[Federal Register Volume 71, Number 165 (Friday, August 25, 2006)]
[Notices]
[Pages 50408-50410]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-14181]



[[Page 50408]]

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DEPARTMENT OF ENERGY

Western Area Power Administration


Boulder Canyon Project--Base Charge and Rates

AGENCY: Western Area Power Administration, DOE.

ACTION: Notice of base charge and rates.

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SUMMARY: The Deputy Secretary of Energy approved the Fiscal Year (FY) 
2007 Base Charge and Rates (Rates) for Boulder Canyon Project (BCP) 
electric service provided by the Western Area Power Administration 
(Western). The Rates will provide sufficient revenue to pay all annual 
costs, including interest expense, and repay investments, within the 
allowable period.

DATES: The Rates will be effective the first day of the first full 
billing period beginning on or after October 1, 2006. These Rates will 
stay in effect through September 30, 2007, or until superseded by other 
rates.

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

SUPPLEMENTARY INFORMATION: The Deputy Secretary of Energy approved the 
existing Rate Schedule BCP-F7 for BCP electric service on August 11, 
2005 (Rate Order No. WAPA-120, 70 FR 50316, August 26, 2005), on an 
interim basis. Rate Schedule BCP-F7, effective October 1, 2005, through 
September 30, 2010, allows for an annual recalculation of the rates. 
Rate Schedule BCP-F7 was approved on a final basis by the Federal 
Energy Regulatory Commission (Commission) on June 22, 2006.
    Under Rate Schedule BCP-F7, the existing composite rate, effective 
on October 1, 2005, was 14.05 mills per kilowatthour (mills/kWh). The 
base charge was $57,465,018, the energy rate was 7.03 mills/kWh, and 
the capacity rate was $1.37 per kilowattmonth (kWmonth). The newly 
calculated Rates for BCP electric service, to be effective October 1, 
2006, will result in an overall composite rate of 17.02 mills/kWh. The 
proposed rates were calculated using the FY 2007 Final Ten Year 
Operating Plan. This resulted in an increase of approximately 21 
percent when compared with the existing BCP electric service composite 
rate. The increase is due to an increase in the annual base charge and 
a decrease in the projected energy sales. The FY 2007 base charge is 
increasing to $67,509,136. The increase is due to increases in annual 
operation and maintenance costs, replacement costs, uprating principal 
payments, and Federal investment principal and interest payments, as 
well as a shortfall in the projected FY 2005 year-end carryover into FY 
2006. The reduction in projected prior year end carryover, in turn, 
increases the amount to be collected through the base charge in the 
subsequent years. The FY 2007 energy rate of 8.51 mills/kWh is 
approximately a 21-percent increase from the existing energy rate of 
7.03 mills/kWh. The increase in the energy rate is due to a decrease in 
the projected energy sales resulting from continued poor hydrology in 
the region which results in lower Lake Mead water elevations. The FY 
2007 capacity rate of $1.63/kWmonth is approximately a 19-percent 
increase from the existing $1.37/kWmonth capacity rate. The capacity 
rate is increasing due to a decrease in the projected capacity caused 
by the dropping lake elevations. Another factor that contributes to the 
increase in the energy and capacity rates is the significant increase 
in the annual base charge due to increasing annual costs.
    The following summarizes the steps taken by Western to ensure 
involvement of all Interested Parties in determining the Rates:
    1. A Federal Register (FR) notice was published on March 2, 2006 
(71 FR 10664), announcing the proposed rate adjustment process, 
initiating a public consultation and comment period, announcing public 
information and public comment forums, and presenting procedures for 
public participation.
    2. On February 13, 2006, a letter was mailed from Western's Desert 
Southwest Customer Service Region to the BCP Contractors and other 
Interested Parties announcing an informal customer meeting and public 
information and comment forums.
    3. Discussion of the proposed Rates was initiated at an informal 
BCP Contractor meeting held March 8, 2006, in Phoenix, Arizona. At this 
informal meeting, representatives from Western and the Bureau of 
Reclamation (Reclamation) explained the basis for estimates used to 
calculate the Rates and held a question and answer session.
    4. At the public information forum held on April 4, 2006, in 
Phoenix, Arizona, Western and Reclamation representatives explained the 
proposed Rates for FY 2007 in greater detail and held a question and 
answer session.
    5. A public comment forum held on May 3, 2006, in Phoenix, Arizona, 
gave the public an opportunity to comment for the record. Five persons 
representing the BCP Contractors and Interested Parties made oral 
comments.
    6. Western received three comment letters during the 90-day 
consultation and comment period. The consultation and comment period 
ended May 31, 2006. All comments were considered in developing the 
Rates for FY 2007. Written comments were received from:

Colorado River Commission of Nevada, Nevada
Irrigation & Electrical Districts Association, Arizona
Metropolitan Water District of Southern California, California

    Comments and responses, paraphrased for brevity, are presented 
below.

