[Federal Register Volume 71, Number 116 (Friday, June 16, 2006)]
[Notices]
[Pages 34925-34928]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-9443]


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DEPARTMENT OF ENERGY

Southwestern Power Administration


Integrated System Power Rates

AGENCY: Southwestern Power Administration, DOE.

ACTION: Notice of public review and comment.

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SUMMARY: The Administrator, Southwestern Power Administration 
(Southwestern), has prepared Current and Revised 2006 Power Repayment 
Studies which show the need for an increase in annual revenues to meet 
cost recovery criteria. Such increased revenues are needed primarily to 
cover increased investments and replacements in hydroelectric 
generating facilities and increased purchased power expenses. The 
Administrator has developed proposed Integrated System rates, which are 
supported by a rate design study, to recover the required revenues. The 
May 2006 Revised Study indicates that the proposed rates would increase 
annual system revenues approximately 25.9 percent from $136,267,400 to 
$171,505,848, over a three-year period to meet projected annual 
expenses and repay the investments in facilities over the required 
number of years.

DATES: The consultation and comment period will begin on the date of

[[Page 34926]]

publication of this Federal Register notice and will end August 15, 
2006. The consultation and comment period has been shortened by the 
Administrator in accordance with Sec. 903.14(a) of 10 CFR part 903, 
because of the need to assure new rates are in place by October 1, 
2006, to respond to financial difficulties resulting from FY 2006 
drought conditions. A combined Public Information and Comment Forum 
(Forum) will be held in Tulsa, Oklahoma at 9 a.m. on July 12, 2006.

ADDRESSES: The Forum will be held in Southwestern's offices, Room 1460, 
Williams Center Tower I, One West Third Street, Tulsa, Oklahoma 74103.

FOR FURTHER INFORMATION CONTACT: Mr. Forrest E. Reeves, Assistant 
Administrator, Office of Corporate Operations, Southwestern Power 
Administration, U.S. Department of Energy, One West Third Street, 
Tulsa, Oklahoma 74103, (918) 595-6696, [email protected].

