[Federal Register Volume 72, Number 184 (Monday, September 24, 2007)]
[Notices]
[Pages 54286-54291]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-18744]


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DEPARTMENT OF THE INTERIOR

Bureau of Reclamation


Adoption of Amended Navajo Power Marketing Plan

AGENCY: Bureau of Reclamation, Interior.

ACTION: Notice of adoption.

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SUMMARY: On September 18, 2007, the Commissioner of Reclamation adopted 
the Amended Navajo Power Marketing Plan (Amended Plan) on behalf of the 
Secretary of the Interior (Secretary), pursuant to section 107 of the 
Hoover Power Plant Act of 1984 (98 Stat. 1333). The Amended Plan is to 
provide for the future marketing of the United States' entitlement to 
generation from the Navajo Generating Station (Navajo) which is in 
excess of the pumping requirements of the Central Arizona Project (CAP) 
and certain needs for desalting and protective pumping facilities. The 
Amended Plan was developed in consultation with representatives of the 
Bureau of Reclamation (Reclamation), Western Area Power Administration 
(Western), the Governor of Arizona, and the Central Arizona Water 
Conservation District (CAWCD) as required by the Hoover Power Plant Act 
of 1984 (Act).
    At the request of Reclamation, Western published a notice in the 
Federal Register on August 14, 2006, to initiate and obtain public 
comments on the proposed Amended Plan. Western held public information 
forums on September 19, 2006, in Phoenix, Arizona, and on September 22, 
2006, in Ontario, California. Western accepted oral and written 
comments on the proposed Amended Plan at public comment forums on 
October 10, 2006, in Phoenix, Arizona, and on October 11, 2006 in 
Ontario, California, and thereafter until November 13, 2006, the end of 
the public comment period. Additional public information forums will be 
held in advance of the time of the actual marketing of Navajo Surplus 
under the Amended Plan to address the procedures to be used in the 
actual marketing process.
    Public comments were received both with respect to the terms of the 
proposed Amended Plan and with respect to Western's presentations at 
the public forums relating to the implementation of the plan. Written 
comments were received from Aha Macav Power Service, Arizona Power 
Authority, Arizona Tribal Energy Association, Colorado River Indian 
Tribes, Ralph E. Hitchcock and Associates, Moyes Storey Law Offices, 
Santa Cruz Water & Power Districts Association, and Salt River Project 
Agricultural Improvement and Power District. Oral comments were 
received from the Central Arizona Water Conservation District, Ralph E. 
Hitchcock and Associates, and the Colorado River Indian Tribes. 
Comments and responses, paraphrased for brevity, are presented below.
    Reclamation considered all comments prior to the adoption of the 
Amended Plan. Reclamation determined that no modifications to the 
proposed Amended Plan were necessary as a result of the comments and in 
light of the proposed Amended Plan's flexible framework. Nevertheless, 
Reclamation has made edits to the proposed Amended Plan for 
clarification purposes.

DATES: As provided in Part X of the Amended Plan, the Amended Plan will 
become effective thirty days after its date of publication in the 
Federal Register.

FOR FURTHER INFORMATION CONTACT: Mr. Ron Smith, Bureau of Reclamation, 
P.O. Box 61470, Boulder City, Nevada 89006, telephone (702) 293-8231, 
e-mail [email protected].

SUPPLEMENTARY INFORMATION: The United States acquired an entitlement to 
24.3 percent of generation available at Navajo for use by CAP pursuant 
to the Colorado River Basin Project Act (43 U.S.C. 1501, et seq.). The 
CAP is a Reclamation multi-purpose water resource development and 
management project in Arizona.
    Section 107(a) of the Act provides that the capacity and energy 
associated with the United States interest in Navajo which is in excess 
of the pumping requirements of the CAP and any needs for desalting and 
protective pumping facilities (Navajo Surplus) shall be marketed and 
exchanged by the Secretary of Energy. Furthermore, Section 107(c) of 
the Act provides that in the marketing and exchanging of Navajo 
Surplus, the Secretary of the Department of the Interior shall adopt 
the plan deemed most acceptable, after consultation with the Secretary 
of Energy, the Governor of Arizona, and CAWCD (or its successor in 
interest to the repayment obligation for the CAP).
    On December 1, 1987, Reclamation, on behalf of the Secretary, 
adopted the Original Plan which provided for long-term contracts 
through September 30, 2011.
    This adopted Amended Plan contains the framework for the sale and 
exchange of Navajo Surplus, including an annual process to determine 
the power to be marketed, eligibility criteria, contract provisions, 
rate-setting provisions, and revenue collection and distribution 
criteria. The rate-setting provisions in the adopted Amended Plan were 
developed to accomplish the requirements of the Act to market and 
exchange Navajo Surplus ``for the purposes of optimizing the 
availability of Navajo surplus and providing