Security Costs

    Comment: Many Interested Parties and a Contractor continue to 
express concern that post September 11, 2001, security costs should not 
be in the BCP power rates. They suggest that Western and Reclamation 
take another look at how these costs are being handled and consider an 
alternative action in making them non-reimbursable. The Interested 
Parties believe that Congress expressed its desire that other 
beneficiaries were to share in the post September 11, 2001, security 
costs. An Interested Party requested the BCP power contractors to join 
together more aggressively and collectively to have their voices heard 
by their Congressional representatives, the leadership of Reclamation, 
and all agencies involved to ensure that all the beneficiaries of the 
Project share the burden of the security costs.
    Response: The Conference Report on the FY 2006 Energy and Water 
Development Appropriations Bill, passed by the Senate on November 14, 
2005, established the amount of FY 2006 non-reimbursable appropriated 
funds available to Reclamation to cover post September 11, 2001, 
security costs. The funding level established by the Conference Report 
has been allocated by Reclamation. The post September 11, 2001, 
security costs not funded by non-reimbursable appropriations have been 
included in the FY 2007 base charge and rates.
    Comment: A Contractor expressed concern that the February 2006 
Report to Congress seemed to contain inconsistent information with 
respect to hardening costs.
    Response: Fortification upgrades that are required to enhance 
security are considered to be non-reimbursable. However, upgrades that 
are made by the projects for reasons other than security enhancement 
are considered to be part of regular operation and maintenance 
expenses.

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    Comment: Numerous Contractors encouraged Western and Reclamation to 
consider a cap limiting the Contractors' total dollar exposure for the 
security costs as a suitable exchange for the transparency and 
disclosure of such costs the Contractors would normally receive through 
the processes outlined in the Boulder Canyon Project Implementation 
Agreement (BCPIA). Information that is considered sensitive had been 
requested from Reclamation with regard to the post September 11, 2001, 
security costs but the information could not be provided for security 
reasons. The Contractors suggested that a strict dollar limitation 
would provide for certainty of future costs and eliminate the need for 
information considered sensitive. One commenter believes adequate 
information concerning the costs in the rates should continue to be 
provided through the BCPIA processes.
    Response: Western and Reclamation acknowledge the customer's 
comments with regard to establishing a cap on the reimbursable amount 
of security costs. Both agencies will continue to work with the BCP 
Contractors through the Engineering and Operating Committee, Technical 
Review Subcommittee (TRC), and annual rate processes to provide the 
requested detailed information relevant to the proposed future power 
rates. However, any information deemed ``For Official Use Only'' will 
only be shared with the Interested Parties after they execute a Non-
Disclosure Agreement.

Visitor Center Costs

    Comment: The BCP Contractors remain concerned with the continuing 
imbalance between the visitor center costs and the revenues due to 
reduced visitation at the Hoover Dam since the September 11, 2001, 
terrorist attack.
    Response: Reclamation will continue its efforts to find other 
additional sources of funding outside the BCP Contractors and is 
looking forward to having Western's and the BCP Contractors' 
participation on a special visitor center task force to complete the 
efforts.

Due Process Concerns

    Comment: An Interested Party stated that the failure of Western and 
Reclamation to provide detailed supporting documentation with regard to 
increased post September 11, 2001, security costs included in the BCP 
base charge and rates for FY 2007 is a denial of fundamental rights of 
due process and a violation of the requirements of the Administrative 
Procedure Act. As a result, the commenter stated the rate process was 
flawed and requested that the public record be reopened, and the 
requested information be supplied to all Hoover power users, including 
subcontractors for Hoover power, in order to give them a reasonable 
opportunity to comment on these proposed expenditures.
    Response: Western and Reclamation shared detailed information 
supporting the proposed rates during numerous forums. Before the formal 
public information forum and public comment forum held as part of the 
formal rate process in accordance with 10 CFR part 903, an informal 
meeting was held during which Western and Reclamation shared detailed 
information in connection with the proposed rates. Prior to the 
informal rate meetings and public forums, Western and Reclamation, in 
accordance with the terms of the BCPIA, conducted a TRC meeting in 
September 2005 with participation by BCP Contractors, Western, and 
Reclamation. Following the TRC meeting, the BCP Engineering and 
Operating Committee, with participation by the BCP Contractors, 
Western, and Reclamation, met in October 2005, February 2006, and again 
in May 2006. Through these forums, BCP Contractors have been involved 
and informed of all costs making up the proposed rate. During these 
forums, the Contractors, while not necessarily agreeing that post 
September 11, 2001, security costs should be included in the rate, have 
been satisfied with the documentation included in the rates. Both 
Reclamation and Western have been complimented for giving them the 
opportunities to discuss, exchange ideas and information, and provide 
comments regarding the proposed rates. Western and Reclamation have 
followed the administrative processes outlined in 10 CFR part 903 and 
18 CFR part 300 in conducting the FY 2007 rate process as well as 
holding numerous forums in which the Contractors had the opportunity to 
provide input and feedback. Based on these processes, there is not a 
need to extend or reopen the public process.

