[Federal Register Volume 66, Number 245 (Thursday, December 20, 2001)]
[Notices]
[Pages 65703-65706]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-31347]



[[Page 65703]]

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DEPARTMENT OF ENERGY

Western Area Power Administration


Energy Imbalance Service

AGENCY: Western Area Power Administration, DOE.

ACTION: Notice of proposed rate.

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SUMMARY: The Western Area Power Administration (Western) is proposing a 
revision to the current rate schedule for Energy Imbalance Service for 
the Western Area Colorado Missouri control area (WACM).
    The Department of Energy (DOE) Deputy Secretary approved rates for 
Transmission and Ancillary Services, including Energy Imbalance 
Service, on March 23, 1998 (Rate Order No. WAPA-80, published in the 
Federal Register on April 6, 1998). The Federal Energy Regulatory 
Commission (FERC) confirmed and approved the rate schedule on July 21, 
1998, under FERC Docket No. EF98-5181-000. Rate Schedule L-AS4, the 
rate schedule for Energy Imbalance Service, was contained within Rate 
Order No. WAPA-80 and became effective on April 1, 1998, for the period 
ending March 31, 2003.
    The proposed rate is a revision to L-AS4 and provides sufficient 
revenue to pay annual costs incurred in WACM's management of control 
area resources and obligations. The proposed rate is scheduled to go 
into effect on April 1, 2002, and will remain in effect through March 
31, 2003. This Federal Register notice begins the formal process for 
the proposed rate.

DATES: The consultation and comment period begins with the publication 
of this notice and ends on January 31, 2002. An informal public 
information meeting will be held on January 15, 2002. No public comment 
forum will be held.

ADDRESSES: If you wish to submit comments, please do so in writing and 
address them to: Mr. Joel K. Bladow, Regional Manager, Rocky Mountain 
Customer Service Region, Western Area Power Administration, 5555 East 
Crossroads Boulevard, Loveland, CO 80538-8986. Western must receive 
written comments by January 31, 2002, to be assured consideration.

FOR FURTHER INFORMATION CONTACT: Mr. Daniel T. Payton, Rates Manager, 
Rocky Mountain Customer Service Region, Western Area Power 
Administration, 5555 East Crossroads Boulevard, Loveland, CO 80538-
8986, telephone (970) 461-7442, e-mail [email protected].

SUPPLEMENTARY INFORMATION: The proposed rate is needed to adequately 
recover the cost of energy purchased when entities conducting business 
within WACM are unable to match their resources and obligations 
accurately.
    The current rate schedule L-AS4 provides for the ability to charge 
100 mills per kilowatt-hour for under deliveries occurring more than 
five times per month outside of a bandwidth of 1.5%. Within 
the bandwidth, the customer returns energy to Western. For over 
deliveries, the current rate schedule provides for the Transmission 
Customer to be credited up to 50 percent of the regional average 
monthly price for non-firm purchases.
    WACM has experienced a great deal of price volatility over the last 
year, with prices ranging from a high of $575 per megawatt (MW) on-peak 
to a low of $22 per MW on-peak. WACM, as a control area operator, has 
final responsibility for balancing resources against obligations. As 
such, in times of deficit energy, WACM is required to purchase energy 
to keep the control area in balance. The existing 100-mill charge is 
inadequate to repay the costs of balancing energy in a high-cost 
market. At other times, it may be excessive. This proposed pass-through 
cost methodology will result in an equitable recovery of expenses.
    Any change to Energy Imbalance Service will be as set forth in a 
revision to this schedule pursuant to applicable Federal laws, 
regulations, and policies and made part of the applicable service 
agreement.

