[Federal Register Volume 71, Number 41 (Thursday, March 2, 2006)]
[Notices]
[Pages 10666-10668]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-2956]


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DEPARTMENT OF ENERGY

Western Area Power Administration


The Central Valley Project-Rate Order No. WAPA-128

AGENCY: Western Area Power Administration, DOE.

ACTION: Notice of Proposed Change of Reactive Power and Voltage Control 
Revenue Requirement Component.

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SUMMARY: The Western Area Power Administration (Western) is proposing 
to revise the transmission revenue requirement (TRR) for existing 
formula rates associated with Reactive Power and Voltage Control from 
the Central Valley Project (CVP) and other non-Federal Generation 
Sources Service (VAR Support). The TRRs for transmission service from 
the CVP transmission system, the Pacific Alternating Current Intertie 
(PACI), and the California-Oregon Transmission Project (COTP) are 
assigned a portion of the VAR Support costs under Rate Schedules CV-T1, 
CV-NWT3, PACI-T1, and COTP-T1 which extend through September 30, 2009. 
The proposed revision to the TRRs will remove the VAR Support costs 
from the TRRs. This formula rate will provide sufficient revenue to 
repay all annual costs, including interest expense, and repay required 
investment within the allowable period. Western will prepare a rate 
brochure that provides detailed information on the impact of this rate 
adjustment to all interested parties. This proposal is scheduled to go 
into effect on September 1, 2006, and will remain in effect through 
September 30, 2009. Publication of this Federal Register notice begins 
the formal process for the proposed revisions to the applicable revenue 
requirements.

DATES: The consultation and comment period begins today and will end 
April 3, 2006. Western will accept written comments any time during the 
consultation and comment period.

ADDRESSES: Send written comments to Mr. Sean Sanderson, Rates Manager, 
Sierra Nevada Customer Service Region, Western Area Power 
Administration, 114 Parkshore Drive, Folsom, CA 95630-4710, e-mail 
[email protected]. Western will post information about the rate process 
on its Web site at http://www.wapa.gov/sn/customers/rates/#currentrates/. Western will post official comments received via letter 
and facsimile to its Web site after the close of the comment period. 
Western must receive the written comments by the end of the 
consultation and comment period to ensure they are considered in 
Western's decision process.

FOR FURTHER INFORMATION CONTACT: Mr. Sean Sanderson, Rates Manager, 
Sierra Nevada Customer Service Region, Western Area Power 
Administration, 114 Parkshore Drive, Folsom, CA 95630-4710, telephone 
(916) 353-4466, e-mail [email protected].

SUPPLEMENTARY INFORMATION: The current formula rates for transmission 
service on the CVP (CV-T1 and CV-NWT3), the PACI (PACI-T1), and the 
COTP (COTP-T1) transmission systems are based on a TRR that includes 
CVP and other non-Federal generator costs for providing VAR Support. 
The proposed revision to the TRR will remove the VAR Support costs from 
the TRRs. Western proposes to collect the revenue requirement for CVP 
VAR Support costs in the PRR under power rate schedule CV-F11. The 
removal of VAR Support costs will result in a more equitable treatment 
of all transmission customers.
    The Deputy Secretary of Energy approved Rate Schedules CV-T1, CV-
NWT3, PACI-T1, and COTP-T1 for transmission service and CV-F11 for Base 
Resource and First Preference Power on November 18, 2004 (Rate Order 
No. WAPA-115, 69 FR 70510, December 6, 2004), and the Federal Energy 
Regulatory Commission (Commission) confirmed and approved the rate 
schedules on October 11, 2005, under FERC Docket No. EF0-5011-000 (113 
FERC 61,026). Rate Schedules CV-T1, CV-NWT3, PACI-T1, COTP-T1, and CV-
F11 began January 1, 2005, and end on September 30, 2009.
    The December 1, 2004, update of the approved rates resulted in 
annual CVP VAR Support costs of $336,070. Western currently estimates 
its annual costs associated with CVP and other non-Federal generator 
VAR Support to be $1,486,558. This cost was pro rata assigned to the 
respective transmission systems on a capacity basis and is one of the 
costs contained in Component 1 of the CVP, PACI, and COTP formula 
rates.
    As part of the implementing of Western's Open Access Transmission 
Tariff, Western separated its merchant function from Western's 
reliability function. It has come to Western's attention, that by 
including the CVP and other non-Federal generation sources' reactive 
power and voltage control costs in Western's TRR, Western, in certain 
circumstances, may be treating its merchant in a manner that is not 
comparable with other transmission customers. Under Western's current 
rates, all transmission customers would pay Western for VAR Support. As 
a result, a transmission customer who also has a generator that is 
directly connected to Western's system and who has an obligation to 
provide reactive power within the bandwidth (commonly referred to as 
the deadband) would also pay Western for VAR Support. Western believes 
that both Federal generators and non-Federal generators should be 
treated comparably when they provide VAR Support.
    To treat both Federal and non-Federal generators comparably, 
Western could either: (1) Roll all the VAR Support costs from both 
types of generators into Western's TRR or (2) Western could exclude all 
VAR Support from both types of generators from Western's TRR. Western's 
proposal is the latter.
    Based on Western's understanding of the Commission's comparability 
requirements, Western has agreed to compensate the Calpine Construction 
Finance Company (CCFC), a non-Federal generator connected to the CVP 
transmission system, for reactive power costs subject to the outcome of 
this rate proceeding. Western will compensate

