[Federal Register Volume 70, Number 41 (Thursday, March 3, 2005)]
[Notices]
[Pages 10398-10401]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-4118]


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DEPARTMENT OF ENERGY

Western Area Power Administration


Parker-Davis Project, Pacific Northwest-Pacific Southwest 
Intertie Project, and the Central Arizona Project--Rate Order No. WAPA-
114

AGENCY: Western Area Power Administration, DOE.

ACTION: Notice of extension of multi-system transmission rate process.

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SUMMARY: The Western Area Power Administration (Western) initiated a 
rate adjustment process for a multi-system transmission rate (MSTR) 
which would have applied to the Parker-Davis Project (P-DP), the 
Pacific Northwest-Pacific Southwest Intertie Project (Intertie), and 
the Central Arizona Project (CAP). Western is extending the rate 
process to allow sufficient time to propose a methodology for the MSTR 
allowing customers to choose between a single system transmission 
service and a multi-system transmission service (customer choice 
model). Western will hold an additional Public Information Forum and 
Public Comment Forum.

DATES: The consultation and comment period begins today and will end 
June 1, 2005. A Public Information Forum will be held on March 29, 2005 
beginning at 10 a.m. MST, in Phoenix, AZ. A Public Comment Forum will 
be held April 6, 2005 beginning at 1 p.m. MST in Phoenix, AZ. Western 
will accept written comments any time during the consultation and 
comment period.

ADDRESSES: Send written comments to J. Tyler Carlson, Regional Manager, 
Desert Southwest Customer Service Region, Western Area Power 
Administration, P.O. Box 6457, Phoenix, AZ 85005-6457, e-mail 
[email protected]. Western will post information about the rate process 
on its Web site at http://www.wapa.gov/dsw/pwrmkt/MSTRP/MSTRP.htm. 
Western must receive written comments by the end of the consultation 
and comment period to ensure they are considered in Western's decision 
process. The Public Information Forum and Public Comment Forum will be 
held at: Desert Southwest Customer Service Regional Office, located at 
615 South 43rd Avenue, Phoenix, Arizona.

FOR FURTHER INFORMATION CONTACT: Mr. J. Tyler Carlson, Regional 
Manager, Desert Southwest Customer Service Region, Western Area Power 
Administration, P.O. Box 6457, Phoenix, AZ 85005-6457, telephone (602) 
605-2453, e-mail address [email protected], or Mr. Jack Murray, Rates 
Team Lead, Desert Southwest Customer Service Region, Western Area Power 
Administration, P.O. Box 6457, Phoenix, AZ 85005-6457, telephone (602) 
605-2442, e-mail [email protected].

SUPPLEMENTARY INFORMATION: During the consultation and comment period 
which this notice extends, Western received comments voicing strong 
opposition to the proposed methodology and also comments voicing 
support for the proposed methodology. Western also received requests to 
change the proposed methodology. The alternative proposal, instead of a 
mandatory phase-in model for all customers, will be a customer choice 
model which will allow existing customers to choose either a single 
system transmission service or a multi-system transmission service.
    The initial consultation and comment period ended September 20, 
2004. All formally submitted comments, both written and oral, were 
considered in preparing this notice.
    Comments:
    Written comments were received from the following organizations: 
Arizona

[[Page 10399]]

