[Federal Register Volume 65, Number 164 (Wednesday, August 23, 2000)]
[Notices]
[Pages 51308-51314]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-21507]


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DEPARTMENT OF ENERGY


Notice of Interim Approval

AGENCY: Southeastern Power Administration, DOE.

ACTION: Notice of Rate Order.

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SUMMARY: The Secretary of Department of Energy, confirmed and approved, 
on an interim basis, Rate Schedules JW-1-F and JW-2-C. The rates were 
approved on an interim basis through September 19, 2005, and are 
subject to confirmation and approval by the Federal Energy Regulatory 
Commission on a final basis.

DATES: Approval of rate on an interim basis is effective through 
September 19, 2005.

FOR FURTHER INFORMATION CONTACT: Leon Jourolmon, Assistant 
Administrator, Finance & Marketing, Southeastern Power Administration, 
Department of Energy, Samuel Elbert Building, 2 South Public Square, 
Elberton, Georgia 30635-2496, (706) 213-3800.

SUPPLEMENTARY INFORMATION: The Federal Energy Regulatory Commission, by 
Order issued November 17, 1995, in Docket No. EF95-3031-000, confirmed 
and approved Wholesale Power Rate Schedules JW-1-E and JW-2-B. Rate 
schedules JW-1-F and JW-2-C replace these schedules.

    Dated: August 11, 2000.
T. J. Glauthier,
Deputy Secretary.

[Rate Order No. SEPA-39]

Southeastern Power Administration-- Jim Woodruff Project Power 
Rates; Order Confirming and Approving Power Rates on an Interim 
Basis)

    Pursuant to Sections 302(a) and 301(b) of the Department of Energy 
Organization Act, Public Law 95-91, the functions of the Secretary of 
the Interior and the Federal Power Commission under Section 5 of the 
Flood Control Act of 1944, 16 U.S.C. 825s, relating to the Southeastern 
Power Administration (Southeastern) were transferred to and vested in 
the Secretary of Energy. By Delegation Order No. 0204-108, effective 
May 30, 1986, 51 FR 19744 (May 30, 1986), the Secretary of Energy 
delegated to the Administrator the authority to develop power and 
transmission rates, and delegated to the Under Secretary the authority 
to confirm, approve, and place in effect such rates on an interim basis 
and delegated to the Federal Energy Regulatory Commission (FERC) the 
authority to confirm and approve on a final basis or to disapprove 
rates developed by the Administrator under the delegation. On November 
24,1999, the Secretary of Energy issued Delegation Order No. 0204-172, 
granting the Deputy Secretary authority to confirm, approve, and place 
into

[[Page 51309]]

effect Southeastern's rates on an interim basis. This rate order is 
issued by the Deputy Secretary pursuant to said notice.

Background

    Power from the Jim Woodruff Project is presently sold under 
Wholesale Power Rate Schedules JW-1--E and JW-2-B. These rate schedules 
were approved by the FERC on November 17, 1995, for a period ending 
September 19, 2000 (73 FERC 62116).

Public Notice and Comment

    Southeastern prepared a Power Repayment Study, dated February of 
2000, that showed that revenues at current rates were not adequate to 
meet repayment criteria. A revised study with a revenue increase of 
$237,000 produced rates that are adequate to meet repayment criteria. 
On March 17, 2000, by Federal Register Notice 65 F. R. 14557, 
Southeastern proposed a rate adjustment of about 4.3 percent to recover 
this revenue. The notice also announced a Public Information and 
Comment Forum to be held May 3, 2000, in Tallahassee, Florida, with a 
deadline for written comments of June 15, 2000. Southeastern received 
five comments from one party. The following is a summary of the 
comments:

