[Federal Register Volume 74, Number 14 (Friday, January 23, 2009)]
[Notices]
[Pages 4183-4188]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-1454]


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DEPARTMENT OF ENERGY

Southwestern Power Administration


White River Minimum Flows--Final Determination of Federal and 
Non-Federal Hydropower Impacts

AGENCY: Southwestern Power Administration, DOE.

ACTION: Notice of final determination.

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SUMMARY: Section 132 of Public Law 109-103 (2005) authorized and 
directed the Secretary of the Army to implement alternatives BS-3 and 
NF-7, as described in the White River Minimum Flows Reallocation Study 
Report, Arkansas and Missouri, dated July 2004.
    The law states that the Administrator, Southwestern Power 
Administration (Southwestern), in consultation with the project 
licensee and the relevant state public utility commissions, shall 
determine any impacts on electric energy and capacity generated at 
Federal Energy Regulatory Commission (FERC) Project No. 2221 caused by 
the storage reallocation at Bull Shoals Lake. Further, the licensee of 
Project No. 2221 shall be fully compensated by the Corps of Engineers 
for those impacts on the basis of the present value of the estimated 
future lifetime replacement costs of the electrical energy and capacity 
at the time of implementation of the White River Minimum Flows project.
    The law also states that losses to the Federal hydropower purpose 
of the Bull Shoals and Norfork Projects shall be offset by a reduction 
in the costs allocated to the Federal hydropower purpose.
    Further, such reduction shall be determined by the Administrator of 
Southwestern on the basis of the present value of the estimated future 
lifetime replacement cost of the electrical energy and capacity at the 
time of implementation of the White River Minimum Flows project.
    Southwestern's draft determination was published by Federal 
Register Notice (73 FR 6717) dated February 5, 2008. Written comments 
were invited through March 6, 2008. All public comments received were 
considered, and Southwestern's draft determination was revised as 
necessary to incorporate the public comments. Since there were 
significant changes to Southwestern's draft determination, Southwestern 
published a proposed determination for additional public review and 
comment prior to its final determination.
    Southwestern's proposed determination was published by Federal 
Register Notice (73 FR 38198) on July 3, 2008. Written comments were 
invited through August 4, 2008. After receiving several requests for 
additional time to provide public comments, Southwestern reopened the 
public comment period through September 18, 2008. All public comments 
received were considered in revising the proposed determination, and 
Southwestern is publishing notification of its final determination. 
Southwestern's final determination is fully documented in its Final 
Determination Report dated January 2009, which was prepared in 
consultation with the licensee and the relevant public service 
commissions.
    Southwestern's Final Determination Report documents the procedure 
to be used to calculate the present value of the future lifetime 
replacement cost of the electrical energy and capacity lost due to the 
White River Minimum Flows project at the non-Federal FERC Project No. 
2221 and the Federal Bull Shoals and Norfork projects. The actual 
hydropower compensation values are to be calculated using the method 
presented in the final determination and current values for the 
specified parameters based on the official implementation date.
    Assuming a January 1, 2011, date of implementation for the White 
River Minimum Flows project and November 2008 values for the specified 
parameters, Southwestern's determination results in a present value for 
the estimated future lifetime replacement costs of the electrical 
energy and capacity at FERC Project No. 2221 of $41,319,400. 
Southwestern's determination results in a present value for the 
estimated future lifetime replacement costs of the electrical energy 
and capacity for Federal hydropower of $109,920,200.
    An electronic copy of Southwestern's Final Determination Report is 
available on Southwestern's Web site at http://www.swpa.gov/pdfs/WRMF_SWPA_FinalDeterminationReport.pdf.

FOR FURTHER INFORMATION CONTACT: Mr. George Robbins, Director, Division 
of Resources and Rates, Southwestern Power Administration, U.S. 
Department of Energy, One West Third Street, Tulsa, Oklahoma 74103, 
(918) 595-6680, [email protected].