SUPPLEMENTARY INFORMATION: Originally established by Secretarial Order 
No. 1865 dated August 31, 1943, Southwestern is an agency within the 
U.S. Department of Energy which was created by an Act of the U.S. 
Congress, entitled the Department of Energy Organization Act, Public 
Law 95-91, dated August 4, 1977. Guidelines for preparation of power 
repayment studies are included in DOE Order No. RA 6120.2 entitled 
Power Marketing Administration Financial Reporting. Procedures for 
Public Participation in Power and Transmission Rate Adjustments of the 
Power Marketing Administrations are found at title 10, part 903, 
subpart A of the Code of Federal Regulations (10 CFR part 903). 
Procedures for the confirmation and approval of rates for the Federal 
Power Marketing Administrations are found at title 18, part 300, 
subpart L of the Code of Federal Regulations (18 CFR part 300).
    Southwestern markets power from 24 multi-purpose reservoir projects 
with hydroelectric power facilities constructed and operated by the 
U.S. Army Corps of Engineers. These projects are located in the states 
of Arkansas, Missouri, Oklahoma, and Texas. Southwestern's marketing 
area includes these States plus Kansas and Louisiana. The costs 
associated with the hydropower facilities of 22 of the 24 projects are 
repaid via revenues received under the Integrated System rates, as are 
those of Southwestern's transmission facilities, which consist of 1,380 
miles of high-voltage transmission lines, 24 substations, and 46 
microwave and VHF radio sites. Costs associated with the Sam Rayburn 
and Robert D. Willis Dams, two Corps of Engineers projects that are 
isolated hydraulically, electrically, and financially from the 
Integrated System are repaid under separate rate schedules and are not 
addressed in this notice.
    Following Department of Energy guidelines, Southwestern's 
Administrator, prepared a Current Power Repayment Study using existing 
system rates. The Study indicates that Southwestern's financial 
requirement to repay annual operating costs and the investment in power 
generating and transmission facilities for power and energy marketed by 
Southwestern will not be met without an increase in revenues. The need 
for increased revenues is primarily due to projected increases in 
investments and replacements at hydroelectric generating facilities of 
the U.S. Army's Corps of Engineers. Increased revenues are also needed 
because of higher projected average purchased power expenses due to 
market price increases and a severe drought during FY 2006 which has 
caused Southwestern to incur substantially more than average purchased 
power costs. The Revised Power Repayment Study shows that additional 
annual revenues of $35,238,448 (a 25.9 percent increase) are needed to 
meet these increased operating expense requirements and satisfy 
repayment criteria.
    A Rate Design Study has also been completed which allocates the 
revenue requirement to the various system rate schedules for recovery, 
and provides for transmission service rates in general conformance with 
FERC Order Nos. 888 (A-C). The proposed rates would increase estimated 
annual revenues from $136,267,400 to $171,505,848 and would meet annual 
operating expenses and repay project and transmission system 
investments within the required number of years. As indicated in the 
Integrated System Rate Design Study, this revenue would be developed 
through increases in the charges for sales of capacity and energy, and 
transmission services, including some of the ancillary services for 
deliveries of both Federal and non-Federal power and associated energy 
from the transmission system of Southwestern.
    Another component of the Integrated System rates for power and 
energy, the Purchased Power Adder (PPA), produces revenues to cover the 
cost of power purchased to meet contractual obligations. The PPA is 
based on Southwestern's average annual purchased power needs and has 
been increased from the existing rate to reflect projected power costs 
based on present market rates. Southwestern is further proposing to 
expand the Administrator's authority to adjust the PPA at his 
discretion (Discretionary Purchased Power Adder Adjustment) to increase 
the size of the Discretionary PPA Adjustment and the frequency of its 
application to no more than twice annually (limited to $0.0067 (6.7 mills)/kWh per year) based on the need for greater 
flexibility to better manage cash flow during drought conditions. With 
increased flexibility, Southwestern will be able to alleviate some of 
the increased revenue pressure of drought situations, such as has 
occurred during the drought of 2006, by implementing increases more 
frequently.
    Because of concerns expressed by Southwestern's customers, during 
their informal participation in the development of the Power Repayment 
and Rate Design Studies, regarding the magnitude and underlying causes 
of the proposed increase, Southwestern is proposing to increase revenue 
in three steps over a three-year period.
    The first step of the rate increase, beginning October 1, 2006, 
will incorporate increased PPA costs ($8,562,500 or 6.3 percent), with 
the PPA increasing from $0.0029 (2.9 mills)/kWh to $0.0067 (6.7 mills)/
kWh during the period that the rates are in effect. The Administrator's 
Discretionary PPA Adjustment will be set to recover purchased power 
costs for all of FY 2006 resulting from the drought which far exceed 
the average. Presently, this rate would be $0.0034 (3.4 mills)/kWh 
($7,620,216 or 5.6 percent) based on current costs through May 2006. 
All other rates currently approved will remain in effect through 
September 30, 2007.
    The second step of the rate increase, beginning October 1, 2007, 
through September 30, 2008, will incorporate \1/2\ of the remaining 
revenue requirement ($9,527,866 or 7.0 percent) caused by increased 
investments and replacements in facilities. As a result, the rate for 
supplemental peaking energy will increase to $0.0082 (8.2 mills)/kWh 
and the capacity charge will increase to $3.18/KW/Mo.
    The final step of the rate increase, beginning October 1, 2008, 
through September 30, 2010, will reach the full revenue requirement of 
$19,055,732, or 14.0 percent revenue increase, caused by the increased 
investments and replacements, and combined with the PPA increase to 
$0.0067 (6.7 mills)/kWh ($8,562 500 or 6.3 percent) and the $0.0034 
(3.4 mills)/kWh Discretionary PPA Adjustment increase ($7,620,216 or 
5.6 percent) from the first and second years, will ensure that cost 
recovery will

[[Page 34927]]

be accomplished as required. The capacity rate will increase to $3.51/
kW/Mo and ancillary services will increase modestly, while the 
transmission capacity rate will increase to $0.95/kW/Mo, as well as the 
rate for network service.
    Below is a general comparison of the existing and proposed system 
rates:

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                                    Existing rates                          Proposed rates
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                                                      Rate schedule P-06  Rate schedule P-06  Rate schedule P-06
        Generation rates          Rate schedule P-05   (System Peaking)    (System Peaking)    (System Peaking)
                                    (System Peaking)  Step 1  10/1/06-9/  Step 2  10/1/07-9/  Step 3  10/1/08--9/
                                                             30/07               30/08               30/10
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Capacity
Grid or 138-161 kV..............  $3.03/kW/Mo.......  $3.03/kW/Mo.......  $3.18/kW/Mo.......  $3.51/kW/Mo.
Required Ancillary Services       $0.09/kW/Mo.......  $0.09/kW/Mo.......  $0.09/kW/Mo.......  $0.10/kW/Mo.
 (generation in control area).
Regulation & Freq. Response       $0.08/kW/Mo.......  $0.08/kW/Mo.......  $0.08/kW/Mo.......  $0.09/kW/Mo.
 (generation in control area).
Reserve Ancillary Services        $0.0158/kW/Mo.....  $0.0158/kW/Mo.....  $0.0158/kW/Mo.....  $0.0184/kW/Mo.
 (generation in control area).
Transformation Service 69 kV      $0.30/kW/Mo.......  $0.30/kW/Mo.......  $0.30/kW/Mo.......  $0.30/kW/Mo.
 (applied to usage, not
 reservation).
Energy
Peaking Energy..................  $0.0082/kWh.......  $0.0082/kWh.......  $0.0082/kWh.......  $0.0082/kWh.
Supplemental Peaking Energy.....  $0.0055/kWh.......  $0.0055/kWh.......  $0.0082/kWh.......  $0.0082/kWh
Purchased Power Adder (PPA).....  $0.0029/kWh.......  $0.0067/kWh.......  $0.0067/kWh.......  $0.0067/kWh.
Administrator's Discretionary     $0.0/kWh..........  $0.0034/kWh.......  $0.0034/kWh.......  $0.0034/kWh.
 PPA Adjustment Applied.
Administrator's Discretionary     $0.0011/kWh   minus>$0.0067/kWh   minus>$0.0067/kWh   minus>$0.0067/kWh
                                   annually.           annually.           annually.           annually.
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                                  Rate schedule NFTS- Rate schedule NFTS- Rate schedule NFTS- Rate schedule NFTS-
       Transmission rates          5 (Transmission)    06 (Transmission)   06 (Transmission)   06 (Transmission)
 
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Capacity (Firm Reservation with   $0.90/kW/Mo,        $0.90/kW/Mo,        $0.90/kW/Mo,        $0.95/kW/Mo,
 energy) Grid or 138-161 kV.       $0.225/kW/Week,     $0.225/kW/Week,     $0.225/kW/Week,     $0.238/kW/Week,
                                   $0.0409/kW/Day.     $0.0409/kW/Day.     $0.0409/kW/Day.     $0.0432/kW/Day.
Required Ancillary Services.....  $0.09/kW/Mo, or     $0.09/kW/Mo, or     $0.09/kW/Mo, or     $0.10/kW/Mo, or
                                   $0.023/kW/Week,     $0.023/kW/Week,     $0.023/kW/Week,     $0.025/kW/Week,
                                   or $0.0041/kW/Day.  or $0.0041/kW/Day.  or $0.0041/kW/Day.  or $0.0045/kW/
                                                                                               Day.
Reserve Ancillary Services        $0.0158/kW/Mo, or   $0.0158/kW/Mo, or   $0.0158/kW/Mo, or   $0.0184/kW/Mo, or
 (generation in control area).     $0.00395/kW/Week,   $0.00395/kW/Week,   $0.00395/kW/Week,   $0.0046/kW/Week,
                                   or $0.00072/kW/     or $0.00072/kW/     or $0.00072/kW/     or $0.00084/kW/
                                   Day.                Day.                Day.                Day.
Regulation & Freq Response        $0.08/kW/Mo, or     $0.08/kW/Mo, or     $0.08/kW/Mo, or     $0.09/kW/Mo, or
 (deliveries within control        $0.020/kW/Week,     $0.020/kW/Week,     $0.020/kW/Week,     $0.023/kW/Week,
 area).                            or $0.0036/kW/Day.  or $0.0036/kW/Day.  or $0.0036/kW/Day.  or $0.0041/kW/
                                                                                               Day.
Transformation Service 69 kV and  $0.30/kW/Mo.......  $0.30/kW/Mo.......  $0.30/kW/Mo.......  $0.30/kW/Mo.
 below (applied on usage, not
 reservation) No weekly/daily
 rates.
Capacity (Non-firm with energy).  No capacity charge  No capacity charge  No capacity charge  No capacity charge
                                   80% of firm         80% of firm         80% of firm         80% of firm
                                   monthly charge      monthly charge      monthly charge      monthly charge
                                   divided by 4 for    divided by 4 for    divided by 4 for    divided by 4 for
                                   weekly rate,        weekly rate,        weekly rate,        weekly rate,
                                   divided by 22 for   divided by 22 for   divided by 22 for   divided by 22 for
                                   daily rate, and     daily rate, and     daily rate, and     daily rate, and
                                   divided by 352      divided by 352      divided by 352      divided by 352
                                   for hourly rate.    for hourly rate.    for hourly rate.    for hourly rate.
Network Service.................  $0.90/kW/Mo.......  $0.90/kW/Mo.......  $0.90/kW/Mo.......  $0.95/kW/Mo.
Required Ancillary Services.....  $0.09/kW/Mo.......  $0.09/kW/Mo.......  $0.09/kW/Mo.......  $0.10/kW/Mo.
Reserve Ancillary Services        $0.00158/kW/Mo....  $0.00158/kW/Mo....  $0.00158/kW/Mo....  $0.00184/kW/Mo.
 (generation in control area).
Regulation & Freq Response        $0.08/kW/Mo.......  $0.08/kW/Mo.......  $0.08/kW/Mo.......  $0.09/kW/Mo.
 (deliveries within control
 area).


