[Federal Register Volume 72, Number 104 (Thursday, May 31, 2007)]
[Notices]
[Pages 30372-30375]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-10514]


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DEPARTMENT OF ENERGY

Western Area Power Administration


Pick-Sloan Missouri Basin Program--Eastern Division--Rate Order 
No. WAPA-135

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 Pick-Sloan Missouri Basin Program--Eastern Division 
(P-SMBP--ED) firm electric and firm peaking power service. Current 
rates, under Rate Schedules P-SED-F8 and P-SED-FP8, extend through 
December 31, 2010, but are not sufficient to meet the P-SMBP--ED 
revenue requirements. The proposed rates will provide sufficient 
revenue to pay all annual costs, including interest expense, and 
repayment of required investment within the allowable period. Western 
will prepare a brochure that provides detailed information on the 
proposed rates. The proposed rates, under Rate Schedules P-SED-F9 and 
P-SED-FP9, 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

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rates at public information forums. Public information forum dates are:
    1. June 18, 2007, 10 a.m. to 12 p.m. MDT, Denver, CO.
    2. June 19, 2007, 9 a.m. to 12 p.m. CDT, Sioux Falls, SD.
    Western will accept oral and written comments at public comment 
forums. Public comment forums will be held on the following dates:
    1. July 23, 2007, 10 a.m. to 12 p.m. MDT, Denver, CO.
    2. July 24, 2007, 9 a.m. to 12 p.m. CDT, Sioux Falls, SD.
    Western will accept written comments any time during the 
consultation and comment period.

ADDRESSES: 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 
Robert J. Harris, Regional Manager, Upper Great Plains Region, Western 
Area Power Administration, 2900 4th Avenue North, Billings, MT 59101-
1266, or e-mail at [email protected]. Western will post information 
about the rate process on its Web site at http://www.wapa.gov/ugp/rates/2008firmrateadjust. 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.
    Public information forum locations are:
    1. Denver--Radisson Stapleton Plaza, 3333 Quebec Street, Denver, 
CO.
    2. Sioux Falls--Holiday Inn, 100 West 8th Street, Sioux Falls, SD.
    Public comment forum locations are:
    1. Denver--Radisson Stapleton Plaza, 3333 Quebec Street, Denver, 
CO.
    2. Sioux Falls--Holiday Inn, 100 West 8th Street, Sioux Falls, SD.

FOR FURTHER INFORMATION CONTACT: Mr. Jon R. Horst, Rates Manager, Upper 
Great Plains Region, Western Area Power Administration, 2900 4th Avenue 
North, Billings, MT 59101-1266, telephone (406) 247-7444, e-mail 
[email protected].

SUPPLEMENTARY INFORMATION: Proposed rates for P-SMBP--ED firm electric 
and firm peaking 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 Schedules P-SED-F8 and P-SED-FP8 for P-SMBP--ED firm electric 
and firm peaking service, respectively, were approved for a 5-year 
period beginning on January 1, 2006, and ending December 31, 2010 \1\. 
Under current Rate Schedule P-SED-F8, the composite rate is 19.54 mills 
per kilowatthour (mills/kWh), the energy rate is 11.29 mills/kWh, and 
the capacity rate is 4.45 per kilowattmonth (kWmonth). Under current 
Rate Schedule P-SED-FP8, the firm peaking capacity rate is $4.45 per 
kWmonth. These rates are set forth in Table 1, below.
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    \1\ WAPA-126 was approved by the Deputy Secretary of Energy on 
November 5, 2005 (70 FR ] 71280), and confirmed and approved by FERC 
on a final basis on April 27, 2006, in Docket No. EF06-5031-000 (115 
FERC ] 62107).
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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 Pick-Sloan Missouri Basin Program (P-
SMBP) and demonstrate a proactive approach to repaying incurred costs 
related to the drought.
    Western also received requests from customers to eliminate the 
tiered rate. The tiered rate charge was implemented in the mid-1970's 
for loads in excess of 60 percent monthly load factor. Customers 
believe that continuing the tiered rate charge discourages load 
management. Moreover, eliminating the tiered rate from the P-SMBP--ED 
firm electric service schedule is consistent with the administration of 
firm electric service rates in the Pick-Sloan Missouri Basin Program--
Western Division (P-SMBP--WD), which does not assess a tiered rate 
charge.
    Western also received customer requests to redesign its revenue 
recovery methodology for firm peaking service. Western presently 
provides both firm electric and firm peaking service to customers using 
a seasonal contract rate of delivery (CROD). Western's firm peaking 
capacity rate is equal to the firm power capacity rate, which is 
calculated by dividing one-half of the P-SMBP--ED revenue requirement 
by the sum of the metered billing units for firm electric service and 
the seasonal CROD monthly billing units for firm peaking service. 
During informal discussions, several customers stated that Western's 
rate design for firm electric capacity and firm peaking capacity should 
be representative of the different products. Customers recommended that 
Western use the sum of the total allocated seasonal CRODs for both firm 
electric capacity and firm peaking capacity and model them as the 
billing units for calculating the firm peaking capacity rate. It was 
noted in these discussions that any change to the peaking power 
capacity revenue requirement methodology also affects the P-SMBP total 
firm power capacity revenue requirement in the P-SMBP power repayment 
study (PRS) which is recovered by both eastern and western divisions of 
the P-SMBP.
    In response to these suggestions, Western prepared proposed rate 
schedules for firm electric service (P-SED-F9) and firm peaking service 
(P-SED-FP9) for consideration and comment during this public process. 
The projected annual revenue requirement under these schedules is 
allocated equally between capacity and energy. These proposed rate 
schedules also reflect rate adjustments based on the Pick-Sloan revenue 
requirement derived from the Fiscal Year 2006 Final Power Repayment 
Study (PRS). The PRS sets the total annual P-SMBP--ED revenue 
requirement for 2008 for firm electric and firm peaking power service 
at $235.9 million.

