[Federal Register Volume 67, Number 112 (Tuesday, June 11, 2002)]
[Notices]
[Pages 39970-39978]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-14609]


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DEPARTMENT OF ENERGY

Western Area Power Administration


Western Area Colorado Missouri Control Area Energy Imbalance 
Service--Rate Order No. WAPA-97

AGENCY: Western Area Power Administration, DOE.

ACTION: Notice of rate order.

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SUMMARY: The Secretary of the Department of Energy (DOE) confirmed and 
approved Rate Order No. WAPA-97 and Rate Schedule L-AS4, which placed 
into effect the provisional formula rate for Energy Imbalance Service 
for the Western Area Colorado Missouri control area (WACM). The 
provisional formula rate will remain in effect until the Federal Energy 
Regulatory Commission (FERC) confirms, approves, and places it into 
effect on a final basis or until it is replaced by another rate. The 
provisional formula rate will provide sufficient revenue to pay all 
assigned costs.

DATES: This provisional formula rate will become effective on an 
interim basis on the first day of the first full billing period 
beginning on or after July 1, 2002. It will remain in effect pending 
FERC's approval of it or a substitute formula rate on a final basis 
through March 31, 2003, or until superseded.

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 Deputy Secretary approved the existing 
Rate Schedule L-AS4 for Energy Imbalance Service on March 23, 1998 
(Rate Order No. WAPA-80, 63 FR 16778, April 6, 1998). FERC confirmed 
and approved the formula rate schedules on July 21, 1998, under FERC 
Docket No. EF98-5181-000 (84 FERC 61,066). The existing formula rate 
became effective on April 1, 1998, and is approved through March 31, 
2003. Rate Schedule L-AS4 will be amended as necessary to incorporate 
the terms of this provisional formula rate, which 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 existing rate schedule provides for the ability to charge 100 
mills per kilowatt-hour for under deliveries

[[Page 39971]]

occurring more than five times per month outside of a bandwidth of 
 1.5 percent. For over deliveries outside the bandwidth, 
the current rate schedule provides for the transmission customer 
(customer) to be credited up to 50 percent of the regional average 
monthly price for non-firm purchases. Within the bandwidth, the 
customer and Western Area Power Administration (Western) exchange 
energy.
    There has been a great deal of price volatility over the last year, 
with on-peak prices ranging from a high of $537 per megawatthour (MWh), 
to a low of $23 per MWh. WACM, as a control area operator, must balance 
resources against obligations. As such, in times of deficit energy, 
WACM must 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.

Provisional Formula Rate for Energy Imbalance Service

    The provisional formula rate for Energy Imbalance Service is 
designed to recover purchase power costs made to balance energy 
requirements within WACM. This provisional formula rate establishes a 
bandwidth of  5 percent (10 percent total bandwidth), with 
a minimum deviation of 2 MW.
    Within the bandwidth, the gross energy imbalance for each 
applicable customer within WACM shall be totaled and netted to 
determine an aggregate energy imbalance for WACM. For both over and 
under deliveries, the customer will receive a credit or charge equal to 
the weighted average real-time sale or purchase price.
    Outside the bandwidth, each customer's energy imbalance will be 
calculated separately. For over deliveries, the customer will be 
credited 50 percent of the weighted average real-time sale price. For 
under deliveries, the customer will be charged 150 percent of the 
weighted average real-time purchase price.
    Customers will be granted bandwidth expansions in certain cases for 
contributions to frequency bias, large thermal resources, and loss of a 
physical resource. The conditions for bandwidth expansion in these 
cases are outlined in-depth in the rate order.
    This provisional formula rate is developed pursuant to 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 Delegation Order No. 00-0037.00 published December 6, 2001, the 
Secretary delegated: (1) The authority to develop long-term power and 
transmission rates on a non-exclusive basis to Western's Administrator; 
(2) the authority to confirm, approve, and place such rates into effect 
on an interim basis to the Deputy Secretary; and (3) the authority to 
confirm, approve, and place into effect on a final basis, to remand, or 
to disapprove such rates to the Federal Energy Regulatory Commission 
(FERC).
    The Procedures for Public Participation in Power and Transmission 
Rate Adjustments and Extensions, 10 CFR part 903, effective September 
18, 1985 (50 FR 37835), have been followed by Western in developing 
this provisional formula rate.
    Rate Order No. WAPA-97, confirming, approving, and placing the 
proposed WACM Energy Imbalance Service rate into effect on an interim 
basis, is issued. New Rate Schedule L-AS4 will be submitted promptly to 
FERC for confirmation and approval on a final basis.

    Dated: May 30, 2002.
Spencer Abraham,
Secretary.

Department of Energy

Secretary

[Rate Order No. WAPA-97]

    In the Matter of: Western Area Power Administration Rate Adjustment 
for Western Area; Colorado Missouri Energy Imbalance Service; Order 
Confirming, Approving, and Placing the Western Area Colorado Missouri 
Control Area Energy Imbalance Service Rate Into Effect on an Interim 
Basis.
    This Energy Imbalance Service formula rate is established pursuant 
to section 302 of the Department of Energy (DOE) 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 (Reclamation) 
under the Reclamation Act of 1902 (ch. 1093, 32 Stat. 388), as amended 
and supplemented by subsequent enactments, primarily section 9(c) of 
the Reclamation Project Act of 1939 (43 U.S.C. 485h(c)), and other acts 
specifically applicable to the project involved, were transferred to 
and vested in the Secretary of Energy (Secretary).
    By Delegation Order No. 00-037.00 published December 6, 2001, the 
Secretary delegated: (1) The authority to develop long-term power and 
transmission rates on a non-exclusive basis to Western's Administrator, 
(2) the authority to confirm, approve, and place such rates into effect 
on an interim basis to the Deputy Secretary; and (3) the authority to 
confirm, approve, and place into effect on a final basis, to remand, or 
to disapprove such rates to the Federal Energy Regulatory Commission 
(FERC).
    Existing DOE procedures for public participation in power rate 
adjustments are found in 10 CFR part 903. Procedures for approving 
power marketing administration rates by FERC are found in 18 CFR part 
300.

