[Federal Register Volume 69, Number 3 (Tuesday, January 6, 2004)]
[Notices]
[Pages 649-656]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-203]


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DEPARTMENT OF ENERGY

Western Area Power Administration


Pick-Sloan Missouri Basin Program--Eastern Division--Rate Order 
No. WAPA-110

AGENCY: Western Area Power Administration, DOE.

ACTION: Notice of rate order.

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SUMMARY: Notice is given of the confirmation and approval by the Deputy 
Secretary of the Department of Energy (DOE) of Rate Order No. WAPA-110 
and Rate Schedules P-SED-F7 and P-SED-FP7 placing into effect 
provisional rates for the Pick-Sloan Missouri Basin Program--Eastern 
Division (P-SMBP--ED) firm power service and firm peaking power service 
of Western Area Power Administration (Western). The provisional rates 
will remain in effect on an interim basis until the Federal Energy 
Regulatory Commission (Commission) confirms, approves, and places them 
into effect on a final basis or until they are replaced by other rates. 
The provisional rates will provide sufficient revenue to pay all annual 
costs, including interest expense, and repayment of required investment 
within the allowable period.

DATES: The provisional rates will be placed into effect on an interim 
basis on February 1, 2004, and will be in effect until the Commission 
confirms, approves, and places the provisional rates in effect on a 
final basis for 5 years ending December 31, 2008, or until superseded.

FOR FURTHER INFORMATION CONTACT: Mr. Robert F. Riehl, Power Marketing 
Manager, Upper Great Plains Region, Western Area Power Administration, 
2900 4th Avenue North, Billings, MT 59101-1266, telephone (406) 247-
7394, e-mail [email protected].

SUPPLEMENTARY INFORMATION: The Deputy Secretary of Energy approved the 
existing Rate Schedules P-SED-F6 and P-SED-FP6 for P-SMBP--ED firm 
power service and firm peaking power service on January 6, 1994 (Rate 
Order No. WAPA-60, 59 FR 3348, January 21, 1994); and the Commission 
confirmed and approved the rate schedules on July 14, 1994, under FERC 
Docket No. EF94-5031-000 (68 FERC 62,040). The rates set forth in Rate 
Order No. WAPA-60 were approved for 5 years beginning February 1, 1994, 
and ending January 31, 1999. On October 16, 1998, Rate Order No. WAPA-
83 (63 FR 58034, October 29, 1988), extended the existing rates for 2 
years beginning February 1, 1999, and ending January 31, 2001. On July 
17, 2000, Rate Order No. WAPA-90 (65 FR 44045, July 10, 2000), further 
extended the existing rates for 2 years and 9 months beginning February 
1, 2001, and ending September 30, 2003. On May 14, 2003, Rate Order No. 
WAPA-102 (68 FR 33120, June 3, 2003), further extended the existing 
rates through March 31, 2004.
    Major factors contributing to this rate adjustment are the economic 
impact of the drought, increased interest expense associated with 
deficits, increased operation and maintenance and other annual expenses 
due to normal inflationary pressure since the last rate adjustment, and 
an additional 11 years of investment since the last rate adjustment.
    Under Rate Schedule P-SED-F6, the composite rate is 14.23 mills per 
kilowatthour (mills/kWh), the energy rate is 8.32 mills/kWh, the tiered 
energy rate for energy in excess of 60 percent load factor is 3.38 
mills/kWh, and the firm capacity rate is $3.20 per kilowattmonth 
(kWmo). Under Rate Schedule P-SED-FP6, the firm peaking capacity rate 
is $3.20 per kWmo, and the firm peaking energy rate is 8.32 mills/kWh. 
The provisional rates are being implemented in two steps. The first 
step of the provisional rates for P-SMBP--ED firm power service in Rate 
Schedule P-SED-F7 will result in an Eastern Division composite rate of 
16.04 mills/kWh. The energy rate will be 9.34 mills/kWh, the capacity 
rate will be $3.62 per kWmo and the tiered energy rate for energy in 
excess of 60 percent load factor will be 5.21 mills/kWh. The Eastern 
Division composite rate will increase approximately 12.7 percent 
effective on February 1, 2004. The second step of the provisional rates 
for P-SMBP--ED firm power service will result in an Eastern Division 
composite rate of 16.51 mills/kWh. The energy rate will be 9.62 mills/
kWh, the capacity rate will be $3.72 per kWmo, and the tiered energy 
rate for energy in excess of 60 percent load factor will be 5.21 mills/
kWh. This will result in an additional increase of 2.9 percent 
effective on October 1, 2004.
    The first step of Rate Schedule P-SED-FP7 will result in a firm 
peaking capacity rate of $3.62 per kWmo and a firm peaking energy rate 
of 9.34 mills/kWh and will become effective February 1, 2004. The 
second step of the firm peaking capacity rate will be $3.72 per kWmo 
and a firm peaking energy rate will be 9.62 mills/kWh and will become 
effective October 1, 2004.

