the P-DP were operated and maintained by 
Reclamation until the formation of the Department of Energy pursuant to 
the Department of Energy Organization Act (DOE Act), 42 U.S.C. Sections 
7101 et seq., enacted by Congress on August 4, 1977. Pursuant to 
Section 302 of the DOE Act (42 U.S.C. 7152), responsibility for the 
power marketing functions of Reclamation, including the construction, 
operation, and maintenance of substations, transmission lines and 
attendant facilities was transferred to the Department of Energy. The 
responsibility for operation and maintenance of the dams and 
powerplants remains with Reclamation.

Power Repayment Studies

    A PRS is prepared each FY to determine if power revenues will be 
sufficient to repay, 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.

Existing and Provisional Rates

    A comparison of the existing rates and rates for FY 1998 calculated 
in accordance with the provisional rate methodology are as follows:

                        Comparison of Existing Rates and Proposed Rate Methodology Rates                        
----------------------------------------------------------------------------------------------------------------
                                                                                  Provisional                   
                                                                Existing Rate    Rate (FY 1998)   Percent Change
                                                                  (FY 1995)           \1\              (%)      
----------------------------------------------------------------------------------------------------------------
Firm Power Service Rate Schedule:                                       PD-F5            PD-F6                  
    Capacity Rate ($/kW/month)...............................           $1.92            $0.56           -70.83 
    Energy Rate (mills/kWh)..................................            1.95             1.29           -34.36 
    Composite Rate (mills/kWh)...............................            6.33             2.57           -59.40 
Firm Transmission Service Rate Schedule:                               PD-FT5           PD-FT6                  
    Firm Transmission Charge ($/kW-month)....................           $0.96            $1.08            12.50 
    Firm Transmission Charge for SLCA/IP ($/kW-month)........           $0.96            $1.08            12.50 
Nonfirm Transmission Service Rate Schedule:                           PD-NFT5          PD-NFT6                  
    Nonfirm Transmission Charge (mills/kWh)..................            2.19             2.47           12.79  
----------------------------------------------------------------------------------------------------------------
\1\ New rates will be calculated in accordance with the rate schedules each year by September 1. These rates    
  represent FY 1998 only.                                                                                       

Certification of Rate

    Western's Administrator has certified that the rate methodology for 
determining the P-DP firm power rate, firm transmission rate, 
transmission service SLCA/IP rate, and nonfirm transmission 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 ratesetting 
methodology that will be used each year to calculate the total Annual 
Revenue Requirement, Annual Revenue Requirement Allocated to 
Generation, Annual Revenue Requirement Allocated to Transmission, 
Capacity Rate, Energy Rate, Firm Transmission Rate, Firm Transmission 
Rate of SLCA/IP Power, and Nonfirm Transmission Rate. For FY 1998, the 
ratesetting methodology produces a decrease in the firm power rates for 
capacity and energy, and a rate increase for firm and nonfirm 
transmission service for the P-DP on an interim basis. Five major 
changes to the rate methodology are affecting these rates for the P-DP.
    The first change concerns the Cost Apportionment Study. The study, 
which demonstrates the distribution of

[[Page 63154]]

costs between generation and transmission, has been changed as follows: 
(1) the PUP contractors' delivery commitments are now included in the 
total amounts reflected in the generation and transmission delivery 
commitment figures; and (2) the amount of funds to be repaid through 
the collection of revenues through rates is now based on the single FY 
projection, instead of a projected 5-year average calculation. These 
changes were required so the PUP contractors can demonstrate payment of 
their portion of generation and transmission costs, and to accommodate 
the yearly reconciliation of expenses under the advance funding 
agreements which have been executed with the PUP contractors and are 
currently being negotiated with the FES contractors.
    The second change concerns the ratesetting methodology. The new 
rate methodology includes the PUP contractors' delivery commitments in 
the calculations of the rates. This was necessary so the PUP 
contractors can demonstrate payment of their portion of generation and 
transmission costs.
    The third change concerns the billing for FES. Due to the 
separation of the transmission component from the Capacity Rate, the 
FES contractors will be billed a Capacity Rate of dollars per kilowatt 
per month, an Energy Rate of mills per kilowatthour, and a Firm 
Transmission Rate of dollars per kilowatt per month.
    The fourth change concerns the updating of the expense and other 
revenue estimates for FY 1997 and the cost evaluation period of FY 1998 
through FY 2002 as a result of better data.
    The final change concerns the significant decrease in the 
transmission CROD used to calculate the Firm Transmission Rate, Firm 
Transmission Rate of Salt Lake City Area Integrated Projects Power, and 
Nonfirm Transmission Rate. The decrease in the CROD resulted primarily 
from changes in delivery commitments.
    With these changes to the existing methodology, the proposed rate 
methodology will yield annual revenues sufficient to satisfy the cost-
recovery criteria set forth in DOE Order RA 6120.2. The existing Annual 
Revenue Requirement and Annual Revenue Requirement for FY 1998 for the 
P-DP are as follows:

------------------------------------------------------------------------
                                                       Estimated Revenue
                                                          (Rounded to   
                                                        Nearest $1,000) 
                                                     -------------------
                                                      Existing   FY 1998
------------------------------------------------------------------------
Annual Revenue Requirement..........................   $28,522   $25,036
Annual Revenue Requirement for Generation...........     4,495     3,459
Annual Revenue Requirement for Transmission.........    24,027    21,577
------------------------------------------------------------------------

Statement of Revenue and Related Expenses

    The Annual Revenue Requirement for Generation and the Annual 
Revenue Requirement for Transmission are based upon a ratebase PRS and 
a Cost Apportionment Study which estimates the annual costs less other 
revenues. The following table provides a summary of revenue and expense 
data through the 5-year period FY 1998-FY 2002 at the provisional 
rates, compared to the 5-year period FY 1996-FY 2000 at the current 
rates.

   Parker-Davis Project Comparison of 5-Year Rate Period Revenues and   
                                Expenses                                
                                [$1,000]                                
------------------------------------------------------------------------
                                       Current   Provisional            
                                       Rate PRS    Rate PRS   Difference
                                      1996-2000   1998-2002             
------------------------------------------------------------------------
Total Revenues......................   $180,212    $189,728       $9,516
Revenue Distribution:                                                   
  O&M...............................    114,874     123,447        8,573
  Purchased Power...................      4,500       2,170      (2,330)
  Other.............................      1,017         769        (248)
  nterest...........................     56,452      58,342        1,890
  Investment Repayment..............      3,014       3,496          482
  Capitalized Expenses Repayment....        355      $1,504        1,149
                                     -----------------------------------
    Total...........................    180,212     189,728        9,516
------------------------------------------------------------------------

Basis for Rate Development

    The rates are calculated using the Annual Revenue Requirement for 
Generation and the Annual Revenue Requirement for Transmission as 
calculated in the Cost Apportionment Study. As a result of this study 
for FY 1998, 86.18 percent of the P-DP costs are to be recovered from 
the firm transmission service, while the remaining 13.82 percent of the 
costs are to be recovered from firm power and PUP service. The rate 
design consists of seven steps.
    1. The data in the Cost Apportionment Study is updated yearly with 
the latest (1) approved budget plans for the next 5 years, (2) 
principal and interest payments derived from the PRS for the next 5 
years, (3) estimate of other revenue, (4) number of electric service 
and transmission contractors for the next 5 years, (5) amount of energy 
commitments for the next 5 years, (6) amount of CROD for the next 5 
years, (7) amount of in-service investments in the plant accounts since 
1987, and (8) 5-year historical capitalized movable property expense 
data.
    2. From the Cost Apportionment Study, the Annual Revenue 
Requirement Allocated to Generation and Transmission is derived on a 
yearly basis.
    3. The firm transmission rate is developed by dividing the Annual 
Revenue Requirement Allocated to Transmission by the average monthly 
billing CROD, rounded to the penny, to determine the yearly rate. The 
monthly billing rate is equal to the yearly rate divided by 12, rounded 
to the penny. Transmission sales include the contracted transmission 
capacity with the firm transmission service customers, FES customers, 
and PUP customers.
    4. The Capacity Rate, Energy Rate, and the Composite Rate are 
calculated. The Capacity Rate is calculated by taking 50 percent of the 
Annual Revenue Requirement Allocated to Generation divided by the sum 
of the Average Monthly Billing CROD for the PUP contractors and FES 
contractors, rounded to the penny, to determine the yearly rate. The 
monthly billing rate is equal to the yearly rate divided by 12, rounded 
to the penny.
    The Energy Rate is calculated by taking 50 percent of the Annual 
Revenue Requirement Allocated to Generation divided by the sum of the 
Annual Energy obligation for the PUP contractors and the Annual Energy 
obligation for the FES contractors, rounded to two decimal places.
    The composite rate is calculated by taking the Annual Revenue 
Requirement Allocated to Generation divided by the sum of the Annual 
Energy obligation for the PUP contractors and the Annual Energy 
obligation for the FES contractors, rounded to two decimal places.
    5. The firm transmission rate for delivery of SLCA/IP power is 
determined by dividing the firm transmission service rate in half, 
rounded to the penny to determine the seasonal rate. The monthly 
billing rate