[[Page 54287]]

financial assistance in the timely construction and repayment of 
construction costs of authorized features of the Central Arizona 
project.'' These provisions also provide that ``rates shall not exceed 
levels that allow for an appropriate saving for the contractor.''
    The adopted Amended Plan implements provisions of the Revised 
Stipulation entered in the Central Arizona Project repayment 
litigation, Central Arizona Water Conservation District v. United 
States, et al., No. CIV 95-625-TUC-WDB (EHC), No. CIV 95-1720-PHX-EHC 
(Consolidated Action). The Revised Stipulation requires, as a condition 
to the effectiveness of the Revised Stipulation, that the Original Plan 
be amended to provide for the establishment of rates for the sale or 
exchange of Navajo Surplus after September 30, 2011 ``which optimize 
the availability and use of revenues'' for the Lower Colorado River 
Basin Development Fund in a manner consistent with the Act. The Arizona 
Water Settlements Act of 2004, Public Law 108-451 amends statutory 
provisions relating to the use of Navajo Surplus revenues set forth in 
43 U.S.C. 1543(f).
    The Original Plan also contains a provision to collect an 
additional rate component that allows CAWCD to recover an advance of 
funds made to Reclamation for the construction of authorized features 
of the CAP. This obligation will be fulfilled under the contract 
provisions of the Original Plan. The Original Plan also contains 
specified quantities of capacity and energy to be marketed under long-
term contracts. This adopted Amended Plan provides for an annual 
determination of capacity and energy resources available for marketing 
as Navajo Surplus based upon the availability of water for CAP pumping, 
in conjunction with an annual determination of rates and the various 
capacity and energy products to be marketed. Navajo Surplus under this 
adopted Amended Plan will be placed under contract for various time 
periods, which may be short-term, annual, or multi-year.

National Environmental Policy Act

    In compliance with the National Environmental Policy Act of 1969 
(NEPA), Council on Environmental Quality regulations, and the 
Department of the Interior regulations for compliance with NEPA, 
Reclamation and Western determined that the adopted Amended Plan met 
the requirements of a categorical exclusion. Copies of the categorical 
exclusions prepared by Reclamation and Western will be made available 
to interested persons upon request.