Acronyms/Terms and Definitions

Acronym/Term and Definition

ACE--Area Control Error.
AGC--Automatic Generation Control; a closed loop control system 
where generation normally responds to errors in energy balance.
DOE--Department of Energy.
Energy Imbalance Service--Service provided when there is a 
difference between a customer's resources and obligations within the 
control area.
FERC--Federal Energy Regulatory Commission.
FRR--Frequency Responsive Reserves
LAP--Loveland Area Projects.
LSE--Load-Serving Entity.
minor rate adjustment A rate adjustment that results in an annual 
revenue increase of less than 1 percent.
MW--Megawatt; unit of power equal to 1,000 kilowatts.
MWh--Megawatthour; energy delivered when 1 MW is supplied over 1 
hour.
MVAR--Megavar, equal to 1,000 kilovolt-amperes reactive (VAR).
MV-90--WACM/RMR's metering database.
NERC--North America Electric Reliability Council (or its 
successors).
NITS--Network Integration Transmission Service.
OATT--Open Access Transmission Tariff.
Obligations--Delivery of energy in the name of the LSE or PSE to 
physical metered delivery points (load) or to load of another entity 
by way of scheduled sales from inside or outside of WACM.
%Bandwidth--A percentage of metered load as measured 
directly at the loads or calculated by boundary metering.
PSE--Purchasing/Selling Entity.
Rate Order No. WAPA-80--Rate Order for Loveland Area Projects 
Transmission and Ancillary Services, Effective April 1, 1998.

[[Page 39972]]

Rate Schedule L-AS4--Rate Schedule filed within Rate Order No. WAPA-
80 for Energy Imbalance Service.
real-time--Purchase or sale made for immediate next hour or hours.
Resources--Receipt of energy, either from customer rights to 
physical metered generation within WACM or scheduled purchase 
traceable to another entity's generation from inside or outside 
WACM.
RMR--Rocky Mountain Customer Service Region.
RMRG--Rocky Mountain Reserve Group.
WACM--Western Area Colorado Missouri control area.
WECC--Western Electric Coordinating Council, Western Systems 
Coordinating Council successor agency.
Western--Western Area Power Administration, U.S. Department of 
Energy.

Effective Date

    This provisional formula rate will become effective on an interim 
basis on the first day of the first full billing period beginning on or 
after July 1, 2002, and will be in effect pending FERC's approval of it 
or a substitute formula rate on a final basis through March 31, 2003, 
or until superseded. This formula rate will be applied under existing 
transmission contracts, Western's OATT, and any subsequent agreements 
required. It will replace Schedule L-AS4, Energy Imbalance Service, 
updated October 1, 2001.

Public Notice and Comment

    The Procedures for Public Participation in Power and Transmission 
Rate Adjustments and Extensions, 10 CFR part 903, have been followed by 
Western in the development of this formula rate and schedule. The 
provisional formula rate for Energy Imbalance Service represents an 
increase of less than 1 percent in total LAP revenues; therefore, it is 
a minor rate adjustment as defined at 10 CFR part 903.2(f)(1). The 
distinction between a minor and a major rate adjustment is used only to 
determine the public procedures for the rate adjustment.
    The following is a summary of the steps Western took to ensure 
involvement of interested parties in the rate adjustment process:
    1. On December 20, 2001, RMR published a Notice of Proposed Rate in 
the Federal Register for revision of existing Energy Imbalance Service 
Rate Schedule L-AS4. The public comment period was to end January 31, 
2002.
    2. An informal public information meeting was held on January 15, 
2002. Fifteen entities were represented at the meeting.
    3. Based upon written comments received prior to January 31, 2002, 
the end of the public comment period, RMR extended the comment period 
to February 28, 2002. At the time of this extension, RMR also delayed 
implementation of Energy Imbalance Service to May 1, 2002.
    4. In response to requests at the January 15 information meeting, 
RMR electronically transmitted trial bills to customers for Energy 
Imbalance Service on February 15, 2002, to provide customers an 
opportunity to view Energy Imbalance Service calculations and pricing.
    5. Western received written comments from seven parties during the 
comment period.
    6. On March 29, 2002, Western sent a letter to customers stating 
that the scheduled implementation date for Energy Imbalance Service had 
been changed to June 1, 2002 (implementation has subsequently been 
moved to July 1, 2002).
    The following organizations submitted written comments:

Basin Electric Power Cooperative, Inc.
Black Hills Power & Light
Colorado Springs Utilities
City of Torrington, Wyoming
Flathead Electric Cooperative, Inc.
Nebraska Municipal Power Pool (Municipal Energy Agency of Nebraska)
Tri-State Generation and Transmission Association, Inc.

