[Federal Register Volume 63, Number 191 (Friday, October 2, 1998)]
[Notices]
[Pages 53045-53047]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-26466]


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DEPARTMENT OF ENERGY

Western Area Power Administration


Boulder Canyon Project-Base Charge and Its Components

AGENCY: Western Area Power Administration, DOE.

ACTION: Notice of Base Charge and its components.

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SUMMARY: Notice is given of the confirmation and approval by the Deputy 
Secretary of the Department of Energy (DOE) placing the provisional 
Base Charge and its components (Base Charge) for the Boulder Canyon 
Project (BCP) firm power into effect for the fourth rate year under the 
current rate methodology pursuant to Rate Schedule BCP-F5 as approved 
by the Federal Energy Regulatory Commission (FERC) on April 19, 1996 
(Rate Order No. WAPA-70). In accordance with Section 13.13 of the BCP 
Implementation Agreement, the rate methodology and calculated rates for 
the first rate year and each fifth fiscal year (FY) shall become 
effective provisionally upon approval by the Deputy Secretary of 
Energy, subject to final approval by the FERC. The rates for all other 
FYs (second FY, third FY, and fourth FY) shall become effective on a 
final basis upon approval by the Deputy Secretary of Energy. The 
provisional FY 1999 Base Charge represents the charges for the fourth 
FY since FERC approval of the current rate methodology. The provisional 
Base Charge will provide sufficient revenue to pay all annual costs, 
including interest expense, and repayment of required investment within 
the allowable period.

DATES: The provisional Base Charge will be placed into effect on 
October 1, 1998, and will be in effect through September 30, 1999.

FOR FURTHER INFORMATION CONTACT: Mr. Anthony H. Montoya, Power 
Marketing Manager, Western Area Power Administration, Desert Southwest 
Customer Service Region, 615 South 43rd Avenue, Phoenix, AZ 85009-5313, 
(602) 352-2789, or Mr. Timothy J. Meeks, Power Marketing Liaison 
Office, Room 8G-027, 1000 Independence Avenue SW., Washington, DC 
20585, (202) 586-5581.

SUPPLEMENTARY INFORMATION: The Deputy Secretary of Energy approved the 
existing Base Charge for firm power service on September 19, 1997. The 
existing Base Charge was calculated in accordance with the methodology 
approved under Rate Order WAPA-70. The Procedures for Public 
Participation in Power and Transmission Rate Adjustments and 
Extensions, 10 CFR Part 903, have been followed by the Western Area 
Power Administration (Western) in determining the Base Charge. The FY 
1999 provisional Base Charge for BCP firm power is based on an Annual 
Revenue Requirement of $48,842,126. The provisional Base Charge 
consists of an energy revenue requirement of $25,208,831, a forecasted 
energy rate of 4.86 mills/kWh, a capacity revenue requirement of 
$23,633,296, and a forecasted capacity rate of $1.01 per kilowattmonth 
(kWmonth).
    The following summarizes the steps taken by Western to ensure 
involvement of all interested parties in the determination of the Base 
Charge:
    1. On March 30, 1998, a letter was mailed from Western's Desert 
Southwest Customer Service Region to all BCP customers and other 
interested parties announcing the informal customer meeting and the 
public information and public comment forums.
    2. A Federal Register notice (FRN) was published on April 21, 1998 
(63 FR 19722), announcing the proposed Base Charge adjustment process, 
initiating the public consultation and comment period, announcing the 
public information and public comment forums, and presenting procedures 
for public participation.
    3. Discussion of the proposed Base Charge was initiated at an 
informal BCP contractor meeting held on May 6, 1998, in Phoenix, 
Arizona. At this informal meeting, representatives from Western and the 
Bureau of Reclamation (Reclamation) explained the basis for estimates 
used in the calculation of the Base Charge. A question and answer 
session was convened for those persons attending.
    4. At the public information forum held on May 14, 1998, in 
Phoenix, Arizona, Western and Reclamation representatives explained the 
proposed Base Charge for Rate Year 1999 in greater detail. A question 
and answer session was convened for those persons attending.
    5. A public comment forum was held on June 11, 1998, in Phoenix, 
Arizona, to give the public an opportunity to comment for the record. 
Three persons representing customers and customer groups made oral 
comments.
    6. Twelve comment letters were received during the 90-day 
consultation and comment period. The consultation and comment period 
ended July 20, 1998. Although all formally submitted comments were not 
specifically pertinent to the Base Charge adjustment, they have been 
considered in the preparation of this FRN. Most of the comments 
received during the public meetings, or in the written correspondence, 
dealt with agency processes, specific cost components, and the power 
repayment study (PRS) comparisons. All comments were considered in 
developing the Base Charge for FY 1999. Written comments were received 
from the following sources:

Metropolitan Water District of Southern California (California)
Utility Resource Services (Arizona)
Arizona Power Authority (Arizona)
Ryley, Carlock & Applewhite (Arizona)
Harquahala Valley Power District (Arizona)

[[Page 53046]]

Roosevelt Irrigation District (Arizona)
Electrical District Number Five (Arizona)
Irrigation & Electrical Districts Association of Arizona (Arizona)
Maricopa-Stanfield Irrigation & Drainage District (Arizona)
Electrical District Number Four (Arizona)
Electrical District Number Eight (Arizona)
McMullen Valley Water Conservation & Drainage District (Arizona)

    The comments and responses, paraphrased for brevity, are presented 
below.

Agency Processes

    Comment: A commentor stated that Reclamation needs to change its 
budgeting process from escalating estimates for future years to using 
actual data. It was suggested that Reclamation begin budgeting on a 
zero-based budget concept. Zero-based budgeting requires justification 
for every position and every process.
    Response: Reclamation will continue to improve its justification 
process for all facets of the budget. Estimates are based on the latest 
actual data available at the time of budget formulation. This data is 
analyzed and modified based on anticipated changes in workload, 
personnel and various requirements necessary for the budget period.
    Comment: A commentor suggested that Reclamation reevaluate its 
organizational structure and develop an organization that is effective 
for Reclamation and its customers.
    Response: Reclamation agrees that an organization must be effective 
for the future. Reclamation continues to evaluate its organization and 
make changes as appropriate, recognizing that its core mission remains 
fairly stable. Reclamation's goal is to satisfy water and water related 
demands while optimizing power generation.
    Comment: A few commentors expressed concern that all participants 
on the Engineering and Operating Committee and 10-Year Operating Plan 
Committee need to renew their commitment to allow these committees to 
function as planned, and all participants need to provide the necessary 
resources.
    Response: Western and Reclamation agree that all participants 
should renew their commitment in order for the processes to be 
successful.
    Comment: A commentor has expressed concern over the high number 
(143) of Bureau Full Time Equivalents (FTE) charged to administrative 
and general expense (support services) in FY 1997.
    Response: Hoover Dam has responsibilities, well beyond power 
generation, which include flood control, irrigation, security, visitors 
and maintaining the structure. Most of the 143 FTEs work to carry out 
these functions. The 1997 ``Hydroelectric Generation Benchmarking 
Program'' Report shows that Hoover's support costs are well below 
average. This indicates a positive result, in that other like-size 
hydro powerplants are much higher in their support service costs. 
Reclamation recognizes that improvements can be made and will continue 
to work towards that end.

Specific Cost Components

    Comment: Several commentors stated concern that there is no 
existing legal authority by which Western can collect and transfer 
funds for the post-retirement benefit costs from the Colorado River Dam 
Fund to the Office of Personnel Management. Based on these concerns, 
many of the contractors are requesting Western to exclude the post-
retirement benefit costs in this rate process.
    Response: In a memorandum dated July 1, 1998, the Department of 
Energy's General Counsel concluded that Western has the authority to 
collect in rates an amount that would offset the United States 
Government's full costs of post-retirement benefits. Accordingly, in 
this rate process, Western is collecting its post-retirement benefit 
costs and these funds will be deposited into the Colorado River Dam 
Fund.
    Comment: A commentor expressed concern that the proposed rates only 
reflect Western's post-retirement benefit costs and not Reclamation's 
portion. Also, the commentor stated that these costs should have been 
presented and disclosed in the 10-year planning process prior to being 
implemented in the rate process.
    Response: Western first disclosed the issue of the unfunded portion 
of the post-retirement benefit costs, and the plan for implementation 
of these costs at a March 5, 1998, Engineering and Operating Committee 
meeting. On May 6, 1998, and May 14, 1998, Western identified its 
portion of these costs and again disclosed that the costs would be 
included in the current rate process. Although Reclamation has not 
allocated its post-retirement benefit costs, upon doing so, Western 
will include the costs in the power rates.
    Comment: A commentor expressed concern for the cost picture of the 
BCP resource and stated that the BCP costs cannot remain static and 
still remain competitive. The commentor requested Reclamation and 
Western open a dialogue with their customers regarding what the 
competitive future looks like in the southwest, and where this resource 
fits in.
    Response: Western and Reclamation believe that appropriate forums 
are already in place which allow for dialogue with the customers to 
discuss the future costs of the BCP resource and the competitive 
market. Western, Reclamation, and all BCP contractors are represented 
on a 10-Year Operating Plan Committee, and an Engineering and Operating 
Committee where this type of dialogue is held. Western and Reclamation 
encourage the BCP contractors to share the meeting minutes of these two 
committees with their customers, and also encourage the need for more 
open dialogue among the BCP contractors, their customers and 
consultants.
    Comment: A commentor requested justification of Visitor Center 
costs. The commentor stated that he does not understand how temporary 
employees are included in the budget or how fringe benefits are 
calculated. Also, the commentor requested an explanation and 
justification for spending almost $500,000 a year on janitorial 
services.
    Response: Classification and staffing requirements change in regard 
to workload needs. In planning for future years' workload, temporary 
employees may be budgeted for, rather than allocating a permanent full-
time employee. The Hoover Public Services uses a variety of staffing 
classifications in order to best accommodate increased workload in an 
efficient manner.
    Benefits are accrued based on work appointment status 
(classification) and length of work schedule. Permanent full time 
employees receive full benefits. Temporary employees receive benefits 
when they have worked longer than 1 year and benefits for part-time 
employees are prorated based on hours actually worked.