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                                   Rate schedule EE-   Rate schedule EE-   Rate schedule EE-   Rate schedule EE-
                                  05 (Excess Energy)  06 (Excess Energy)  06 (Excess Energy)  06 (Excess Energy)
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Energy..........................  $0.0055/kWh.......  $0.0055/kWh.......  $0.0082/kWh.......  $0.0082/kWh.
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    Opportunity is presented for Southwestern's customers and other 
interested parties to receive copies of the Integrated System Studies. 
If you desire a copy of the Integrated SystemPower Repayment Studies 
and Rate Design Study Data Package, submit your request to Mr. Forrest 
E. Reeves, Assistant Administrator, Office of

[[Page 34928]]

Corporate Operations, Southwestern Power Administration, One West 
Third, Tulsa, OK 74103 (918) 595-6696.
    A Public Information and Comment Forum is scheduled for July 12, 
2006, to explain to the public the proposed rates and supporting 
studies and to allow for comment. The proceeding will be transcribed. A 
chairman, who will be responsible for orderly procedure, will conduct 
the Forum. Questions concerning the rates, studies, and information 
presented at the Forum will be answered, to the extent possible, at the 
Forum. Questions not answered at the Forum will be answered in writing, 
except that questions involving voluminous data contained in 
Southwestern's records may best be answered by consultation and review 
of pertinent records at Southwestern's offices.
    Persons desiring to attend the Forum should indicate in writing 
(address cited above) by letter, email or facsimile transmission (918-
595-6656) by July 1, 2006, their intent to appear at such Forum. If no 
one so indicates his or her intent to attend, no such Forum will be 
held. Persons interested in speaking at the Forum should submit a 
request to Mr. Forrest E. Reeves, Assistant Administrator, 
Southwestern, at least seven (7) calendar days prior to the Forum so 
that a list of forum participants can be developed. The chairman may 
allow others to speak if time permits.
    A transcript of the Forum will be made. Copies of the transcript 
may be obtained, for a fee, from the transcribing service. Copies of 
all documents introduced will also be available from the transcribing 
service upon request for a fee. Five copies of all written comments, 
together with a diskette or compact disk in MS Word, on the proposed 
Integrated System Rates are due on or before August 15, 2006. Comments 
should be submitted to Forrest E. Reeves, Assistant Administrator, 
Southwestern, at the above-mentioned address for Southwestern's 
offices.
    Following review of the oral and written comments and the 
information gathered in the course of the proceeding, the Administrator 
will submit the finalized Integrated System Rate Proposal, Power 
Repayment Studies, and Rate Design Study in support of the proposed 
rates to the Deputy Secretary of Energy for confirmation and approval 
on an interim basis, and subsequently to the Federal Energy Regulatory 
Commission (Commission) for confirmation and approval on a final basis. 
The Commission will allow the public an opportunity to provide written 
comments on the proposed rate increase before making a final decision.

    Dated: May 30, 2006.
Michael A. Deihl,
Administrator.
 [FR Doc. E6-9443 Filed 6-15-06; 8:45 am]
BILLING CODE 6450-01-P