Description of WACM

    WACM is operated by RMR and has within its borders Federal 
generating resources from the Pick-Sloan Missouri Basin Program, 
Fryingpan-Arkansas Project, and the Colorado River Storage Project. 
There are also large thermal generators within WACM that are not 
Federal resources, such as the Laramie River Station and Craig 
Powerplant, operated by Basin Electric Power Cooperative, Inc. and Tri-
State Generation and Transmission Association, Inc., respectively. A 
number of smaller thermal units also exist within WACM.
    The Federal generation is currently the only generation resource 
that responds to energy imbalances within WACM. The thermal generators 
located within WACM are either not on AGC, or are operated to an ACE 
signal that responds only to their sub-control area.
    WACM has interconnections with seven other control areas: Nebraska 
Public Power District, Western Area Upper Missouri East, Western Area 
Upper Missouri West, Public Service Company of Colorado, Public Service 
Company of New Mexico, Pacificorp East, and Western Area Lower 
Colorado.
    The peak load within WACM is about 2,900 MW with approximately 
4,700 MW of generation, 1,000 MW of which is Federal generation.

Energy Imbalance Service

    WACM 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 transmission 
and transformer losses) for any combination of scheduled transfers/
transactions integrated over each hour.
    Resources are defined as actual generation plus scheduled 
resources, imports, or receipts. Obligations are defined as actual 
deliveries plus scheduled obligations, exports or deliveries plus 
losses not accounted for separately. Some deviation from zero is 
expected, and a bandwidth based on metered load is established to 
accommodate reasonable variations from an exact match. Deviation beyond 
an acceptable bandwidth is not considered prudent utility practice. 
Through-schedules, imports, and exports will not be included in the 
determination of the bandwidth.
    Balancing energy is provided by WACM, most of which must be 
purchased in the real-time market.

Existing Rate Schedule and Need for Action

    The rate adjustment is needed to adequately recover the cost of 
energy purchased when entities conducting business within WACM are 
unable to match their resources and obligations.
    Rate Schedule L-AS4 currently provides for a charge of 100 mills 
per kilowatt-hour for under deliveries occurring more than five times 
per month outside a bandwidth of 1.5 percent. For over 
deliveries outside the bandwidth, the current rate schedule provides 
for a credit of 50 percent of the regional weighted average monthly 
price for non-firm purchases. Within the bandwidth, energy is exchanged 
between the customer and Western.
    There has been a great deal of price volatility over the last year, 
with on-peak prices ranging from a high of $537 per MWh, to a low of 
$23 per MWh. The existing 100-mill charge is inadequate to repay the 
expenses of balancing energy in a high-cost market. At other times, 100 
mills may be excessive. The provisional formula rate for Energy 
Imbalance Service uses a cost-based methodology, which will result in 
an equitable assessment of expenses to customers and WACM.

[[Page 39973]]

Applicability of Energy Imbalance Service

    Energy Imbalance Service will apply to any entity that falls into 
one or more of the following categories:
    1. Those serving load internal to WACM.
    2. Those operating or holding scheduling rights to generators 
within WACM.
    3. Those receiving scheduled resources as a buyer whose load is 
within WACM at a point where the buyer is the PSE at that Point of 
Delivery (POD).
    4. Those delivering scheduled obligations as a seller whose 
resource is within WACM from a point where the seller is the PSE at 
that Point of Receipt (POR).

Energy Imbalance Bandwidth

    WACM is establishing a bandwidth of 5 percent (based on 
customer load) with a minimum deviation of 2 MW, applied hourly to any 
energy imbalance that occurs as a result of a difference in the 
customers' resources and obligations. WACM has increased the bandwidth 
from 1.5 percent to 5 percent to accommodate 
the widest range of imbalanced energy in a non-punitive manner. The 2 
MW minimum allows for situations in which entities with loads less than 
40 MW have a wider bandwidth than 5 percent; e.g., using 
the 5 percent, a load of 30 MW would normally have a 
bandwidth of 1.5 MW, but the minimum bandwidth of 2 MW 
results in an increased bandwidth of 7 percent. This 
accommodation allows the smaller customer more flexibility to deal with 
scheduling requirements (in whole megawatts) and forecasting 
difficulties.
    In situations where a customer has elected to functionally 
integrate its load with another customer's and provide one schedule, 
that combined schedule will be treated as one entity for purposes of 
bandwidth calculation. The bandwidth will be determined by the sum of 
the load(s), not the sum of the bandwidths. The 2 MW minimum will only 
apply once in this scenario.

Formula Rate

    All Energy Imbalance Service provided, both inside and outside the 
bandwidth, will be settled financially, accounted for hourly at the end 
of each month.
    There are four scenarios for Energy Imbalance Service, each of 
which receive a specific pricing calculation. They are: (1) Over 
delivery within the bandwidth; (2) under delivery within the bandwidth; 
(3) over delivery outside the bandwidth; and (4) under delivery outside 
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 aggregate 
energy imbalance will determine whether sale or purchase pricing will 
be used (surplus conditions will use sale pricing and deficit 
conditions will use purchase pricing). One-hundred percent of the real-
time weighted average sale or purchase price is charged or credited to 
the customer, using hourly data when available.
    Outside the bandwidth, WACM energy imbalance will not be 
aggregated. Each entity within WACM will be charged or credited 
independently for Energy Imbalance Service taken, dependent upon their 
over- or under-delivery status. For an under delivery outside the 
bandwidth, the charge will be 150 percent of the real-time hourly 
weighted average purchase price. For an over delivery outside the 
bandwidth, the credit will be 50 percent of the real-time hourly 
weighted average sale price.
    If hourly data is unavailable, pricing defaults are as shown below 
in Table 1.