[[Page 63155]]

is equal to the seasonal rate divided by six, rounded to the penny.
    6. The nonfirm transmission rate is calculated by taking the firm 
transmission rate yearly rate divided by the product of 8,760 
multiplied by 60 percent with the result multiplied by 1,000, rounded 
to two decimal places.
    7. The FES contractors are billed monthly an energy charge, a 
capacity charge, and a transmission charge. The contractor's monthly 
energy charge is equal to the contractor's monthly energy entitlement 
multiplied by the energy rate. The contractor's monthly capacity charge 
is equal to the contractor's seasonal billing CROD multiplied by the 
monthly capacity rate. The contractor's monthly transmission charge is 
equal to the contractor's seasonal billing CROD multiplied by the 
monthly firm transmission rate.

Comments

    During the 90-day comment period, Western received six written 
comments either requesting information or commenting on the rate 
adjustment. In addition, six persons commented during the July 14, 
1997, public comment forum. All comments were reviewed and considered 
in the preparation of this rate order.
    Written comments were received from the following sources:

R. W. Beck, Arizona Public Service Company, Overton Power District No. 
5 and Valley Electric Association, Irrigation & Electrical Districts 
Association of Arizona, K. R. Saline & Associates, and Citizens 
Utilities Company.

    Representatives of the following organizations made oral comments:

Arizona Power Authority, Citizens Utilities Company and Arizona Public 
Service Company, Salt River Project, Irrigation & Electrical District 
Association of Arizona and the City of Needles, CA, Overton Power 
District No. 5, Valley Electric Association, and the Town of Fredonia, 
AZ, and K. R. Saline & Associates.

    The comments received at the public meetings and in correspondence 
dealt with (1) the development of better allocators for apportioning 
the costs and other revenues between generation and transmission; (2) 
the finalization of budget estimates and what costs should go into 
those estimates; (3) the changes in contract relationships with 
contractors and their effect on the rates; and (4) the use of the PRS. 
The comments and responses, paraphrased for brevity, are discussed 
below. Direct quotes from comment letters are used for clarification 
where necessary.
    Issue: A contractor commented that the ``customer allocator'' used 
in the Cost Apportionment Study does not sufficiently provide for a 
direct relationship between cost-causation and the recovery of expenses 
through rates. The customer requests serious consideration of this 
issue be addressed in the future.
    Response: Western has given this issue serious consideration during 
this rate process and will continue to examine this issue during the 
next rate process. Additional information concerning the allocation 
factors is discussed below.
    Issue: A customer commented that a reexamination of the cost 
allocation factors would not be cost beneficial and would result in 
only a minor change to the overall allocation percentages.
    Response: At this time, Western cannot predict what the effect to 
the overall allocation percentages would be upon reexamination of the 
cost allocation factors. With the overall revenue requirement for the 
P-DP approaching $30 million, even a minor change to the overall 
allocation percentages may significantly affect some of Western's 
smaller customers.
    Issue: A comment was made that the public comment period be 
continued for an additional 30 to 60 days in order to further review 
the cost allocation factors and to analyze the allocation of Western's 
operation expenses.
    Response: At a meeting held with contractors and interested parties 
on January 16, 1997, it was agreed the cost allocation factors, as they 
currently exist, remain functional and that a better process does not 
exist. However, it was also agreed the allocation factors may be 
revisited during future rate processes. At another meeting with the 
contractors and interested parties held on August 8, 1997, it was once 
again agreed the current rate process move forward using the allocation 
factors that were documented and approved during the last rate process 
and reaffirmed during this current rate process. Once again it was 
agreed the cost allocation methods be reexamined during the next rate 
process.
    Issue: A customer commented that Western review its current 
policies or develop new processes to mitigate the rate impacts to 
remaining customers when it enters new relationships with existing 
customers.
    Response: Western will continue to seek to improve on existing 
procedures or develop new processes that will meet Western's legislated 
mandates in a fair and equitable manner. Furthermore, Western will 
continue to pursue sound business practices that produce the lowest 
possible rate to the extent possible.
    Issue: A customer stated that staffing levels, below authorized 
levels, allowed a large portion of the projected current year carryover 
and suggested that Western perform a thorough review of its staffing 
requirements and provide supporting evidence to its customers of any 
increased staffing over current levels.
    Response: Western is nearing completion of a transformation process 
that began in 1995 and is expected to be complete by June of 1998. The 
recommended staffing level was a result of a detailed and in-depth 
analysis that evaluated all of Western's processes and recommended the 
most effective and efficient staffing levels to meet Western's needs. 
Any variation from those levels would require another in-depth 
analysis. Western will continue to evaluate all processes for 
continuous improvement and will make adjustments to staffing levels as 
necessary to meet changing requirements.
    Issue: A customer commented a review of the cost allocation of the 
Conservation and Renewable Energy Program costs be conducted and that 
these costs are not transmission related and should be allocated to 
generation.
    Response: It is intended the allocation of the Conservation and 
Renewable Energy Program be reviewed during the next rate process.
    Issue: A customer suggested that Western review the methodology 
used to allocate multiproject costs and general Western administration 
costs. Furthermore, another customer commented that FTE data should be 
based on actual staff levels, not authorized positions, and where 
possible, the use of direct allocations to responsible projects.
    Response: The methodology for allocating multiproject costs was 
published in a report developed in cooperation with the DSW customers. 
A meeting was held with DSW customers in March 1997 to review the 
methodology for allocating multiproject costs. During that meeting, 
minor adjustments to the methodology were recommended and are in the 
process of being implemented. Western will continue to review the 
methodology to seek improvements. Any changes to the methodology will 
be done in a joint customer forum.
    The method for distributing general Western administration costs is 
a Western-wide methodology that was implemented after a review of 
Western's operations by the firm of Deloitte and Touche. Any change to 
this