Formula Rate

    Western provides Energy Imbalance Service when there is a 
difference between a customer's resources and obligations. Energy 
Imbalance is calculated as resources minus obligations (adjusted for 
losses) for any combination of scheduled transfers/transactions located 
within WACM over each hour. Resources are defined as the quantity of 
actual generation plus scheduled resources, imports, or receipts. 
Obligations are defined as the quantity of actual deliveries plus 
scheduled obligations, exports or deliveries plus losses not accounted 
for separately. Some deviation from zero is expected, and a bandwidth 
is established to accommodate reasonable variations from an exact match 
of obligations and resources. Deviation beyond that bandwidth is not 
considered to be prudent utility practice.
    WACM will establish a bandwidth of 4 percent (8 percent 
bandwidth), with a minimum deviation of 2 megawatts (MW) to be applied 
hourly to any energy imbalance that occurs as a result of a difference 
in the customers' resources and obligations. WACM has proposed this 
increase in the bandwidth because the original rate schedule's 
bandwidth of 1.5 percent was not reasonable with regard to 
current industry instrumentation accuracy, which is approximately 1 
percent. WACM proposes to increase the bandwidth to 4 
percent to accommodate a wider range of customers' imbalances in a non-
punitive manner, while still recovering WACM's expenses to balance 
energy. Four percent was determined to be the maximum capacity risk 
that WACM was willing to consider. With an estimated average control 
area load of 2,900 MW, the selection of a 4 percent bandwidth creates a 
capacity risk of 116 MW for WACM. The 2 MW minimum deviation 
accommodates a situation where entities with smaller loads are not 
harmed by the industry standard of scheduling in whole megawatts.
    All Energy Imbalance Service provided, both inside and outside the 
bandwidth, will be handled through financial settlement, accounted for 
hourly, at the end of each month.
    Within the established bandwidth, charges for under deliveries or 
compensation for over deliveries will be aggregated and distributed to 
customers on a pass-through cost basis. The intent is to keep the 
control area whole within this range. Prices inside the bandwidth will 
be based on WACM's weighted average of nonfirm purchases and sales.
    Outside the bandwidth, WACM will provide disincentives for those 
exceeding the established limits. These disincentives will be in the 
form of higher charges for under deliveries and lower compensation for 
over deliveries. Prices outside the bandwidth will be based on WACM's 
marginal nonfirm purchases or sales.

Within the Bandwidth

    Within the bandwidth, the gross energy imbalance for each 
applicable entity within WACM shall be totaled and netted to determine 
an aggregate energy imbalance for WACM. The sign of the net amount will 
determine which of the following pricing mechanisms will apply:
    For excursions by individual customers during hours of WACM net 
over-delivery, WACM will provide the customer with a financial charge 
for under deliveries or credit for over deliveries, as applicable, 
equal to 100 percent of the weighted average of nonfirm Loveland Area 
Projects (LAP) energy sale prices for that hour made by Western's 
Energy Management and

[[Page 65704]]

Marketing Office (EMMO) in Montrose. If during the hour in question, 
there are no LAP sales by EMMO, WACM will use the daily on-or off-peak 
weighted average nonfirm energy LAP sale prices. If there were no LAP 
sales made by EMMO during the day in question, then the Palo Verde 
nonfirm index will be used for on- and off-peak hours.
    For excursions by individual customers during hours of WACM net 
under-delivery, for each hour, WACM will provide the customer with a 
financial charge for under deliveries or credit for over deliveries, as 
applicable, equal to 100 percent of the weighted average of nonfirm 
energy LAP purchase prices for that hour made by EMMO. If during the 
hour in question, there are no LAP purchases by EMMO, WACM will use the 
daily on-or off-peak weighted average of nonfirm LAP purchase prices. 
If there were no LAP purchases made by EMMO during the day in question, 
then the Palo Verde nonfirm index will be used for on- and off-peak 
hours.
    Transmission expenses incurred in the sale or purchase of balancing 
energy will be factored in the sale and purchase prices.

Outside the Bandwidth

    Outside the bandwidth, aggregated WACM energy imbalance will not be 
taken into account. Each entity within WACM will be charged or credited 
independently for energy imbalance service taken.
    For positive excursions (over deliveries) outside the bandwidth, 
WACM will credit the customer for 90 percent of the weighted average of 
the lowest marginal nonfirm energy LAP sale prices for that hour made 
by EMMO. If during the hour in question, there are no LAP sales, WACM 
will use 90 percent of the weighted average of the lowest marginal 
nonfirm energy LAP sale prices for the day. If there were no LAP sales 
made by EMMO during the day in question, WACM will use 90 percent of 
the Palo Verde nonfirm index for on- and off-peak hours.
    For negative excursions (under deliveries) outside the bandwidth, 
WACM will charge the customer 110 percent of the weighted average of 
the highest marginal nonfirm energy LAP purchase prices for that hour 
made by EMMO. If during the hour in question, there are no LAP 
purchases, WACM will use 110 percent of the weighted average of the 
highest marginal nonfirm LAP purchase prices for the day. If there were 
no LAP purchases made by EMMO during the day in question, WACM will use 
110 percent of the Palo Verde nonfirm index for on- and off-peak hours.
    Transmission expenses incurred in the sale or purchase of balancing 
energy will be factored in the sale and purchase prices.
    WACM reserves the right to offer no financial credit during periods 
when control area operations are compromised by over-delivery; e.g., 
during periods of high water or other operating constraints.
    WACM will keep hourly records of Energy Imbalance Service amounts 
by customer and will produce a monthly report showing such amounts.
    In the case of a generator imbalance where the generator is jointly 
owned, the charges/credits for Energy Imbalance Service will be 
assigned to the operating agent of the generator, unless WACM has been 
provided with a signed agreement from the generator owners designating 
a specific methodology used to allocate among owners and entitlees, the 
amount of aggregate energy imbalance due to the generator(s). Western 
reserves the right to refuse a designation that does not provide for 
the full and accurate recovery of all energy imbalance existing among 
owners/entitlees.