Examples of Energy Imbalance Service Calculations

                                 Table 1
------------------------------------------------------------------------
          Within the bandwidth
------------------------------------------------------------------------
                                           Credits for under deliveries
 Credits for over deliveries (based on   (based on weighted average real-
 weighted average real-time sale price)        time purchase price)
------------------------------------------------------------------------
Scenario: WACM Aggregate Net Over        Scenario: WACM Aggregate Net
 Delivery.                                Under Delivery.
    Sale 1 25 MW @ $22 ($550).
    Sale 2 25 MW @ $20 ($500).
    Sale 3 25 MW @ $17 ($425).
    Sale 4 25 MW @ $12 ($300).
    Purchase 1 100 MW @
     $35($3,500).
    Purchase 2 50 MW @$32
     ($1,600).
    Purchase 3 100 MW @ $15
     ($1,500).
    Purchase 4 50 MW @ $10 ($
     500).
Calculation:                             Calculation:
    ($550+$500+$425+$300) = $1,775.....     ($3,500+$1,600+$1,500+$500)=
                                             $7,100
    $1,775 / 100 MW = $17.75/MW........     $7,100 / 300 MW = $23.67/MW.
Weighted Average Real-Time Sale Price    Weighted Average Real-Time
 Price = $17.75/MW.                       Purchase Price = $23.67/MW.
Customer would be credited $17.75/MW...  Customer would be charged
                                          $23.67/MW.
Pricing Defaults: If no hourly real-     Pricing Defaults: If no hourly
 time sales, default is to daily real-    real-time purchase, default is
 time sales weighted average on/off-      to daily real-time purchase
 peak. If no daily real-time sales,       weighted averaged on-/off-
 default is to monthly real-time sales    peak. If no daily real-time
 weighted averaged on-/off-peak. If no    purchase, default is to
 monthly real-time sales, default is to   monthly real-time purchase
 the prior month real-time sales          weighted averaged on-/off-
 weighted average on-/off-peak.           peak. If no monthly real-time
                                          purchase, default is to prior
                                          month real-time purchase
                                          weighted average on-/off-peak.
Applicable transmission cost deducted..  Applicable transmission cost
                                          added.
------------------------------------------------------------------------


                                 Table 2
------------------------------------------------------------------------
                                           Credits for over deliveries
                                         (based on weighted average real-
                                                 time sale price)
         Outside the bandwidth          --------------------------------
                                           Credits for under deliveries
                                         (based on weighted average real-
                                               time purchase time)
------------------------------------------------------------------------
Scenario: Customer A Over Delivered....  Scenario: Customer B Under
                                          Delivered.

[[Page 39974]]

 
    Sale 1 25 MW @ $22 ($550).  Purchase 1 100 MW @
                                          $35 ($3,500)
    Sale 2 25 MW @ $20 ($500).  Purchase 2 50 MW @ $32
                                          ($1,600)
    Sale 3 25 MW @ $17 ($425).  Purchase 3 100 MW @
                                          $15 ($1,500)
    Sale 4 25 MW @ $12 ($300).  Purchase 4 50 MW @ $10
                                          ($ 500)
Calculation:                             Calculation:
    ($550+$500+$425+$300) = $1,775.....     ($3,500+$1,600+$1,500+$500)=
                                             $7,100
    $1,775 / 100 MW = $17.75/MW........  $7,100 / 300 MW = $23.67/MW.
Weighted Average Real-Time Sale Price =  Weighted Average Real-Time
 $17.75/MW.                               Price = $23.67/MW.
Customer credited 50% = $8.88/MW.......  Customer charged 150% = $35.50/
                                          MW.
Pricing Defaults: Same as shown in       Pricing Defaults: Same as shown
 Table 1.                                 in Table 1.
Applicable transmission cost deducted..  Applicable transmission cost
                                          added.
------------------------------------------------------------------------

Comparison of Existing and Provisional Formula Rate for Energy 
Imbalance Service

    The following is a comparison of the existing rate and the 
provisional formula rate for Energy Imbalance Service.

------------------------------------------------------------------------
    Existing rate schedule effective         Provisional formula rate
            October 1, 2001              schedule effective July 1, 2002
------------------------------------------------------------------------
Energy imbalance will be settled with    All energy imbalance will be
 both energy and dollars.                 settled financially, accounted
                                          for hourly, at the end of each
                                          month.
Within the bandwidth, the customer and   Within the bandwidth, the gross
 Western will exchange energy through     energy imbalance for each
 energy deviation accounting.             applicable entity within WACM
                                          shall be totaled and netted to
                                          determine an aggregate energy
                                          imbalance for WACM (deficit
                                          conditions use purchase
                                          pricing; surplus conditions
                                          use sale pricing). One-hundred
                                          percent of the weighted
                                          average real-time purchase or
                                          sale price is charged or
                                          credited to the customer,
                                          using hourly pricing data when
                                          available (see Table 1 for
                                          defaults).
Outside the  1.5%            Outside the bandwidth, for
 bandwidth, for negative excursions (2    negative excursions (2 MW
 MW minimum) and occurring more than 5    minimum), RMR will charge the
 times per month, RMR reserves the        customer 150% of the hourly
 right to charge 100 mills/kWh.           weighted average real-time
                                          purchase price (with defaults
                                          as stated herein).
Outside the  1.5%            Outside the bandwidth, for
 bandwidth, positive excursions may be    positive excursions (2 MW
 credited to the customer within 30       minimum), RMR will credit the
 days for 50% of the regional weighted    customer 50% of the hourly
 average monthly price for non-firm       weighted average real-time
 purchases.                               sales price (with defaults as
                                          stated herein).
A credit for over delivery will be       A credit for over delivery may
 provided if over deliveries do not       not apply during times of WACM
 impinge upon WACM operations. For        operating constraints; e.g.,
 example, during times of high water or   high-water ``must-run''
 operating constraints, RMR reserves      conditions. During these
 the right to eliminate credits for       times, RMR reserves the right
 over deliveries..                        to eliminate credits for over
                                          deliveries.
No bandwidth expansion provided........  Bandwidth may be expanded
                                          during certain hours in
                                          response to loss of physical
                                          resource, frequency bias
                                          contribution, and start up/
                                          shut down of large thermal
                                          resources.
------------------------------------------------------------------------