[[Page 63156]]

methodology would require involvement of all offices throughout 
Western, and involvement of Western's auditors.
    Issue: A customer commented on a recent disclosure by Western that 
certain pension costs may be included in future rate processes and is 
of the opinion that these costs not be included for repayment unless 
legislatively mandated.
    Response: Western will record the costs for pension and health 
benefits in the 1997 financial statements. However, the inclusion of 
these costs in the PRS will depend upon the outcome of a final decision 
on Western's legal authority to include these costs in the rate base.
    Issue: A customer commented about waiting for several years for 
Reclamation's commitment to develop a 10-year planning process for 
Parker-Davis.
    Response: Reclamation has begun to develop and implement its 10-
year planning process for the Parker-Davis Project and intends for it 
to be a useful and beneficial process for obtaining customer comments 
and feedback.
    Issue: A customer commented on the need to review the program 
function of the PRS and on the possibility of developing a more 
efficient tool for implementing the PRS function.
    Response: Western remains open to implementing more efficient and 
effective processes in the best interests of the customers. Continual 
improvement of the PRS program is a goal and customer feedback is 
always welcome. In the forthcoming fiscal year, Western will once again 
look for ways to implement changes to the PRS program that provides for 
more efficient output.
    Issue: A customer commented on the potential for large rate swings 
from year to year now that the rates for the Parker-Davis Project are 
being calculated on an annual basis and no longer on a 5-year average.
    Response: The calculation of the rate on an annual basis performs 
two very critical functions. It allows for a synchronization of the 
costs shown in the Cost Apportionment Study with those in the PRS and 
it enables Western to perform an annual cost reconciliation to the Cost 
Apportionment Study without causing a divergence to the data in the 
PRS. In order to mitigate potential surprises to the customers in the 
5-year out period, Western will continue to project the rates for those 
years thereby allowing contractors to adequately budget for those 
future costs or to mitigate those costs by providing feedback through 
Western and Reclamation's 10-year planning process.

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 this action is categorically excluded from the 
preparation of an environmental assessment or an environmental impact 
statement.

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 OMB is required.

Availability of Information

    Information regarding this rate adjustment, including PRSs, 
comments, letters, memorandums, and other supporting material made or 
kept by Western for the purpose of developing the power rates, is 
available for public review in the Desert Southwest Regional Office, 
Western Area Power Administration, Office of the Assistant Regional 
Manager for Power Marketing, 615 South 43rd Avenue, Phoenix, Arizona 
85009; and Office of the Assistant Administrator for Power Marketing 
Liaison, Room 8G-027, 1000 Independence Avenue SW., Washington, DC 
20585.

Submission to Federal Energy Regulatory Commission

    The rate 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. Western is 
developing open access tariffs consistent with FERC Order No. 888 and 
intends to publish short-term rates by November 1997, and submit long-
term rates to the FERC by April 1, 1998.