Provisional Rates for P-SMBP--ED Firm Power Service and Firm Peaking 
Power Service

    The provisional rates for P-SMBP--ED firm power service are 
designed to recover an annual revenue requirement that includes 
investment repayment, interest, purchased power, operation and 
maintenance expense, and other annual expenses. The annual revenue 
requirement for firm power service is allocated equally between 
capacity and energy.
    The provisional rates for P-SMBP--ED firm power service are 
developed under the DOE Organization Act (42 U.S.C. 7101-7352), through 
which the power marketing functions of the Secretary of the Interior 
and the Bureau

[[Page 650]]

of Reclamation under the Reclamation Act of 1902 (ch. 1093, 32 Stat. 
388), as amended and supplemented by subsequent laws, particularly 
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).
    Under Delegation Order No. 00-037.00, effective December 6, 2001, 
the Secretary delegated (1) the authority to develop 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 Commission. Existing DOE procedures for 
public participation in power rate adjustments are located at 10 CFR 
903, effective on September 18, 1985 (50 FR 37835).
    The Procedures for Public Participation in Power and Transmission 
Rate Adjustments and Extensions, 10 CFR 903, have been followed by 
Western in developing these provisional rates.
    Rate Order No. WAPA-110, confirming, approving, and placing the 
provisional P-SMBP--ED firm power service and firm peaking power rates 
into effect on an interim basis, is issued. New Rate Schedules P-SED-F7 
and P-SED-FP7 will be submitted promptly to the Commission for 
confirmation and approval on a final basis.

    Dated: December 24, 2003.
Kyle E. McSlarrow,
Deputy Secretary.
    Department of Energy, Deputy Secretary
    In the matter of: Western Area Power Administration Rate Adjustment 
for the Pick-Sloan Missouri Basin Program--Eastern Division; Order 
Confirming, Approving, and Placing the Pick-Sloan Missouri Basin 
Program--Eastern Division Firm Power and Firm Peaking Power Service 
Rates Into Effect on an Interim Basis
[Rate Order No. WAPA-110]

    These rates are developed under the 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 under the 
Reclamation Act of 1902 (ch. 1093, 32 Stat. 388), as amended and 
supplemented by subsequent laws, particularly 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.
    By Delegation Order No. 00-037.00, effective December 6, 2001, the 
Secretary delegated (1) the authority to develop power and transmission 
rates on a nonexclusive basis to Western's Administrator; (2) the 
authority to confirm, approve, and place 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 Commission. Existing DOE procedures for 
public participation in power rate adjustments are found at 10 CFR part 
903. Procedures for approving Power Marketing Administration rates by 
the Commission are found at 18 CFR part 300.

Acronyms and Definitions

    As used in this Rate Order, the following acronyms and definitions 
apply:
    Administrator: The Administrator of the Western Area Power 
Administration.
    Capacity: The electric capability of a generator, transformer, 
transmission circuit, or other equipment. It is expressed in kW.
    Capacity Rate: The rate which sets forth the charges for capacity. 
It is expressed in dollars per kWmo and applied to each kW delivered to 
each customer per month.
    Commission: Federal Energy Regulatory Commission.
    Composite Rate: The rate for firm power. It is the total annual 
revenue requirement for capacity and energy divided by the expected 
annual firm energy sales. It is expressed in mills/kWh and used for 
comparison purposes.
    Corps: United States Army Corps of Engineers.
    CROD: Contract Rate of Delivery. The maximum amount of capacity 
made available to a preference customer for a period specified under a 
contract.
    Customer: An entity with a contract for and receiving firm electric 
service from Western's Upper Great Plains Region.
    DOE: United States Department of Energy.
    DOE Order RA 6120.2: An order outlining power marketing 
administration financial reporting and rate-making procedures.
    Energy: That which does or is capable of doing work. It is measured 
in terms of the work it is capable of doing over a period of time. It 
is expressed in kWh.
    Energy Rate: The rate which sets forth the charges for energy. It 
is expressed in mills/kWh and applied to each kWh delivered to each 
customer.
    Firm: A type of product and/or service that is available at the 
time requested by the customer.
    FRN: Federal Register notice.
    Fry-Ark: Fryingpan-Arkansas Project.
    FY: Fiscal year; October 1 to September 30.
    Interior: United States Department of the Interior.
    kW: Kilowatt--the electrical unit of capacity that equals 1,000 
watts.
    kWmo: Kilowattmonth--the electrical unit of the monthly amount of 
capacity.
    kWh: Kilowatthour--the electrical unit of energy that equals 1,000 
watts in 1 hour.
    Load Factor: The ratio of average load in kW supplied during a 
designated period to the peak or maximum load in kW occurring in that 
period.
    LAP: Loveland Area Projects.
    Mills/kWh: Mills per kilowatthour--the unit of charge for energy 
(equals one tenth of a cent or one thousandth of a dollar).
    MW: Megawatt--the electrical unit of capacity that equals 1 million 
watts or 1,000 kilowatts.
    O&M: Operation and maintenance.
    P-SMBP: The Pick-Sloan Missouri Basin Program.
    P-SMBP--ED: Pick-Sloan Missouri Basin Program--Eastern Division.
    P-SMBP--WD: Pick-Sloan Missouri Basin Program--Western Division
    Power: Capacity and energy.
    Power Factor: The ratio of real to apparent power at any given 
point and time in an electrical circuit. Generally it is expressed as a 
percentage ratio.
    Preference: The requirements of Reclamation Law which provide that 
preference in the sale of Federal power shall be given to 
municipalities and other public corporations or agencies and also to 
cooperatives and other nonprofit organizations financed in whole or in 
part by loans made under the Rural Electrification Act of 1936 
(Reclamation Project Act of 1939, section 9(c), 43 U.S.C. 485h(c)).
    Project Use: Power as defined by Reclamation law which is used to 
operate P-SMBP--ED facilities.
    Provisional Rates: Rates schedules which have been confirmed, 
approved, and placed in effect on an interim basis by the Deputy 
Secretary of DOE.
    PRS: Power repayment study.
    Rate Brochure: A document prepared for public distribution 
explaining the rationale and background of the rate proposal contained 
in this rate order dated June 2003.
    Reclamation: United States Department of the Interior, Bureau of 
Reclamation.