Energy Imbalance and Control Area Operating Constraints

    WACM reserves the right to eliminate credits for over deliveries 
during times of WACM operating constraints, such as ``must-run'' 
hydrologic conditions, or when WACM cannot dispose of surplus energy. 
It is not feasible for Western to offer a credit for energy when the 
market price is zero (or near zero).
    In the case of over delivery, if the disposition of over-delivered 
energy results in zero value sales, there is no income to disburse. Due 
to the unpredictable nature of hour-to-hour energy imbalance and the 
very short notice for disposition of over deliveries, Western expects 
some hours of zero value sales and the elimination of credits.
    Additionally, if Western is unable to dispose of the entire net 
over delivery, and operating criteria for the control area are not met, 
there may be financial penalties to Western from reliability oversight 
agencies such as NERC or WECC. In these cases, credit to customers will 
be eliminated and parties over delivering may share in the cost to 
Western of the penalty.

Treatment for Jointly Owned Generation

    In the case of a jointly owned generator, the charges and/or 
credits for Energy Imbalance Service will be assigned to the operating 
agent of the generator. Unless WACM is provided with a legally binding 
signed agreement from the owners designating a specific methodology to 
allocate among owners and entitlees, the amount of aggregate energy 
imbalance will be assigned to the operating agent of the generator(s). 
Western reserves the right to refuse a designation that does not 
provide for the full and accurate recovery of all generator energy 
imbalances existing among owners and/or entitlees.
    Generation owners and/or entitlees will be responsible for the 
actual implementation of the allocation among the multiple owners. 
Providing WACM with a methodology within a signed agreement will not in 
itself be sufficient. The generation owners must ensure that

[[Page 39975]]

proper tagging and scheduling of the generation is accomplished so that 
the Energy Imbalance Service is assigned accurately to each generation 
owner.

Physical Resource Loss

    Western recognizes that the loss of a physical resource or 
generator due to an uncontrollable event (forced outage), can result in 
a loss of a significant percentage of an entity's resource(s), and may 
result in an energy condition outside the bandwidth. To lessen the 
impact of such instances, the bandwidth will be widened to accommodate 
the amount of time required for an emergency response.
    Western will apply this expanded bandwidth to those cases where a 
resource is lost (either internal to or scheduled into WACM) due to an 
uncontrollable event, that is replaced for 1 or 2 hours by a 
coordinated response from a Western-recognized reserve-sharing group, 
such as RMRG.
    Responses to another group member's loss of a unit during a reserve 
group activation will be accounted for by an after-the-fact schedule 
for the response. Therefore, no bandwidth expansion is required. For 
those entities for which real-time ACE is used to measure energy 
imbalance, bandwidth expansion will be evaluated on a customer-by-
customer basis.

Contributions for Frequency Bias

    For those entities operating generation in a tie-line bias mode, 
subject to the requirements for FRR, Western intends to offset the 
calculated raw energy imbalance by an amount equal to the weighted 
average hourly frequency multiplied by the entity's frequency response 
bias factor. This will eliminate any Energy Imbalance Service costs 
incurred due to provision of frequency support to the interconnection. 
Inadvertent energy accumulated between sub-control areas and WACM due 
to activation of FRR will be separately tracked. For an entity to 
qualify for this accommodation, the requesting entity must provide 
Western with data required for physical confirmation of FRR 
participation. Minimum data that must be provided in real time includes 
the scan-by-scan information regarding individual unit capability, real 
MW output, and reactive MVAR output. Engineering data commonly used for 
system modeling must also be provided. Other data may be required and 
will be requested in writing. No credit will be allowed for frequency 
bias contributions until the requested real-time and engineering data 
is provided to WACM.

Consideration of Large Thermal Resources

    Western recognizes the difficulty in transitioning large base-load 
thermal resources between an on-line and off-line state. During such 
transitions, these units generate energy that is not easily predicted, 
controlled, or scheduled, and over-supply may result if the unit is 
still synchronized and generating, but the delivery schedules are zero. 
During these transitional periods, Western will expand the bandwidth 
until the unit is adjusted to its desired position: on or off line.
    These transitional periods should be infrequent occurrences and not 
considered normal operation. The expanded bandwidth will be applied 
hourly beginning with the first hour containing synchronized generation 
from the unit. The period of expanded bandwidth will continue until the 
unit has reached an output level deemed by the operating agent and 
agreed to by Western to be sufficient for scheduling energy (minimum 
scheduling level).
    For scheduled transitions from on line to off line, expanded 
bandwidth will be applied hourly beginning with the hour in which the 
unit generates less than the minimum scheduling level.
    Forced transitions from on-line to off-line will receive credit as 
explained in the ``Physical Resource Loss'' section of this notice.
    The bandwidth will not be expanded when ramping services have been 
acquired by an entity.

Treatment of Intermittent Renewable Resources

    Western promotes the installation of renewable sources of energy, 
but recognizes that these resources fluctuate significantly as a normal 
part of their operation. WACM is a geographically large control area 
with few resources available to balance loads and resources, which 
limits WACM's ability to cover the fluctuation anticipated with an 
intermittent renewable resource. Western will apply Energy Imbalance 
Service to renewable energy resources. However, Western is willing to 
purchase, on a pass-through cost basis, the regulation and energy 
required to mitigate the fluctuations inherent in intermittent 
resources. This will assure that the intermittent resources only pay 
for their impact on the system and are not penalized for out-of-band 
excursions.