Janitorial Services

    The Visitor Center, Parking Garage and Tour Route include 425,049 
square feet of area. Janitorial services for this area were performed 
by in-house staff for the first 6 months of operation. At that time, a 
review determined these services could best be performed by a private 
contract.
    A contract was awarded for $417,957 in May 1996 to the lowest 
qualified bidder. Modifications have since been made to the contract to 
cover cleaning of the Exhibit Level, Theater Area, an additional area 
in the Parking Garage, and Department of Labor wage increases.

[[Page 53047]]

    Comment: A commentor expressed concern that the Visitor's Center is 
not producing all the revenues projected by Reclamation.
    Response: In a September 1996 report to the Senate Appropriations 
Committee, Reclamation outlined its commitments: ``* * * to, within the 
best of its ability and legal authorities, establish and maintain user 
fees sufficient to fund all of the visitor program's operation, 
maintenance, and replacement (OM&R) costs, as well as a portion of the 
annual debt service.'' The goal was to ``establish a visitor program 
that will produce $9 million in revenues annually.'' This revenue level 
would cover the visitor program's estimated $4 million annual OM&R 
cost, and provide $5 million for debt service repayment, thus reducing 
the ratepayer's burden by approximately 50 percent.
    The management of the Public Services Office is continually 
reviewing operational costs. Revenue enhancing opportunities are also 
being explored, evaluated, and implemented where advantageous. These 
activities are necessary to ensure efficient operation and a quality of 
service that meets customers' expectations. They are also necessary in 
order to meet Reclamation's goal of repaying approximately 50 percent 
of the debt service.
    Expenditures for FY 1996 were $3,988,000; revenues were $4,913,000. 
The amount available for debt service was $925,000. In FY 1997, 
expenditures were $4,367,000; revenues were $6,736,000. The amount 
available for debt service was $2,369,000. Based on FY 1998 actual 
expenditures and revenues to date, the amount available for debt 
service is $3,719,000 through June.

Power Repayment Study

    Comment: A commentor stated that the appropriate comparison of the 
PRS for the public process would have been to compare the current 
proposed May 1998 PRS to the final February 1998 BCP 10-Year Operating 
Plan PRS.
    Response: The PRS comparison presented at the informal and public 
process rate meetings comparing the previous ratebase PRS with the 
current ratebase PRS is the most appropriate comparison between the 
PRSs. Western and Reclamation have previously stated that the PRS 
included in the annual final 10-year plan has no purpose other than to 
give the customers a point-in-time look at the costs, and the impact to 
the power rates and revenue requirements at that particular time 
period. There are other factors such as year end actuals, crosswalk 
adjustments, and updated budget numbers which impact a rate year that 
are not included in the annual Final 10-Year Operating Plan PRS. 
Therefore, utilizing the 10-Year Operating Plan PRS during the rate 
process will provide an inaccurate characterization of the real impact 
on the proposed Base Charge.
    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 charges and rates are established pursuant to section 302(a) 
of the DOE Organization Act, 42 U.S.C. 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. 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. 485h(c), and other acts 
specifically applicable to the project system involved, were 
transferred to and vested in the Secretary.

    Dated: September 18, 1998.
Elizabeth A. Moler,
Deputy Secretary.
[FR Doc. 98-26466 Filed 10-1-98; 8:45 am]
BILLING CODE 6450-01-P