[[Page 651]]

    Reclamation Law: A series of Federal laws which govern the 
marketing and rate-setting of power by Western.
    Revenue Requirement: The revenue required to recover O&M expenses, 
purchase power and transmission service expenses, interest, deferred 
expenses, and repayment of Federal investments, and other assigned 
costs.
    Secretary: Secretary of Energy.
    Tiered Rate: Pick-Sloan Missouri Basin Program--Eastern Division 
rate applied to energy in excess of 60 percent load factor.
    Upper Great Plains Region: The Upper Great Plains Customer Service 
Region of Western.
    Western: United States Department of Energy, Western Area Power 
Administration.

Effective Date

    The provisional rates will become effective on an interim basis on 
the first day of the first full billing period beginning on or after 
February 1, 2004, and will be in effect pending the Commission's 
approval of them or substitute rates on a final basis for 5 years 
ending December 31, 2008, or until superseded.

Public Notice and Comment

    The Procedures for Public Participation in Power and Transmission 
Rate Adjustments and Extensions, 10 CFR 903, have been followed by 
Western in developing these rates. The following summarizes the steps 
Western took to ensure involvement of interested parties in the rate 
process:
    1. The proposed rate adjustment was initiated on March 21, 2003, 
when a letter announcing informal meetings to discuss the proposed firm 
power service and firm peaking power service rate adjustment was sent 
to the P-SMBP--ED preference customers and other interested parties. 
Informal meetings were held on April 14 through April 16, 2003, in 
Denver, CO, Lincoln, NE, Sioux Falls, SD, and Fargo, ND. At these 
informal meetings, Western explained the rationale for the rate 
adjustment, presented rate designs and methodologies and answered 
questions.
    2. On June 6, 2003, letters were mailed from Western's Upper Great 
Plains Regional Office to all P-SMBP--ED preference customers and 
interested parties announcing the upcoming publication of a Federal 
Register notice including the P-SMBP--ED rate proposal, and announcing 
the times and locations of four public information forums and two 
public comment forums.
    3. A Federal Register notice was published on June 13, 2003 (68 FR 
35402), officially announcing the proposed rates for the P-SMBP--ED, 
initiating the public consultation and comment period and announcing 
the public information and public comment forums.
    4. On June 16, 2003, letters were mailed from Western's Upper Great 
Plains Regional Office to all P-SMBP--ED preference customers and 
interested parties transmitting a copy of the Federal Register notice 
published June 13, 2003 (68 FR 35402), initiating the public rate 
process.
    5. On July 14, 2003, beginning at 1 p.m. MDT, the first public 
information forum was held at the Radisson Stapleton Plaza in Denver, 
CO. On July 15, 2003, beginning at 9 a.m. CDT, the second public 
information forum was held at the Southeast Community College in 
Lincoln, NE. On July 16, 2003, beginning at 9 a.m. CDT, the third 
public information forum was held at the Ramkota Hotel and Conference 
Center in Sioux Falls, SD. On July 17, 2003, beginning at 9 a.m. CDT, 
the fourth public information forum was held at the Doublewood Inn in 
Fargo, ND. At these public information forums, Western provided 
detailed explanations of the proposed rates for P-SMBP--ED, provided a 
list of issues that could change the proposed rates and answered 
questions. A rate brochure detailing the proposed rates was provided at 
these forums.
    6. On August 6, 2003, beginning at 1 p.m. MDT, a public comment 
forum was held at the Radisson Stapleton Plaza in Denver, CO. Western 
gave the public an opportunity to comment for the record. No oral or 
written comments were received at this forum. On August 7, 2003, 
beginning at 9 a.m. CDT, a public comment forum was held at the Ramkota 
Hotel and Convention Center in Sioux Falls, SD. Western gave the public 
an opportunity to comment for the record. Two oral comments were 
received at this forum.
    7. Thirty-one comment letters were received during the consultation 
and comment period that ended September 11, 2003. All formally 
submitted comments have been considered in preparing this rate order.
    8. Western's Upper Great Plains Region provided a Web site with all 
of the letters, time frames, dates and locations of forums, documents 
discussed at the information meetings, Federal Register notices and all 
other information about this rate process for easy customer access. The 
Web site is located at http://www.wapa.gov/ugp/rates/2004RateAdj/Default.htm.