SUPPLEMENTARY INFORMATION: Originally established by Secretarial Order 
No. 1865 dated August 31, 1943, as an agency of the U.S. Department of 
the Interior, Southwestern is now an agency within the U.S. Department 
of Energy which was created by an Act of the U.S. Congress, entitled 
the Department of Energy Organization Act, Public Law 95-91 (1977). 
Southwestern markets power from 24 multi-purpose reservoir projects 
with hydroelectric power facilities constructed and operated by the 
U.S. Army Corps of Engineers. These projects are located in the states 
of Arkansas, Missouri, Oklahoma, and Texas. Southwestern's marketing 
area includes these states plus Kansas and Louisiana.
    Southwestern developed a procedure for calculating projected energy 
and capacity losses for FERC Project No. 2221 and the Bull Shoals and 
Norfork projects, including additional losses related to the 
reallocation for minimum flows as appropriate. Based on November 2008 
values for the specified parameters, the calculated compensation due to 
the licensee of FERC Project.
    No. 2221 is $41,319,400, and the calculated credit due to Federal 
hydropower is $109,920,200. The values were calculated on the basis of 
the present value of the estimated future lifetime replacement cost of 
the electrical energy and capacity assuming an implementation date of 
January 1, 2011, for the White River Minimum Flows project.
    The final calculation will depend on the official date of 
implementation as specified by the Corps of Engineers and the value of 
the specified parameters in effect at that time.
    FERC Project No. 2221, the non-Federal Ozark Beach hydroelectric 
project, will be directly affected by the minimum flow plan. The 
implementation of the authorized plan will result in a reduction of the 
amount of gross head (headwater elevation minus the tailwater 
elevation) available for generation at the non-Federal project at Ozark 
Beach. The reduction in gross head will result in an annual energy loss 
of 6,029 megawatt-hours (MWh) of on-peak energy and 2,969 MWh of off-
peak energy, or an annual total energy loss of 8,998 MWh. Also 
associated with the loss of gross head, there will be a

[[Page 4184]]

capacity loss of 3.00 megawatts (MW) at the project.
    Section 132 of Public Law 109-103 (2005) authorized alternative BS-
3 at Bull Shoals, as described in the White River Minimum Flows 
Reallocation Study Report, Arkansas and Missouri, dated July 2004. 
Under the authorized plan for the Bull Shoals project, five feet of 
storage for minimum flows will be reallocated from the flood control 
pool with provisions to provide a portion of the reallocated storage 
for hydropower's use to maintain the yield of the current hydropower 
storage. The current seasonal pool plan will be superimposed on the new 
top of conservation pool. As a result, both the conservation and 
seasonal pool levels at Bull Shoals will be raised five feet. The 
additional downstream releases for minimum flows will be accomplished 
by generating with one of the main units at a low, inefficient rate. 
Since the current hydropower yield will be maintained, there will be no 
loss of marketable capacity or peaking energy at Bull Shoals.
    The energy loss, 23,855 MWh per year of off-peak energy, will be 
the result of making the required minimum downstream releases by 
generating energy at a much lower plant efficiency than normal 
generation.
    Since the energy that is produced from the minimum flow releases 
will be generated at a time when the energy is not needed to fulfill 
Federal peaking energy contracts, it is similar in value to the off-
peak energy normally generated during flood control operations.
    Operating a main unit at the lower efficiency will also increase 
the average maintenance costs at the project by an estimated $68,000 
per year. Section 132 of Public Law 109-103 (2005) authorized 
alternative NF-7 at Norfork, as described in the White River Minimum 
Flows Reallocation Study Report, Arkansas and Missouri, dated July 
2004. Under the authorized plan for the Norfork project, 3.5 feet of 
storage will be reallocated for minimum flows. One-half of the storage 
for minimum flows will be reallocated from the flood control pool and 
the other half from hydropower storage. The reallocation portion from 
the flood control storage is similar to the storage reallocation at 
Bull Shoals in that the hydropower storage yield for that portion will 
be maintained and the existing seasonal pool plan will be superimposed 
on the new top of conservation pool. As a result, both the conservation 
and seasonal pool levels at Norfork will be raised 1.75 feet. Unlike 
Bull Shoals, all minimum flow releases at Norfork, whether from 
reallocated flood or hydropower storage, will be spilled through a 
siphon with no energy generated from the water. Although there is no 
marketable capacity loss associated with the flood control storage 
portion of the reallocation, there will be an off-peak energy loss. The 
portion of the reallocation from the hydropower storage will reduce the 
yield available to hydropower and will directly impact the marketable 
capacity and on-peak energy available at Norfork. The annual energy 
loss at Norfork associated with the reallocation will be 6,762 MWh of 
off-peak energy and 6,762 MWh of on-peak energy, for a total annual 
energy loss of 13,524 MWh. The marketable capacity loss will be 3.93 
MW.