Contractual Vehicle for Energy Imbalance Service

    All entities currently operating within WACM post revenues and 
expenses for energy deviation under their interconnection agreements. 
Energy Imbalance Service will replace energy deviation accounting for 
all transactions, effective July 1, 2002. Some customers within WACM 
serve load without the use of the Federal transmission system. Prior to 
July 1, 2002, as Western works through the implementation of Energy 
Imbalance Service with its customers, Western will determine whether or 
not a customer has an existing contract or needs to execute an 
additional agreement.
    For customers who are unwilling to take Energy Imbalance Service, 
Western will work with them to meter their load out of WACM. Until such 
time as that meter reconfiguration is accomplished, Western will charge 
or credit the customer for Energy Imbalance Service taken.

Certification of Rates

    Western's Administrator has certified that the Energy Imbalance 
Service, Rate Schedule L-AS4, placed into effect on an interim basis 
herein is the lowest rate possible consistent with sound business 
principles. The formula rate has been developed in accordance with 
agency administrative policies and applicable laws.

Energy Imbalance Service Written Comments

    Following is a summary of written comments received during the 
public comment period and RMR's response. Comments were combined and 
paraphrased to address similar issues. Several requests for 
clarification and definition of various words, phrases or processes 
were made, and Western has addressed those within the context of this 
order.
    In addition to clarification, changes have been made to the 
proposed rate methodology published in the Federal Register on December 
20, 2001, based upon the input received during the public process.
    Comment: Several comments received related to: (1) The complexity 
of the billing and the volume of data; (2) the use of network 
transmission billing as a starting point for Energy Imbalance Service 
calculation; and (3) the ability of the control area and customers to 
implement this service.
    Response: RMR has both the staff and systems in place to implement 
Energy Imbalance Service. Western will continue to work with customers 
to simplify the presentation of material and assure that the customer 
understands the Energy Imbalance Service calculation. RMR has 
eliminated

[[Page 39976]]

the marginal pricing methodology to simplify the billing process.
    Western agreed with the comment to begin with the NITS billing data 
as a starting point for Energy Imbalance Service calculation and has 
made that change for any customer currently receiving a network 
transmission bill from Western.
    Customers are not required to develop or maintain any new systems 
in response to Energy Imbalance Service. However, they must maintain 
full, active, and ongoing communication with Western. Additionally, it 
will be the customers' responsibility to review the bill and promptly 
notify Western of any concerns.
    Western will provide customers the detail necessary to support the 
Energy Imbalance Service calculations. This will include, but not be 
limited to, hourly details of all import and export schedules and 
generation and load data. Each customer will receive a summary file 
combining all elements into a final Energy Imbalance Service bill.
    Comment: A commenter asked whether Western's current energy 
deviation accounting will now be handled through Energy Imbalance 
Service and result in a net cash transaction versus energy exchange.
    Response: Effective June 30, 2002, existing energy deviation 
accounts will be ``frozen'' and settled consistent with the terms of 
existing contracts or mutual agreements. Energy Imbalance Service and 
subsequent billing will replace all previous WACM internal deviation 
energy accounting and will be settled financially.
    Comment: A commenter asked how an existing contract for regulation 
and frequency response service outside the OATT would be handled within 
the scope of Energy Imbalance Service calculation.
    Response: Western will honor all existing contracts and will expand 
the bandwidth accordingly for regulation service taken as provided by 
the customer's contract with Western.
    Comment: Several comments were received concerning administrative 
issues for Energy Imbalance Service, specifically: (1) defining the 
process for Energy Imbalance Service to be followed when a generator is 
jointly owned; and (2) requesting information about how Western will 
charge for loads off the Federal transmission system.
    Response: Western has addressed both of these issues in separate 
sections within the text of this rate order, entitled ``Treatment of 
Jointly-Owned Generation'' and ``Contractual Vehicle for Energy 
Imbalance.''
    Comment: A commenter raised a question about a single PSE that 
currently uses two PSE codes (one for merchant activity and one for 
reliability) in the tagging system. Will they be treated separately?
    Response: These types of tagging situations will be addressed on a 
case-by-case basis by WACM. It would appear that the two entities will 
be treated (accounted for) separately, as the tags indicate that they 
are separate entities. However, at the customer's request and with 
WACM's concurrence, Western will manually merge them into a final 
energy accounting and bill.
    Comment: Customers employing AGC in a tie-line bias mode as 
recommended by WECC and NERC may be penalized by their efforts to 
support regional reliability. The commenter feels WACM should offer a 
penalty adjustment to allow for AGC control.
    Response: Western agrees and has addressed this issue in the 
section entitled ``Contribution for Frequency Bias'' in this final rate 
order.
    Comment: Comments were made concerning the processes to be used in 
the administration of Energy Imbalance Service, specifically: (1) 
Extension of the comment period; (2) equal treatment of all parties; 
and (3) dispute resolution and the processes that are in place when the 
service is implemented.
    Response: Western officially extended the comment period until 
February 28, 2002, to allow parties sufficient time to comment after 
viewing sample data.
    Western will continue to work with all parties to ensure the 
accuracy of data and equitable treatment. If any customer has 
information that would assist Western in reconciling its energy 
accounts, Western encourages them to initiate a timely exchange so that 
the information can be considered in the customer's Energy Imbalance 
Service calculation.
    It is Western's intention that any and all disputes over the 
calculation of Energy Imbalance Service will be resolved between 
Western and the customer prior to billing for the service. However, if 
no resolution is achieved, the process to address disputes outlined in 
the customer's service contract will be used.
    Comment: Various comments were made concerning the final 
calculation of the energy imbalance bills. These included comments and 
questions on (1) after-the-fact checkouts and related adjustments; (2) 
calculation of ACE; (3) metering errors and energy-only meters; (4) 
proper accounting for losses; and (5) the timing and disposition of 
bills.
    Response: The primary principle of Energy Imbalance Service is to 
account for generation, load, and control area boundary flow on an 
hourly basis. However, Western recognizes that scheduling differences 
among control areas may require changes to be made in accordance with 
inadvertent resolution procedures established by NERC and WECC. Western 
has expanded its checkout processes and will continue to work with 
individual generation operators and LSEs toward improving daily and 
monthly checkouts. Affected customers will be responsible for 
contacting Western concerning tagging and checkout issues and working 
through the discrepancies in a timely manner prior to Energy Imbalance 
Service billing. Once inter-control area schedules are agreed upon, 
Western will consider additional corrections to schedules totally 
inside the control area on a case-by-case basis.
    Western is working with all customers impacted by the 
implementation of Energy Imbalance Service to ensure that where Western 
calculates an individual customer's ACE within the control area, it is 
in agreement with the customer's ACE measurement. This will be an 
ongoing effort up to, through, and beyond implementation of Energy 
Imbalance Service. Western will continue to work toward the real-time 
notification to customers of potential imbalance. This action, however, 
will not postpone implementation of Energy Imbalance Service within 
WACM.
    Metering errors will also be addressed on a case-by-case basis. 
Western will account for energy-only meters by dividing monthly energy 
by the number of hours in the month. Monthly meters are normally used 
in applications where load characteristics are primarily flat, such as 
small 24-hour industrial operations without large hour-to-hour 
variations. Most loads in WACM with a significant impact to Energy 
Imbalance Service calculations are already metered with interval 
recording devices. Any remaining monthly energy-only meters in WACM 
that Western believes to have a load profile other than the flat model 
will need to be replaced at the customer's expense.
    Western assesses applicable control area, network, or grandfathered 
contract service with a uniform loss rate associated with physical load 
in WACM. Western will allow customers to ``scale up'' each hourly meter 
reading (multiplying by 1 plus the applicable loss rate) in the same 
manner currently in force; i.e., the increase of load meters having the 
same loss factor. Losses associated with point-to-point transmission 
service on Western's transmission system, or through the WACM control 
area for purposes of