Project Description

    The P-SMBP was authorized by Congress in Section 9 of the Flood 
Control Act of December 22, 1944, commonly referred to as the 1944 
Flood Control Act. The multipurpose program provides flood control, 
irrigation, navigation, recreation, preservation and enhancement of 
fish and wildlife and power generation. Multipurpose projects have been 
developed on the Missouri River and its tributaries in Colorado, 
Montana, Nebraska, North Dakota, South Dakota, and Wyoming.
    In addition to the multipurpose water projects authorized by 
Section 9 of the Flood Control Act of 1944, certain other existing 
projects have been integrated with the P-SMBP for power marketing, 
operation, and repayment purposes. The Colorado-Big Thompson, Kendrick, 
and Shoshone projects were combined with the P-SMBP in 1954, followed 
by the North Platte Project in 1959. These projects are referred to as 
the ``Integrated Projects'' of the P-SMBP.
    The Flood Control Act of 1944 also authorized the inclusion of the 
Fort Peck Project with the P-SMBP for operation and repayment purposes. 
The Riverton Project was integrated with the P-SMBP in 1954, and in 
1970 was reauthorized as a unit of P-SMBP.
    The P-SMBP is administered by two regions. The Upper Great Plains 
Region with a regional office in Billings, MT, markets power from the 
Eastern Division of P-SMBP and the Rocky Mountain Region with a 
regional office in Loveland, CO, markets the Western Division power of 
P-SMBP. The Upper Great Plains Region markets power in western Iowa, 
Minnesota, Montana east of the Continental Divide, North Dakota, South 
Dakota, and the eastern two-thirds of Nebraska. The Rocky Mountain 
Region markets P-SMBP power (and Fry-Ark power, which in combination 
with P-SMBP--WD is known as LAP power) in northeastern Colorado, east 
of the Continental Divide in Wyoming, west of the 101st meridian in 
Nebraska and northern Kansas. P-SMBP power is marketed to approximately 
300 firm power customers by the Upper Great Plains Region and 
approximately 40 firm power customers by the Rocky Mountain Region.

Power Repayment Study

    PRSs are prepared each fiscal year to determine if power revenues 
will be sufficient to pay, within the prescribed time periods, all 
costs assigned to the P-SMBP power function. Repayment criteria are 
based on law, policies, DOE Order RA 6120.2 and authorizing 
legislation.

[[Page 652]]

Existing and Provisional Rates

    The provisional rates for P-SMBP--ED firm power service and firm 
peaking power service are designed to recover an annual revenue 
requirement that includes the investment repayment, interest, purchase 
power and O&M expenses. The provisional rates will be implemented in 
two steps. First step rates are to become effective on an interim basis 
on the first day of the first full billing period beginning on or after 
February 1, 2004. Second step rates are to become effective on the 
first day of the first full billing period beginning on or after 
October 1, 2004. Under Rate Schedule P-SED-F7, the first and second 
step provisional rates for P-SMBP--ED firm power service will result in 
an overall composite rate increase of approximately 15.6 percent. A 
comparison of the existing and provisional rates for P-SMBP--ED firm 
power service and firm peaking power service follows:

                        Comparison of Existing and Provisional Rates P-SMBP--ED Firm Power Service and Firm Peaking Power Service
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                                                                               First step provisional rates and      Second step provisional rates and
          Firm power service                      Existing rates             percent of change, effective Feb. 1,   percent of change, effective Oct. 1,
                                                                                             2004                                   2004
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Revenue Requirement...................  $135.2 million....................  $155.5 million (15.0%)...............  $160.1 million (3.0%).
Composite Rate........................  14.23 mills/kWh...................  16.04 mills/kWh (12.7%)..............  16.51 mills/kWh (2.9%).
Firm Capacity.........................  $3.20/kWmo........................  $3.62/kWmo (13.1%)...................  $3.72/kWmo (2.8%).
Firm Energy...........................  8.32 mills/kWh....................  9.34 mills/kWh (12.2%)...............  9.62 mills/kWh (3.0%).
Tiered  60 Percent Load      3.38 mills/kWh....................  5.21 mills/kWh (54.1%)...............  5.21 mills/kWh (0.0%).
 Factor.
Firm Peaking Capacity.................  $3.20/kWmo........................  $3.62/kWmo (13.1%)...................  $3.72/kWmo (2.8%).
Firm Peaking Energy \1\...............  8.32 mills/kWh....................  9.34 mills/kWh (12.2%)...............  9.62 mills/kWh (3.0%).
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\1\ Firm Peaking Energy is normally returned. This rate will be assessed in the event Firm Peaking Energy is not returned.

Western Division

    The LAP rate will be designed to cover the P-SMBP--WD revenue 
requirement for the P-SMBP and the revenue requirement for Fry-Ark. The 
adjustment to the LAP rate is a separate formal rate process which is 
documented in Rate Order No. WAPA-105. Rate Order No. WAPA-105 is also 
scheduled to go into effect on the first day of the first full billing 
period beginning on or after February 1, 2004.

Certification of Rate

    Western's Administrator has certified that the P-SMBP--ED firm 
power service and firm peaking power service rates placed into effect 
on an interim basis herein are the lowest possible rates consistent 
with sound business principles. The provisional rates were developed 
following administrative policies and applicable laws.