Electric Power Cooperative, Arizona Power Authority, Arizona Public 
Service, Calpine Power Company, Cortaro Water Users' Association, K. R. 
Saline & Associates, Mohave Electric Cooperative, Navopache Electric 
Cooperative, Robert S. Lynch and Associates, Salt River Project, 
Southwest Transmission Cooperative, Welton-Mohawk Irrigation and 
Drainage District.
    Representatives of the following organizations made oral comments: 
Calpine Power Company, Irrigation & Electrical Districts Association of 
Arizona, R.W. Beck, Salt River Project.
    Western responded to oral comments received during the Public 
Information and Comment Forums in a letter dated September 2, 2004. 
Responses in this notice focus primarily on written comments pertinent 
to a revised customer choice model and Western's authority to develop a 
MSTR.
    Comment: Several comments indicated a preference for the ability to 
choose whether to remain on a single system rate or elect to have 
broader system access and pay the MSTR.
    Response: Western is extending the public process to allow for 
consideration and development of a customer choice model for the MSTR.
    Comment: Several comments indicated that under the mandatory 
convergence model Western proposed, they would experience increased 
costs and would not receive any benefit, while others submitted 
comments in favor of the proposal because it would have decreased their 
costs due the elimination of pancaked rates.
    Response: Western acknowledges all comments and is extending the 
public process to develop a customer choice model for firm and non-firm 
transmission service. A customer choice model will allow those 
customers who recognize no benefit to remain on a single system rate 
while those wanting broader transmission system access without pancaked 
rates can opt for the MSTR.
    Comment: Several comments stated that the proposed MSTR constituted 
a cross-subsidization of one power system to another, and that Western 
did not have the authority to require that one project be subsidized by 
another.
    Response: The MSTR model referred to in this comment is the 
Convergence Model which would have applied the MSTR in the fifth year 
(Fifth Year Convergence). Under this model, each power system would 
have remained financially independent for accounting and repayment 
purposes. Each power system would have maintained a separate Power 
Repayment Study (PRS) and financial reports. The Fifth Year Convergence 
model would have combined the revenue requirements of three power 
systems to calculate a firm transmission rate. The total MSTR revenue 
collected would have been allocated to each power system based on the 
individual power system's percentage of the total MSTR revenue 
requirement. It is true that an increase (or decrease) in revenues or 
expenses on one power system would have an impact on the overall MSTR 
revenue requirement and therefore a transfer of repayment 
responsibility under the MSTR would exist.
    While Western is revising the MSTR to a customer choice model, it 
is not prohibited from implementing such a blended rate by either DOE 
Order RA 6120.2 or project-specific legislation. Western has combined 
the revenue requirements of multiple projects for rate-setting purposes 
in its other regional offices.
    Comment: Some comments specifically alleged there is a subsidy from 
the Intertie 230/345-kilovolt system to the Intertie 500-kV system.
    Response: From a legislative, power system repayment, and 
accounting standpoint, both the 230/345-kV and 500-kV components of 
Intertie are considered one power system. There is one PRS that 
includes the investments, revenues, and expenses of both components. 
Western's financial accounting system does not break costs down by a 
230/345-kV or 500-kV component class of service and Western does not 
record costs to one component over the other. However, Western 
established two rates for the two components in the 1995 Rate 
Adjustment in response to customer comments.
    Comment: A commenter indicated that granting single system credits 
to the Firm Electric Service (FES) customers discriminated against the 
other customers because the credits are part of the revenue requirement 
for the MSTR.
    Response: FES customers receive a bundled firm electric service 
product. This product is firm energy delivered to the customer's point 
of delivery on the Parker-Davis System including all necessary 
ancillary services. Although transmission is bundled in the FES 
contracts, in Rate Order No. WAPA-75, Western defined a generation 
component and a transmission component equal to the P-DP Firm 
Transmission rate. This was done in an effort to voluntarily comply 
with the intent of Federal Energy Regulatory Commission (Commission) 
Order No. 888, by giving comparable access to other generation. 
However, the nature of the P-DP FES product was unchanged and Western's 
customers agreed that FES remains a bundled product, including both the 
generation and transmission components. Therefore the FES customers 
that chose to continue to take limited service delivery solely on the 
P-DP system would receive a credit for the difference between the MSTR 
and the transmission component of the P-DP bundled Power rate.
    The P-DP PRS does not separate the generation and transmission to 
calculate a P-DP revenue requirement. A second study, the Cost 
Apportionment Study, was developed in 1995 to calculate this separation 
with an allocation of costs between the power and transmission 
customers. The Commission recognizes the existence of bundled power 
contracts and the special nature of Western's power marketing mission. 
The MSTR, as proposed in the June 2004 Public Information Forum, would 
have been put in place strictly for firm transmission service, which 
represents an entirely different class of service than firm electric 
service. Western is following generally accepted industry practices to 
use different pricing methodologies for different classes of service.
    Comment: A commenter indicated that granting credits to UNS 
Electric (UNS) and Central Arizona Water Conservation District (CAWCD) 
discriminated against the other customers because the credits are part 
of the revenue requirement for the MSTR.
    Response: Western was not proposing to provide credits to either 
entity. UNS has a contract which identifies a specific rate through 
2008. This contract was executed prior to Western establishing a rate 
for the CAP. The UNS contract does, however, allow for modification to 
the rate. All other transmission contracts specify that the contractor 
will pay the rates and charges set forth in the applicable rate 
schedule. Since UNS does not pay the firm transmission rate as 
published in the CAP rate schedule, the revenue collected from that 
contract is classified as ``other revenue'' when calculating the CAP 
revenue requirement. Other revenue is subtracted from or ``credited'' 
against the gross revenue requirement to determine the revenue 
requirement that must be collected from other firm transmission 
customers.
    CAWCD does not receive credit for any part of its transmission use 
on the CAP system. The CAP transmission system was built to supply 
power to CAP pumping loads. CAWCD is the project use beneficiary of the 
CAP and has the financial obligation to repay the entire CAP system. 
The Desert

[[Page 10400]]

