[Federal Register Volume 69, Number 181 (Monday, September 20, 2004)]
[Notices]
[Pages 56218-56221]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-21058]


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DEPARTMENT OF ENERGY


Notice of Interim Approval

AGENCY: Southeastern Power Administration, DOE.

ACTION: Notice of rate order.

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SUMMARY: The Deputy Secretary of the Department of Energy, confirmed 
and approved, on an interim basis, Rate Schedules JW-1-H and JW-2-E. 
The rates were approved on an interim basis through September 19, 2009, 
and are subject to confirmation and approval by the Federal Energy 
Regulatory Commission (Commission) on a final basis.

DATES: Approval of rate on an interim basis is effective through 
September 19, 2009.

FOR FURTHER INFORMATION CONTACT: Leon Jourolmon, Assistant 
Administrator, Finance & Marketing, Southeastern Power Administration, 
Department of Energy, 1166 Athens Tech Road, Elberton, Georgia 30635-
6711, (706) 213-3800.

SUPPLEMENTARY INFORMATION: The Commission, by Order issued April 2, 
2003, in Docket No. EF02-3031-000, confirmed and approved Wholesale 
Power Rate Schedules JW-1-G and JW-2-D. Rate schedules JW-1-H and JW-2-
E replace these schedules.

    Dated: September 9,2004.
Kyle E. McSlarrow,
Deputy Secretary.

Order Confirming and Approving Power Rates on an Interim Basis

Rate Order No. SEPA-45

    In the Matter of: Southeastern Power Administration; Jim 
Woodruff Project Power Rates;

    Pursuant to sections 302(a) and 301(b) of the Department of Energy 
Organization Act, Public Law 95-91, the functions of the Secretary of 
the Interior and the Federal Power Commission under section 5 of the 
Flood Control Act of 1944, 16 U.S.C. 825s, relating to the Southeastern 
Power Administration (Southeastern) were transferred to and vested in 
the Secretary of Energy. By Delegation Order No. 00-037.00 (December 6, 
2001), the Secretary of Energy delegated to the Administrator of 
Southeastern the authority to develop power and transmission rates, and 
delegated to the Deputy Secretary of the Department of Energy the 
authority to confirm, approve, and place in effect such rates on an 
interim basis and delegated to the Federal Energy Regulatory Commission 
(Commission) the authority to confirm and approve on a final basis or 
to disapprove rates developed by the Administrator under the 
delegation. This rate order is issued by the Deputy Secretary pursuant 
to said delegation.

Background

    Power from the Jim Woodruff Project is presently sold under 
Wholesale Power Rate Schedules JW-1-G and JW-

[[Page 56219]]

2-D. These rate schedules were approved by the Commission on April 2, 
2003, for a period ending September 19, 2005 (103 FERC 62003).

Public Notice and Comment

    Southeastern prepared a Power Repayment Study, dated March 2004, 
that showed that revenues at current rates were not adequate to meet 
repayment criteria. A revised study with a revenue increase of 
$2,182,000 produced rates that are adequate to meet repayment criteria 
in Fiscal Years 2005, 2006, and 2007. On March 31, 2004, by Federal 
Register notice (69 FR 16916), Southeastern proposed a rate adjustment 
of about 35.5 percent for Fiscal Years 2005, 2006, and 2007 and 3.1 
percent for Fiscal Year 2008 and thereafter to recover this revenue. 
The notice also announced a Public Information and Comment Forum to be 
held May 6, 2004, in Tallahassee, Florida. Six preference customers and 
one customer representative made comments at the forum. Written 
comments were accepted on or before June 29, 2004. Written comments 
were received from two sources.