    Dated: January 12, 2009.
Jon C. Worthington,
Administrator.

Comments on Southwestern's June 2008 Proposed Determination

    Southwestern received comments from 176 entities and individuals 
during the public comment period. All of the comments received were 
considered, and responses to all comments are included in 
Southwestern's Final Determination Report. The major comments, by 
categories, and Southwestern's responses thereto, included the 
following:

A. Energy and Capacity Losses

    1. Comment. The non-Federal licensee reiterated the comments they 
provided on Southwestern's Draft Determination Report concerning the 
SUPER program and Southwestern's calculation of the lost energy.
    Response: Southwestern addressed Empire's previous comments in its 
Federal Register Notice (73 FR 38198) dated July 3, 2008. Responses to 
the comments are also included in Appendix K of Southwestern's Proposed 
Determination Report and Final Determination Report.
    2. Comment. The non-Federal licensee stated its ``calculations have 
resulted in a lost energy value that is approximately 40% higher than 
the most recent lost energy value calculated by SWPA'' and suggested 
that ``there must be significant differences in the modeling process as 
well.''
    Response: Southwestern's calculations were performed on a daily 
basis for the period of record modeled in SUPER and were based on the 
daily calculated value of head available at Ozark Beach. Empire's 
calculations were based on a different period of record and assumed 
that the loss of head would be five feet every day. The loss of head 
will vary on a daily basis and will not be a constant five feet. 
Southwestern's analysis correctly accounts for the daily variation in 
available head at the project. The different head calculation/
assumption accounts for the majority of the difference in the energy 
loss determination noted by Empire.
    3. Comment. The non-Federal licensee requested access to the SUPER 
model, including the data files used by Southwestern to calculate the 
lost energy at Ozark Beach, and the user's manual. It also requested 
copies of the model output showing benchmarking results that correlate 
the SUPER program output with the actual amount of energy generated at 
Ozark Beach through the historical period.
    Response: Southwestern has provided the data files used in its 
SUPER analysis and the calculations and output used in comparing the 
SUPER output with historical generation at Ozark Beach. Southwestern 
advised Empire, and Empire acknowledged that the SUPER program and 
user's manual is the property of the Corps of Engineers and Empire 
would need to ask the Corps for that material.
    4. Comment. The non-Federal licensee agrees with the 67% on-peak 
and 33% off-peak split for the lost energy at Ozark Beach.
    Response: Concur.
    5. Comment. The non-Federal licensee agrees with Southwestern's 
determination of the 3.00 MW capacity loss at Ozark Beach.
    Response: Concur.
    6. Comment. The commenters stated that they ``continue to support 
Southwestern's technical approach to the calculation of lost capacity 
and energy from water storage reallocations.''
    Response: Concur.
    7. Comment. The commenter ``strongly supports the process 
Southwestern uses for identifying and quantifying the energy and 
capacity lost due to reallocation of storage at Bull Shoals and 
Norfork, as well as the process for determining whether particular 
energy lost is peaking energy versus off-peak energy.''
    Response: Concur.
    8. Comment. The commenter ``concurs with the use of the drought of 
record to determine the loss of dependable capacity'' and also stated 
``since Southwestern's system is entirely hydro-based and Southwestern 
markets firm capacity, use of the drought of record is the only 
acceptable method to determine capacity losses due to storage 
reallocation.''
    Response: Concur.
    9. Comment. The commenter questioned whether Southwestern's

