[Federal Register Volume 72, Number 104 (Thursday, May 31, 2007)]
[Notices]
[Pages 30370-30372]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-10513]


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DEPARTMENT OF ENERGY

Western Area Power Administration


Loveland Area Projects--Rate Order No. WAPA-134

AGENCY: Western Area Power Administration, DOE.

ACTION: Notice of proposed power rates.

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SUMMARY: The Western Area Power Administration (Western) is proposing 
revised rates for Loveland Area Projects (LAP) firm electric service. 
LAP consists of the Fryingpan-Arkansas Project (Fry-Ark) and the Pick-
Sloan Missouri Basin Program (Pick-Sloan)--Western Division, which were 
integrated for marketing and rate-making purposes in 1989. The current 
rates, under Rate Schedule L-F6, expire on December 31, 2010, but are 
not sufficient to meet the LAP revenue requirements. The proposed rates 
will provide sufficient

[[Page 30371]]

revenue to pay all annual costs, including interest expense, and repay 
required investment within the allowable period. Western will prepare a 
brochure that provides detailed information on the proposed rates. The 
proposed rates, under Rate Schedule L-F7, are scheduled to go into 
effect on January 1, 2008, and will remain in effect through December 
31, 2012. Publication of this Federal Register notice begins the formal 
process for the proposed rate adjustment.

DATES: The consultation and comment period begins today and will end 
August 29, 2007. Western will present a detailed explanation of the 
proposed rates at a public information forum on June 18, 2007, 10 a.m. 
to 12 p.m. MDT, in Denver, Colorado. Western will accept oral and 
written comments at a public comment forum on July 23, 2007, 10 a.m. to 
12 p.m. MDT, in Denver, Colorado. Western will accept written comments 
any time during the consultation and comment period.

ADDRESSES: The public information forum and the public comment forum 
will both be held at the Radisson Stapleton Plaza Hotel, 3333 Quebec 
Street in Denver, Colorado, on the dates cited above. Written comments 
and/or requests to be informed of Federal Energy Regulatory Commission 
(Commission) actions concerning the rates submitted by Western to the 
Commission for approval should be sent to James D. Keselburg, Regional 
Manager, Rocky Mountain Region, Western Area Power Administration, 5555 
East Crossroads Boulevard, Loveland, CO 80538-8986, e-mail 
[email protected]. Western will post information about the rate 
process on its Web site under the ``Rate Adjustments'' section at 
http://www.wapa.gov/rm/ratesRM/2008RatesAdjustment--FirmPower.htm. 
Western will post comments received via letter and e-mail to its Web 
site after the close of the comment period. Written comments must be 
received by the end of the consultation and comment period to be 
considered by Western in its decision process.

FOR FURTHER INFORMATION CONTACT: Ms. Sheila D. Cook, Rates Manager, 
Rocky Mountain Region, Western Area Power Administration, 5555 East 
Crossroads Boulevard, Loveland, CO 80538-8986, telephone (970) 461-
7211, e-mail [email protected] or [email protected].

SUPPLEMENTARY INFORMATION: Proposed rates for LAP firm electric service 
are designed to recover an annual revenue requirement that includes 
investment repayment, interest, purchase power, operation and 
maintenance, and other expenses. The projected annual revenue 
requirement for firm electric service is allocated equally between 
capacity and energy.
    Rate Schedule L-F6 for firm electric service, WAPA-125, was 
approved for a 5-year period beginning January 1, 2006, and ending 
December 31, 2010.\1\ Under the current Rate Schedule L-F6, a two-step 
method was approved. The composite rate for the second step, effective 
on January 1, 2007, is 27.36 mills per kilowatthour (mills/kWh), the 
firm energy rate is 13.68 mills/kWh and the firm capacity rate is $3.59 
per kilowattmonth (kW-month). These rates are listed in Table 1.
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    \1\ WAPA-125 was approved by the Deputy Secretary of Energy on 
November 9, 2005 (70 FR ] 71273), and confirmed and approved by FERC 
on a final basis on June 14, 2006, in Docket No. EF06-5181-000 (115 
FERC ] 62276).
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    During informal discussions prior to the commencement of this rate 
adjustment process, Western received requests from firm power customers 
to identify its firm electric service revenue requirement using a Base 
component (Base) and Drought Adder component (Drought Adder). The firm 
power customers noted that by identifying the components of the firm 
electric service revenue requirement in this manner, Western could 
identify drought impacts in the regions covered by the LAP and the 
Pick-Sloan Missouri Basin Program (Pick-Sloan)--Eastern Division 
(individually called Project and collectively called Projects) and 
demonstrate a proactive approach to repaying incurred costs related to 
the drought.
    In response to these suggestions, Western prepared a proposed rate 
schedule identifying these two components for LAP firm electric service 
(L-F7) for consideration and comment during this public process. This 
proposed rate schedule also reflects rate adjustments based on the Fry-
Ark and Pick-Sloan--Western Division revenue requirements derived from 
the Fiscal Year 2006 Power Repayment Studies (PRS). The PRSs set the 
LAP revenue requirement for 2008 for firm electric service at $66.1 
million, which is an 18.5 percent increase. The proposed rates under L-
F7 are listed in Table 1.