[[Page 39977]]

merchant transactions, will remain, for now, under a separate ongoing 
loss collection process.
    The issuance of final Energy Imbalance Service bills for any month 
will take place at the earliest possible date following the end of the 
month. However, Energy Imbalance Service billing is not possible until 
all relevant energy schedules have been through the NERC and WECC 
checkout process and all after-the-fact pricing calculations have been 
completed. This may take several months. Western's research has shown 
that most utilities billing for Energy Imbalance Service have a lag 
from ``month-end to bill'' of about 60 to 90 days.
    Comment: Comments expressed concern about WACM's MV-90 metering 
system as the determinant of actual load obligations within WACM on an 
after-the-fact basis.
    Response: Western currently reads 300 meters by remote means and 
achieves an error rate of less than 1 percent. Remote readings for the 
previous month (including error processing) are usually completed by 
the third day of the following month.
    Comment: Many comments were received concerning the Energy 
Imbalance Service methodology. They included requests for: (1) An 
expansion of the 4 percent bandwidth; (2) revised treatment 
of forced resource outages; (3) elimination of out-of-band penalties 
for non-firm intermittent renewable resources; and (4) elimination of 
out-of-band penalties for large thermal units during startup and 
shutdown transitions.
    Response: Western has expanded the previously proposed bandwidth of 
4 percent to 5 percent. Please refer to the 
section of this rate order entitled, ``Energy Imbalance Bandwidth.''
    Western will allow some expansion of the bandwidth under certain 
criteria during times of loss of a physical resource. Western has 
addressed the issue of forced resource outages in the section of this 
rate order entitled ``Physical Resource Loss.''
    Western will apply Energy Imbalance Service to renewable energy 
resources. However, Western is willing to purchase, on a pass-through 
cost basis, the regulation and energy required to mitigate the 
fluctuations inherent in intermittent resources. Western has addressed 
the issue of non-firm intermittent renewable resources in the section 
of this rate order entitled ``Treatment of Intermittent Renewable 
Resources.''
    Western will allow some expansion of the bandwidth under certain 
criteria during startup and shutdown of large thermal resources. 
Western has addressed this issue in the section of this rate order 
entitled ``Consideration of Large Thermal Resources.''
    Comment: Comments questioned the use of WACM prices versus 
published indices, how these prices are determined, and whether WACM 
will make them available to the customers.
    Response: Western has eliminated the use of industry indices in its 
pricing structure. Prices are derived from WACM hourly real-time sales 
and purchases (in some cases multiple-hour transactions).
    The prices may or may not bear a relationship to a published market 
index, but Western maintains that the best method to ensure that 
Western does not over- or under-collect revenue, nor under- or over-
credit for surpluses, is to adhere to the actual real-time purchase and 
sales pricing.
    The WACM sales and purchase pricing will be posted after-the-fact 
on a web site currently under development. Customers will be provided 
information related to the web site's access and use prior to the first 
issuance of an Energy Imbalance Service bill.
    Comment: Several comments were received concerning: (1) The 
complexity of the pricing structure; (2) the need for an out-of-band 
penalty; (3) how Western makes the distinction between merchant and 
reliability related transmission; and (4) and the application of 
revenues received for the out-of-band penalties.
    Response: Western has simplified the pricing mechanism by 
eliminating both marginal pricing and the use of industry indices. This 
rate order contains the details of these changes. Pricing for both 
within and outside of the bandwidth will be the average prices for 
real-time transactions, with penalties for out-of-band imbalances.
    Federal transmission transactions correspond with an energy 
transaction. Western determines its merchant versus reliability energy 
transactions by virtue of the transaction either being done in 
preschedule or real-time mode. The transmission transactions would 
follow the associated energy transaction and be deemed to be either for 
merchant or reliability purposes.
    Western's analysis substantiated out-of-band penalties as: (1) An 
appropriate economic disincentive for entities operating outside the 
expanded bandwidth of 5 percent; and (2) a mitigation of 
Western's risk in crediting customers for over deliveries.
    Compensation from the penalties applied outside the bandwidth will 
cover unplanned maintenance costs associated with unscheduled unit 
responses, as well as Western's expenses for disruption of generation 
schedules.
    Comment: The provision that allows WACM the ability 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) was questioned.
    Response: Western maintains that during times of control area 
constraints, it reserves the right to offer no credit for over delivery 
of energy. Western addressed this comment in the section of this rate 
order entitled ``Energy Imbalance Service and Control Area Operating 
Constraints.''
    Comment: Concern was expressed that small-load entities that are 
required to schedule in whole MW increments would be penalized by 
Energy Imbalance Service.
    Response: The size of an entity will not exempt a customer from the 
responsibility of balancing resources with obligations. However, the 2 
MW minimum bandwidth was established expressly for the smaller 
customer, so that scheduling in whole MWs would not push them outside 
the bandwidth. More detailed information on this comment appears in the 
sections of this rate order entitled ``Energy Imbalance Bandwidth'' and 
``Formula Rate.''