Public Comments and Responses

    Comments relating to the term of Navajo Surplus contracts: Material 
presented at the public information forums on the proposed Amended Plan 
indicates Navajo Surplus will be marketed on an annual or shorter term 
basis. This will expose the Development Fund to market volatility and 
discourage purchasers who require the certainty of longer term 
contracts. Navajo Surplus should be made available for multi-year terms 
of at least three years. A five-year contract provides greater 
stability than a one-year contract. At least a portion of the Navajo 
Surplus should be sold in long term contracts.
    Response: The Amended Plan is designed to be flexible. The Amended 
Plan permits both shorter and longer term contracts for the sale or 
exchange of Navajo Surplus. Article IV.A. of the Amended Plan states 
that Reclamation will on an annual or more frequent basis determine the 
quantity of Navajo Surplus available to be marketed and the period for 
which it is available. The annual determination process will allow 
Reclamation to take into account the varying power demand of the CAP 
and will reduce the need for the CAP to purchase power to supply its 
demand. Although the determination of available Navajo Surplus will be 
made at least annually, the period for which the power is sold or 
exchanged may vary. Reclamation anticipates that some blocks of power 
may be marketed in multi-year contracts and others marketed for shorter 
terms.
    Comments relating to the pricing of Navajo Surplus: Navajo Surplus 
should be sold at cost. Western does not have legal authority to market 
Navajo Surplus at market-based prices. Federal power sold to preference 
customers should be sold at cost-based prices. Western is proposing to 
depart from established cost-based principles governing pricing of 
federal power. This poses a threat to Western's preference customers. 
The plan to optimize revenue from the sale of Navajo Surplus should be 
balanced against the statutory requirement of an appropriate savings 
for the contractor to result in a below market price. The power should 
be sold at a price based on the market but reduced to eliminate costs 
incurred by the private sector but not by the federal government such 
as taxes. After the CAP is paid off, Navajo Surplus should be sold at 
cost.
    Response: Navajo Surplus has never been marketed at cost-based 
pricing. The Hoover Power Plant Act of 1984 and the Arizona Water 
Settlements Act of 2004 provide that the Lower Colorado River Basin 
Development Fund (Development Fund) is to be used to repay CAP 
construction costs and to fund specified purposes including Indian 
water projects and settlements. Congress has directed that revenues 
from the sale of Navajo Surplus be deposited into the Development Fund 
and be available for these purposes. Cost-based pricing of this 
resource would not result in revenue which could be dedicated to CAP 
construction costs or Indian water projects. This would run counter to 
intent of these Acts of Congress. The Hoover Power Plant Act of 1984 
states that the rates for Navajo Surplus should not exceed levels that 
allow for an appropriate saving for the contractor but does not further 
define what is intended by ``appropriate savings.'' The marketing 
process for Navajo Surplus will permit the contractors to determine the 
price which represents to them an appropriate savings when, for 
example, placing a bid or submitting a request for proposal to Western. 
The provisions of the Hoover Power Plant Act of 1984 and the Arizona 
Water Settlements Act of 2004 which relate to the CAP, the sale of 
Navajo Surplus, and the purposes for which the Development Fund may be 
used have no bearing upon the marketing of power from other federal 
projects.
    Comments relating to the possible auction of Navajo Surplus: 
Western and Reclamation should support the use of an auction process to 
sell Navajo Surplus, using standard electricity products and standard 
market contract arrangements to promote efficiency. Such a process 
could accommodate those seeking smaller quantities of power.
    Response: The Amended Plan is designed for flexibility. It would 
allow Navajo Surplus to be auctioned as standard electricity products 
using standard contracts in a manner which promotes efficiency and 
which accommodates those seeking smaller quantities of power.
    Comments relating to the exchange of Navajo Surplus: The proposed 
Amended Plan, unlike the original Navajo Power Marketing Plan, does not 
specify the amount of power to be exchanged.
    Response: The Amended Plan is designed for flexibility. Whether and 
to what extent power is available for exchange will be determined by 
Reclamation in an annual process which takes into account the varying 
power needs of the CAP.

[[Page 54288]]