Staff Evaluation of Public Comments

    No comments were received at the Public Information and Comment 
Forum held in Tallahassee, Florida, on May 3, 2000. Written comments 
were received from one source by facsimile during the comment period, 
which are included as part of the Administrator's record of decision as 
an attachment to Exhibit A-5, filed with the FERC. These comments were 
received pursuant to Federal Register Notice 65 Fed. Reg. 14557 dated 
March 17, 2000.
    The comments, received from Southeastern Federal Power Customers, 
Inc. (SeFPC or SFPC), are regarding the Department of Energy (DOE) 
policy to recover Civil Service Retirement System costs and health 
benefits costs (CSRS) that are unfunded by DOE (unfunded) and funded by 
the Office of Personnel Management (OPM). Congress has addressed the 
problem of shortfalls in the sufficiency of funding for retiree 
benefits by authorizing a permanent indefinite appropriation for 
transfer of general funds from Treasury to the Retirement Fund 
administered by the OPM to finance such unfunded liabilities. It is 
DOE's position that the Power Marketing Administrations have sufficient 
statutory authority to include unfunded costs in their rates to offset 
such appropriations from the general fund of the Treasury made by 
Congress to the Retirement Fund administered by OPM from which post-
retirement costs are paid retirees. See July 1, 1998 Memorandum, 
Department of Energy's General Counsel, Mary Anne Sullivan, ``PMA 
Authority To Collect In Rates, And Reimburse To Treasury, Government's 
Full Costs of Post-Retirement Benefits,'' at page 2. The Memorandum is 
cited hereafter as Memorandum Opinion. A copy of the Memorandum Opinion 
is included as part of the Administrator's record of decision as 
Exhibit A-5 filed with the FERC pursuant to 18 C.F.R. 300.10 et seq. in 
support of this rate action.
    The preference customers have contended in two prior Southeastern 
rate filings that Southeastern does not have the legal authority to 
include such unfunded costs in their rates without specific 
Congressional authorization. They also contend these costs are beyond 
the boundaries of cost-based ratemaking authority established by the 
Flood Control Act of 1944; and that the term ``cost'' in the Flood 
Control Act should not be read to include such retirement and pension 
benefit costs.
    The Georgia-Alabama-South Carolina Rates were filed with FERC on 
September 22, 1998, and approved by FERC on February 26, 1999. See 
Southeastern Power Administration, 86 FERC para. 61,195 (1999). The 
customers have requested a rehearing and the request is currently 
pending before FERC. Many of these issues were responded to in that 
prior rate filing.
    The preference customers also objected to the inclusion of such 
unfunded costs in the Cumberland System of Projects rates that were 
filed with FERC on July 1, 1999, and approved by FERC on March 17, 
2000. See Southeastern Power Administration, 90 FERC para. 61,266 
(2000). The customers requested a rehearing, which was denied by FERC 
on June 15, 2000. See 91 FERC para. 61,272 (2000). Many of these issues 
were responded to in that rate filing.
    In its March 17, 2000, decision regarding Southeastern's Cumberland 
System Rates, FERC concluded that such contentions were without merit. 
It noted that it had so ruled in its first such challenge to 
Southeastern's rates, i.e. Southeastern's Georgia-Alabama-South 
Carolina Rates (SEPA-37). See Southeastern Power Administration, 86 
FERC para. 61,195, p. 61,681 (1999). In the case of the Georgia-
Alabama-South Carolina Rates (SEPA-37), FERC had ruled that the Flood 
Control Act of 1944 ``. . . does not contain any language prohibiting 
the recovery of these costs''and that the costs are ``. . . reasonably 
incurred by Southeastern and recoverable from Southeastern's customers. 
. . . '' See 86 FERC para. 61,195, p. 61,681 (1999).
    In its March 17, 2000, Cumberland decision, FERC ruled that ``. . . 
SFPC had failed to demonstrate that the inclusion of these costs is 
arbitrary, capricious or unlawful.'' See 90 FERC para. 61,266, p. 
61,894 (2000).
    On June 15, 2000, in its denial of a rehearing of its March 17, 
2000, Cumberland Rate case, FERC noted that the preference customers 
had reiterated the recovery of such costs in Southeastern's rates was 
arbitrary and capricious. FERC rejected this, saying that in its March 
17, 2000, Cumberland Order, it had already rejected the argument that 
such costs are arbitrary and capricious. Since the preference customers 
had ``. . . not proffered any new arguments that demonstrate that the 
inclusion of these costs (in Southeastern rates) is arbitrary and 
capricious . . .,'' it denied their requests for a rehearing. See 91 
FERC para. 61,272 (2000). See also 90 FERC para. 61,266 (2000).
    The most detailed consideration of inclusion in Southeastern's 
rates of unfunded costs was set forth in FERC's February 26, 1999, 
Georgia-Alabama-South Carolina Rate Order. See 86 FERC para. 61,195, p. 
61,681 (1999). In concluding that Southeastern's annual costs of CSRS 
and post-retirement health benefits were within Southeastern's cost-
based ratemaking authority, FERC relied heavily upon the July 1, 1998, 
Memorandum Opinion of the Department of Energy's General Counsel. FERC 
essentially agreed with the Memorandum Opinion. The General Counsel's 
Memorandum Opinion noted, and FERC agreed, that Section 5 of the Flood 
Control Act of 1944 ``. . . leaves considerable discretion to 
Southeastern's Administrator regarding what expenses may be considered 
costs recoverable under the Flood Control Act.'' See 86 FERC para. 61, 
195, p. 61,681 (1999).
    FERC agreed with the DOE General Counsel's legal analysis which 
concluded that there also would seem to be ``. . . little room to 
dispute that the full amount of the retiree benefits is a `cost' of 
hiring the employees to operate and maintain the PMA power systems. . . 
.'' See 86 FERC para. 61,195, p. 61,681 (1999), citing the Memorandum 
Opinion at page 5, and ruled that CSRS costs and the costs of post 
retirement health benefits ``. . . are costs reasonably incurred by 
Southeastern and recoverable from Southeastern's customers. . . .'' See 
86 FERC para. 61,195,