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, 1997, Rate Schedules PD-F6, PD-FT6, PD-
FCT6, and PD-NFT6 for the Parker-Davis 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, 2002.

    Dated: November 18, 1997.
Elizabeth A. Moler,
Deputy Secretary.

[Rate Schedule PD-F6; (Supersedes Schedule PD-F5)]

Schedule of Rates for Wholesale Firm Power Service

    Effective: The first day of the first full billing period beginning 
on or after November 1, 1997, and remaining in effect through September 
30, 2002, or until superseded, whichever occurs first.
    Available: In the marketing area serviced by the Parker-Davis 
Project (P-DP).
    Applicable: To the existing wholesale power customers for firm 
power service supplied through one meter at one point of delivery, 
unless otherwise provided by contract.
    Character and Conditions of Service: Alternating current at 60 
hertz, three-phase, delivered and metered at the voltages and points 
established by contract.
    Monthly Charge: Energy Charge. Each Contractor shall be billed 
monthly an energy charge. This charge is equal to the Contractor's 
monthly energy entitlement multiplied by the Energy Rate (rounded to 
the penny). The Energy Rate shall be equal to 50 percent of the Annual 
Revenue Requirement Allocated to Generation divided by the sum of the 
Annual Energy entitlement to the P-DP Priority Use Power Contractors 
and the Annual Energy entitlement to the P-DP Firm Electric Service 
Contractors, rounded to two decimal places.
    Capacity Charge: Each Contractor shall be billed monthly a capacity 
charge. This charge is equal to the Contractor's Seasonal Billing 
Contract Rate of Delivery (CROD) multiplied by the Capacity Rate, 
rounded to the penny. The Capacity Rate shall be equal to 50 percent of 
the Annual Revenue Requirement Allocated to Generation divided by the 
sum of the Average Monthly Billing CROD for the P-DP Priority Use Power 
Contractors and P-DP Firm Electric Service Contractors that is then 
divided by 12, rounded to the penny.
    Transmission Charge. Each Contractor shall be billed monthly a 
transmission charge equal to the Contractor's Seasonal Billing Contract 
Rate of Delivery (CROD) multiplied by the rate calculated in accordance 
with PD-FT6, rounded to the penny.
    Billing of Excess Energy: For each billing period in which there is 
excess energy available, offered, and delivered to the Contractor, such 
excess energy purchases shall be billed at the Energy Rate.

[[Page 63157]]

    Billing for Unauthorized Overruns: For each billing period in which 
there is a contract violation involving an unauthorized overrun of the 
CROD, energy, and/or transmission obligations, such overruns shall be 
billed at 10 times (1) the Energy Rate for energy overruns, (2) the 
Capacity Rate for CROD overruns, and (3) the P-DP Firm Transmission 
Rate, then in effect as it may be amended, for transmission overruns.
    For Transformer Losses: If delivery is made at transmission voltage 
but metered on the low-voltage side of the substation, the meter 
readings will be increased to compensate for transformer losses as 
provided for in the contract.
    For Power Factor: The customer will normally be required to 
maintain a power factor at all points of measurement between 95-percent 
lagging and 95-percent leading.

[Rate Schedule PD-FT6; (Supersedes Schedule PD-FT5)]

Schedule of Rate for Firm Transmission Service

    Effective: The first day of the first full billing period beginning 
November 1, 1997, and remaining in effect through September 30, 2002, 
or until superseded, whichever occurs first.
    Available: Within the marketing area served by the Parker-Davis 
Project (P-DP).
    Applicable: To existing firm transmission service customers where 
capacity and energy are supplied to the P-DP system at points of 
interconnection with other systems and transmitted and delivered, less 
losses, to points of delivery on the P-DP system specified in the 
service contract.
    Character and Conditions of Service: Alternating current at 60 
hertz, three-phase, delivered and metered at the voltages and points 
established by contract.
    Monthly Rate: Transmission Service Charge: Each Contractor shall be 
billed a dollar per kilowatt per year rate for each kilowatt at the 
point of delivery, established by contract, payable monthly at a dollar 
per kilowatt per month rate. The yearly rate is equal to the Annual 
Revenue Requirement Allocated to Transmission divided by the Average 
Monthly Billing Contract Rate of Delivery, rounded to the penny. The 
monthly billing rate is equal to the dollar per kilowatt per year rate 
divided by 12, rounded to the penny.
    Adjustments: For Reactive Power. There shall be no entitlement to 
transfer of reactive kilovoltamperes at delivery points, except when 
such transfers may be mutually agreed upon by contractor and 
contracting officer or their authorized representatives.
    For Losses. Capacity and energy losses incurred in connection with 
the transmission and delivery of power and energy under this rate 
schedule shall be supplied by the customer in accordance with the 
service contract.
    Billing for Unauthorized Overruns. For each billing period in which 
there is a contract violation involving an unauthorized overrun of the 
contractual firm transmission obligations, such overrun shall be billed 
at 10 times the above rates.