Discussion

    According to Reclamation Law, Western must establish power rates 
sufficient to recover operation, maintenance, and purchased power 
expenses, and repay the Federal Government's investment in generation 
and transmission facilities, as well as certain nonpower costs in 
excess of the irrigation users' ability to repay. Rates must also be 
set to cover interest expenses on the unpaid balance of facilities' 
investments, replacements and additions.
    The current rates, $3.20 per kWmo and 8.32 mills/kWh, were placed 
in effect in the October 1994 billing period and approved by the 
Commission on a final basis on July 14, 1994, FERC Docket No. EF94-
5031-000 (68 FERC [rsqbb] 62,040). These rates were originally set to 
expire on January 31, 1999, but have been extended several times. The 
rates are currently set to expire on March 31, 2004, or until 
superseded.
    Major factors contributing to this rate adjustment are the economic 
impact of the drought, increased interest expense associated with 
deficits, increased operation and maintenance and other annual expenses 
due to normal inflationary pressure since the last rate adjustment, and 
an additional 11 years of investment since the last rate adjustment.
    The P-SMBP--ED firm power service rates were developed from the 
revenue requirement calculated in the FY 2003 Ratesetting PRS for the 
P-SMBP. The first step provisional rates are $3.62 per kWmo for firm 
capacity, 9.34 mills/kWh for energy and the tiered energy rate for 
energy in excess of 60 percent load factor will be 5.21 mills/kWh, and 
are to be implemented in the first full billing period beginning on or 
after February 1, 2004. The second step provisional rates are $3.72 per 
kWmo for firm capacity, 9.62 mills/kWh for energy, and the tiered 
energy rate for energy in excess of 60 percent load factor will be 5.21 
mills/kWh, and are to be implemented in the first full billing period 
beginning on or after October 1, 2004.
    The first step of Rate Schedule P-SED-FP7 will result in a firm 
peaking capacity rate of $3.62 per kWmo and a firm peaking energy rate 
of 9.34 mills/kWh and will become effective February 1, 2004. The 
second step of the firm peaking capacity rate will be $3.72 per kWmo 
and a firm peaking energy rate will be 9.62 mills/kWh and will become 
effective October 1, 2004.

Statement of Revenue and Related Expenses

    The following table provides a summary of revenues and expenses for 
the 5-year provisional rate period.

   Pick-Sloan Missouri Basin Program Comparison of 5-Year Rate Approval Period Revenues and Expenses ($1,000)
----------------------------------------------------------------------------------------------------------------
                                                                   Existing rate    Provisional
                                                                   PRS (FY 2004-   rate PRS (FY     Difference
                                                                       2008)        2004-2008)
----------------------------------------------------------------------------------------------------------------
Total Revenues..................................................      $1,217,478      $1,470,866        $253,388
Revenue Distribution:

[[Page 653]]

 
    O&M.........................................................         610,380         756,944         146,564
    Purchase Power..............................................               0         161,653         161,653
    Transmission................................................           0 \1\          67,012          67,012
    Interest....................................................         373,360         420,099          46,739
    Integrated Projects.........................................               0               0               0
    Investment Repayment........................................         233,738           6,450       (227,288)
    Capitalized Expenses........................................               0          58,708          58,708
                                                                                 -------------------------------
        Total...................................................       1,217,478      $1,470,866         253,388
----------------------------------------------------------------------------------------------------------------
\1\ In the existing rate PRS, transmission expense was included in O&M expense.

    A table comparing the P-SMBP existing revenue requirement to the 
proposed revenue requirements is shown below:

                                P-SMBP Firm and Firm Peaking Revenue Requirement
                                                  ($1,000,000)
----------------------------------------------------------------------------------------------------------------
                                                                                    First step      Second step
                                                                     Existing      February 2004   October 2004
----------------------------------------------------------------------------------------------------------------
P-SMBP--ED Firm Power...........................................          $120.8          $139.9          $144.0
P-SMBP--ED Firm Peaking Power...................................            14.4            15.6            16.1
Total P-SMBP--ED Revenue Requirement............................           135.2           155.5           160.1
P-SMBP--WD Firm Power...........................................            31.4            35.0            35.9
Total P-SMBP Revenue Requirement................................           166.6           190.5           196.0
----------------------------------------------------------------------------------------------------------------

Basis for Rate Development

    The 2002 repayment analysis for the P-SMBP indicated a need to 
adjust the existing firm power service and firm peaking power service 
rates. To meet those requirements, the P-SMBP--ED proposed adjustments 
to the firm power service and firm peaking power service rates.
    The proposed P-SMBP--ED firm power service rate is designed to 
recover 50 percent of the revenue requirement from the capacity rate 
and 50 percent from the energy rate. The capacity rate of $3.62 per 
kWmo is calculated by dividing 50 percent of the total annual revenue 
requirement by the number of billing units (kWmos) in a year. The 
energy rate of 9.34 mills/kWh is calculated by dividing 50 percent of 
the total annual revenue requirement by the annual energy sales. The 
capacity rate is applied to both firm power and firm peaking power. The 
energy rate is applied to firm energy and firm peaking energy that is 
not returned to Western.
    The P-SMBP--ED firm peaking rate is equal to the capacity charge 
for the firm power rate. The customer pays the capacity rate on its 
total firm peaking CROD each month rather than firm peaking delivered 
each month. Contract terms vary among firm peaking customers with 
respect to the return of peaking energy. One customer returns all 
peaking energy, while other peaking customers may pay for 20 to 40 
percent of the peaking energy they use and return the rest to Western. 
When a peaking customer keeps peaking energy, it pays for it at the 
firm peaking energy rate.
    The proposed rate adjustment is scheduled to become effective on an 
interim basis on the first day of the February 2004 billing period. The 
two-step rate adjustment for P-SMBP--ED firm power service will result 
in an Eastern Division composite rate increase of approximately 12.7 
percent effective February 1, 2004, and another 2.9 percent effective 
October 1, 2004, for a total increase of approximately 15.6 percent. 
The rate schedule approval period terminates December 31, 2008.