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

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

[[Page 39978]]

involving rates or services applicable to public property.

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.

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.

Submission to the Federal Energy Regulatory Commission

    The interim rate herein confirmed, approved, and placed into 
effect, together with supporting documents, will be submitted to FERC 
for confirmation and final approval.

Order

    I confirm and approve on an interim basis, effective July 1, 2002, 
Rate Schedule L-AS4 for Energy Imbalance Service for the Western Area 
Colorado Missouri control area for the Western Area Power 
Administration. The rate schedule shall remain in effect on an interim 
basis, pending FERC confirmation and approval of it or a substitute 
rate on a final basis through March 31, 2003.

Dated: May 30, 2002.

Spencer Abraham,
Secretary.

Rate Schedule L-AS4, (Supersedes L-T3); Schedule 4 to OATT,

July 1, 2002.

Department of Energy

Western Area Power Administration, Rocky Mountain Region, Western Area 
Colorado Missouri Control Area; Schedule of Rate for Energy Imbalance 
Service

Effective

    The first day of the first full billing period beginning on or 
after July 1, 2002, through March 31, 2003.

Available

    Within the Rocky Mountain Customer Service Region's Western Area 
Colorado Missouri control area (WACM).

Applicable

    To customers receiving Energy Imbalance Service from WACM.

Character and Conditions of Service

    WACM 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 transmission 
and transformer losses) for any combination of scheduled transfers, 
transactions, or actual load integrated over each hour. Both Federal 
transmission customers and customers on others' transmission systems 
within WACM must either obtain this service from WACM or make 
alternative comparable arrangements to satisfy its Energy Imbalance 
Service obligation.

Formula Rate

    All Energy Imbalance Service provided, both inside and outside the 
bandwidth, will be settled financially, accounted for hourly at the end 
of each month. The WACM shall establish a deviation band of 
5 percent (with a minimum of 2 MW) of the actual load to be 
applied hourly to any energy imbalance that occurs as a result of a 
customer's schedules and/or meter data.
    Normally, there are four scenarios for Energy Imbalance Service, 
each of which receive a specific pricing calculation. They are: (1) 
Over delivery within the bandwidth; (2) under delivery within the 
bandwidth; (3) over delivery outside the bandwidth; and (4) under 
delivery outside the bandwidth. During periods of control area 
operating constraints, Western reserves the right to eliminate credits 
for over deliveries and parties over delivering may share in the cost 
to Western of the penalty.
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 aggregate energy imbalance will determine 
whether sale or purchase pricing will be used (surplus conditions use 
sale pricing and deficit conditions will use purchase pricing).
    Depending upon the sign of the aggregate energy imbalance for all 
entities within WACM, the pricing for charges and credits within the 
bandwidth will be: Weighted Average Sale or Purchase Price @ 100%.
Outside the Bandwidth
    Each entity within WACM will be charged or credited independently 
for Energy Imbalance Service taken, dependent upon their over- or 
under-delivery status.

Under Delivery (customer deficit) = Customer will be charged 150% of 
the weighted average real-time purchase price.
Over Delivery (customer surplus) = Customer will be credited 50% of the 
weighted average real-time sale price.

    Expansion of the bandwidth will be allowed during the following 
instances:

--The loss of a physical resource.
--Upon evidence of proven frequency bias contribution for control area 
needs.
--The transition (start up/shut down) period for large thermal 
resources.
Pricing Defaults
    When no hourly data is available, the pricing defaults for sales 
and purchase pricing both within and outside the bandwidth will be 
applied in the following order:

--Weighted average real-time sale or purchase pricing for the day (on 
and off peak).
--Weighted average real-time sale or purchase pricing for the month (on 
and off peak).
--Weighted average real-time sale or purchase pricing for the prior 
month (on and off peak).
--Weighted average real-time sale or purchase pricing for the month 
prior to the prior month (and continuing until sale or purchase pricing 
located) (on and off peak).

Billing

    The billing determinants for the above formula rates are specified 
in the final rate order and in the associated service agreement.

[FR Doc. 02-14609 Filed 6-10-02; 8:45 am]
BILLING CODE 6450-01-P