[[Page 51310]]

p. 61,681 (1999). FERC concluded that SFPC, ``. . . along with the 
other intervenors, have failed to demonstrate that the inclusion of 
these costs is arbitrary, capricious, or unlawful. Accordingly, we will 
deny the intervenors' request to eliminate these costs from 
Southeastern's rates.'' Id. p. 61,681.
    FERC's approval of the Memorandum Opinion is not limited to 
Southeastern's rates. It has also been cited with approval in the case 
of Western Area Power Administration's (Western or WAPA) Pacific 
Northwest-Pacific Southwest Rates (Western's Rate No. 76). See 87 FERC 
para. 61,346 (1999). In that case, the certain Western's customers 
protested `` . . . the inclusion of the unfunded portion of the Civil 
Service Retirement Costs and Post-Retirement Health and Life Insurance 
Benefits (retirement benefits) in Rate Order WAPA-76.'' Western Area 
Power Administration (Pacific Northwest-Pacific Southwest Intertie 
Project), Docket No. EF99-5191-000, 87 FERC para. 61,346 (1999). 
Certain customers of Western argued that Western ``. . . does not have 
the legal authority to recover these costs without specific 
Congressional authorization. . . .'' See 87 FERC para. 61,346, p. 
63,337 (1999).
    In its approval of Western's Rate 76, FERC expressly followed its 
earlier Southeastern decision in the case of the Georgia-Alabama-South 
Carolina Rates, upholding the inclusion of such costs in Southeastern 
rates. See Southeastern Power Administration, citing 86 FERC para. 
61,195 (1999). FERC stated that the same principle applied to Western's 
rates.
    It stated, at 87 FERC para. 61,346, p. 62,338, ``FERC has 
previously held that the power marketing administrations (PMAs), such 
as WAPA, can include these costs in their rates.'' FERC placed heavy 
reliance upon the Memorandum Opinion, where the General Counsel stated 
that there would seem to be ``. . . little room to dispute that the 
full amount of the retiree benefits is a `cost' of hiring the employees 
to operate and maintain the PMA power systems.'' See Memorandum 
Opinion, p. 5. FERC concluded that such unfunded costs ``. . . are 
reasonably incurred by WAPA and are recoverable from WAPA's customers. 
Because APA and Arizona TDU have failed to demonstrate that the 
inclusion of these costs is arbitrary, capricious or unlawful, we will 
deny the intervenors' request to eliminate these costs from WAPA's 
rates.'' See 87 FERC para. 61,346, p. 62,338 (1999).
    We will respond to each comment individually.
    Comment 1: FERC must follow specific factors to ensure that the 
approved rate is ``the lowest possible rate to consumers consistent 
with sound business principles.''
    Response 1: On July 1, 1998, DOE General Counsel Mary Anne Sullivan 
responded to the issue of Southeastern's discretion to collect the full 
CSRS costs in rates by a memorandum opinion of same date entitled, 
``PMA Authority To Collect In Rates, and Reimburse To Treasury, 
Government's Full Costs of Post-Retirement Benefits''
    (Memorandum Opinion). The Memorandum Opinion concludes at page 4:

    ``[T]hat it is reasonable to interpret the term ``cost'' in the 
organic statutes to include the total costs to the Government of 
post-retirement benefits for PMA-related employees.''

    The Memorandum Opinion also concludes at page 7:

    DOE policy, FASB [Financial Accounting Standards Board] 
principles, and FERC ratemaking policy indicate the inclusion in 
rates applicable for a given period of all employer costs accruing 
in that period is a reasonable interpretation of the statutory 
obligation to recover costs.

    In both the Georgia-Alabama-South Carolina and Cumberland Rate 
filings, FERC explained the Flood Control Act of 1944 does not (1) 
contain any language prohibiting the recovery of unfunded costs, that 
(2) these are costs reasonably incurred by Southeastern and recoverable 
from Southeastern's customers. It emphasized that those customers that 
had protested inclusion of unfunded CSRS costs in Southeastern's rates 
``. . . have failed to demonstrate that the inclusion of these costs is 
arbitrary, capricious or unlawful. . . .'' See United States Department 
of Energy-Southeastern Power Administration, 86 FERC para. 61,195, p. 
61,681 (1999), and 90 FERC para. 61,266, p. 61,894 (2000).
    Comment 2: SEPA's inclusion of CSRS costs contradicts Congressional 
directives that a portion of the costs should be recovered by 
appropriations.
    Response 2: Southeastern rejects the premise of the Comment. 
Congress is well aware that appropriations to Southeastern to pay the 
Federal Government's share of civil service retirement benefits, even 
in combination with the matching employees' contributions, fails to 
recover their full cost. The Memorandum Opinion took this fully into 
account. It is stated at page 2:

    The Civil Service Retirement Act provides retirement and 
disability benefits for Federal employees. The employing agency 
deducts a percentage of an employee's basic pay, combines it with an 
equal amount contributed by the appropriate governmental agency, and 
deposits it in the Treasury to the credit of the Civil Service 
Retirement and Disability Fund (Retirement Fund). Clark v. United 
States, 691 F. 2d 837, 841 (7th Cir. 1982), citing 5 U.S.C. 8334. 
Prior to 1969, however, the Retirement Fund had an unfunded deficit 
created ``by the Government's failure to contribute sufficient 
funds, the gradual increase in liability caused by past increased 
retirement benefits, and salary increases.'' S. Rep. No. 339, 91st 
Cong. 1st Sess., reprinted in 1969 U.S. Code Cong. & Admin. News 
1168, 1169.
    In 1969, Congress addressed the problem of potential shortfalls 
in the sufficiency of funding for retiree benefits by authorizing a 
permanent indefinite appropriation for transfer of general funds 
from the Treasury. Clark v. United States, 691 F. 2d at 841. The 
statute authorizes appropriations to the Retirement Fund to finance 
the unfunded liability created by new or liberalized benefits 
payable from the Fund, extension of the coverage of the Fund to new 
groups of employees, or increases in pay on which benefits are 
computed. 5 U.S.C. 8348(f). The cost of CSRS retirement benefits is 
approximately 25 percent of the annual salary, while the combined 
agency and employee contributions are only 14 percent.

    The Memorandum Opinion addresses the question of the Congressional 
intent of full cost recovery at page 5:

    On a practical, common sense level, there seems little room to 
dispute that the full amount of the retirees' benefits is a ``cost'' 
of hiring the employee to operate and maintain the PMA power 
systems. Thus, recovering these costs in rates is entirely 
consistent with Congressional objectives that the PMA's operate on a 
fiscally self-supporting basis.

    The Commission has also stated in the Georgia-Alabama-South 
Carolina rate case, 86 FERC para. 61,195, p. 61,681 (1999) (footnotes 
omitted), that:

    The Flood Control Act does not contain any language prohibiting 
the recovery of these costs. In fact, as the Department of Energy's 
General Counsel explained in a memorandum accompanying SEPA's 
filing, section 5 of the Flood Control Act leaves considerable 
discretion to SEPA's Administrator regarding what expenses may be 
considered costs recoverable under the Flood Control Act. There also 
would seem to be ``little room to dispute that the full amount of 
the retiree benefits is a `cost' of hiring the employees to operate 
and maintain the PMA power systems.'' In sum, therefore, these are 
costs reasonably incurred by SEPA and recoverable from SEPA's 
customers, and SFPC, along with the other intervenors, have failed 
to demonstrate that the inclusion of these costs is arbitrary, 
capricious or unlawful. Accordingly, we will deny the intevenors' 
request to eliminate these costs from SEPA's rates.

    FERC noted that the SFPC had asserted, in the case of the Georgia-
Alabama-South Carolina Rates, that

[[Page 51311]]

``. . . Southeastern does not have the legal authority to include such 
costs, without specific Congressional authorization. They argue that, 
under section 5 of the Flood Control Act of 1944, these costs are 
beyond the boundaries of cost-based ratemaking authority established 
for power marketing administrations and assert that the term `cost' in 
the Flood Control Act should not be read to include such retirement and 
pension benefit costs.'' See 86 FERC para. 61,195, p. 61,681 (1999).
    Comment 3: SEPA's CSRS policy is arbitrary and capricious and 
beyond the scope of its authority.
    Response 3: The preference customers advanced precisely the same 
arguments before FERC as part of FERC's review of the Georgia-Alabama-
South Carolina Rates. [86 FERC para. 61,195, p. 61,681 (1999)] and 
Southeastern's Cumberland Rates [90 FERC para. 61,266, p. 61,894 
(2000)]. FERC rejected their contentions.
    In the case of the Georgia-Alabama-South Carolina Rates, FERC 
stated:

    SFPC, along with the other intervenors, raises a number of 
issues concerning the inclusion of CSRS and post-retirement health 
benefits costs in their proposed rates. Intervenors argue that SEPA 
does not have the legal authority to include such costs, without 
specific Congressional authorization. They argue that, under section 
5 of the Flood Control Act of 1944, these costs are beyond the 
boundaries of cost-based ratemaking authority established for power 
marketing administrations and assert that the term ``cost'' in the 
Flood Control Act should not be read to include such retirement and 
pension benefit costs. See 86 FERC para. 61,195, p. 61,681 (1999) 
(footnotes omitted).