BCP Electric Service Rates

    BCP electric service rates are designed to recover an annual 
revenue requirement that includes operation and maintenance expenses, 
payments to States, visitor services, uprating program, replacements, 
investment repayment, and interest expense. Western's Power Repayment 
Study (PRS) allocates the projected annual revenue requirement for 
electric service equally between capacity and energy.

Availability of Information

    Information about this base charge and rate adjustment, including 
power repayment studies, comments, letters, memorandums, and other 
supporting material made or kept by Western used to develop the FY 2007 
BCP base charge and rates, is available for public review in the Desert 
Southwest Customer Service Regional Office, Western Area Power 
Administration, 615 South 43rd Avenue, Phoenix, Arizona. The 
information is also available on Western's Web site at http://www.wapa.gov/dsw/pwrmkt/BCP/RateAdjust.htm.

Regulatory Procedure Requirements

    BCP electric service rates are developed under the Department of 
Energy 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 enactments, 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, were transferred to and vested in the Secretary of Energy, 
acting by and through Western.
    By Delegation Order No. 00-037.00, effective December 6, 2001, the 
Secretary of Energy delegated (1) The authority to develop long-term 
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 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 DOE procedures for public participation in 
electric service rate adjustments are located at 10 CFR part 903, 
effective September 18, 1985 (50 FR 37835) and 18 CFR part 300. DOE 
procedures were followed by Western in developing the rate formula 
approved by the Commission on June 22, 2006, at 115 FERC ] 61,362.
    The BCPIA requires Western, prior to October 1 of each rate year, 
to determine the annual rates for the next fiscal year. The rates for 
the first rate year, and each fifth rate year thereafter, will become 
effective provisionally upon approval by the Deputy Secretary of Energy 
subject to final approval by the Commission. For all other rate years, 
the rates will become effective on a final basis upon approval by the 
Deputy Secretary of Energy.

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    Western will continue to provide annual rates to the BCP 
Contractors by October 1 of each year using the same ratesetting 
formula. The rates are reviewed annually and adjusted upward or 
downward to assure sufficient revenues exist to achieve payment of all 
costs and financial obligations associated with the project. Each 
fiscal year, Western prepares a PRS to update actual revenues and 
expenses and include future estimates of annual revenues and expenses 
for the BCP, including interest and capitalized costs.
    Western's BCP electric service ratesetting formula set forth in 
Rate Order No. WAPA-70 was approved on April 19, 1996, in Docket No. 
EF96-5091-000 at 75 FERC ] 62,050, for the period beginning November 1, 
1995, and ending September 30, 2000. Rate Order No. WAPA-94, extending 
the existing ratesetting formula beginning on October 1, 2000, and 
ending September 30, 2005, was approved on July 31, 2001, in Docket No. 
EF00-5092-000 at 96 FERC ] 61,171. Rate Order No. WAPA-120, extending 
the existing ratesetting formula for another five-year period beginning 
on October 1, 2005, and ending September 30, 2010, was approved on June 
22, 2006, in Docket No. EF05-5091-000 at 115 FERC ] 61,362. The BCP 
ratesetting formula includes a base charge, an energy rate, and a 
capacity rate. The ratesetting formula was used to determine the BCP FY 
2007 Base Charge and Rates.
    Western proposes the FY 2007 base charge of $67,509,136, the energy 
rate of 8.51 mills/kWh, and the capacity rate of $1.63/kWmonth be 
approved on a final basis.
    Consistent with procedures set forth in 10 CFR part 903 and 18 CFR 
part 300, Western held a consultation and comment period. The notice of 
the proposed FY 2007 Rates for electric service was published in the 
Federal Register on March 2, 2006 (71 FR 10664).
    Under Delegation Order Nos. 00-037.00 and 00-001.00B, and in 
compliance with 10 CFR part 903 and 18 CFR part 300, I hereby approve 
the FY 2007 Rates for BCP Electric Service on a final basis under Rate 
Schedule BCP-F7, through September 30, 2007.

    Dated: August 10, 2006.
Clay Sell,
Deputy Secretary.
[FR Doc. E6-14181 Filed 8-24-06; 8:45 am]
BILLING CODE 6450-01-P