[Federal Register Volume 73, Number 159 (Friday, August 15, 2008)]
[Notices]
[Pages 47945-47947]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-18953]



[[Page 47945]]

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DEPARTMENT OF ENERGY

Western Area Power Administration


Pick-Sloan Missouri Basin Program--Eastern Division--Rate Order 
No. WAPA-140

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-F9 and P-SED-FP9, extend through 
December 31, 2012, 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 expenses, and repay 
required investments within the allowable periods. Western will prepare 
and make available a brochure that provides detailed information on the 
proposed rates. The proposed rates, under Rate Schedules P-SED-F10 and 
P-SED-FP10, are scheduled to go into effect on January 1, 2009, and 
will remain in effect through December 31, 2013, or until superseded. 
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 
November 13, 2008. Western will present a detailed explanation of the 
proposed rates at public information forums. Public information forum 
dates are:
    1. September 9, 2008, 9 a.m. to 10:30 a.m. MDT, Denver, CO.
    2. September 10, 2008, 8 a.m. to 9:30 a.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. September 9, 2008, 11:30 a.m. to 12:30 p.m. MDT, Denver, CO.
    2. September 10, 2008, 10:30 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 (FERC) actions concerning the rates 
submitted by Western to FERC for approval should be sent to Mr. 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/2009firmrateadjust. Western will post comments received via letter and 
e-mail to its Web site after the close of the comment period. Western 
must receive written comments by the end of the consultation and 
comment period to ensure they are considered in Western's decision 
process.
    Public information and comment forum locations are:
    1. Denver--Ramada Plaza Hotel, 10 East 120th Avenue, Northglenn, 
CO.
    2. Sioux Falls--Holiday Inn, 100 West 8th Street, Sioux Falls, SD.

FOR FURTHER INFORMATION CONTACT: Ms. Linda Cady-Hoffman, Rates Manager, 
Upper Great Plains Region, Western Area Power Administration, 2900 4th 
Avenue North, Billings, MT 59101-1266, telephone (406) 247-7439, e-mail 
[email protected].

SUPPLEMENTARY INFORMATION: The 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.
    Rate Schedules P-SED-F9 and P-SED-FP9 for P-SMBP--ED firm electric 
and firm peaking service, respectively, were approved for a 5-year 
period beginning on January 1, 2008, and ending December 31, 2012.\1\ 
Under current Rate Schedule P-SED-F9 effective January 1, 2008, the 
composite rate is 24.49 mills per kilowatthour (mills/kWh), the firm 
energy rate is 13.99 mills/kWh, and the firm capacity rate is $5.65 per 
kilowattmonth (kWmonth). The projected revenue requirement for firm 
electric service is allocated equally between capacity and energy. 
Under current Rate Schedule P-SED-FP9 effective January 1, 2008, the 
firm peaking capacity rate is $5.10/kWmonth. These Rate Schedules are 
formula based, providing for an up to 2 mills/kWh increase in the 
Drought Adder rate component.
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    \1\ WAPA-135 was approved by the Deputy Secretary of Energy on 
November 14, 2007 (72 FR ] 64067), and confirmed and approved by 
FERC on a final basis on April 14, 2008, through December 31, 2012, 
in Docket No. EF08-5031-000 (123 FERC ] 62048).
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    This proposed rate adjustment reflects a rate increase based on the 
P-SMBP--ED Final Fiscal Year 2007 Power Repayment Study (PRS). The PRS 
sets the total annual P-SMBP--ED revenue requirement for 2009 for firm 
electric and firm peaking power service at $282.6 million, or a 19.8 
percent increase for a composite rate of 29.34 mills/kWh. The current 
rates, including a 2 mills/kWh increase provided for under the Drought 
Adder formula rate component, are not sufficient to meet the P-SMBP--ED 
revenue requirements. Given the need for a Base rate component increase 
and the size of the Drought Adder rate component increase, Western is 
required to initiate a formal public process.\2\ Western has prepared 
rate schedules for firm electric service (P-SED-F10) and firm peaking 
service (P-SED-FP10) for consideration and comment during this public 
process. A comparison of the existing revenue requirement and rates, 
and the proposed revenue requirement and rates under P-SED-F10 and P-
SED-FP10 are listed in Table 1.
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    \2\ Under the current Rate Schedules Western had the option of 
increasing the Drought Adder rate component by up to 2 mills/kWh 
outside of a formal public process, and only initiating the formal 
public process for the Base rate component increase and the 
incremental increase of the Drought Adder rate component above 2 
mills/kWh. Instead, Western has opted to initiate the formal public 
process for this rate increase.