    In its February 26, 1999, Georgia-Alabama-South Carolina Rate 
decision, 86 FERC para. 61,195 (1999), FERC also rejected such 
assertion, stating that:

    The Flood Control Act does not contain any language prohibiting 
the recovery of these costs. In fact, as the Department of Energy's 
General Counsel explained in a memorandum accompanying SEPA's 
filing, section 5 of the Flood Control Act leaves considerable 
discretion to SEPA's Administrator regarding what expenses may be 
considered costs recoverable under the Flood Control Act. There also 
would seem to be ``little room to dispute that the full amount of 
the retiree benefits is a `cost' of hiring the employees to operate 
and maintain the PMA power systems.'' In sum, therefore, these are 
costs reasonably incurred by SEPA and recoverable from SEPA's 
customers, and SFPC, along with the other intervenors, have failed 
to demonstrate that the inclusion of these costs is arbitrary, 
capricious or unlawful. Accordingly, we will deny the intevenors' 
request to eliminate these costs from SEPA's rates. See 86 FERC 
para. 61,195, p. 61,681 (1999) (footnotes omitted).

    In its March 17, 2000, Cumberland Rate decision, 90 FERC para. 
61,266, p. 61,894 (2000), the customers's contentions that inclusion of 
these costs was arbitrary and capricious were again rejected. It also 
stated, in its February 29, 1999, decision respecting Southeastern's 
Georgia-Alabama-South Carolina Rates, [United States Department of 
Energy-Southeastern Power Administration, 86 FERC para. 61,195, p. 
61,681 (1999), reh'g pending], that ``. . . the Flood Control Act does 
not contain any language prohibiting the recovery of these costs.''
    Also, in its June 15, 2000, denial of a rehearing of its March 17, 
2000, Cumberland Rate Order, FERC, for the fourth time, rejected the 
contention that the inclusion of unfunded CSRS costs in Power Marketing 
Administration Rates was arbitrary and capricious. FERC, in denying 
rehearing, noted that it had already addressed these arguments in its 
March 17, 2000, Order. Denial of rehearing was appropriate because 
SeFPC ha(d) not proffered any new arguments that demonstrate that the 
inclusion of these costs is arbitrary and capricious. See 91 FERC para. 
61,272 (2000). FERC, in its review of said Southeastern rates, as well 
as in its review of Western's Pacific Northwest-Pacific Southwest 
Intertie Project Rates (WAPA-76), [(87 FERC para. 61,346 (1999)], again 
made it abundantly clear that it agreed with the Memorandum Opinion 
(cited in our responses to Comments 2, 3, 4, and 5).
    Accordingly, we reject the assertion that inclusion of such 
unfunded CSRS costs in rates is arbitrary and capricious beyond the 
scope of Southeastern's authority.
    Comment 4: The DOE directives must be read in pari materia with 
OPM's statutory mandate to fund employee benefits.
    Response 4: SeFPC's argument is that Southeastern should not rely 
entirely on the Flood Control Act of 1944 to determine which costs 
should be included in rates. Instead Southeastern should also rely on 
the OPM's statutory authority which provides for the funding of a 
portion of the costs through OPM's appropriation. The OPM's statutory 
authority is concerning how the CSRS costs will be funded. The 
statutory authority does not deal with whether the costs should or 
should not be recovered in rates. The comments by SeFPC on page 4 quote 
the OPM law, 5 U.S.C.A. 8334(a)(1) (1999) (footnote omitted):

    ``[T]he employing agency shall deduct and withhold 7 percent of 
the basic pay of an employee . . . . [A]n equal amount shall be 
contributed from the Appropriation or fund used to pay the employee 
. . .''

    SeFPC on page 6 states that, ``SeFPC does not take issue with 
Southeastern over the recovery of these amounts.''
    These costs are funded through Southeastern and the Corps of 
Engineers appropriations, and the DOE has determined that they are a 
legitimate cost of a PMA. Similarly, the OPM costs that are funded by 
OPM appropriations have been determined by DOE and FERC, in its review 
of the Georgia-Alabama-South Carolina and Cumberland Rates, to be 
legitimate costs and therefore should be recovered in the rate.
    The customers protesting the rate appear to argue that two statutes 
must be read in pari materia. These are 5 U.S.C.A. 8334 and 5 U.S.C.A. 
8348(f). The first one, 5 U.S.C.A. 8334, requires the employing agency 
to deduct a percentage of an employee's basic pay and to combine it 
with the specified amount contributed by the appropriate government 
agency. Such combined payment is paid to the OPM retirement fund. The 
second statute, 5 U.S.C.A. 8348(f), is the 1969 Act of Congress 
authorizing a permanent appropriation from the General Treasury to OPM 
to meet shortfalls in the sufficiency of funding for retiree benefits.
    This argument that these two statutes be read in pari materia has 
some logic. Under the doctrine, statutes are to be read together ``. . 
. when they relate to the same person or thing, or to the same class of 
persons or things, or have the same purpose or object.'' See 2B 
Sutherland Statutory Const Sec. 51.03 (5th Ed. 1992)(footnotes 
omitted). See also In the Matter of Robison, 665 F. 2d 166, 171 (7th 
Cir. 1981). Under the in pari materia canon of statutory 
interpretation, statutes which pertain to the same thing are to be 
``harmonized.'' 2B Sutherland, supra, Sec. 51.05. It is clear that the 
permanent appropriation statute to OPM to meet the costs of unfunded 
liabilities, 5 U.S.C.A. 8348(f), and the statute, 5 U.S.C.A. 8334, 
requiring employer and employee to make payments to the retirement 
fund, have a common purpose.
    Also, the doctrine of in pari materia requires consideration of all 
relevant statutes and regulations. See Chemical Bank New York Trust Co. 
v. U.S., 249 F. Supp. 450, 459 (S.D.N.Y. 1966), Bzozowski v. 
Pennsylvania-Reading Seashore Lines, 259 A. 2d 231, 233 (Superior Court 
of N.J. 1969). The other relevant statute which Southeastern believes 
must also be read in pari materia with 5 U.S.C.A. 8348(f) and 5 
U.S.C.A. 8334 is section 5 of the Flood Control Act of 1944 (16 U.S.C. 
825s) requiring Southeastern to return its costs to the Treasury. The 
proper

