[Federal Register Volume 66, Number 176 (Tuesday, September 11, 2001)]
[Notices]
[Pages 47208-47210]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-22697]


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DEPARTMENT OF ENERGY

Western Area Power Administration


Boulder Canyon Project--Base Charge and Rates

AGENCY: Western Area Power Administration, DOE.

ACTION: Notice of base charge and rates.

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SUMMARY: The Deputy Secretary of the Department of Energy (DOE) has 
confirmed and approved the FY 2002 Base Charge and Rates (Rates) for 
the Boulder Canyon Project (BCP) electric service provided by the 
Western Area Power Administration (Western). The Rates will provide 
sufficient revenue to pay all annual costs, including interest expense, 
and repay required investment within the allowable period.

DATES: The Rates will be effective the first day of the first full 
billing period beginning on or after October 1, 2001. These Rates will 
stay in effect through September 30, 2002, or until other Rates replace 
them.

FOR FURTHER INFORMATION CONTACT: Mr. Maher Nasir, Rates Team Lead, 
Western Area Power Administration, Desert Southwest Customer Service 
Region, 615 South 43rd Avenue, Phoenix, AZ 85009, telephone (602) 352-
2768, e-mail [email protected].

SUPPLEMENTARY INFORMATION: The Deputy Secretary of Energy approved the 
existing Rate Schedule BCP-F6 for BCP electric service on September 18,

[[Page 47209]]

2000 (Rate Order No. WAPA-94, 65 FR 60933, October 13, 2000), on an 
interim basis, effective on October 1, 2000, through September 30, 
2005, and allowed for an annual recalculation of the Rates. On July 31, 
2001, the Federal Energy Regulatory Commission (FERC) approved Rate 
Order No. WAPA-94 on a final basis.
    Under Rate Schedule BCP-F6, the existing composite rate, effective 
on October 1, 2000, is 9.75 mills per kilowatthour (mills/kWh), the 
base charge is $47,788,574, the forecasted energy rate is 5.04 mills/
kWh, and the forecasted capacity rate is $0.99 per kilowattmonth 
(kWmonth). The newly calculated Rates for BCP electric service to be 
effective October 1, 2001, will result in an overall composite rate of 
10.32 mills/kWh. This is an increase of approximately 6 percent when 
compared with the existing BCP electric service composite rate. The 
increase is due to a slight increase in the annual revenue requirement 
and lower projected energy sales. The FY 2002 base charge is increasing 
slightly to $48,039,988. The slight increase is due mainly to higher 
operation and maintenance expenses and replacement costs. The FY 2002 
forecasted energy rate of 5.33 mills/kWh is approximately a 6-percent 
increase from the existing forecasted energy rate of 5.04 mills/kWh. 
The slight increase is due mainly from a projected lower water year 
that results in reduced projected energy sales. The FY 2002 forecasted 
capacity rate of $0.99/kWmonth remains the same as the existing 
forecasted capacity rate.
    The following summarizes the steps taken by Western to ensure 
involvement of all interested parties in determining the Rates:
    1. On February 8, 2001, a letter was mailed from Western's Desert 
Southwest Customer Service Region to the BCP Contractors 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 February 13, 
2001 (66 FR 10018), announcing the proposed rate adjustment process, 
initiating the public consultation and comment period, announcing the 
public information and public comment forums, and presenting procedures 
for public participation.
    3. Discussion of the proposed Rates was initiated at an informal 
BCP Contractor meeting held March 21, 2001, in Phoenix, Arizona. At 
this informal meeting, representatives from Western and the Bureau of 
Reclamation (Reclamation) explained the basis for estimates used to 
calculate the Rates. A question and answer session was held.
    4. At the public information forum held on April 4, 2001, in 
Phoenix, Arizona, Western and Reclamation representatives explained the 
proposed Rates for FY 2002 in greater detail. A question and answer 
session was held.
    5. A public comment forum was held on April 25, 2001, in Phoenix, 
Arizona, to give the public an opportunity to comment for the record. 
Two persons representing customers made oral comments.
    6. Three comment letters were received during the 90-day 
consultation and comment period. The consultation and comment period 
ended May 14, 2001. All comments were considered in developing the 
Rates for FY 2002. Written comments were received from:

Arizona Power Authority
Irrigation & Electrical Districts Association of Arizona
Metropolitan Water District of Southern California
    Comments and responses, paraphrased for brevity, are presented 
below.