                     Table 1.--Proposed Firm Electric Service Revenue Requirement and Rates
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                                                                          Proposed Rate  (Jan. 1,      Percent
          Firm electric service                Existing rate  L-F6              2008)  L-F7             change
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LAP Revenue Requirement..................  $55.8 million..............  $66.1 million..............         18.5
LAP Composite Rate.......................  27.36 mills/kWh............  32.42 mills/kWh............         18.5
Firm Energy..............................  13.68 mills/kWh............  16.21 mills/kWh............         18.5
Firm Capacity............................  $3.59/kW-month.............  $4.25/kW-month.............         18.4
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    Through this Federal Register notice, as well as through Western's 
Pick-Sloan--Eastern Division Rate Order No. WAPA-135 process, Western's 
Rocky Mountain and Upper Great Plains Regions (Regions) are proposing 
to identify their firm electric service revenue requirements using a 
Base and a Drought Adder. The Base is a revenue requirement for each 
Project that includes annual operation and maintenance expenses, 
investment repayment and associated interest, normal timing power 
purchases, and transmission costs. Normal timing power purchases are 
purchases due to operational constraints (e.g., management of 
endangered species habitat, water quality, navigation, control area 
purposes, etc.) and are not associated with the current drought in the 
Regions.
    The Drought Adder revenue requirement for each Project is a 
formula-based revenue requirement that includes costs attributable to 
the present drought conditions within the Regions. The Drought Adder 
includes costs associated with future non-timing purchases of 
additional power to firm obligations not covered with available system 
generation due to the drought, previously incurred deficits due to 
purchased power debt that resulted from non-timing power purchases made 
during this drought, and the interest

[[Page 30372]]

associated with the previously incurred and future drought debt. The 
Drought Adder is designed to repay the drought debt within 10 years 
from the time the debt was incurred, using balloon payment methodology. 
For example, the drought debt incurred in Pick-Sloan in 2006 will be 
paid off by 2016.
    The annual revenue requirement calculation can be summarized by the 
following formula: Annual Revenue Requirement = Base + Drought Adder. 
Under this proposal, the LAP annual revenue requirement equals $66.1 
million and is comprised of a Base revenue requirement of $48.6 million 
plus a Drought Adder revenue requirement of $17.5 million.
    Western's proposal for identifying the firm electric service 
revenue requirement using a Base and a Drought Adder will allow Western 
to identify and present the impacts of the drought, demonstrate 
repayment of those drought related costs in the Fry-Ark PRS and the 
Pick-Sloan PRS, and allow Western to be more responsive to changes in 
drought-related expenses. Western will continue to charge and bill its 
customers firm electric service rates for energy and capacity, which 
are the sum of the Base and Drought Adder.
    Western reviews its firm electric service rates annually. Western 
will review the Base component after the annual PRSs are completed, 
generally in the first quarter of the calendar year. If an adjustment 
to the Base is necessary, Western will initiate a public process 
pursuant to 10 CFR part 903 prior to making an adjustment.
    Western will review the Drought Adder each September to determine 
if drought costs differ from those projected in the PRSs. Based upon 
this review, Western will determine whether an adjustment to the 
Drought Adder is necessary. For any adjustments attributed to drought 
costs of less than or equal to the equivalent of 2 mills/kWh to the LAP 
composite rate, Western will notify customers by letter in October of 
the planned adjustment and implement the adjustment in the following 
January billing cycle. For the portion of any planned incremental 
adjustment greater than the equivalent of 2 mills/kWh to the LAP 
composite rate, Western will engage in a public process pursuant to 10 
CFR part 903 prior to making that portion of the adjustment. Although 
decremental adjustments to the Drought Adder will occur, the adjustment 
cannot result in the Drought Adder being a negative number. Western 
will conduct a preliminary review of the Drought Adder in early summer 
to give customers advance notice of any adjustment for the following 
January. Customers will be advised by letter of the estimated change to 
the Drought Adder with the final Drought Adder adjustment verified with 
notification in the October letter to the customers.

Legal Authority

    Since the proposed rates constitute a major adjustment as defined 
by 10 CFR part 903, Western will hold both a public information forum 
and a public comment forum. After review of public comments and 
possible amendments or adjustments, Western will recommend that the 
Deputy Secretary of Energy approve the proposed rates on an interim 
basis.
    Western is establishing firm electric service rates for LAP 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; section 9(c) of the Reclamation 
Project Act of 1939 (43 U.S.C. 485h(c)); section 5 of the Flood Control 
Act of 1944 (16 U.S.C. 825s); 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.

Availability of Information

    All brochures, studies, comments, letters, memorandums, e-mail, or 
other documents that Western initiates to develop the proposed rates 
are available for inspection and copying at the Rocky Mountain Regional 
Office, located at 5555 East Crossroads Boulevard, Loveland, Colorado. 
Many of these documents and supporting information are also available 
on Western's Web site under the ``Rate Adjustments'' section located at 
http://www.wapa.gov/rm/ratesRM/2008RatesAdjustment--FirmPower.htm.

Ratemaking Procedure Requirements

Environmental Compliance

    In compliance with the National Environmental Policy Act of 1969 
(NEPA) (42 U.S.C. 4321, et seq.); the Council on Environmental Quality 
Regulations for implementing NEPA (40 CFR parts 1500-1508); and DOE 
NEPA Implementing Procedures and Guidelines (10 CFR part 1021), Western 
is in the process of determining whether an environmental assessment or 
an environmental impact statement should be prepared or if this action 
can be categorically excluded from those requirements.

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.

    Dated: May 15, 2007.
Timothy J. Meeks,
Administrator.
[FR Doc. E7-10513 Filed 5-30-07; 8:45 am]
BILLING CODE 6450-01-P