Physical Resource Loss

    Western recognizes that the loss of a physical resource/generator, 
by virtue of an uncontrollable event (forced outage), can represent a 
significant percentage of an entity's resource, and may result in an 
out-of-bandwidth condition. Western proposes to lessen the impact of 
such instances by widening the bandwidth an additional amount to 
accommodate the amount of time required for an emergency response. This 
would be equivalent to the entity's resource loss in MW, divided by 8. 
The divisor of 8 is justified by the 15-minute response requirement, 
divided in half. The period immediately preceding the resource loss 
should have production on-schedule and the period after the loss should 
have the group response on-schedule.
    The 15-minute period immediately following the trip would begin 
with an out-of-balance condition in the amount of the entity's 
schedule/allocation from the off-line unit and end with a balanced 
condition due to the group response. Thus, the amount of imbalance in 
the 15-minute period would be one-half of the energy in that period, 
for a total of one-eighth of the schedule from the tripped unit for 
that hour. The standard bandwidth would be extended by that one-eighth 
amount for either the hour of the trip or the hour of the trip and the 
next hour, depending on whether or not the 15-minute period rested 
entirely within an hour or overlapped into the following hour.
    Western would also apply this expanded bandwidth to those cases 
where there is the loss of a resource (either internal to or scheduled 
into WACM) by virtue of an uncontrollable event, which is replaced for 
1 or 2 hours by a coordinated response from a Western-recognized 
reserve-sharing group.
    Western would provide a similarly expanded bandwidth of 1 to 2 
hours for those members of a bona fide reserve-sharing group whose 
calculation of energy imbalance is pushed out of balance by virtue of a 
response to another member's loss of a unit during a reserve group 
activation. In this case, the expanded bandwidth would be the supplying 
members' response level for the trip, divided by 8. Again, the divisor 
of 8 is justified by the 15-minute response requirement, divided in 
half.

Sample Calculations

Within the Bandwidth

    Within the bandwidth, credits and charges will be based on the 
weighted average of all nonfirm energy sales or purchases made within 
the hour or day, as depicted in Table 1:

                                 Table 1
------------------------------------------------------------------------
    Credits for Over Deliveries:        Charges for Under Deliveries:
Weighted Average Nonfirm Sale Price   Weighted Average Nonfirm Purchase
              (WANSP)                           Price (WANPP)
------------------------------------------------------------------------
Scenario: Aggregate over delivery    Scenario: Aggregate under delivery
    Sale #1 25 MW @ $200 ($5,000)        Purchase #1 100 MW @ $200
                                      ($20,000)
    Sale #2 25 MW @ $100 ($2,500)        Purchase #2 50 MW @ $100
                                      ($5,000)
    Sale #3 25 MW @ $ 43 ($1,075)        Purchase #3 100 MW @ $ 65
                                      ($6,500)
    Sale #4 25 MW @ $ 25 ($ 625)         Purchase #4 50 MW @ $ 35
                                      ($1,750)
Calculation:                             Calculation:
    ($5,000+$2,500+$1,075+$625) =        ($20,000+$5,000+$6,500+$1,750)
     $9,200                           = $33,250

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    $9,200/100 MW = $92                  $33,250/300 MW = $110.83
    WANSP: $92/MW                        WANPP: $110.83/MW
    Or Palo Verde posted rate, if        Or Palo Verde posted rate, if
     no sales (Applicable             no purchases (Applicable
     transmission cost deducted)      transmission cost added)
------------------------------------------------------------------------

Outside the Bandwidth

    Reference is made above to the weighted average of the lowest and 
highest marginal nonfirm sale and purchase price(s) for the hour or day 
that a sale or purchase is made by EMMO. These prices will apply only 
to imbalances outside the bandwidth. The weighted average of the lowest 
and highest marginal nonfirm energy sale and purchase prices will be 
derived as depicted in Table 2:

                                 Table 2
------------------------------------------------------------------------
    Credits for Over Deliveries:        Charges for Under Deliveries:
  Weighted Average Lowest Marginal    Weighted Average Highest Marginal
    Nonfirm Sale Price (WALMNSP)       Nonfirm Purchase Price (WAHMNPP)
------------------------------------------------------------------------
Scenario: Customer surplus 35 MW     Scenario: Customer deficit 175 MW
    Sale #1 25 MW @ $25 ($625)           Purchase #1 100 MW @ $200
                                      ($20,000)
    Sale #2 25 MW @ $43 ($1,075)         Purchase #2 50 MW @ $100
                                      ($5,000)
    Sale #3 25 MW @ $100 ($2,500)        Purchase #3 100 MW @ $65
                                      ($6,500)
    Sale #4 25 MW @ $200 ($5,000)        Purchase #4 50 MW @ $35
                                      ($1,750)
Calculation keys off of surplus of   Calculation keys off deficit of 175
 35 MW:                               MW:
    ($625)+(10 MW  x  $43) = $1,055      ($20,000)+($5,000)+(25 MW  x
                                      $65) = $26,625
    $1,055 / 35 MW = $30.14              $26,625 / 175 MW = $152.14
    WALMNSP: $30.14/MW  x  90            WAHMNPP: $152.14/MW  x  110
     percent = $27.13/MW              percent = $167.36/MW
    Or Palo Verde posted rate, if        Or Palo Verde posted rate, if
     no sales (Applicable             no purchases (Applicable
     transmission cost deducted)      transmission cost added)
------------------------------------------------------------------------

Procedural Requirements

    The proposed rate will result in a minor rate adjustment as defined 
at 10 CFR 903.2. A minor rate adjustment is one that will not increase 
annual revenue of the power system by more than 1 percent. The proposed 
rate will accomplish a pass-through of costs incurred to purchase 
energy to balance the control area, resulting in only incidental 
changes in net revenue. An informal public information meeting will be 
held on January 15, 2002, at the Rocky Mountain Customer Service Region 
Office. No public comment forum will be held. The comment period will 
end on January 31, 2002. All comments must be sent to the address 
listed in the Addresses section. Western will review written comments 
received during the comment period and will recommend that the proposed 
rate or a revised proposed rate be approved on an interim basis by the 
DOE Deputy Secretary.
    The proposed rate for Energy Imbalance Service is being established 
pursuant to the Department of Energy Organization Act, 42 U.S.C. 7101-
7352; 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 
specifically applicable to the projects involved.
    By Amendment No. 3 to Delegation Order No. 0204-108, published 
November 10, 1993 (58 FR 59716), the Secretary of DOE 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 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 power rate adjustments are found at 10 CFR part 
903.

Availability of Information

    Comments, letters, memorandums, or other documents made or kept by 
Western in developing the proposed rate will be made available for 
inspection and copying at the Rocky Mountain Customer Service Region, 
located at 5555 East Crossroads Boulevard, Loveland, CO 80538-8986.

Regulatory Procedural Requirements

Regulatory Flexibility Analysis

    The Regulatory Flexibility Act of 1980 (5 U.S.C. 601, et seq.) 
requires Federal agencies to perform a regulatory flexibility analysis 
if a final rule is likely to have a significant economic impact on a 
substantial number of small entities and there is a legal requirement 
to issue a general notice of proposed rulemaking. Western has 
determined that this action does not require a regulatory flexibility 
analysis since it is a rulemaking of particular applicability involving 
rates or services applicable to public property.

Environmental Compliance

    In compliance with the National Environmental Policy Act of 1969 
(NEPA) (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 determined that this action is categorically 
excluded from the preparation of an environmental assessment or an 
environmental impact statement.

Determination Under Executive Order 12866

    Western has an exemption from centralized regulatory review under 
Executive Order 12866; accordingly, no

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clearance of this notice by the Office of Management and Budget is 
required.

Small Business Regulatory Enforcement Fairness Act

    Western has determined that this rule is exempt from Congressional 
notification requirements under 5 U.S.C. 801 because the action is a 
rulemaking of particular applicability relating to rates or services 
and involves matters of procedure.

    Dated: December 5, 2001.
Michael S. Hacskaylo,
Administrator.
[FR Doc. 01-31347 Filed 12-19-01; 8:45 am]
BILLING CODE 6450-01-P