Civil Service Retirement Costs

    Comment: A Contractor requested that Western and Reclamation cease 
from including the civil service retirement costs in the BCP Rates 
until FERC has made its final ruling on the reimbursability of these 
costs. The Contractor argued that Western cannot use its power revenues 
to augment the appropriations from outside sources without specific 
statutory authority. The Contractor also challenged Western's authority 
to fund any civil service retirement costs for employees of agencies 
other than Western such as Reclamation, the Corps of Engineers (Corps), 
and the International Boundary and Water Commission (IBWC). A 
Contractor stated that neither the Boulder Canyon Project Act nor the 
Colorado River Storage Project Act allow for the removal of money from 
the Colorado River Dam Fund (CRDF) to specifically satisfy the 
liability for the civil service retirement costs. Therefore, the BCP 
Contractors have concerns with the authority to collect these dollars 
in the CRDF. A Contractor also requested a copy of the accounting for 
those costs collected into the CRDF, including interest, be sent to all 
BCP Contractors and what has already been collected from the 
Contractors be refunded accordingly.
    Response: On July 31, 2001, FERC issued an Order approving Rate 
Order No. WAPA-94, including the BCP rates for capacity and energy for 
FY 2001. In the Order, FERC expressly approved Western's recovery of 
the full civil service retirement costs in these rates, finding that 
such recovery was not an unlawful augmentation of appropriations, was 
not prohibited by the pertinent BCP legislation, and was consistent 
with FERC's previous approval of the collection of these costs for 
Western's Pacific Northwest-Pacific Southwest Intertie Project rates, 
87 FERC 61,346 (June 22, 1999) and for Southeastern Power 
Administration's rates, 90 FERC 61,266 (March 17, 2000) and 86 FERC 
61,195 (February 26, 1999). Therefore, Western will continue to collect 
these costs in the BCP rates. As for the Contractors' challenge to 
Western's authority to fund any civil service retirement costs for 
employees of agencies other than Western, the rates for the Desert 
Southwest Customer Service Region's projects do not include costs from 
the Corps or IBWC agencies. A copy of the accounting records to date 
for the collection of the civil service retirement costs was provided 
to the BCP Contractors prior to the close of the comment period.

Allocation of Specific Costs

    Comment: A Contractor requested that Western continue to determine 
a fair and equitable allocation of costs for (1) the potable water and 
fire systems at Mead Substation, (2) the Buchanan Boulevard Project at 
Mead Substation, and (3) the Arizona/Nevada Switchyard.
    Response: Western is committed to continue working with the 
Contractors in developing a fair and equitable allocation of costs for 
these items.

Visitor Services Expense

    Comment: A Contractor requested explanation of why both the 
revenues and expenses for the visitor services are decreasing for FY 
2003 and FY 2004.
    Response: The Contractor's understanding is incorrect, as both the 
revenues and expenses for the visitor services are increasing for FY 
2003 and FY 2004 due to indexing for inflation. It should be recognized 
that the estimated figures for FY 2003 and FY 2004 do not impact these 
Rates, as the Rates are based on FY 2002 data.
    Comment: An interested party raised concerns about a $1.5 million 
increase in the visitor center costs, a $1.2 million increase in 
Reclamation's administrative and general expenses, and a $0.5 million 
increase in Western's system operations and dispatch costs.
    Response: Western and Reclamation have explained in great detail 
the amount of the increases, and why the increases have incurred. 
Visitor service costs have increased $1.6 million to provide more 
security, customer service,

[[Page 47210]]

and backlogged maintenance and repair items. Reclamation's 
administrative and general expenses have increased $1.2 million due 
mainly to transfers of personnel from operations to administrative and 
general expense. During the public forum presentations, Western 
specified in detail why its system operations and load dispatching 
costs were increasing approximately $450,000 in the proposed base 
charge from the existing base charge. The majority of the increase was 
due to the staffing of two additional full time positions, mandatory 
travel, training requirements, and additional costs incurred in keeping 
up with the pace of the utility industry changes. Since the closing of 
the comment and consultation period, Western has implemented a new cost 
distribution methodology for the operations' scheduling and dispatcher 
staff. The new charging methodology decreased the total operation and 
maintenance budget for FY 2002 by approximately $1.0 million in the 
proposed base charge from the existing base charge. Western has been 
reallocating its budget to cover costs where they are anticipated to 
occur.