             Table 1.--Proposed Firm Electric and Firm Peaking Service Revenue Requirement and Rates
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                                                                          Proposed rates  (Jan. 1,     Percent
          Firm electric service                   Existing rates                   2008)                change
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P-SMBP--ED Firm and Firm Peaking Revenue   $189.9 million.............  $235.9 million.............         24.2
 Requirement.
P-SMBP--ED Composite Rate................  19.54 mills/kWh............  24.49 mills/kWh............         25.3
Firm Capacity............................  $4.45/kWmonth..............  $5.65/kWmonth..............         27.0
Firm Energy..............................  11.29 mills/kWh............  13.99 mills/kWh............         23.9
Tiered > 60 Percent Load Factor..........  5.21 mills/kWh.............

[[Page 30374]]

 
Firm Peaking Capacity....................  $4.45/kWmonth..............  $5.10/kWmonth..............         14.6
Firm Peaking Energy 1....................  11.29 mills/kWh............  13.99 mills/kWh............        23.9
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1 Firm peaking energy is normally returned. This will be assessed in the event firm peaking energy is not
  returned.

    Under proposed Rate Schedule P-SED-F9, the composite rate will 
increase 25.3 percent. The firm energy rate will increase to 13.99 
mills per kWh, or 23.9 percent, and the firm capacity rate will 
increase to $5.65/kWmonth, or 27.0 percent.
    Additionally, under Rate Schedule P-SED-F9, Western is proposing to 
identify its firm electric service revenue requirement using a Base and 
a Drought Adder. The Base is a revenue requirement that includes annual 
operation and maintenance expenses, investment repayment and associated 
interest, normal timing power purchases, and transmission costs. 
Western's normal timing power purchases are purchases due to 
operational constraints (e.g., management of endangered species 
habitat, water quality, navigation, etc.) and are not associated with 
the current drought.
    The Drought Adder is a formula-based revenue requirement that 
includes costs attributable to the present drought conditions within 
the Pick-Sloan Program. 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 associated with the previously incurred and future drought 
debt. The Drought Adder is designed to repay Western's drought debt 
within 10 years from the time the debt was incurred, using balloon 
payment methodology. For example, the drought debt incurred by Western 
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 P-SMBP--ED annual revenue requirement equals 
$245.2 million and is comprised of a Base revenue requirement of $157.2 
million plus a Drought Adder revenue requirement of $88.0 million. Both 
the Base and Drought Adder recover portions of the firm power revenue 
requirement, firm peaking power, and associated 5 percent discount 
revenue necessary to equal the P-SMBP--ED annual revenue requirement.
    Western's proposal for identifying its firm electric service 
revenue requirement using Base and Drought Adder will help Western 
present the impacts of the drought within the Pick-Sloan Program, 
demonstrate repayment of those drought related costs in the 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 after the annual PRS is 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 PRS, and, if so, 
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 PRS composite rate, Western will 
notify customers by letter in October of the planned adjustment and 
implement the adjustment in the January billing cycle. For the portion 
of any planned incremental adjustment greater than the equivalent of 2 
mills/kWh to the PRS 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 advanced notice of any 
adjustment in 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.
    Under Rate Schedule P-SED-F9, Western is also proposing to 
eliminate the tiered rate in the P-SMBP--ED. Western agrees with 
customers that continuing a tiered rate charge for loads in excess of 
60 percent monthly load factor discourages load management, and 
eliminating the tiered rate from the P-SMBP--ED firm electric service 
schedule is consistent with the design of firm electric service rates 
in the P-SMBP--WD.
    Western is also proposing to redesign its revenue recovery 
methodology for firm peaking service. Under proposed Rate Schedule P-
SED-FP9, the firm peaking capacity charge will be calculated by 
dividing one-half of the P-SMBP--ED revenue requirement by the sum of 
the total allocated seasonal CRODs modeled as monthly billing units for 
both firm electric and firm peaking service. While Western is proposing 
to redesign its methodology for calculating the firm peaking capacity 
rate, it notes that the firm electric capacity and firm peaking 
capacity rates combined will continue to recover one-half of P-SMBP--ED 
annual revenue requirement.
    As set forth in Table 1, above, under proposed Rate Schedule P-SED-
FP9, the firm peaking capacity rate will increase to $5.10 per kWmonth, 
or 14.6 percent. Peaking energy is either returned to Western or paid 
for in accordance with the terms of the contract between Western and 
the peaking power customer. The firm peaking energy rate is set forth 
in Table 1, above.

Legal Authority

    Since the proposed rates constitute a major rate adjustment as 
defined by 10 CFR part 903, Western will hold both public information 
forums and public comment forums. 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 firm electric service and peaking rates for 
P-SMBP--ED 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,

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particularly 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

    Interested parties may review and copy all brochures, studies, 
comments, letters, memorandums, or other documents that Western 
initiates or uses to develop the proposed rates. These documents are at 
the Upper Great Plains Regional Office, located at 2900 4th Avenue 
North, Billings, Montana. Many of these documents and supporting 
information are also available on Western's Web site under the ``2008 
Firm Rate Adjustment'' section located at http://www.wapa.gov/ugp/rates/2008firmrateadjust.

Ratemaking Procedure Requirements

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 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 18, 2007.
Timothy J. Meeks,
Administrator.
 [FR Doc. E7-10514 Filed 5-30-07; 8:45 am]
BILLING CODE 6450-01-P