    Comments relating to the resale of Navajo Surplus: Western should 
not apply Western's General Power Contract Provisions (GPCP), Article 
17, to sales of Navajo Surplus because this would not allow a 
contractor to resell Navajo Surplus. If a contractor acquires Navajo 
Surplus and is not permitted to resell unused portions, the risk for 
the contractor increases. With higher risk, the contractor is likely to 
offer a lower price for Navajo Surplus and this would defeat the 
purposes of the Hoover Power Plant Act of 1984 and the Arizona Water 
Settlements Act of 2004.
    Response: Article 17 of the GPCP was included in contracts for the 
sale of Navajo Surplus under the original Navajo Power Marketing Plan. 
At the time of actual contracting under the Amended Plan, Western will 
determine which GPCPs will be included in contracts marketing Navajo 
Surplus.
    Comments relating to the first opportunity provisions of the 
original Navajo Power Marketing Plan: The original Navajo Power 
Marketing Plan and the contracts entered into under that plan provide a 
first opportunity to existing contractors to enter into new contracts 
for Navajo Surplus when the existing contracts expire. New contracts 
should be entered into under the first opportunity provisions of the 
original plan. Exercise of the first opportunity provisions for new 
contracts may impact the extent to which Navajo Surplus is available to 
be marketed to others.
    Response: Reclamation is engaging in ongoing negotiations relating 
to the first opportunity provisions of the original Navajo Power 
Marketing Plan. These negotiations may result in new contracts for the 
sale of Navajo Surplus. The extent to which any such new contracts may 
affect the amounts of Navajo Surplus which is available to be marketed 
to others will not be known until the conclusion of those negotiations.
    Comments relating to marketing Navajo Surplus to Indian tribes: 
Many tribes in the Colorado River Basin are new participants in the 
electric energy business. It is unlikely that Indian tribes have the 
staff capabilities to successfully participate in an auction process. 
The federal government and Indian tribes have a long-standing trust 
relationship. Western should consider benefits to Arizona Indian tribes 
when marketing Navajo Surplus. Western should set aside the amount of 
Navajo Surplus necessary to meet the needs of Indian reservations. 
Tribes in Arizona should be included in the first priority group for 
eligibility to contract with Western for the sale or exchange of Navajo 
Surplus. Navajo Surplus should be sold to Indian tribes at cost or at 
the same cost as it is sold to larger utilities with sufficient staff 
to evaluate its value. Many tribes cannot take advantage of the sale of 
Navajo Surplus in large blocks of power or for single year periods.
    Response: The Amended Plan is designed to optimize the revenues 
from the sale of Navajo Surplus to fulfill Congressional purposes 
relating to the repayment of construction costs of the CAP and relating 
to funding specified purposes including Indian water projects and 
settlements. In order to optimize revenues, Reclamation anticipates 
that Western will market the power, through an auction or by a request 
for proposals. Indian tribes are welcome to participate in these 
processes. An auction is only one of several methods that Western may 
use to market Navajo Surplus under the Amended Plan. The Amended Plan 
provides that first priority will be given to Arizona preference 
entities. Western currently recognizes several Indian Tribes as 
qualifying as preference entities in Arizona. The Amended Plan provides 
for flexibility in designing the products for sale and exchange. The 
Amended Plan does not require the products be structured in any 
particular manner. Reclamation anticipates that both large and small 
blocks of power may be available to be marketed as Navajo Surplus and 
further anticipates that some blocks may be available in multi-year 
increments. Both Reclamation and Western recognize the trust 
relationship between the United States and Federally-recognized Indian 
Tribes.
    Comments relating to the possible sale of Navajo Surplus as a firm 
product: If Navajo Surplus is sold as a firm product, the proposed 
Amended Plan is unclear as to whether Western will be responsible for 
ensuring the firm product is delivered. Western should not firm Navajo 
Surplus at the expense of other Western customers.
    Response: The Amended Plan is designed to be flexible. The Amended 
Plan permits Western to market Navajo Surplus as a firm product and as 
a unit contingent product. Costs related to the marketing of Navajo 
Surplus will not be passed along to non-CAP Western customers, nor will 
generation resources from other federal projects be use to firm Navajo 
Surplus.
    Comments relating to the integrated operation of the CAP water and 
power systems: The CAP design assumes an integrated operation of the 
CAP water and power systems to optimize the efficiency of both. The 
proposed Amended Plan should place more emphasis on the integrated 
operation of the CAP water and power systems.
    Response: The Amended Plan addresses the integrated operation of 
the CAP water and power systems in Article V. The integrated operation 
will optimize revenues from the marketing of Navajo Surplus. The 
Amended Plan recognizes in Article VII(C) that CAWCD may be a party to 
contracts for the sale or exchange of Navajo Surplus for the purpose of 
affirming any obligations of CAWCD under the contract. Such contracts 
may further address CAP operations to enhance the availability and 
value of this resource.
    Comments relating to participation of CAWCD in energy marketing: 
The proposed Amended Plan does not ensure the availability of power to 
run CAP pumps in the event of an outage of the entire Navajo power 
plant. It is unclear whether the expectation is that CAWCD will 
actively participate in energy marketing or simply bear the financial 
responsibility for a replacement supply.
    Response: The Amended Plan solely addresses the marketing of Navajo 
Surplus. It does not address the availability of alternate supplies to 
run CAP pumps in the event of a complete outage of the Navajo 
Generating Station. Should such an outage occur, CAWCD, as the 
operating agent for the CAP, will make the decision whether to actively 
participate in energy marketing or to utilize another entity for this 
purpose. CAWCD currently participates in energy marketing.
    Comments related to transmission of Navajo Surplus: A section 
should be added requiring Western to consult with the Arizona Power 
Authority prior to entering into any contracts relating to the 
transmission of Navajo Surplus in order to avoid compromising 
transmission rights and paths for the delivery of Arizona's federal 
entitlement to power from Hoover Dam.
    Response: The Amended Plan addresses the marketing of Navajo 
Surplus. To the extent Western in its contracts for the sale or 
exchange of Navajo Surplus addresses transmission, Western will take 
into account transmission rights held by others. Western will not 
compromise the transmission rights and paths for the delivery of 
Arizona's federal entitlement to power from Hoover Dam.
    Comments relating to credit requirements for purchasers of Navajo 
Surplus: The proposed Amended Plan is silent as to the credit 
requirements for purchasers of Navajo Surplus. Western should not bear 
the credit risk and then