Comments

    During the public consultation and comment period, Western received 
31 letters containing comments pertaining to this rate adjustment. In 
addition, we received verbal comments during the August 7, 2003, public 
comment forum. All comments received by the end of the public 
consultation and comment period, September 11, 2003, were reviewed and 
considered in preparing this rate order. Written comments were received 
from: Capital Electric Cooperative, North Dakota, City of Akron, Iowa, 
City of Beatrice, Nebraska, City of McLaughlin, South Dakota, Central 
Electric Cooperative, South Dakota, Clay-Union Electric Corporation, 
South Dakota, Corn Belt Power Cooperative, Iowa, Dakota Valley Electric 
Cooperative, North Dakota, East Grand Forks Water & Light Department, 
Minnesota, East River Electric Power Cooperative, South Dakota, 
Harrison County Rural Electric Cooperative, Iowa, Intertribal Council 
On Utility Policy, South Dakota, KEM Electric Cooperative, North 
Dakota, L & O Power Cooperative, Iowa, Lincoln Electric System, 
Nebraska, Lower Yellowstone REA, Montana, Marshall Municipal Utilities, 
Minnesota, McLean Electric Cooperative, North Dakota, McLeod 
Cooperative Power, Minnesota, Mid-West Electric Consumers Association, 
Colorado, Minnkota Power Cooperative, North Dakota, Mni Sose 
Intertribal Water Rights Coalition, South Dakota, Moorhead Public 
Service, Minnesota, Moreau-Grand Electric Cooperative, South Dakota, 
Northwest Iowa Power Cooperative, Iowa, Slope Electric Cooperative, 
North Dakota, State of South Dakota, South Dakota, Tri-State Generation 
and Transmission Association, Colorado, Union County Electric 
Cooperative, South Dakota Upper Missouri G & T Electric

[[Page 654]]

Cooperative, Montana, Verendrye electric Cooperative, North Dakota.
    The following is a summary of the comments received by the end of 
the consultation and comment period and Western's responses to those 
comments. Comments and responses, paraphrased for brevity, are 
presented below. Specific comments are used for clarification where 
necessary.
    Comment: During the comment period, Western received 29 comments 
(28 written and 1 verbal) in favor of a two-step rate adjustment and 
one comment in favor of a one-step rate adjustment. Western also 
received 6 written comments after the comment period closed in favor of 
the two-step rate adjustment.
    Response: The two-step option causes the projected cumulative 
deficit to be approximately $5 million higher than under the one-step 
option, but the deficit and its associated interest expense are 
projected to be fully repaid in 2011 under either option. Since the 
two-step option meets all repayment requirements according to DOE Order 
RA 6120.2 and an overwhelming majority of the comments were in favor of 
it, Western will adopt the two-step rate adjustment.
    Comment: Three customers commented that the increase is quite large 
and would like to see the increase as small as possible to mitigate the 
impacts on customers. One customer commented that Western should spread 
the rate increase over 3 years.
    Response: In accordance with DOE Order RA 6120.2, Western has set 
the rate such that it is the lowest possible consistent with sound 
business principles. By adopting the two-step rate adjustment, Western 
has spread the impact of the rate increase on the customers over a 
longer period of time than with the one-step adjustment. Spreading the 
rate increase over 3 years would cause the cumulative deficit to 
increase even more. Western does not believe it would be consistent 
with sound business principles to do this.
    Comment: One commenter suggested that Western should decrease its 
purchase power costs by offering to pay the Native American Tribal 
customers a lump sum payment in the amount of the benefit they would 
have received from their power allocation rather than making purchases 
to support Tribal allocations.
    Response: Paying the Tribes in lieu of purchasing power to support 
delivery of Tribal allocations is outside the scope of this rate 
process. Western has the obligation under its existing P-SMBP--ED 
marketing plan and contracts to deliver firm power to customers.
    Comment: The Intertribal Council on Utility Policy (Intertribal 
COUP) submitted comments related to wind and other renewable energy 
resources. One of the Intertribal COUP comments was that Western should 
purchase wind and solar power when supplementary purchases are 
necessary. In addition, rather than spending millions of dollars on 
supplemental purchases, Western should use this money to invest in wind 
power, which would provide 25 to 30 years of clean, wholesale power at 
a low fixed cost.
    Response: Western does not presently have the statutory authority 
to invest in wind power. When Western must purchase supplemental energy 
to meet its contractual obligations, it purchases at the best market 
price available at the time to mitigate the impact on the firm power 
rate. This practice reflects the statutory requirement that Western set 
rates at the lowest possible level to consumers consistent with sound 
business principles. If wind or other renewable energy resources are 
available in the market at the time these purchases are made, and are 
competitively priced, they would be included in these wholesale energy 
market purchases. In order to promote renewable resources, Western is 
willing to firm a customer's allocation with wind or solar energy at 
the request of the customer, if the customer agrees to bear any 
associated expenses.
    Comment: Two customers commented that they disagree with the 
shifting of off-system transmission costs for project use customers to 
firm power customers. The commenter suggested that project use 
customers should be subject to the same policy as firm power customers 
with off-system transmission costs (Western pays 1 mill/kWh of the 
transmission costs). Western received five letters after the close of 
the comment period with similar comments.
    Response: These comments refer to a Reclamation policy that is 
outside the scope of this rate process.
    Comment: One customer commented that the proposed increase in the 
capacity and energy charges of approximately 15 percent exceeds the 
normal rate increases being implemented by other electrical energy 
providers.
    Response: P-SMBP rates have not been adjusted since October 1994. 
Although the second step of the firm composite rate increase is 
approximately 16 percent over the current firm composite rate, this 
translates into an annual increase of approximately 1.5 percent, which 
is well below the rate of inflation for the same time period. Western 
sets rates to comply with statutes and regulations. Given the current 
revenue requirement, we need to raise the rates to a level that is 
approximately 16 percent higher than the current rates to comply with 
these statutes and regulations.
    Comment: Western received seven written comments during the comment 
period and 6 written comments after the comment period closed 
concerning the proposed tiered rate adjustment. Five comments received 
during the comment period and all of the late comments stated that the 
tiered rate adjustment was too high and should be reexamined. These 
comments also stated that Western should also consider ``pooling'' the 
cost of purchases for greater than 60 percent load factor energy rather 
than charging a separate rate for these costs. One comment received 
during the comment period stated that the purchase price of 14.4 mills/
kWh used in the tiered rate calculation was too low and should be 
reexamined. The commenter was also concerned that a P-SMBP--ED tiered 
rate that does not fully recover its costs would cause the LAP rate to 
increase. Another comment was that the tiered rate should cover the 
greater than 60 percent load factor energy, but it appeared that 
decreased generation was one of the main causes of the tiered rate 
increase, which implies that customers with 60 percent load factor 
energy should not be singled out to pay the costs due to decreased 
generation. This commenter stated that Western should monitor costs 
related to greater than 60 percent load factor energy more closely.
    Response: Western reexamined the tiered rate for energy in excess 
of 60 percent load factor and has determined that the rate should be 
5.21 mills/kWh. This rate is calculated using average Corps generation 
from 1898 through 2002 excluding 1934 through 1942, the years when 
hydrogeneration was most affected by the 1930s drought. These years 
were excluded from the current tiered rate calculation because they 
were considered extreme years that would artificially decrease the 
generation average. Excluding these years from the average in the 
provisional tiered rate will be consistent with the previous tiered 
rate design.
    The 5.21 mills/kWh tiered rate also reflects a change in the load 
figure used in the calculation. The average load figures in the tiered 
rate calculation should be changed from a long-term average to the 
average firm load from FY 2000 through 2003. The FY 2000 through 2003 
average reflects the current amount of fixed energy