Staff Review of Comments

    The following comments were received during the public comment 
period. Southeastern's response follows each comment.
    Comment 1: In reviewing RA 6120.2, we determined that recovery of 
the annual interest expense may be deferred in unusual circumstances 
for short periods of time. This guidance is set forth in section 12 of 
RA 6120 under cost recovery criteria.
    Response 1: Southeastern believes the intent of this section was to 
cover unplanned events such as drought. However, Southeastern agrees 
that the need for a drastic rate increase followed by a rate reduction 
is an unusual circumstance. Southeastern also believes that this 
section gives Southeastern some discretion to defer interest payments. 
Southeastern is proposing to defer payment of capitalized unpaid 
interest deficits incurred in 1999, 2000, and 2001 until 2007, 2008, 
and 2009. Southeastern will use all available funds to meet the 
required payment of the initial investment in the Jim Woodruff Project 
that is due in 2007.
    Comment 2: The SeFPC and the [Jim Woodruff preference] customers 
encourage Southeastern to use the provision of RA 6120.2 to capitalize 
the interest on the new plant until 2008. Following this approach, the 
proposed rate increase for the Jim Woodruff Project, as we understand 
it, may only need to be in the 10 percent range, plus or minus, as 
opposed to the 35.5 percent that is currently proposed.
    Response 2: A 10 percent rate increase would meet the required 
repayment of the initial investment in the Jim Woodruff Project in 
2007, provided repayment of interest on investment is deferred. 
Southeastern projects that repayment of this interest would be 
accomplished in 2020 which is more that 13 years after the interest on 
the Federal investment was incurred. Southeastern believes that this 
repayment period does not qualify as a short period of time as 
described in section 12 of RA 6120.2.
    Comment 3: The customers are also concerned with the amounts that 
have been included in the repayment study for purchase capacity and 
energy costs. We understand that Southeastern has estimated the 
previous 25 years of daily peak plant output in determining what should 
be included in the repayment study for purchase capacity and energy. 
The fact that Southeastern has looked at the previous 25 years, 
discounting all the years when the project was being rehabilitated, 
gives us concern that Southeastern has inflated the amount that it 
needs to be included for purchased capacity and energy.
    Response 3: Southeastern has estimated purchase capacity and energy 
using historic streamflow conditions. This is an established industry 
practice. Southeastern discounted the years when the project was 
undergoing rehabilitation because these years were not representative 
of the operation of the project. Southeastern does not believe that the 
estimate of purchase capacity and energy is inflated. Southeastern will 
monitor purchase capacity and energy expense and may propose a pass-
through of these expenses if Southeastern and the customers determine 
that a pass-through is appropriate. A pass-through of these costs would 
eliminate the need for an estimate in the repayment study.
    Comment 4: It may be appropriate for Southeastern to consider 
making purchased capacity and energy costs a pass-through cost 
component as Southeastern has done in other marketing areas.
    Response 4: Southeastern has not proposed to establish a pass-
through charge for support capacity and purchased power costs in the 
Jim Woodruff System. Southeastern will monitor support capacity and 
purchase power costs and may propose a pass-through if Southeastern and 
the customers determine that such a pass-through is appropriate. The 
implications of such a change to the cost-recovery from Florida Power 
Corporation need to be carefully examined before proposing such a 
change.
    Comment 5: Appropriate review is merited of the Operations and 
Maintenance (O&M) costs that are recovered for the U.S. Army Corps of 
Engineers (Corps). In reviewing the projections for the Corps O&M 
expenses, the members of the SeFPC are alarmed by a considerable 
increase in joint maintenance costs. In 2002, the joint maintenance 
costs allocated to hydropower were $271,000. In 2003, these same costs 
rose to $871,000, despite the fact that the Corps had projected the 
joint maintenance cost allocable to hydropower would be only $88,000. 
At some point a significant error occurred, either with the original 
projection, or the inclusion of these additional maintenance costs.
    The stated reason for this increase is the cost associated with the 
purchase of supplies and materials increased in Fiscal Year 2003 by 
$455,000. Southeastern has failed to justify this calculation. 
Therefore, recovery of these amounts is arbitrary and capricious in the 
absence of an explanation.
    Response 5: Estimates of Corps O&M costs are provided to 
Southeastern by the Corps. Southeastern, the Corps, and the Customers, 
through the O&M committee of the SeFPC, review these estimates. 
Estimates incorporated into the power repayment study were provided to 
the O&M Committee of the SeFPC in 2003. The customers reviewed the 
Corps O&M costs at that time. The variance of Corps O&M estimates to 
the actual costs incurred has not been significant.
    Comment 6: The proposed rate has legal infirmities that cannot be 
cured unless the proposed rate is revised. In the absence of such 
revision, implementation of the rate will be an arbitrary and 
capricious decision by the Administrator of Southeastern in light of 
the following factors:
    (1) The proposed rate does not explain why Southeastern has 
declined to invoke the provision of DOE Regulation RA 6120.2 to ensure 
the lowest possible rate consistent with sound business principles;
    (2) The calculation of estimated purchased energy and capacity 
costs is based on historical data the Customers do not believe is 
indicative of expected performance by the project;
    (3) The Corps O&M costs have not been justified in the case of 
future recoveries for inflated joint costs allocable to maintenance.
    Response 6: Because of this comment, Southeastern is proposing to 
revise the proposed rate increase deferring the

