[Federal Register Volume 68, Number 165 (Tuesday, August 26, 2003)]
[Notices]
[Pages 51265-51267]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-21776]


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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 
approved Rate Schedule BCP-F6, FY 2004 Base Charge and Rates (Rates) 
for 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 investment repayment 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, 2003. These Rates will 
stay in effect through September 30, 2004, or until other Rates replace 
them.

FOR FURTHER INFORMATION CONTACT: Mr. Jack Murray, Rates Team Lead, 
Desert Southwest Customer Service Region, Western Area Power 
Administration, PO Box 6457, Phoenix, AZ 85005-6457, telephone (602) 
352-2442, e-mail [email protected].

SUPPLEMENTARY INFORMATION: The Deputy Secretary of DOE approved the 
existing Rate Schedule BCP-F6 for BCP electric service on September 18, 
2000 (Rate Order No. WAPA-94, 65 FR 60933, October 13, 2000), on an 
interim basis. Rate Schedule BCP-F6, effective October 1, 2000, through 
September 30, 2005, allows 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, 2002, was 11.16 mills per kilowatthour (mills/kWh), the 
base charge was $50,761,729, the energy rate was 5.58 mills/kWh, and 
the capacity rate was $1.08 per kilowattmonth (kWmonth). The newly 
calculated Rates for BCP electric service, to be effective October 1, 
2003, will result in an overall composite rate of 12.91 mills/kWh. This 
is an increase of approximately 16 percent when compared with the 
existing BCP electric service composite rate. The increase is due to an 
increase in the annual base charge and a decrease in the projected 
energy sales. The Fiscal Year (FY) 2004 base charge is increasing to 
$51,719,075. The increase is due mainly to a reduction in visitor 
service revenues resulting from fewer tours at the Hoover Dam. The FY 
2004 energy rate of 6.46 mills/kWh is approximately a 16-percent 
increase from the existing energy rate of 5.58 mills/kWh. The increase 
in the energy rate is due to a decrease in the projected energy sales 
resulting from lake elevations continuing to drop due to poor hydrology 
in the lower Colorado River basin. The FY 2004 capacity rate of $1.17/
kWmonth is approximately an 8-percent increase from the existing $1.08/
kWmonth capacity rate. The capacity rate is increasing due to decreased 
generation ratings resulting from lower lake elevations. Another factor 
that contributes to the increase in the energy and capacity rates is 
the increase in the annual base charge.
    The following summarizes the steps taken by Western to ensure 
involvement of all interested parties in determining the Rates:
    1. A Federal Register (FR) notice was published on February 27, 
2003 (68 FR 9078), announcing the proposed rate adjustment process, 
initiating a public consultation and comment period, announcing public 
information and public comment forums, and presenting procedures for 
public participation.
    2. On March 7, 2003, a letter was mailed from Western's Desert 
Southwest Customer Service Region to the BCP Contractors and other 
interested parties announcing an informal customer meeting, and public 
information and comment forums. The BCP Contractors consist of 
Municipalities in Arizona and Nevada, States Agencies from Arizona, 
Nevada, and Southern California and an Investor Owned Utility from 
Southern California.
    3. Discussion of the proposed Rates was initiated at an informal 
BCP Contractor meeting held March 19, 2003, 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 1, 2003, in 
Phoenix, Arizona, Western and Reclamation representatives explained the 
proposed Rates for FY 2004 in greater detail. A question and answer 
session was held.
    5. A public comment forum was held on April 23, 2003, in Phoenix, 
Arizona, to give the public an opportunity to comment for the record. 
Four persons representing customers made oral comments.
    6. One comment letter was received during the 90-day consultation 
and comment period. The consultation and comment period ended May 28, 
2003. All comments were considered in developing the Rates for FY 2004. 
Written comments were received from: Irrigation & Electrical Districts 
Association of Arizona, AZ.
    Comments and responses, paraphrased for brevity, are presented 
below.

Agency Accountability

    Comment: The Contractors stressed the importance of accountability, 
for both Western and the U. S. Bureau of Reclamation, under the 
implementation agreement processes, and indicated that there appears to 
be something wrong in the processes. Similarly, concern was expressed 
over the significant increases

[[Page 51266]]

in Reclamation's costs over the last 8 years, particularly the 
administrative and general expenses increasing by 128 percent since 
1996. The Contractors requested a specific breakdown and itemization of 
the expenses be provided for discussion at the next engineering and 
operating committee (E&OC) meeting on May 14, 2003. The E&OC is a 
committee established by the BCP Implementation Agreement.
    Response: Western and Reclamation agreed that each agency has an 
obligation under the implementation agreement to uphold accountability 
in all the various processes. Both agencies have stated that they are 
willing to work with the Contractors to alleviate these concerns. This 
was an agenda item for discussion at the May 2003 E&OC meeting. Also, 
Reclamation provided the requested detail of the itemized 
administrative and general costs for discussion at the meeting.

