[Federal Register Volume 72, Number 170 (Tuesday, September 4, 2007)]
[Notices]
[Pages 50676-50679]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-17404]


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DEPARTMENT OF ENERGY

Western Area Power Administration


Boulder Canyon Project

AGENCY: Western Area Power Administration, DOE.

ACTION: Notice of base charge and rates.

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SUMMARY: The Deputy Secretary of Energy has approved the Fiscal Year 
(FY) 2008 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, 2007. These Rates will 
stay in effect through September 30, 2008, or until superseded by other 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: Rate Schedule BCP-F7, Rate Order No. WAPA-
120, effective October 1, 2005, through September 30, 2010, allows for 
an annual recalculation of the rates.\1\
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    \1\ WAPA-120 was approved by the Deputy Secretary of Energy on 
August 11, 2005 (70 FR 50316) and confirmed and approved by FERC on 
a final basis on June 22, 2006, in Docket No. EF05-5091-000 (115 
FERC ] 61,362).
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    Under Rate Schedule BCP-F7, the existing composite rate, effective 
on October 1, 2006, was 17.02 mills per kilowatthour (mills/kWh). The 
base charge was $67,509,136, the energy rate was 8.51 mills/kWh, and 
the capacity rate was $1.63 per kilowattmonth (kWmonth). The newly 
calculated rates for BCP electric service, to be effective October 1, 
2007, will result in an overall composite rate of 17.64 mills/kWh. The 
proposed rates were calculated using the FY 2008 Final Ten Year 
Operating Plan. This resulted in an increase of approximately 3.60 
percent when compared with the existing BCP electric service composite 
rate. The increase is due to a decrease in the projected energy sales. 
The FY 2008 base charge is decreasing to $66,975,283. The major 
contributing factor to the decrease is a portion of the post September 
11, 2001, security costs which will have been fully collected in the FY 
2007 base charge, being deemed non-reimbursable in FY 2007. This 
results in a larger year end carryover into FY 2008, reducing the 
revenue requirement. The FY 2008 energy rate of 8.82 mills/kWh is 
approximately a 3.60 percent increase from the existing energy rate of 
8.51 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 
2008 capacity rate remains at the existing $1.63/kWmonth. Although the 
capacity sales are decreasing due to dropping lake elevations, the base 
charge is also decreasing resulting in no change to the capacity rate.
    The following summarizes the steps taken by Western to ensure 
involvement

[[Page 50677]]

of all Interested Parties in determining the Rates:
    1. On February 9, 2007, 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.
    2. A Federal Register notice was published on February 14, 2007 (72 
FR 7026), 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.
    3. Discussion of the proposed Rates was initiated at an informal 
BCP Contractor meeting held March 7, 2007, 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 11, 2007, in 
Phoenix, Arizona, Western and Reclamation representatives explained the 
proposed Rates for FY 2008 in greater detail and held a question and 
answer session.
    5. A public comment forum held on May 9, 2007, in Phoenix, Arizona, 
gave the public an opportunity to comment for the record.
    6. Western received two comment letters during the 90-day 
consultation and comment period. The consultation and comment period 
ended May 15, 2007. All comments were considered in developing the 
Rates for FY 2008. Written comments were received from:

Metropolitan Water District of Southern California, California
Irrigation & Electrical Districts Association of Arizona, Arizona

    Comments and responses, paraphrased for brevity when not affecting 
the meaning of the statements, are presented below.

Security Costs

    Comment: A BCP Contractor commented that the $10 million cap placed 
on post September 11, 2001, security costs for 2006 should remain in 
place since Reclamation is still under a continuing resolution in 2007. 
Numerous Contractors as well as an Interested Party also commented that 
these costs should be treated as non-reimbursable or shared with other 
beneficiaries of the BCP. The BCP Customers believe the Hoover Dam and 
Lake Mead provide a wide range of important benefits to a number of 
different classes of beneficiaries such as water users, boaters, 
fishermen and recreational users, and those users should share in the 
recovery of the post September 11, 2001, security costs.
    Response: It is true that the Bureau is operating under a 
continuing resolution in 2007. However, the $10 million cap is not 
binding in 2007 and there is no Congressional direction to limit 
security cost reimbursement to $10 million as in FY 2006. The Bureau 
has carefully considered the concerns of power customers over costs as 
well as the intent that project beneficiaries should pay a share of the 
security costs just as they do other O&M costs. Based on discretion 
allowed under Reclamation law, the Bureau has determined that absent 
clear guidance from the Congress, FY 2007 will be a second transition 
year in which reimbursement of security costs will be increased from 
$10 million in FY 2006 to $14.5 million in FY 2007 and will be 
distributed among project beneficiaries proportionately using 
methodology similar to that used in FY 2006. Of the $4,111,000 for FY 
2007 guard and patrol security costs at Hoover, $954,850 will be non-
reimbursable costs.