[[Page 54289]]

pass it along to other Western customers.
    Response: Reclamation expects that Western will follow its standard 
procedures with respect to credit requirements to be applied to 
purchasers of Navajo Surplus. Western will not pass along to other 
Western customers any credit risk relating to purchasers of Navajo 
Surplus.
    Comments relating to editing the proposed Amended Plan: The 
proposed Amended Plan alternates between the use of the phrase ``sold 
and exchanged'' and ``sold or exchanged'' and should be consistent in 
its terminology. The definition of ``Development Fund'' should include 
the phrase ``as amended or supplemented'' because the statutory section 
establishing the fund has been amended. Article VI.D. (Eligibility) 
appears to paraphrase Section 107(c) of the 1984 Hoover Power Plant Act 
but should be modified to clearly and simply state the intent of 
Congress.
    Response: Reclamation believes the Amended Plan appropriately uses 
``and'' and ``or'' in different contexts when describing actions 
related to the marketing of Navajo Surplus. Reclamation has accepted 
this change to the Development Fund definition. The Amended Plan 
carries the Eligibility language forward from the original Navajo 
Marketing Plan. Reclamation believes it accurately reflects the intent 
of Congress.

    Dated September 18, 2007.
Robert W. Johnson,
Commissioner, Bureau of Reclamation.

Amended Plan

    The text of the adopted Amended Plan is as follows:

Amended Navajo Power Marketing Plan

I. Purpose and Scope

    Section 107 of the Hoover Power Plant Act of 1984, Pub. L. 98-381, 
requires that a power marketing plan be developed to provide for 
marketing and Exchanging of Navajo Surplus for the purposes of 
optimizing the availability of Navajo Surplus and providing financial 
assistance in the timely construction and repayment of construction 
costs of authorized features of the Central Arizona Project. The 
Secretary of the Department of the Interior adopted the original Navajo 
Power Marketing Plan on December 1, 1987 (Original Plan). The Revised 
Stipulation entered in the Central Arizona Project repayment 
litigation, Central Arizona Water Conservation District v. United 
States, et al., No. CIV 95-625-TUC-WDB (EHC), No. CIV 95-1720-PHX-EHC 
(Consolidated Action) requires, as a condition to the effectiveness of 
the Revised Stipulation, that the Original Plan be amended. The Revised 
Stipulation requires the amended Navajo Power Marketing Plan provide 
for the establishment and collection of rates for the sale or Exchange 
of Navajo Surplus that optimize the availability and use of revenues 
for the Lower Colorado River Basin Development Fund while allowing for 
an appropriate saving for the contractor. Satisfying the requirements 
of the Revised Stipulation is one of the elements necessary for final 
judgment to be entered in the above-referenced litigation. The entry of 
final judgment in that litigation permits the Secretary of the 
Department of the Interior to make a required finding under the terms 
of the Arizona Water Settlements Act of 2004, Pub. L. 108-451.
    A. This Amended Navajo Power Marketing Plan hereinafter called 
``Plan'' shall be applicable to all new or amended contracts for Navajo 
Surplus entered into after this Plan is adopted. The Original Plan 
shall remain in effect for all Navajo Surplus contracts entered into 
before the adoption of this Plan and shall continue until such 
contracts terminate or are amended in accordance with this Plan.
    B. This Plan recognizes the obligation of the United States to use 
its entitlement to electrical capacity and energy from Navajo to 
provide necessary power for the pumping requirements of the Central 
Arizona Project and any such needs for desalting and protective pumping 
facilities as may be required under section 101(b)(2)(B) of the 
Colorado River Basin Salinity Control Act of 1974, Pub. L. 93-320, as 
amended.
    C. This Plan provides that Western, working closely with 
Reclamation and CAWCD, will be the marketing entity responsible for the 
sale and Exchange of Navajo Surplus in accordance with applicable 
Federal law, regulations and the Revised Stipulation. Western shall 
market Navajo Surplus directly to, with or through the Arizona Power 
Authority and/or other entities having the status of preference 
entities under the Reclamation Project Act of 1939. Western may utilize 
Exchange, banking, purchase or sales agreements, or integration with 
other resources to fulfill any purpose of this Plan.
    D. This Plan sets parameters for the establishment of Rates, not to 
exceed levels that allow for an appropriate saving for the contractor, 
that will optimize the availability and use of revenues from the sale 
and Exchange of Navajo Surplus to provide financial assistance for 
payment of the operation and maintenance expenses associated with 
Navajo Surplus and for the purposes set forth in 43 U.S.C. 1543(f), as 
amended by the Arizona Water Settlements Act of 2004, Pub. L. 108-451.
    E. This Plan satisfies the obligation of the United States in 
accordance with the Revised Stipulation, to amend the Original Plan 
``to provide for the establishment and collection of rates for the sale 
or exchange of Navajo Surplus Power after September 30, 2011.''
    F. This Plan specifies that for so long as Navajo operates and 
there is Navajo Surplus, Western shall continue to market Navajo 
Surplus under this Plan with such amendments or revisions as may be 
adopted by the Secretary of the Department of the Interior, after 
consultation with the Secretary of Energy, CAWCD, and the Governor of 
Arizona and as provided by law, including the authorities set forth in 
section II.