[[Page 10667]]

CCFC from December 2005 until new rates are in effect regardless of the 
outcome of this rate proceeding. At a minimum, such payments increase 
Western's annual costs for reactive power from approximately $341,000 
to almost $1.2 million. While CCFC is the only entity that has 
currently sought to charge Western for reactive power, Western intends 
to treat every generator directly connected to Western's transmission 
system in a comparable fashion. Western cannot determine the cost 
associated with all such facilities. The obligation to provide such 
payments could create an open, indefinite, and undefined future 
liability for Western. Such costs could likely exceed $1.2 million. On 
the other hand, if Western excludes both the Federal and non-Federal 
generator costs for VAR Support in the TRR, it would ultimately fall to 
the customers who purchase power from the generator to pay for such 
costs. Customers who receive power from Western through Rate Schedule 
CV-F11 currently pay VAR Support costs in the PRR including the VAR 
Support associated with network service. Also included are VAR Support 
costs associated with the Rate Schedules PACI-T1 and COTP-T1 if not 
recovered from contracted sales. By excluding the VAR Support component 
from the TRR, Western can accurately determine the costs associated 
with transmission service. Furthermore, while Western's statutory 
customers, such as preference power customers, would be obligated to 
pay Western for all of the costs associated with reactive power from 
the United States generators in its power rates, the overall cost to 
Western's statutory customers would be lower and more predictable since 
they are paying for only the costs associated with the Federal 
generators.
    As a result, Western seeks comments from all interested parties on 
Western's rate proposal. In addition, Western seeks particular comments 
on the following: (1) Whether Western should not make any changes to 
its rates (no action) and if Western takes no action, whether Western's 
current rates result in non-comparable treatment; (2) whether Western 
should remove the VAR Support component from Western's TRR and apply to 
the PRR for the CVP; Schedule of Rates for Base Resource and First 
Preference Power (CV-F11); and (3) whether including the costs 
associated with VAR Support in its TRR would be consistent with 
Western's statutory obligation to provide power at the lowest rates 
possible consistent with sound business principles. While Western seeks 
particular comments on the above, Western invites all interested 
parties to submit other comments related to the proposal. As part of 
Western's final decision, Western will evaluate all comments received 
before the end of the consultation and comment period.
    Under the 2004 Power Marketing Plan, Base Resource and First 
Preference power is primarily CVP hydrogeneration available subject to 
water conditions and operating constraints. The Base Resource and First 
Preference power formula rates recover a PRR through percentages of 
costs to First Preference and Base Resource Customers.
    Component 1 of the PRR for Base Resource and First Preference 
Power, as approved in the rate schedule (CV-F11), includes operations 
and maintenance (O&M), purchased power for project use and First 
Preference Customer loads, interest expense, annual expenses (including 
any other statutorily required costs or charges), investment repayment 
for the CVP, and the Washoe Project annual PRR that remains after 
project use loads are met. Revenues from project use, transmission, 
ancillary services, and other services are applied to the total PRR, 
and the remainder is collected from Base Resource and First Preference 
Customers.
    The proposed rate formula change for CV-F11 for the Base Resource 
and First Preference PRR is listed in Table 1.

           Table 1.--Proposed Formula Rate Change for Base Resource and First Preference PRR (CV-F11)
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                                                                Existing rates   Proposed rates
                                                                  ($000)\1\        ($000)\2\      Percent change
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Base Resource and First Preference PRR.......................          53,032           52,966           -0.13
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Note 1: Includes the VAR Support costs from the CVP and CCFC.
Note 2: Includes only the CVP VAR Support costs.

Legal Authority

    The proposed revision to the revenue requirements described above 
constitutes a minor rate adjustment. Western has determined that it is 
not necessary to hold a public information or comment forum for this 
proposed minor rate adjustment as defined by 10 CFR part 903. After 
review of public comments, and possible amendments or adjustments, 
Western will recommend the Deputy Secretary of Energy approve the 
proposed rates on an interim basis.
    Western is establishing TRRs and a PRR for the formula rates for 
CV-T1, CV-NWT3, PACI-T1, and COTP-T1 transmission service and CV-F11 
for Base Resource and First Preference Power 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 
project 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.

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 Sierra Nevada Regional 
Office, located at 114 Parkshore Drive, Folsom, California. Many of 
these documents and supporting information are also available on the 
Web site under the ``Current Rates'' section located at http://www.wapa.gov/sn/customers/rates/#currentrates/.

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

[[Page 10668]]

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.

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 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: February 16, 2006.
Michael S. Hacskaylo,
Administrator.
[FR Doc. E6-2956 Filed 3-1-06; 8:45 am]
BILLING CODE 6450-01-P