Post Civil Service Retirement Costs

    Comment: A Contractor objects to post Civil Service Retirement 
System (CSRS) costs being collected through the rates. The Contractor 
claims these expenses are paid through appropriations and therefore the 
rates are in excess of the legitimate cost of service. The Contractor 
requests that the DOE General Counsel re-examine the issue and order 
that the funds that have been collected be returned to the rate payers. 
The Contractor questions whether Western is pursuing such action.
    Response: In a memorandum dated July 1, 1998, the DOE General 
Counsel concluded that the Power Marketing Administrations have the 
authority to collect the full costs of the retirement benefits. Western 
subsequently began collecting CSRS costs in BCP rates. When Western 
filed the rate schedule for the BCP as part of Rate Order No. WAPA-94, 
the Contractor protested to FERC regarding Western's inclusion of these 
costs. In an Order issued July 31, 2001, FERC ruled that Western's 
inclusion of the full CSRS costs in its computation of the costs of 
project operation, and thus in its rates, is neither arbitrary nor 
capricious nor in violation of law. Docket No. EF00-5092-000 (96 FERC ] 
61171). The contractors contention is contrary to well settled 
precedent. FERC has ruled on at least five occasions that CSRS cost are 
legitimate for inclusion in PMA rates. See 86 FERC ] 61,195 (Feb. 26, 
1999), rehearing denied, 96 FERC ] 61,171 (July 31, 2001), Southeastern 
Power Administration's (SEPA's) Georgia Alabama rate; 90 FERC ] 61,266 
(March 17, 2000), rehearing denied, 91 FERC ] 61,272, (June 15, 2000), 
SEPA's Cumberland rates); 93 FERC ] 62,100 (Nov. 9, 2000), SEPA's Jim 
Woodruff rates; 87 FERC ] 61,346 (June 22, 1999), Western's Pacific 
Northwest Pacific Southwest Intertie rates; and 96 FERC ] 61,171 (July 
31, 2001), Western's Boulder Canyon rates.

Compliance With Northern Electricity Reliability Council (NERC) 
Standards

    Comment: A BCP Contractor requests that Western and Reclamation 
ensure their compliance with mandatory NERC reliability requirements 
established by the Energy Policy Act of 2005. They stressed that all 
costs associated with meeting NERC requirements, as well as associated 
membership dues such as those paid to the Western Electric Coordinating 
Council, are appropriately budgeted and allocated to customers. The 
Contractor further requested that any potential or actual noncompliance 
penalties that impact BCP and exceed $10,000 be communicated to BCP 
contractors, and that BOR and Western provide regular updates at the 
upcoming Engineering and Operating Committee (E&OC) and Technical 
Review Committee meetings.
    Response: Western and the Bureau are both aware of the mandatory 
NERC reliability standards and the potential cost impact to BCP. 
Appropriate compliance-related costs have been incorporated into the 
agency's FY 2008 budget calculations. Both agencies will continue to 
include all costs associated with properly operating and maintaining 
the system in the annual budget calculations. Western has developed a 
team that will review ongoing required compliance activities and has 
committed to tracking the specific costs related to those activities 
through separate account numbers in its financial accounting system.

Managing for Excellence Program

    Comment: Numerous BCP Contractors suggested Western monitor 
progress of Reclamation's ``Managing for Excellence Program''. They 
shared that the program and strategy is good but Western needs to 
ensure it does not impact or interfere with the current successful 
partnership shared among the customers, Reclamation, and Western on the 
Lower Colorado River Projects, specifically, the BCP.
    Response: Reclamation reports to the BCP E&OC on an ongoing basis 
on the

[[Page 50678]]

status of its Managing for Excellence Program. Western is confident 
that monitoring any potential impacts from Reclamation's Program to the 
BCP would be through the E&OC process. In the update provided at the 
May 23, 2007, E&OC meeting, Reclamation invited the BCP Contractors to 
attend a meeting regarding the Managing for Excellence Program in 
Denver on May 30, 2007. Reclamation encourages the Contractors to 
participate in future meetings and share any concerns they may have 
with this Program.

Visitor Center

    Comment: BCP Contractors expressed appreciation to Western and 
Reclamation for exploring additional funding sources for BCP besides 
customer funding. In addition, they remain concerned with the 
continuing imbalance between the visitor center costs and the revenues 
due to reduced visitation since the terrorist attack on September 11, 
2001.
    Response: Western and the Bureau appreciate the recognition for the 
efforts contributed by both Federal agencies. Both agencies commit to 
continual efforts, in partnership with the power customers, to explore 
new funding opportunities and to develop strategies for pursuing those 
opportunities for alternative sources of funding for the Visitor 
Center. To further those efforts, at the May 23, 2007, E&OC meeting, 
Reclamation presented a draft business plan which includes ideas to 
increase visitor center revenues. Upon completion of the draft plan, 
Reclamation will reconvene with an ad hoc committee comprised of 
Reclamation, Western and the Contractors to review and have input on 
finalizing and implementing the business plan recommendations.

Other Comments

    Comment: A Contractor noted that Western had prevailed in certain 
litigation before the U.S. Federal Courts of Appeals and thanked 
Western for the diligence and efforts it took to protect its customers 
from the lawsuit.
    Response: Western appreciates the comment.
    Comment: A Contractor commends Reclamation and Western in their 
determination and recognizes and appreciates their efforts in the 
various annual rate processes.
    Response: Reclamation and Western appreciate the comment.

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, the 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 2008 
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.

Ratemaking 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 
Federal Energy Regulatory Commission (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 ] 61362.
    The Boulder Canyon Project Implementation Agreement 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. This is the second year following Commission approval of 
BCP-F7 rate. Accordingly, this rate will become final upon approval by 
the Deputy Secretary.
    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 ] 62050, 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 ] 61171. 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 ] 61362. 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 
2008 Base Charge and Rates.
    Western has proposed a FY 2008 base charge of $66,975,283, an 
energy rate of 8.82 mills/kWh, and a capacity rate of $1.63/kW month. 
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 2008 Rates for electric service was published in the 
Federal Register on February 14, 2007 (72 FR 7026).
    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 2008 Rates for BCP Electric Service

[[Page 50679]]

on a final basis under Rate Schedule BCP-F7, through September 30, 
2008.

    Dated: August 21, 2007.
Clay Sell,
Deputy Secretary of Energy.
 [FR Doc. E7-17404 Filed 8-31-07; 8:45 am]
BILLING CODE 6450-01-P