[[Page 56220]]

recovery of capitalized deficits incurred in 1999, 2000, and 2001 until 
recovery of the initial investment in the Jim Woodruff Project that is 
due in 2007 is repaid.
    Southeastern believes its estimate of purchased energy and capacity 
costs is appropriate considering the operations of the project and the 
contract with Florida Power Corporation. If conditions warrant, 
Southeastern will consider implementation of a pass-through charge for 
purchased energy and support capacity as discussed in Response 4.
    Southeastern relies on the Corps to provide estimates of Corps O&M. 
The variance of O&M estimates provided by the Corps to actual costs 
incurred has not been significant as discussed in Response 5.
    Comment 7: The City of Quincy realizes that some of the increase in 
our rates that Southeastern Power has made must come so that this 
Project may continue producing the needed power that we all receive 
benefits from. [We] would like to see Southeastern strive, if possible, 
to re-evaluate its proposed rate increase and give serious 
consideration to extending the period for recouping its generated 
revenue from the project to say ten years instead of three.
    Response 7: Southeastern has extended the repayment period for the 
capitalized deficits that were incurred in 1999, 2000, and 2001 from 
three years to five years. Section 12 of RA 6120.2 allows that recovery 
of annual interest expense may be deferred in unusual circumstances for 
short periods of time. Southeastern believes it is within 
Southeastern's discretion to defer repayment of these capitalized 
deficits until 2009.

Discussion

System Repayment

    An examination of Southeastern's revised system power repayment 
study, prepared in March 2004, for the Jim Woodruff Project, shows that 
with the proposed rates, all system power costs are paid within the 50-
year repayment period required by existing law and DOE Procedure RA 
6120.2. The Administrator of Southeastern has certified that the rates 
are consistent with applicable law and that they are the lowest 
possible rates to customers consistent with sound business principles.

Environmental Impact

    Southeastern has reviewed the possible environmental impacts of the 
rate adjustment under consideration and has concluded the adjusted 
rates would not significantly affect the quality of the human 
environment within the meaning of the National Environmental Policy Act 
of 1969. The proposed action is not a major Federal action for which 
preparation of an Environmental Impact Statement is required.

Availability of Information

    Information regarding these rates, including studies, and other 
supporting materials is available for public review in the offices of 
Southeastern Power Administration, 1166 Athens Tech Road, Elberton, 
Georgia 30635-6711.

Submission to the Federal Energy Regulatory Commission

    The rates hereinafter confirmed and approved on an interim basis, 
together with supporting documents, will be submitted promptly to the 
Commission for confirmation and approval on a final basis for a period 
beginning September 20, 2004, and ending no later than September 19, 
2009.

Order

    In view of the foregoing and pursuant to the authority delegated to 
me by the Secretary of Energy, I hereby confirm and approve on an 
interim basis, effective September 20, 2004, attached Wholesale Power 
Rate Schedules JW-1-H and JW-2-E. The rate schedules shall remain in 
effect on an interim basis through September 19, 2009, unless such 
period is extended or until the Federal Energy Regulatory Commission 
confirms and approves them or substitute rate schedules on a final 
basis.

    Dated: September 9, 2004.

Kyle E. McSlarrow,

Deputy Secretary.

Wholesale Power Rate Schedule JW-1-H

Availability

    This rate schedule shall be available to public bodies and 
cooperatives (the Customers) served by the Florida Power Corporation 
and having points of delivery within 150 miles of the Jim Woodruff 
Project (Project).

Applicability

    This rate schedule shall be applicable to firm power and 
accompanying energy made available by the Government from the Project 
and sold in wholesale quantities.

Character of Service

    The electric capacity and energy supplied hereunder will be 3-phase 
alternating current at a nominal frequency of 60 cycles per second 
delivered at the delivery points of the customer.

Monthly Rate

    The monthly rate for capacity and energy made available or 
delivered under this rate schedule shall be:

Demand Charge

    $6.95 per kilowatt of monthly contract demand.

Energy Charge

    19.95 mills per kilowatt-hour.

Billing Demand

    The monthly billing demand for any billing month shall be the lower 
of (a) The Customer's contract demand or (b) the sum of the maximum 30-
minute integrated demands for the month at each of the Customer's 
points of delivery; provided, that, if an allocation of contract demand 
to delivery points has become effective, the 30-minute maximum 
integrated demand for any point of delivery shall not be considered to 
be greater than the portion of the Customer's contract demand allocated 
to that point of delivery.