     Table 1--Proposed P-SMBP-ED Firm Electric and Firm Peaking Power Service Revenue Requirement and Rates
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                                                                                                  Percent change
                                                                   Proposed rates (Jan. 1, 2009)   from existing
       Firm electric service          Existing rates as of 2008                 \2\                   2008 to
                                                                                                   proposed 2009
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Firm and Firm Peaking Revenue       $235.9 million...............  $282.6 million...............            19.8
 Requirement.
Composite Rate....................  24.49 mills/kWh..............  29.34 mills/kWh..............            19.8
Firm Capacity Rate................  $5.65/kWmonth................  $6.80/kWmonth................            20.4

[[Page 47946]]

 
Firm Energy Rate..................  13.99 mills/kWh..............  16.71 mills/kWh..............            19.4
Firm Peaking Capacity Rate........  $5.10/kWmonth................  $6.20/kWmonth................            21.6
Firm Peaking Energy Rate \1\......  13.99 mills/kWh..............  16.71 mills/kWh..............            19.4
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\1\ Firm peaking energy is normally returned. This will be assessed in the event firm peaking energy is not
  returned.
\2\ The proposed rates are subject to adjustment prior to publication in the final Notice of Order Concerning
  Power Rates. Adjustments, if any, would be based on revisions to the Drought Adder rate component due to
  changes in hydrological conditions.

    Under Rate Schedule P-SED-F10, Western is proposing to continue to 
identify its firm electric service revenue requirement using Base and 
Drought Adder rate components and provide up to a 2 mills/kWh increase 
in the Drought Adder rate component. The Base rate component 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 rate component is a formula-based revenue 
requirement that includes costs attributable to the past and present 
drought conditions within the Pick-Sloan Program. The Drought Adder 
rate component 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 
rate component 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 2007 
will be repaid by 2017.
    The annual revenue requirement calculation will continue to be 
summarized by the following formula: Annual Revenue Requirement = Base 
Revenue Requirement + Drought Adder Revenue Requirement. Under this 
proposal, effective January 1, 2009, the P-SMBP-ED annual revenue 
requirement equals $293.7 million and is comprised of a Base revenue 
requirement of $163.5 million plus a Drought Adder revenue requirement 
of $130.2 million. Both the Base and Drought Adder rate components 
recover portions of the firm power revenue requirement, firm peaking 
power, and associated five percent discount revenue necessary to equal 
the P-SMBP-ED revenue requirement. A comparison of the current and 
proposed rate components are listed in Table 2.

                                 Table 2--Summary of P-SMBP--ED Rate Components
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                                       Existing rates as of 2008           Proposed rates (effective January 1,
                               -----------------------------------------                2009) \2\
                                                                        ----------------------------------------
                                   Base rate    Drought  adder   Total      Base rate    Drought  adder
                                   component    rate component              component    rate component   Total
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Firm Capacity Rate (/kWmonth).           $3.65           $2.00    $5.65           $3.80           $3.00    $6.80
Firm Energy Rate (mills/kWh)..            8.93            5.06    13.99            9.27            7.44    16.71
Firm Peaking Capacity Rate (/            $3.25           $1.85    $5.10           $3.40           $2.80    $6.20
 kWmonth).....................
Firm Peaking Energy Rate                  8.93            5.06    13.99            9.27            7.44    16.71
 (mills/kWh) \1\..............
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\1\ Firm peaking energy is normally returned. This will be assessed in the event firm peaking energy is not
  returned.
\2\ The proposed rates are subject to adjustment prior to publication in the final Notice of Order Concerning
  Power Rates. Adjustments, if any, would be based on revisions to the Drought Adder rate component due to
  changes in hydrological conditions.