[[Page 4185]]

calculations for Bull Shoals and Norfork included Hydropower Yield 
Protection Operation (HYPO) storage and Dependable Yield Mitigation 
Storage (DYMS) storage. They stated ``storage not available to meet 
minimum flow should not be included in the energy compensation 
calculations at Bull Shoals and Norfork.''
    Response: Concur. Southwestern's determination of the hydropower 
impacts at Bull Shoals and Norfork due to the implementation of minimum 
flows was based on comparing current conditions and conditions after 
the implementation of minimum flows. The HYPO and DYMS storage provided 
as a result of the flood control storage reallocations has never been 
included as part of the minimum flows storage in the SUPER simulation 
or in Southwestern's calculations.
    10. Comment. The commenter questioned Southwestern's 
characterization of all energy produced from minimum flow releases at 
Bull Shoals as off-peak. They noted that ``generation occurring between 
6 a.m. and 10 p.m. (16 hours) is considered on-peak, and electricity 
produced between 10 p.m. and 6 p.m. (8 hours) is considered off-peak.'' 
They suggested that ``a split of 67% on-peak and 33% off-peak should be 
used to value energy produced by minimum flows at Bull Shoals.''
    Response: Southwestern's marketing plan and the limited storage in 
Bull Shoals dictate that in a conservation pool operation, the Bull 
Shoals project may be run for only a few hours during the day to meet 
customers' contractual peaking energy demands. Releases for minimum 
flows will be made through one of the main units during all other hours 
of the day. Even though minimum flows may be released during the 
industry standard on-peak hours of the day (6 a.m. to 10 p.m. weekdays, 
excluding holidays), the energy that results from those releases will 
be produced at a time when it is not needed to fulfill Southwestern's 
contractual obligations. That energy will be marketed by Southwestern 
to its customers as ``supplemental'' energy. While supplemental energy 
is valuable to Southwestern's customers, it is not nearly as valuable 
to them as firm peaking energy. Southwestern will continue to consider 
all energy produced by minimum flows at Bull Shoals to be off-peak 
energy. If the lost energy were valued as on-peak energy as suggested, 
the credit to the Federal hydropower purpose would increase.
    11. Comment. The commenter questioned the use of the current 
seasonal pool in the base condition SUPER run stating ``Base runs for 
the determining of energy loss at Bull Shoals and Norfork should not 
include seasonal pools. If included, we would consider the use of 
seasonal pools on both reservoirs a significant federal action and 
subject to NEPA.''
    Response: Releases have been required from Bull Shoals and Norfork 
since the 1960s in order to maintain water temperatures suitable for 
the downstream trout fishery. Those releases are dependent on the 
forecasted air temperature to assure more cold water releases on hotter 
days. Since storage was not specifically allocated to the trout 
fishery, releases were made from hydropower storage. The increase in 
reliability of the cold water for the fishery reduced the flexibility 
of the hydropower operation. The water was still being used for power 
production, but the schedule was based on fishery requirements rather 
than electrical demand. Minimum release requirements from Bull Shoals 
and Norfork were increased in the late 1970s in an effort to achieve 
desired water temperatures in the river all the way down to Sylamore.
    During the mid-1970s, the Corps and Southwestern negotiated the 
development of seasonal use of a portion of the flood control storage 
for hydropower use. That seasonal use of flood storage was an attempt 