Southwest Region (DSW) does not bill CAWCD for transmission service for 
project use loads on the CAP. In order to include the CAP transmission 
service revenue paid by others in the MSTR, Western determined a 
revenue requirement based on the percentage of use on the CAP by CAWCD 
and subtracted that from the total CAP revenue requirement.
    Comment: A commenter indicated there was a discrepancy caused by 
granting credits to the P-DP FES customers and not to the Salt Lake 
City Area Integrated Projects (SLCA/IP) FES customers.
    Response: DSW approached Western's Colorado River Storage Project 
(CRSP) Management Center and Rocky Mountain Region (RMR) with several 
plans to incorporate the SLCA/IP FES into the MSTR. SLCA/IP FES is a 
bundled product and no acceptable method for breaking out the 
transmission component could be determined. SLCA/IP FES contracts 
include Western's obligation to deliver to points on the CRSP system. 
Deliveries off the CRSP system to the P-DP system require payment at 
the applicable rate for P-DP Transmission Service. Any methods devised 
by DSW to include SLCA/IP FES customers resulted in inequities between 
the SLCA/IP Customers on P-DP and the other SLCA/IP Southern and 
Northern Division Customers. The CRSP, RMR, and DSW offices agreed that 
it is not feasible to consider eliminating pancaking among the Regions 
unless we could combine the transmission service rates of all three 
Regions.
    Comment: A commenter stated that the MSTR does not follow RA 6120.2 
and cites paragraphs 7.g., 10.a., and 10.h.
    Response: Paragraph 1 of RA 6120.2, which sets forth the purpose of 
establishing financial and reporting policies, procedures and 
methodologies for all DOE Power Marketing Administrations, specifically 
allows for deviations when ``approved by the Secretary, authorized by 
statute, or identified and explained in a transmittal memorandum or in 
the footnotes to the reports''.
    Paragraph 7.g. defines a power system as ``a system comprised of 
one project or more than one project hydraulically and/or electrically 
integrated and therefore treated as one unit for the purpose of 
establishing rates.'' While a transmission system is not a defined term 
in RA 6120.2, the key feature of the DSW system is that it is 
electrically connected and thus fits the requirement for being treated 
as one system for establishing rates.
    Neither paragraph 10.a. nor paragraph 10.h. addresses combining the 
transmission portions of the revenue requirement of multiple power 
systems. Paragraph 10 sets forth the general requirements for PRSs. The 
revenue requirement for the MSTR is a combination of transmission 
revenue requirements for each power system that has been determined 
using practices consistent with RA 6120.2. Western has previously 
combined revenue requirements of separate power systems for rate-making 
purposes. Western's RMR and Sierra Nevada Region (SNR), as well as the 
CRSP Management Center, have combined revenue requirements from 
multiple power systems to calculate one combined rate. They also have a 
firm transmission rate which is calculated separately from the PRS. 
Revenue from this service is applied to the appropriate PRS as ``Other 
Revenue'' similar to what was envisioned for revenue from the MSTR in 
DSW.
    Comment: A commenter questioned the information on the number of 
customers who benefited from the implementation of the MSTR and those 
who were disadvantaged and requested additional data.
    Response: In a letter dated September 2, 2004, Western provided an 
impact analysis that listed rates for each year and the total impact by 
customer. Also included in this data was a listing of reservations by 
customer for the FY 2005-2009 rate evaluation period. The data is also 
available on Western's Web site at http://www.wapa.gov/dsw/pwrmkt/MSTRP/MSTRP.htm.
    Since Western is revising the MSTR proposal to a customer choice 
model, each customer will be able to make the choice whether it is most 
beneficial to them to remain on a single system rate or elect the MSTR.

Legal Authority

    Western will hold both a public information forum and a public 
comment forum on a revised customer choice methodology for the proposed 
MSTR. After review of public comments, and possible amendments or 
adjustments, Western will either recommend the Deputy Secretary of 
Energy approve the revised MSTR proposal on an interim basis, continue 
the public process, or withdraw the proposal.
    Western is establishing the proposed MSTR under the Department of 
Energy Organization Act (42 U.S.C. 7152); 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 that specifically apply to the 
projects involved.
    By Delegation Order No. 00-037.00, effective December 6, 2001, the 
Secretary of Energy delegated: (1) The authority to develop power and 
transmission rates to Western's Administrator; (2) the authority to 
confirm, approve, and place such rates into effect on an interim basis 
to the Deputy Secretary of Energy; 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 Department of Energy 
(DOE) procedures for public participation in power rate adjustments (10 
CFR part 903) were published on September 18, 1985 (50 FR 37835).

Availability of Information

    All brochures, studies, comments, letters, memorandums, or other 
documents that Western initiates or uses to develop the proposed rates 
are available for inspection and copying at the Desert Southwest 
Customer Service Regional Office, Western Area Power Administration, 
located at 615 South 43rd Avenue, Phoenix, Arizona. Many of these 
documents and supporting information are also available on Western's 
Web site at http://www.wapa.gov/dsw/pwrmkt/MSTRP/MSTRP.htm.

Regulatory Procedure Requirements

Regulatory Flexibility Analysis

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

Environmental Compliance

    In compliance with the National Environmental Policy Act of 1969 
(NEPA) (42 U.S.C. 4321, et seq.); Council on Environmental Quality 
Regulations (40 CFR parts 1500-1508); and DOE NEPA Regulations (10 CFR 
part 1021), Western has determined this action is categorically 
excluded from preparing an environmental assessment or an environmental 
impact statement.

[[Page 10401]]

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.

Small Business Regulatory Enforcement Fairness Act

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

    Dated: Feburary 14, 2005.
Michael S. Hacskaylo,
Administrator.
[FR Doc. 05-4118 Filed 3-2-05; 8:45 am]
BILLING CODE 6450-01-P