[[Page 51312]]

application of the doctrine of in pari materia, in Southeastern's 
opinion, requires that these statutes be read in light of DOE Order RA 
6120.2 and the applicable Standards of the FASB.
    DOE Order RA 6120.2 guides Southeastern in the establishment of its 
rates and is one of the criteria FERC uses in confirming these rates. 
See Southeastern Power Administration, 91 FERC para. 61,272 (2000). 
Also, DOE Order RA 6120.2 requires the PMAs to use accounting practices 
consistent with the principles by the FASB. As the result of new 
accounting rules issued by the FASB, ``{a} post-retirement benefit is 
part of the compensation paid to an employee for services rendered.'' 
Under such rules, unfunded pensions promised to current and retired 
employees are actual liabilities of Southeastern under the Flood 
Control Act of 1944, as construed by both DOE and FERC.
    Under all relevant statutes and regulations, the inclusion in 
Southeastern rates for a given period of all employer costs, including 
the unfunded component accruing in the period is, in both the view of 
DOE and FERC, a reasonable interpretation of Southeastern's statutory 
obligation to recover costs.
    Accordingly, Southeastern must reject the in pari materia argument 
advanced by the customers as too restrictive an interpretation of the 
statutes that have to be harmonized.
    Comment 5: SEPA has deviated from past practice without sufficient 
justification.
    Response 5: The Memorandum Opinion addressed this argument and 
stated:

    Given the PMAs' previous practice of not securing recovery in 
rates of the unfunded portion of employee retirement benefits, it 
may be argued that the PMAs' inclusions of such costs now would 
represent a change in agency interpretation. We do not understand 
this practice, however, to have been premised on an articulated 
legal judgment that it would be legally impermissible. See 
Memorandum Opinion, p. 4.
    Even if it had been, an agency ``is not locked into the first 
interpretation it espouses. Sacred Heart Medical Center v. Sullivan, 
958 F. 2d. 537, 544 (3d Cir. 1992). ``[A]n Agency's reinterpretation 
of statutory language is . . . entitled to deference, so long as the 
agency acknowledges and explains the departure from its prior 
views.'' Mobil Oil Corp. v. E.P.A., 871 F. 2d 149, 152 (D.C. Cir. 
1989).'' See Memorandum Opinion, p. 4, f.n. 4.

    There is no merit to the assertion that Southeastern has deviated 
from past practice without sufficient justification.
    In the case of the Jim Woodruff rates, Southeastern is adhering to 
four FERC decisions, upholding the DOE General Counsel's Memorandum 
Opinion. As indicated above, the thrust of the Memorandum Opinion was 
the simple fact that the cost of CSRS retirement benefits is 
approximately 25 percent of the annual salary, while the combined 
agency and employee contributions are only 14 percent. See Memorandum 
Opinion, p. 2. The Memorandum Opinion took cognizance that in 1969, 
Congress addressed the problem of potential shortfalls in the 
sufficiency of funding for retiree benefits by authorizing a permanent 
indefinite appropriation for transfer of general funds from the 
Treasury ``to the'' Retirement Fund to finance the unfunded liability. 
See Memorandum Opinion, p. 2, citing 5 U.S.C.A, 8348(f).
    The General Counsel indicated that as the result of new accounting 
rules issued by the FASB, ``[a] post-retirement benefit is part of the 
compensation paid to an employee for services rendered.'' See 
Memorandum Opinion, p. 5, f.n. 5. Under such rules, unfunded pensions 
promised to current and retired employees are actual liabilities. Id. 
The General Counsel also recognized that DOE Order No. RA 6120.2, para. 
12 (September 20, 1979), requires the PMAs to use accounting practices 
consistent with the principles prescribed by the FASB. See Memorandum 
Opinion, p. 5. Thus, as a function of meeting the operating expenses of 
the PMAs, it was within the discretion of the PMA Administrators to 
include in rates the allocated undercollections for post-retirement 
benefits.
    This result follows, in the Opinion of the General Counsel, because 
DOE policy, FASB principles, and FERC ratemaking policy indicate the 
inclusion in rates applicable for a given period of all employer costs 
accruing in the period is a reasonable interpretation of the statutory 
obligation to recover costs. See Memorandum Opinion, p. 7.
    FERC, as indicated above in our response to the customers' 
objections, agrees with the General Counsel's July 1, 1998, Memorandum 
Opinion and Southeastern is applying both DOE's and FERC's well 
articulated principles to the Jim Woodruff rates. In no way are the Jim 
Woodruff rates an unexplained departure from past practice.