to minimize the losses to power production caused by the releases 
necessary to maintain the trout fishery. The current seasonal pools at 
Bull Shoals and Norfork Lakes were officially implemented as a 
permanent part of the Corps' water control plan in the late 1970s in 
order to provide a more dependable supply of water from hydropower 
storage for the trout fishery, while partially mitigating the 
hydropower losses due to those releases. The seasonal pools are a part 
of the current approved water control plans as shown in the Corps' 
``White River Basin, Arkansas and Missouri, Water Control Master 
Manual,'' dated March 1993. As such, the seasonal pools were included 
in both the base and minimum flow SUPER runs for the Corps' and 
Southwestern's analysis.
    Exclusion of the seasonal pools from the base condition, as 
suggested, and inclusion of the seasonal pools in the ``with project'' 
condition, as authorized, would result in even higher energy and 
capacity losses to the non-Federal licensee of FERC project number 
2221.
    12. Comment. The commenter questioned Southwestern's computed 
capacity loss at Ozark Beach, stating that ``compensation for energy 
loss alone seems to be a more reasonable approach.''
    Response: Since the Ozark Beach project is a run of river project 
and not a storage project, the capacity loss calculation was developed 
with a slightly different type of analysis than that performed at Bull 
Shoals and Norfork. The capacity loss was computed by comparing the 
plant capacity values in the base SUPER run and the minimum flows SUPER 
run. The average difference in capacity over the 23,376 days in the 
period of record is 1.87 MW. The median difference is 2.34 MW. A 
duration analysis of the daily differences in capacity revealed that 
the difference was 3.00 MW or greater about 30 percent of the time. In 
addition, the difference was 3.00 MW or greater about 30 percent of the 
time during the typically high electrical load months of July and 
August. For a storage project, a reduction of capacity during the 
critical period is considered to be a capacity loss to the project. For 
a run of river project, capacity that is unavailable 30 percent of the 
time, especially during the peak electrical demand months, is not 
reliable or marketable. Electrical consumers expect their lights to 
work 100 percent of the time, not 70 percent. Empire computed the 
capacity loss independently by a different method and also determined a 
3.00 MW capacity loss. The capacity loss at Ozark Beach is 3.00 MW.
    13. Comment. ``It appears as though worst case scenarios and 
drought environmental conditions were used to calculate all energy and 
capacity losses for both SWPA and Empire District Electric. When SWPA 
calculated energy losses what was the basis of these calculations?''
    Response: Energy losses for both the Federal and non-Federal 
hydropower projects were computed based on average annual results over 
the 1940-2003 period of record modeled with the Corps' SUPER reservoir 
simulation model.
    Capacity losses at the Federal projects were computed based on the 
1953-1954 drought. Southwestern bases its marketable capacity on the 
worst drought in the period of record in order to provide reliable, 
dependable electrical capacity. The critical drought occurred in 
Southwestern's system during the period from June 1953 through August 
1954, with August 1954 being the critical month. Thus, the computed 
capacity loss was also determined based on that drought period. Any 
reduction in the yield of the hydropower storage will result in a 
reduction of the marketable capacity that can be supported by the 
storage. A reduction in the supportable capacity results in a capacity 
loss. There was no