II. Authorities

    The authorities under which this Plan is developed are:
    A. Federal Reclamation laws (43 U.S.C. 372 et seq., and all Acts 
amendatory thereof or supplementary thereto); in particular, the 
Colorado River Basin Project Act of 1968, Pub. L. 90-537, as amended, 
the Colorado River Basin Salinity Control Act of 1974, Pub. L. 93-320, 
as amended, the Hoover Power Plant Act of 1984, Pub. L. 98-381, and the 
Arizona Water Settlements Act of 2004, Pub. L. 108-451.
    B. Rules, regulations, and agency agreements of Western and 
Reclamation issued or made pursuant to applicable law.

III. Definitions

    The following terms wherever used herein shall have the following 
meanings:
    A. ``Boulder City Marketing Area'' shall mean the marketing area 
defined in the 1984 Conformed Criteria published in the Federal 
Register (49 FR 50585) on December 28, 1984.
    B. ``Central Arizona Project'' or ``CAP'' shall mean the 
Reclamation multipurpose water resource development and management 
project in Arizona authorized by the Colorado River Basin Project Act 
of 1968, Pub. L. 90-537, as amended (43 U.S.C. 1501 et. seq.).
    C. ``CAWCD'' shall mean the Central Arizona Water Conservation 
District.
    D. ``Conformed Criteria'' shall mean the Conformed General 
Consolidated Power Marketing Criteria or Regulations

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for Boulder City Area Projects published in the Federal Register (49 FR 
50582) on December 28, 1984.
    E. ``Development Fund'' shall mean the Lower Colorado River Basin 
Development Fund established under section 403 of the Colorado River 
Basin Project Act of 1968, Pub. L. 90-537, as amended.
    F. ``Exchange'' shall mean any arrangements providing for delivery 
of capacity and energy to Western and return of capacity and energy by 
Western from Navajo within a one year period.
    G. ``Navajo'' shall mean the Navajo Generating Station, the thermal 
generating power plant located near Page, Arizona, and associated 
transmission facilities.
    H. ``Navajo Entitlement'' shall mean the United States entitlement 
of 24.3 percent of the generation from Navajo.
    I. ``Navajo Surplus'' shall mean capacity and energy associated 
with the Navajo Entitlement which is in excess of the pumping 
requirements of the Central Arizona Project and any such needs for 
desalting and protective pumping facilities as may be required under 
section 101(b)(2)(B) of the Colorado River Basin Salinity Control Act 
of 1974, Pub. L. 93-320, as amended.
    J. ``New Waddell Dam'' or ``New Waddell Reservoir'' shall mean the 
regulatory storage facilities constructed on the Agua Fria River as a 
feature of the CAP.
    K. ``Original Plan'' shall mean the original Navajo Power Marketing 
Plan adopted on December 1, 1987.
    L. ``Plan'' shall mean this Amended Navajo Power Marketing Plan.
    M. ``Rate(s)'' shall mean the price(s) established by a marketing 
process for various Navajo Surplus capacity or energy products marketed 
under this Plan to optimize the availability and use of revenues for 
the Development Fund.
    N. ``Reclamation'' shall mean the Bureau of Reclamation, United 
States Department of the Interior.
    O. ``Revised Stipulation'' shall mean the Revised Stipulation 
Regarding a Stay of Litigation, Resolution of Issues During the Stay 
and for Ultimate Judgment Upon the Satisfaction of Conditions, filed 
with the United States District Court for the District of Arizona in 
Central Arizona Water Conservation District v. United States, et al., 
No. CIV 95-625-TUC-WDB (EHC), No. CIV 95-1720-PHX-EHC (Consolidated 
Action), and that court's order dated April 28, 2003, and any 
amendments or revisions thereto.
    P. ``Western'' shall mean the Western Area Power Administration, 
United States Department of Energy.