Discussion

System Repayment

    An examination of Southeastern's revised system power repayment 
study, prepared in May 2000, for the Jim Woodruff Project, shows that 
with the proposed rates, all system power costs are paid within the 50-
year repayment period required by existing law and DOE Procedure RA 
6120.2. The Administrator of Southeastern has certified that the rates 
are consistent with applicable law and that they are the lowest 
possible rates to customers consistent with sound business principles.

Environmental Impact

    Southeastern has reviewed the possible environmental impacts of the 
rate adjustment under consideration and has concluded that, because the 
adjusted rates would not significantly affect the quality of the human 
environment within the meaning of the National Environmental Policy Act 
of 1969, the proposed action is not a major Federal action for which 
preparation of an Environmental Impact Statement is required.

Availability of Information

    Information regarding these rates, including studies, and other 
supporting materials is available for public review in the offices of 
Southeastern Power Administration, Samuel Elbert Building, Elberton, 
Georgia 30635.

Submission to the Federal Energy Regulatory Commission

    The rates hereinafter confirmed and approved on an interim basis, 
together with supporting documents, will be submitted promptly to the 
Federal Energy Regulatory Commission for confirmation and approval on a 
final basis for a period beginning September 20, 2000, and ending no 
later than September 19, 2005.

Order

    In view of the foregoing and pursuant to the authority delegated to 
me by the Secretary of Energy, I hereby confirm and approve on an 
interim basis, effective September 20, 1995, attached Wholesale Power 
Rate Schedules JW-1-F and JW-2-C. The rate schedules shall remain in 
effect on an interim basis through September 19, 2005, unless such 
period is extended or until the FERC confirms and approves them or 
substitute rate schedules on a final basis.

Dated: August 11, 2000.

T. J. Glauthier
Deputy Secretary.

Wholesale Power Rate Schedule    JW-1-F

    Availability: This rate schedule shall be available to public 
bodies and cooperatives served by the Florida Power Corporation and 
having points of

[[Page 51313]]

delivery within 150 miles of the Jim Woodruff Project (hereinafter 
called the Project).
    Applicability: This rate schedule shall be applicable to firm power 
and accompanying energy made available by the Government from the 
Project and sold in wholesale quantities.
    Character of Service: The electric capacity and energy supplied 
hereunder will be three-phase alternating current at a nominal 
frequency of 60 cycles per second delivered at the delivery points of 
the customer.
    Monthly Rate: The monthly rate for capacity and energy made 
available or delivered under this rate schedule shall be:
    Demand Charge: $5.51 per kilowatt of monthly billing demand
    Energy Charge: 15.46 mills per kilowatt hour
    Billing Demand: The monthly billing demand for any billing month 
shall be the lower of (a) the Customer's contract demand or (b) the sum 
of the maximum 30-minute integrated demands for the month at each of 
the Customer's points of delivery, provided, that, if an allocation of 
contract demand to delivery points has become effective, the 30-minute 
maximum integrated demand for any point of delivery shall not be 
considered to be greater than the portion of the Customer's contract 
demand allocated to that point of delivery.
    Capacity Made Available: The capacity which the Government will 
supply to meet the demand of the Customer in any billing month will be 
the maximum amount of capacity required for that purpose up to the 
contract demand. Such maximum amount of capacity required will be 
determined by adding the maximum 30-minute integrated measured demands 
at all points of delivery of the Customer located within 150 miles of 
the Project power station. At such time as the demand of the Customer 
approximates the contract demand, the Government will allocate the 
contract demand among the Customer's then existing delivery points on 
the basis of the demands recorded as of that time at each such point of 
delivery adjusted to round each point's allocation to the nearest 10 
kilowatts. The allocation of contract demand to delivery points shall 
become effective the billing month that the Customer's total demand at 
said delivery points exceeds its contract demand.
    Energy Made Available: During any billing month in which the 
Government supplies all the Customer's capacity requirements, the 
Government will make available such when both the Government and the 
Florida Power Corporation are supplying capacity to a delivery point, 
each kilowatt of capacity supplied to such point during such month will 
be considered to be accompanied by an equal quantity of energy.
    Billing Month: The billing month for power sold under this schedule 
shall end at 12:00 midnight on the 20th day of each calendar month.
    Conditions of Service: The customer shall at its own expense 
provide, install, and maintain on its side of each delivery point the 
equipment necessary to protect and control its own system. In so doing, 
the installation, adjustment, and setting of all such control and 
protective equipment at or near the point of delivery shall be 
coordinated with that which is installed by and at the expense of the 
Florida Power Corporation on its side of the delivery point.
    Service Interruption: When energy delivered to the Customer's 
system for the account of the Government is reduced or interrupted for 
1 hour or longer, and such reduction or interruption is not due to 
conditions on the Customer's system or has not been planned and agreed 
to in advance, the demand charge for the month shall be appropriately 
reduced.