[Rate Schedule PD-FCT6; (Supersedes Schedule PD-FCT5)]

Schedule of Rate for Firm Transmission Service of Salt Lake City 
Area Integrated Projects Power

    Effective: The first day of the first full billing period beginning 
on or after November 1, 1997, and remaining in effect through September 
30, 2002, or until superseded, whichever occurs first.
    Available: Within the marketing area served by the Parker-Davis 
Project (P-DP) transmission facilities.
    Applicable: To existing Salt Lake City Area Integrated Projects 
(SLCA/IP) southern division customers where SLCA/IP capacity and energy 
are supplied to the P-DP system by the Colorado River Storage Project 
(CRSP) at points of interconnection with the CRSP system and for 
transmission and delivery on a unidirectional basis, less losses, to 
southern division customers at points of delivery on the P-DP system 
specified in the service contract.
    Character and Conditions of Service: Alternating current at 60 
hertz, three-phase, delivered and metered at the voltages and points of 
delivery established by contract.
    Monthly Rate: Transmission Service Charge: Each Contractor shall be 
billed a dollar per kilowatt per seasonal rate for each kilowatt at the 
point of delivery, established by contract, payable monthly at a dollar 
per kilowatt per month rate. The seasonal rate is equal to the P-DP 
Firm Transmission Rate then in effect as it may be amended divided by 
2, rounded to the penny. The monthly billing rate is equal to the 
dollar per kilowatt per season rate divided by six, rounded to the 
penny.
    Adjustments: For Reactive Power. There shall be no entitlement to 
transfer of reactive kilovoltamperes at delivery points, except when 
such transfers may be mutually agreed upon by contractor and 
contracting officer or their authorized representatives.
    For Losses. Capacity and energy losses incurred in connection with 
the transmission and delivery of power and energy under this rate 
schedule shall be supplied by the customer in accordance with the 
service contract.
    Billing for Unauthorized Overruns. For each billing period in which 
there is a contract violation involving an unauthorized overrun of the 
contractual firm transmission obligations, such overrun shall be billed 
at 10 times the above rates.

[Rate Schedule PD-NFT6; (Supersedes Schedule PD-NFT5)]

Schedule of Rate for Nonfirm Transmission Service

    Effective: The first day of the first full billing period beginning 
on or after November 1, 1997, and remaining in effect through September 
30, 2002, or until superseded, whichever occurs first.
    Available: Within the marketing area serviced by the Parker-Davis 
Project (P-DP) transmission facilities.
    Applicable: To existing nonfirm transmission service customers 
where capacity and energy are supplied to the P-DP system at points of 
interconnection with other systems, transmitted subject to the 
availability of the transmission capacity, and delivered on a 
unidirectional basis, less losses, to points of delivery on the P-DP 
system specified in the service contract.
    Character and Conditions of Service: Alternating current at 60 
hertz, three-phase, delivered and metered at the voltages and points of 
delivery established by contract.
    Monthly Rate: Nonfirm Transmission Service Charge: Each Contractor 
shall be billed monthly a mills per kilowatthour rate of scheduled or 
delivered kilowatthours at point of delivery, established by contract, 
payable monthly. This rate is equal to P-DP Firm Transmission dollar 
per kilowatt-year rate then in effect as it may be amended divided by 
(8,760 multiplied by 0.60) multiplied by 1,000, rounded to two decimal 
places.
    Adjustments: For Reactive Power. There shall be no entitlement to 
transfer of reactive kilovoltamperes at delivery points, except when 
such transfers may be mutually agreed upon by contractor and 
contracting officer or their authorized representatives.
    For Losses. Capacity and energy losses incurred in connection with 
the transmission and delivery of power and energy under this rate 
schedule shall be supplied by the customer in accordance with the 
service contract.
[FR Doc. 97-31074 Filed 11-25-97; 8:45 am]
BILLING CODE 6450-01-P