IV. Power To Be Marketed

    A. Reclamation, in consultation with CAWCD, shall annually or more 
frequently, as appropriate, determine the Navajo Surplus available for 
sale and Exchange by Western, and the period for which it will be 
available for sale and Exchange, taking into consideration among other 
factors, the following:
    1. Existing contractual commitments to deliver Navajo Surplus, 
including new contracts entered into under the first opportunity 
provisions of section IV.G. of the Original Plan.
    2. CAP estimated pumping energy requirements in excess of capacity 
and energy supplied to CAWCD from Hoover Dam or New Waddell Dam, based 
on projected CAP water deliveries for that year and successive years.
    3. Estimated capacity and energy needs of the United States for 
desalting and protective pumping facilities, as may be required under 
section 101(b)(2)(B) of the Colorado River Basin Salinity Control Act 
of 1974, Pub. L. 93-320, as amended.
    4. Projected Navajo generation.
    B. Any Navajo Surplus not sold or Exchanged in accordance with 
paragraph A of this section may, as determined by Western, in 
cooperation with CAWCD and Reclamation, be sold under appropriate long-
term or short-term arrangements.

V. Optimization

    A. To optimize the availability of Navajo Surplus, CAWCD shall 
utilize, for CAP pumping requirements, Hoover capacity and energy 
scheduled from Hoover Dam in accordance with the terms and conditions 
of CAWCD's contract with the Arizona Power Authority to permit 
additional Navajo capacity and energy to be sold or Exchanged by 
Western as Navajo Surplus.
    B. To optimize the availability and use of revenues from the sale 
and Exchange of Navajo Surplus:
    1. CAWCD will use seasonal and daily power management. 
Specifically, CAWCD will divert maximum amounts of water from the 
Colorado River in the winter season for storage in the New Waddell 
Reservoir, and then serve CAP water demands in the summer season from 
water previously placed in storage. On a daily basis, CAWCD to the 
extent possible will pump off-peak to optimize the on-peak availability 
of Navajo Surplus.
    2. Western, in consultation with Reclamation and CAWCD, shall 
develop capacity and energy products from the Navajo Surplus determined 
to be available under section IV.A for sale or Exchange, taking into 
account market prices for standard capacity and energy products.

 VI. Eligibility

    A. Western shall offer Navajo Surplus for sale in the following 
order of priority, in accordance with part IV, section A of the 
Conformed Criteria:
    1. Preference entities within Arizona.
    2. Preference entities within the Boulder City Marketing Area.
    3. Preference entities in adjacent Federal marketing areas.
    4. Non-preference entities in the Boulder City Marketing Area.
    B. In the event a bidding or request for proposal process is 
utilized, after the bids or proposals are received the bidding entities 
will be given first opportunity, in order of priority, to purchase at a 
price which is based on the highest offer.
    C. In the event that a potential contractor fails to place Navajo 
Surplus capacity and energy under contract within a reasonable period, 
as specified by Western and in accordance with the terms and conditions 
offered by Western, the amounts of capacity and energy not placed under 
contract will be reoffered in accordance with the order of priority 
specified in paragraph A of this section.
    D. Arizona entities, regardless of preference status, shall have 
first opportunity for electrical capacity and energy Exchange rights as 
necessary to implement this Plan. Western, in consultation with CAWCD 
and Reclamation, may determine that any capacity and energy not 
subscribed to by Arizona entities for Exchange may be offered for sale 
in the order of priority stated in paragraph A of this section or may 
be offered to non-Arizona entities for Exchange.