[[Page 655]]

requirements as well as the increased energy under the Post-2000 
allocations.
    Finally, the 5.21 mills/kWh tiered rate reflects a purchase power 
price of 19.43 mills/kWh. This is the average off-peak price of 
Western's power purchases (in the Upper Great Plains Region) from 
November 2002 through March 2003. This average reflects the most recent 
winter purchase prices. The Upper Great Plains Region's average off-
peak purchase power prices have not been at or below 14.4 mills/kWh for 
at least 10 years, so it is reasonable to increase the purchase price 
in the tiered rate calculation. The provisional tiered rate calculation 
is shown here:
295 GWH @ 19.43 mills/kWh off-peak purchase price = $5,731,850 tiered 
rate revenue requirement.

                                                  Provisional Tiered Rate Calculation (5.21 mills/kWh)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                    Plus                            Total
                                                    Corps        reclamation   Less plant use    generation      Divided by     Average load   Purchases
                    Month                        generation      generation         (GWH)      less plant use    1.07 losses        (GWH)        (GWH)
                                                    (GWH)           (GWH)                           (GWH)           (GWH)
--------------------------------------------------------------------------------------------------------------------------------------------------------
November.....................................             912              80               4             988             923             729      0
December.....................................             765              81               5             841             786             832     46
January......................................             769              80               6             843             788             838     50
February.....................................             664              74               5             733             685             805    120
March........................................             632              82               5             709             663             742     79
                                                              ------------------------------------------------------------------------------------------
    Total....................................           3,742             397              25           4,114           3,845           3,946    295
--------------------------------------------------------------------------------------------------------------------------------------------------------

$5,731,850 tiered rate revenue requirement / 1,101 GWH per year tiered 
energy = 5.21 mills/kWh tiered rate.

Environmental Compliance

    Under the National Environmental Policy Act (NEPA) of 1969, 42 
U.S.C. 4321, et seq.; Council on Environmental Quality Regulations, 40 
CFR 1500-1508; and DOE NEPA Regulations, 10 CFR 1021, Western 
determined that this action is categorically excluded from 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; so 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 determined 
that this action does not require a regulatory flexibility analysis 
since it is a rulemaking involving rates or services for public 
property.

Small Business Regulatory Enforcement Fairness Act

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

Availability of Information

    Information about this rate adjustment, including power repayment 
studies, comments, letters, memorandums, and other supporting material 
made or kept by Western in developing the provisional rates, is 
available for public review in the Office of the Power Marketing 
Manager, Upper Great Plains Region, Western Area Power Administration, 
2900 4th Avenue North, Billings, MT, and in the Power Marketing Liaison 
Office, Room 8G-027, 1000 Independence Avenue SW., Washington, DC.

Submission to the Federal Energy Regulatory Commission

    The rates herein confirmed, approved, and placed into effect on an 
interim basis, together with supporting documents, will be submitted to 
the Commission for confirmation and approval on a final basis.