Congressional Authorization

    Comment: The Contractors expressed concern that some security costs 
resulting from activities made necessary after the September 11, 2001, 
terrorist attack are not being considered as non-reimbursable costs; 
specifically, $600,000 identified in Reclamation's budget in FY 2003 
for Information Technology (IT) Security. The Contractors believe 
Congress was very specific in deeming such costs non-reimbursable and 
providing funding to cover the costs.
    Response: Reclamation did receive a supplemental appropriation in 
FY 2003 for IT security related to counterterrorism, of which $3.3 
million was earmarked for IT security ($1.8 million for implementation 
of the Office of Inspector General's audit recommendation including 
accreditation and certification, training, and background 
investigations, and $1.5 million for implementation of network security 
improvements including system conversions). Appropriations for physical 
security, such as guards and surveillance, equipment, etc., are 
entirely separate from the appropriations for IT security. The $600,000 
identified in Reclamation's budget is considered normal IT security 
costs. It covers Reclamation's perimeter security system (RECNET) 
assessment, fire walls and intrusion detection, accreditation and 
certification, and application conversions. Reclamation believes that 
Ninety thousand dollars ($90,000) of these funds may qualify as non-
reimbursable and therefore are being submitted for consideration for 
supplemental funding. If the supplemental funding is obtained, the 
$600,000 will be reduced by $90,000.

Revenue Transfers

    Comment: An interested party representative expressed concern that 
Western was making a unilateral decision of transferring a portion of 
revenues from the Parker-Davis Project (P-DP) to the BCP without the 
consent of either the P-DP or BCP customers. The interested party 
indicated that the customers first needed to see the documentation 
supporting this determination.
    Response: Western has the obligation under the BCP Electric Service 
Contracts to equitably apportion benefits and appropriate charges among 
the BCP, other Desert Southwest Projects, and other Federal Projects on 
the Colorado River. Western recognizes the customers' concerns with the 
methodology that is currently being applied to transmission losses, 
spinning reserves and regulation revenues. Western has chartered a team 
to establish a control area accounting methodology that identifies 
compensation due to all projects. The expected duration of the project 
is 12 months with an implementation phase to follow. As Western moves 
further into the project it will hold a meeting to share information 
and receive input regarding the accounting methodology.

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 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 Delegation Order No. 00-037.00, effective December 6, 2001, the 
Secretary of Energy delegated (1) the authority to develop long-term 
power and transmission rates on a nonexclusive 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 FERC. 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 were followed by Western in 
developing the rate formula approved by FERC on July 31, 2001, at 96 
FERC ] 61,171.
    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, will become 
effective provisionally upon approval by the Deputy Secretary subject 
to final approval by the FERC. For all other rate years, the rates will 
become effective on a final basis upon approval by the Deputy 
Secretary.
    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 BCP. Each fiscal year, Western prepares a 
power repayment study 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 set forth in 
Rate Order No. WAPA-70 was approved on April 19, 1996, in Docket No. 
EF96-5091-000 at 75 FERC ] 62,050, for the period beginning November 1, 
1995, and ending September 30, 2000. Rate Order No. WAPA-94 extended 
the existing rate-setting formula beginning on October 1, 2000, and 
ending September 30, 2005. The BCP rate-setting formula includes a base 
charge, an energy rate, and a capacity rate. The rate-setting formula 
was used to determine the BCP FY 2004 Base Charge and Rates.
    Western proposes the FY 2004 base charge of $51,719,075, the energy 
rate of 6.46 mills/kWh, and the capacity rate of $1.17/kWmonth be 
approved on a final basis.
    Consistent with procedures set forth in 10 CFR part 903, Western 
held a consultation and comment period. The

[[Page 51267]]

notice of the proposed FY 2004 Rates for electric service was published 
in the Federal Register on February 27, 2003.
    Following review of Western's proposal, I approve the FY 2004 
Rates, on a final basis for BCP electric service, under Rate Schedule 
BCP-F6, through September 30, 2004.

    Dated: August 14, 2003.
Kyle E. McSlarrow,
Deputy Secretary.
[FR Doc. 03-21776 Filed 8-25-03; 8:45 am]
BILLING CODE 6450-01-P