VII. Contract Provisions

    A. Western, after consultation with Reclamation and CAWCD, shall 
enter into all power sales and Exchange contracts necessary to carry 
out the provisions of this Plan in selling and exchanging Navajo 
Surplus. Navajo Surplus shall be marketed, and Exchange rights granted, 
by Western on behalf of the Secretary of the Department of the 
Interior, under contracts consistent with this Plan and the Conformed 
Criteria.
    B. Contracts for the sale or Exchange of Navajo Surplus shall 
specify a delivery point on the Navajo or CAP

[[Page 54291]]

transmission systems as may be available. If the contractor cannot take 
delivery of Navajo Surplus into its own system at these delivery 
points, transmission service arrangements to other delivery points will 
be the obligation of the contractor.
    C. CAWCD may be a party to contracts for the sale or Exchange of 
Navajo Surplus for the limited purposes of (i) concurring that the 
contracts optimize the financial assistance available for the purposes 
set forth in 43 U.S.C. 1543(f), as amended by the Arizona Water 
Settlements Act of 2004, Pub. L. 108-451, and (ii) affirming any rights 
and obligations of CAWCD under the contracts.
    D. Western and the contractor shall agree upon written metering and 
scheduling instructions prior to any deliveries under this Plan. The 
metering and scheduling instructions shall provide the operating and 
accounting procedures for such deliveries. Metering and scheduling 
instructions are intended to implement terms of the contract, not to 
modify or amend it, and therefore are subordinate to the contract. 
Western and the contractor may modify these instructions, as necessary, 
to reflect changing power system conditions. In the event the 
contractor fails or refuses to execute the initial metering and 
scheduling instructions or any revised instructions Western determines 
to be necessary, Western shall develop and implement temporary 
instructions until acceptable instructions have been developed and 
executed by Western and the contractor.

VIII. Rate-Setting

    A. Rates for Navajo Surplus developed pursuant to section IV.A 
shall be established annually by Reclamation and Western, in 
consultation with CAWCD, through a competitive process that optimizes 
the availability and use of revenues for the Development Fund with 
priority to entities in accordance with section VI.A. and that allows 
for an appropriate saving for the contractor, taking into 
consideration, among other factors, prices for comparable capacity and 
energy products.
    B. Rates for Navajo Surplus developed under section IV.B or 
marketed under the first opportunity provision of the Original Plan 
shall be established in the contracts for sale of such Navajo Surplus, 
taking into consideration, among other factors, prices for comparable 
capacity and energy products, and allowing for an appropriate saving 
for the contractor.
    C. Rates developed annually pursuant to this Plan shall not be 
applicable to pre-existing contracts unless provided for in such 
contracts.
    D. Because of the Hoover Power Plant Act of 1984's, Pub. L. 98-381, 
requirements for noncost-based rates, the Rates established pursuant to 
this Plan are not suitable to the required review of Western's rates by 
the Federal Energy Regulatory Commission. All Rates promulgated by the 
Administrator of Western under this Plan shall be a final act of the 
Secretary of Energy and shall be subject to review pursuant to the 
judicial review provided by the Administrative Procedure Act (5 U.S.C. 
553, et seq.).

IX. Revenue Collection and Distribution

    Western shall deposit all revenue collected from the marketing of 
Navajo Surplus under this Plan into the Development Fund, where it will 
be used:
    A. First, to pay all costs of operation and maintenance determined 
to be associated with the sale and Exchange of Navajo Surplus, 
including actual costs for services performed by Reclamation and 
Western under this Plan including appropriate administrative expenses 
of Reclamation and Western.
    B. Second, for the purposes set forth in 43 U.S.C. 1543(f), as 
amended by the Arizona Water Settlements Act of 2004, Pub. L. 108-451, 
including crediting funds against the annual CAWCD repayment obligation 
and funding specific Indian water-related activities.

X. Effective Date

    This Plan will become effective 30 days after publication in the 
Federal Register following adoption by the Secretary of the Department 
of the Interior.

XI. Consultation

    This Plan is deemed most acceptable in accordance with section 
107(c) of the Hoover Power Plant Act of 1984, Pub. L. 98-381, after 
consultation with Western (Secretary of Energy), the Governor of 
Arizona, and CAWCD.
    Adopted:

    Dated: September 18, 2007.
Robert W. Johnson,
Commissioner, Bureau of Reclamation.
[FR Doc. E7-18744 Filed 9-21-07; 8:45 am]
BILLING CODE 4310-MN-P