    As set forth in Table 2 above, under proposed Rate Schedule P-SED-
FP10, the firm peaking capacity rate will increase to $6.20/kWmonth, or 
a 21.6 percent increase for the proposed January 1, 2009, rate 
adjustment. 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.
    Continuing to identify the firm electric service revenue 
requirement using Base and Drought Adder rate components will assist 
Western in the presentation of the impacts of the drought within the 
Pick-Sloan Program, demonstrate repayment of the 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 rate components.
    Western reviews its firm electric service rates annually. Western 
will review the Base rate component after the annual PRS is completed, 
generally in the first quarter of the calendar year. If an adjustment 
to the Base rate component is necessary, Western will initiate a public 
process pursuant to 10 CFR part 903 prior to making an adjustment.
    In accordance with the original implementation of the Drought Adder 
rate component, Western will continue to review the Drought Adder rate 
component each September to determine if drought costs differ from

[[Page 47947]]

those projected in the PRS, and, if so, whether an adjustment, either 
incremental or decremental, to the Drought Adder rate component is 
necessary. Western will notify customers by letter each October of the 
planned incremental or decremental adjustment and implement the 
adjustment in the January billing cycle. Although decremental 
adjustments to the Drought Adder rate component will occur as drought 
costs are repaid, the adjustments cannot result in a negative Drought 
Adder rate component. To give customers advance notice, Western will 
conduct a preliminary review of the Drought Adder rate component in 
early summer and notify customers by letter of the estimated change to 
the Drought Adder rate component for the following January, with the 
final Drought Adder rate component adjustment verified with 
notification in the October letter to the customers. Implementing the 
Drought Adder rate component adjustment on January 1 of each year will 
help keep the drought deficits from escalating as quickly, will lower 
the interest expense due to drought deficits, will demonstrate 
responsible deficit management, and will provide prompt drought deficit 
repayments.
    As a part of the current and proposed rate schedules, Western 
provides for a formula-based adjustment of the Drought Adder rate 
component of up to 2 mills/kWh. The 2 mills/kWh cap is intended to 
place a limit on the amount the Drought Adder formula can be adjusted 
relative to associated drought costs without having to go through a 
public process to recover costs attributable to the Drought Adder 
formula rate for any one-year cycle.
    During informal discussions with its customers prior to the 
commencement of this rate adjustment process, Western discussed the 
possibility of implementing a two-step rate adjustment for the Base 
rate component to address operational and maintenance costs as well as 
normal inflationary costs that would be entered into the PRS from the 
FY 2010 work plans. Western has reevaluated the benefits of a two-step 
rate adjustment and concluded with the unpredictability of the 
hydrological conditions, rising fuel costs and proposed changes in the 
electric transmission industry, it is more prudent to forego a two-step 
rate adjustment and continue the annual customer consultations and 
possible annual rate adjustments. Therefore, Western is not proposing a 
two-step rate adjustment in this public process.
    Due to continuing below normal hydropower generation in the P-
SMBP--ED, Western may need to use the Continuing Fund (Emergency Fund) 
to pay for unanticipated purchase power and wheeling expenses necessary 
to meet its contractual obligations for the sale and delivery of power 
to its customers. Should Western use this funding mechanism, Western 
will replenish the Continuing Fund (Emergency Fund) in accordance with 
law and Western's associated repayment policy, dated March 15, 2007.\3\
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    \3\ Western's Continuing Fund (Emergency Fund) Policy can be 
found at http://www.wapa.gov/powerm/pdf/repaypolicy.pdf.
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Legal Authority

    Since the proposed rates constitute a major rate adjustment as 
defined by 10 CFR part 903, Western will hold public information forums 
and public comment forums. Western will review all timely public 
comments and make amendments or adjustments to the proposal as 
appropriate. Proposed rates will be forwarded to the Deputy Secretary 
of Energy for approval 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, 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 FERC. 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, or other 
documents that Western initiates or uses to develop the proposed rates 
are available for inspection and copying 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 ``2009 Firm Rate Adjustment'' section 
located at http://www.wapa.gov/ugp/rates/2009firmrateadjust.

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: July 31, 2008.
Timothy J. Meeks,
Administrator.
[FR Doc. E8-18953 Filed 8-14-08; 8:45 am]
BILLING CODE 6450-01-P