Wholesale Power Rate Schedule    JW-2-C

    Availability: This rate schedule shall be available to the Florida 
Power Corporation (hereinafter called the Company).
    Applicability: This rate schedule shall be applicable to electric 
energy generated at the Jim Woodruff Project (hereinafter called the 
Project) and sold to the Company in wholesale quantities.
    Points of Delivery: Power sold to the Company by the Government 
will be delivered at the connection of the Company's transmission 
system with the Project bus.
    Character of Service: Electric power delivered to the Company will 
be three-phase alternating current at a nominal frequency of 60 cycles 
per second.
    Monthly Rate: The monthly rate for energy sold under this schedule 
shall be equal to 60 percent of the calculated saving in the cost of 
fuel per KWH to the Company determined as follows:

Energy Rate = 63% x [Computed to the nearest $0.00001 (1/100mill) per 
KWH]
Where:
Fm = Company fuel cost in the current period as defined in Federal 
Power Commission Order 517 issued November 13, 1974, Docket No. R-479.
Sm = Company sales in the current period reflecting only losses 
associated with wholesale sales for resale. Sale shall be equated to 
the sum of (a) generation, (b) purchases, (c) interchange-in, less (d) 
inter-system sales, less estimated wholesale losses (based on average 
transmission loss percentage for preceding calendar year).

    Method of Application: The energy rate applied during the current 
billing month will be based on costs and equated sales for the second 
month preceding the billing month.
    Determination of Energy Sold: Energy will be furnished by the 
Company to supply any excess of Project use over Project generation. 
Energy so supplied by the Company will be deducted from the actual 
deliveries to the Company's system to determine the net deliveries for 
energy accounting and billing purposes. Energy for Project use shall 
consist of energy used for station service, lock operation, Project 
yard, village lighting, and similar uses.
    The on-peak hours shall be the hours between 7:00 a.m. and 11:00 
p.m., Monday through Sunday, inclusive. Off-peak hours shall be all 
other hours.
    All energy made available to the Company, exclusive of transfers to 
the Georgia Power Company for the account of the Government, shall to 
the extent required be classified as energy transmitted to the 
Government's preference customers served from the Company's system. All 
energy made available to the Company from the Project shall be 
separated on the basis of the metered deliveries to it at the Project 
during on-peak and off-peak hours, respectively. Such on-peak energy as 
is made available to the Company at the points of interconnection with 
Georgia Power Company shall be determined from schedules of deliveries. 
Deliveries to preference customers of the Government shall be divided 
on the basis (with allowance for losses) of 77 percent being considered 
as on-peak energy and 23 percent being off-peak energy. Such 
percentages may by mutual consent be changed from time to time as 
further studies show to be appropriate. Deliveries made to the Georgia 
Power Company shall be on the basis (with allowances for losses) of 
schedules of deliveries. In the event that in classifying energy there 
is more than enough on-peak energy available to supply on-peak 
requirements of the Government's preference customers but less than 
enough off-peak energy available to supply such customers off-peak 
requirements, such excess on-peak

[[Page 51314]]

energy may be applied to the extent necessary to meet off-peak 
requirements of such customers in lieu of purchasing deficiency energy 
to meet such off-peak requirements.
    Any on-peak and off-peak Project energy made available in any 
billing month over and above that required for transfers to the Georgia 
Power Company for the account of the Government and to meet the above 
requirements of preference customers shall be classified as energy sold 
under this rate schedule.
    The energy requirements of the Government's preference customers 
shall be the total energy requirements of such customers so long as the 
Government is supplying the total capacity required. In any month when 
both the Government and the Company are supplying capacity to a 
preference customer, each kilowatt of capacity shall be considered to 
be accompanied by an equal quantity of energy. The energy supplied by 
the Government shall come from its own resources or from purchases from 
the Company and shall be accounted for as transmitted for the account 
of the Government. Energy delivered to preference customers by the 
Company shall be increased by 7 percent to provide for losses in 
transmission.
    Billing Month: The billing month under this schedule shall end at 
12:00 midnight on the 20th day of each calendar month.
    Power Factor: The purchaser and seller under this rate schedule 
agree that they will both so operate their respective systems that 
neither party will impose an undue reactive burden on the other.
[FR Doc. 00-21507 Filed 8-22-00; 8:45 am]
BILLING CODE 6450-01-P