[[Page 4186]]

capacity loss at Bull Shoals. There was a capacity loss computed at 
Norfork that was due to the conservation storage portion of the 
reallocation.
    The capacity loss calculated for the non-Federal project was 
discussed in the previous response.

B. Replacement Costs of Energy and Capacity

    1. Comment. The non-Federal licensee agreed with Southwestern's use 
of the Platts High Fuel Value energy costs for replacement on-peak and 
off-peak energy and combined cycle plant capacity cost for replacement 
capacity.
    Response: Concur.
    2. Comment. The commenter stated that ``on average, the Platts 
forecast of electricity prices provides a reasonable basis for 
estimating the economic value of the energy lost by Empire District 
Electric Company at its Ozark Beach Hydroelectric Plant on the White 
River.''
    Response: Concur.
    3. Comment. The commenter stated that they ``believe that Platts 
Power Outlook Research Service offers as reliable a forecast as is 
currently available. We have no objection to the use of the Platts 
long-term forecast, on the understanding that the forecast will be 
updated at the time the minimum flow program is implemented.''
    Response: Concur.
    4. Comment. The commenter ``commends Southwestern for adopting 
recommendations it received in the previous comment period to utilize 
Platt's energy price forecasts as the proxy for the value of on-peak 
and off-peak energy losses.''
    Response: Concur.
    5. Comment. ``According to the SWPA report, energy and capacity 
losses were calculated utilizing the Platts and FERC methods. Is it 
prudent to assume that the methods used for calculating energy losses 
and capacity losses should be the same?''
    Response: The Corps' Hydropower Analysis Center (HAC) is 
responsible for developing the energy and capacity values used by the 
Corps in their evaluation of hydropower projects. Prior to mid-2005, 
HAC typically used the PROSYM production cost model, a proprietary 
computer model, to develop energy values and used procedures developed 
by FERC to develop capacity values. The FERC model also computed energy 
values; however, HAC did not use those values in its computations. 
Southwestern concluded based on purchasing experience that the PROSYM 
model produced energy values considerably below market rates. Although 
the FERC method energy values were also typically below market rates, 
they better reflected market values than the PROSYM model values. 
Absent another source, Southwestern would typically use the FERC method 
energy values to determine the impacts of various changes on hydropower 
production. Southwestern, like HAC, used the FERC method in determining 
the value of capacity losses.
    Southwestern used the FERC method calculations for valuation of 
both lost energy and capacity in its Draft Determination Report. 
Southwestern recognized that the FERC-based values for energy, 
particularly off-peak energy, were significantly below real-life market 
conditions. However, Southwestern used the FERC-based values to be 
consistent with its previous comments on Corps reallocation studies.
    The Corps' HAC began exploring other sources to provide realistic 
energy values during the study period. In late 2005, HAC started using 
the Platts Power Outlook Research Service, a North American power 
market forecast subscription service, for determining energy values. 
Although FERC no longer supported its model, HAC continued using the 
FERC model for determination of capacity values by indexing upward to 
current prices. Southwestern began searching for more appropriate 
methods to determine both energy and capacity values when it was 
assigned responsibility of determining the hydropower impacts of the 
minimum flows to both the Federal and non-Federal projects. Comments on 
Southwestern's Draft Determination Report from electrical industry 
participants strongly supported the use of an industry source such as 
Platts to overcome the wide disparity between the low energy prices 
used in the initial report and actual market conditions. Southwestern's 
research revealed that the Platts values for on-peak and off-peak 
energy are much more reflective of the current market than the FERC 
values and closely match Southwestern's energy purchases during the 
2005-2006 drought period. A discussion of Southwestern's research is 
included in Appendix L in Southwestern's Final Determination Report. 
Like HAC, Southwestern eventually concluded that Platts was the best 
source for energy values and, because of a lack of other sources, the 
FERC method would continue to be the best source for determining the 
capacity value.
    Additionally, the Corps and Empire had agreed to the use of the 
Platts energy values prior to Southwestern's legislative obligation to 
determine the hydropower impacts. Electrical industry participants also 
commented that the FERC-based values for capacity were ``reasonable'' 
but ``conservative''. Sources for valuing energy and capacity are 
limited. Southwestern attempted to use sources that closely reflect 
market conditions.
    6. Comment. ``According to the SWPA study, energy losses were 
calculated utilizing on peak energy replacement costs only. Since 
generation can occur at on and off peak times, shouldn't on and off 
peak rates be utilized in this calculation?''
    Response: Both on-peak and off-peak energy rates were utilized in 
the calculation as determined appropriate according to when the losses 
were expected to occur. The energy loss at Bull Shoals was considered 
100% off-peak. The energy loss at Norfork was considered 50% on-peak 
and 50% off-peak. The energy loss at Ozark Beach was considered 67% on-
peak and 33% off-peak. The reasoning behind those on-peak/off-peak 
splits is detailed in Southwestern's report. Losses considered on-peak 
were valued as on-peak energy, and losses considered off-peak were 
valued as off-peak energy.