Uprating Credit Program Process

    Comment: A Contractor requested Western identify methods to ensure 
the BCP Uprating Credit process is being performed properly beginning 
in FY 2002, and the interest rate calculated for cash-funded 
Contractors is being determined in accordance with the BCP 
Implementation Agreement and associated resolutions.
    Response: Western is administering the uprating credit process in 
accordance with the June 1996 uprating credits program written 
procedures and practices document. Western received a request in July 
2000 to review the uprating credit process and ensure the interest rate 
is being calculated correctly for the cash-funded Contractors. On 
August 31, 2000, Western met with a working group of the BCP 
Contractors to address the discrepancies that were discovered in the 
review. Western's goal was to complete this review and recalculation 
process and implement any revisions to the uprating credit program by 
February or March 2001. Due to delays in receiving Contractors' 
revisions to their schedules and Western's workload constraints, 
completion of this task has been delayed. In the upcoming months 
Western will meet with the Contractors again to discuss the impacts of 
the discrepancies. Provided Western and the Contractors can meet and 
come to an agreement on the impacts and preferred method of resolution, 
the process would be properly in place beginning in FY 2002.

BCP Electric Service Rates

    BCP electric service Rates are designed to recover an annual 
revenue requirement that includes the operation and maintenance 
expenses, payments to States, visitor services, uprating program, 
replacements, investment repayment, and interest expense. Western's 
power repayment study (PRS) allocates the projected annual revenue 
requirement for electric service between capacity and energy, 50 
percent to capacity and 50 percent to energy.

Procedural Requirements

    BCP electric service Rates are developed under the Department of 
Energy Organization Act (42 U.S.C. 7101-7352), through which the power 
marketing functions of the Secretary of the Interior and the Bureau of 
Reclamation under the Reclamation Act of 1902 (ch. 1093, 32 Stat. 388), 
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 that specifically apply to the project 
involved, were transferred to and vested in the Secretary of Energy.
    By Amendment No. 3 to Delegation Order No. 0204-108, published 
November 10, 1993 (58 FR 59716), the Secretary of Energy delegated (1) 
the authority to develop long-term power and transmission rates on a 
nonexclusive basis to Western's Administrator; and (2) the authority to 
confirm, approve, and place into effect on a final basis, to remand, or 
to disapprove such rates to the FERC. In Delegation Order No. 0204-172, 
effective November 24, 1999, the Secretary of Energy delegated the 
authority to confirm, approve, and place such rates into effect on an 
interim basis to the Deputy Secretary. Existing DOE procedures for 
public participation in electric service rate adjustments are located 
at 10 CFR part 903, effective September 18, 1985 (50 FR 37835). DOE 
procedures have been followed by Western in developing these Rates.
    The Boulder Canyon Project Implementation Agreement Contract No. 
95-PAO-10616 requires Western, prior to October 1 of each rate year, to 
determine the annual Rates for the next fiscal year. The Rates for the 
first rate year and each fifth rate year thereafter, shall become 
effective provisionally upon approval by the Deputy Secretary of Energy 
subject to final approval by FERC. For all other rate years, the Rates 
shall become effective on a final basis upon approval by the Deputy 
Secretary of Energy.
    Western will continue to provide the Contractors annual Rates by 
October 1 of each year using the same rate setting formula. The Rates 
are reviewed annually and adjusted upward or downward to assure 
sufficient revenues to achieve payment of all costs and financial 
obligations associated with the project. Each fiscal year, Western 
prepares a PRS that updates actual revenues and expenses and includes 
future estimates of annual revenues and expenses for the BCP including 
interest and capitalized costs.
    Western's BCP electric service rate setting formula was submitted 
to FERC for confirmation and approval on October 31, 1995. On April 19, 
1996, in Docket No. EF96-5091-000 at 75 FERC 62,050, FERC issued an 
order confirming, approving, and placing into effect on a final basis 
the electric service rate setting formula for BCP. The rate setting 
formula set forth in Rate Order No. WAPA-70 was approved for a period 
beginning November 1, 1995, and ending September 30, 2000. Rate Order 
No. WAPA-94 extends the existing rate setting formula beginning on 
October 1, 2000, and ending September 30, 2005.
    Western proposes the FY 2002 base charge of $48,039,988, the 
forecasted energy rate of 5.33 mills/kilowatthour, and the forecasted 
capacity rate of $0.99/kilowattmonth be approved on a final basis.
    In accordance with 10 CFR part 903, Western held a consultation and 
comment period. The notice of the proposed FY 2002 Rates for electric 
service was published in the Federal Register on February 13, 2001.
    Following review of Western's proposal within DOE, I approve the FY 
2002 Rates, on a final basis, for BCP electric service, under Rate 
Schedule BCP-F6, through September 30, 2002.

    Dated: August 29, 2001.
Francis S. Blake,
Deputy Secretary.
[FR Doc. 01-22697 Filed 9-10-01; 8:45 am]
BILLING CODE 6450-01-P