Contract Demand

    The contract demand is the amount of capacity in kilowatts stated 
in the contract which the Government is obligated to supply and the 
Customer is entitled to receive.

Energy Made Available

    During any billing month in which the Government supplies all the 
Customer's capacity requirements for a particular delivery point, the 
Government will make available the total energy requirement of said 
point. When both the Government and the Florida Power Corporation are 
supplying capacity to a delivery point, each kilowatt of capacity 
supplied to such point during such month will be considered to be 
accompanied by an equal quantity of energy.

Billing Month

    The billing month for power sold under this schedule shall end at 
12 (midnight) on the 20th day of each calendar month.

Conditions of Service

    The customer shall, at its own expense, provide, install, and 
maintain on its side of each delivery point the equipment necessary to 
protect and control its own system. In so doing, the installation, 
adjustment, and setting of all such control and protective equipment at 
or near the point of delivery shall be coordinated with that

[[Page 56221]]

which is installed by and at the expense of the Florida Power 
Corporation on its side of the delivery point.

Service Interruption

    When energy delivered to the Customer's system for the account of 
the Government is reduced or interrupted for one hour or longer, and 
such reduction or interruption is not due to conditions on the 
Customer's system or has not been planned and agreed to in advance, the 
demand charge for the month shall be appropriately reduced.

Proposed Wholesale Power Rate Schedule JW-2-E

Availability

    This rate schedule shall be available to the Florida Power 
Corporation (hereinafter called the Company).

Applicability

    This rate schedule shall be applicable to electric energy generated 
at the Project and sold to the Company in wholesale quantities.

Points of Delivery

    Power sold to the Company by the Government will be delivered at 
the connection of the Company's transmission system with the Project 
bus.

Character of Service

    Electric power delivered to the Company will be 3-phase alternating 
current at a nominal frequency of 60 cycles per second.

Monthly Rate

    The monthly rate for energy sold under this schedule shall be equal 
to 90 percent of the calculated saving in the cost of fuel per 
kilowatt-hour (KWh) to the Company determined as follows:

[GRAPHIC] [TIFF OMITTED] TN20SE04.003

Where:

Fm = Company fuel cost in the current period as defined in Federal 
Power Commission Order 517 issued November 13, 1974, Docket No. R-479.
Sm = Company sales in the current period reflecting only losses 
associated with wholesale sales for resale. Sale shall be equated to 
the sum of (a) generation, (b) purchases, (c) interchange-in, less (d) 
inter-system sales, less estimated wholesale losses (based on average 
transmission loss percentage for preceding calendar year).

Determination of Energy Sold

    Energy will be furnished by the Company to supply any excess of 
Project use over Project generation. Energy so supplied by the Company 
will be deducted from the actual deliveries to the Company's system to 
determine the net deliveries for energy accounting and billing 
purposes. Energy for Project use shall consist of energy used for 
station service, lock operation, Project yard, village lighting, and 
similar uses.
    The on-peak hours shall be the hours between 7 a.m. and 11 p.m., 
Monday through Sunday, inclusive. Off-peak hours shall be all other 
hours.
    All energy made available to the Company shall, to the extent 
required, be classified as energy transmitted to the Government's 
preference customers served from the Company's system. All energy made 
available to the Company from the Project shall be separated on the 
basis of the metered deliveries to it at the Project during on-peak and 
off-peak hours, respectively. Deliveries to preference customers of the 
Government shall be divided on the basis (with allowance for losses) of 
77 percent being considered as on-peak energy and 23 percent being off-
peak energy. Such percentages may by mutual consent be changed from 
time to time as further studies show to be appropriate. In the event 
that in classifying energy there is more than enough on-peak energy 
available to supply on-peak requirements of the Government's preference 
customers but less than enough off-peak energy available to supply such 
customers off-peak requirements, such excess on-peak energy may be 
applied to the extent necessary to meet off-peak requirements of such 
customers in lieu of purchasing deficiency energy to meet such off-peak 
requirements.

Billing Month

    The billing month under this schedule shall end at 12 (midnight) on 
the 20th day of each calendar month.

Power Factor

    The purchaser and seller under this rate schedule agree that they 
will both so operate their respective systems that neither party will 
impose an undue reactive burden on the other.

[FR Doc. 04-21058 Filed 9-17-04; 8:45 am]
BILLING CODE 6450-01-P