Order

    In view of the foregoing and by the authority delegated to me by 
the Secretary of Energy, I confirm and approve on an interim basis, 
effective February 1, 2004, Rate Schedules P-SED-F7 and P-SED-FP7, for 
the Pick-Sloan Missouri Basin Program--Eastern Division of the Western 
Area Power Administration. The rate schedules shall remain in effect on 
an interim basis, pending the Commission confirmation and approval of 
them or substitute rates on a final basis through December 31, 2008.
    Dated: December 24, 2003.
    Kyle E. McSlarrow,
    Deputy Secretary.

United States Department of Energy, Western Area Power Administration; 
Pick-Sloan Missouri Basin Program--Eastern Division, Montana, North 
Dakota, South Dakota, Minnesota, Iowa, Nebraska; Schedule of Rates for 
Firm Power Service

    [Rate Schedule P-SED-F7 (Supersedes Schedule P-SED-F6)]

Effective

First Step
    The first day of the first full billing period beginning on or 
after February 1, 2004, through September 30, 2004.
Second Step
    Beginning on the first day of the first full billing period 
beginning on or after October 1, 2004, through December 31, 2008.

Available

    Within the marketing area served by the Eastern Division of the 
Pick-Sloan Missouri Basin Program.

Applicable

    To the power and energy delivered to customers as firm power 
service.

Character

    Alternating current, 60 hertz, three phase, delivered and metered 
at the voltages and points established by contract.

Monthly Rate:

First Step:

Demand Charge

    $3.62 for each kilowatt per month (kWmo) of billing demand.

[[Page 656]]

Energy Charge

    9.34 mills for each kilowatthour (kWh) for all energy delivered as 
firm power service. An additional charge of 5.21 mills per kWh (mills/
kWh), for a total of 14.55 mills/kWh, will be assessed for all energy 
delivered as firm power service that is in excess of 60-percent monthly 
load factor and within the delivery obligations under the provisions of 
the power sales contract.

Billing Demand

    The billing demand will be as defined by the power sales contract.
Second Step:

Demand Charge

    $3.72 for each kW-month of billing demand.

Energy Charge

    9.62 mills for each kWh for all energy delivered as firm power 
service. An additional charge of 5.21 mills/kWh for a total of 14.83 
mills/kWh will be assessed for all energy delivered as firm power 
service that is in excess of 60-percent monthly load factor and within 
the delivery obligations under the provisions of the power sales 
contracts.

Billing Demand

    The billing demand will be as defined by the power sales contract.

Adjustments

For Character and Conditions of Service

    Customers who receive deliveries at transmission voltage may in 
some instances be eligible to receive a 5-percent discount on capacity 
and energy charges when facilities are provided by the customer that 
result in a sufficient savings to Western to justify the discount. The 
determination of eligibility for receipt of the voltage discount shall 
be exclusively vested in Western.

For Billing of Unauthorized Overruns

    For each billing period in which there is a contract violation 
involving an unauthorized overrun of the contractual firm power and/or 
energy obligations, such overrun shall be billed at 10 times the above 
rate.

For Power Factor

    None. The customer will be required to maintain a power factor at 
the point of delivery between 95-percent lagging and 95-percent 
leading.

Schedule of Rates for Firm Peaking Power Service

[Rate Schedule P-SED-FP7 (Supersedes Schedule P-SED-FP6)]

Effective

First Step
    The first day of the first full billing period beginning on or 
after February 1, 2004, through September 30, 2004.
Second Step
    Beginning on the first day of the first full billing period 
beginning on or after October 1, 2004, through December 31, 2008.

Available

    Within the marketing area served by the Eastern Division of the 
Pick-Sloan Missouri Basin Program, to our customers with generating 
resources enabling them to use firm peaking power service.

Applicable

    To the power sold to customers as firm peaking power service.

Character

    Alternating current, 60 hertz, three phase, delivered and metered 
at the voltages and points established by contract.

Monthly Rate:

First Step:

Demand Charge:

    $3.62 for each kilowatt per month (kWmo) of the effective contract 
rate of delivery for peaking power or the maximum amount scheduled, 
whichever is greater.

Energy Charge:

    9.34 mills for each kilowatthour (kWh) for all energy scheduled for 
delivery without return.

Billing Demand:

    The billing demand will be the greater of (1) the highest 30-minute 
integrated demand measured during the month up to, but not in excess 
of, the delivery obligation under the power sales contract, or (2) the 
contract rate of delivery.
Second Step:

Demand Charge:

    $3.72 for each kW-month of the effective contract rate of delivery 
for peaking power or the maximum amount scheduled, whichever is 
greater.

Energy Charge:

    9.62 mills for each kWh for all energy scheduled for delivery 
without return.

Billing Demand:

    The billing demand will be the greater of (1) the highest 30-minute 
integrated demand measured during the month up to, but not in excess 
of, the delivery obligation under the power sales contract, or (2) the 
contract rate of delivery.

Adjustments

Billing for Unauthorized Overruns:

    For each billing period in which there is a contract violation 
involving an unauthorized overrun of the contractual obligation for 
peaking capacity and/or energy, such overrun shall be billed at 10 
times the above rate.

[FR Doc. 04-203 Filed 1-5-04; 8:45 am]
BILLING CODE 6450-01-P