C. Maintenance Costs

    1. Comment. ``The sources used by Empire do not include fixed O&M 
costs as part of the capacity costs. As long as there is agreement that 
the ultimate source is: a) reflective of the current market for 
construction costs and b) actually includes fixed O&M costs, Empire 
will accept this assumption.''
    Response: Concur.

D. Inflation

    1. Comment. The non-Federal licensee agrees that the inflation rate 
used by Southwestern is ``an acceptable assumption.''
    Response: Concur.
    2. Comment. The commenter stated that ``from 1982 to 2006, 
inflation has averaged 3.1 percent per year'', and reiterated their 
recommendation that Southwestern utilize ``an industry specific 
producer price index which more closely mirrors the increased costs 
associated with electric power generation.''
    Response: Southwestern recognizes that historical inflation rates, 
including the Bureau of Labor Statistics data cited by the commenter, 
have been higher than the EIA ``reference case'' rate proposed by 
Southwestern in its proposed determination. Economic conditions over 
the next 50 years are difficult if not impossible to reliably predict. 
Southwestern has been unable to locate a long-term, energy-specific 
inflation forecast. The EIA is an independent statistical and 
analytical

[[Page 4187]]

agency within the U.S. Department of Energy, which is a recognized 
source of policy-neutral data, forecasts, and analyses. Southwestern 
will continue to use the ``reference case'' inflation rate in the 
latest Annual Energy Outlook in the determination of the Federal and 
non-Federal hydropower impacts.
    3. Comment. The commenter urged Southwestern to ``search for 
another proxy that better reflects the anticipated cost increases to be 
expected in the electric utility industry.''
    Response: See response to Comment 2.

E. Present Value Determination

    1. Comment. The non-Federal licensee ``agrees with SWPA that the 
current rate on 30-year Treasury Notes at the time of implementation is 
the appropriate value to use in the calculation.''
    Response: Concur.
    2. Comment. The commenter stated that they ``support Southwestern's 
selection of the current rate on 30-year Treasury notes to be used as 
the discount rate in the present value calculation.''
    Response: Concur.
    3. Comment. ``Per the SWPA study, Empire's loss of hydropower and 
capacity calculations have been based on a 50 year time frame. Since 
Ozark Beach Dam's FERC license is only good for another 14 years--to 
2022, why would the cost be calculated based on 50 years when their 
license (FERC license number 2221) expires in 14 years? There is no 
guarantee that Empire's FERC license will be reissued particularly in 
light of the potential for other energy options to materialize. Is it 
legal or ethical for Congress to appropriate taxpayer dollars to pay 
Empire District Electric for future power that they are not yet 
licensed to market?''
    Response: Southwestern selected a 50-year period for its analysis 
of the impacts of the White River minimum flows project on hydropower 
production at the FERC Project No. 2221 and for its determination of 
the compensation owed to the FERC licensee. The 50-year period does 
exceed the 14 years remaining on the current FERC license for the 
project.
    The period of analysis used by Southwestern in its determination of 
the impacts of the White River minimum flows on the Empire District 
Electric Company's FERC-licensed project is based in part on the 
Economic and Environmental Principles and Guidelines for Water and 
Related Land Resources Implementation Studies (Principles and 
Guidelines). The Principles and Guidelines were developed by the U.S. 
Water Resources Council in 1983 to guide the formulation and evaluation 
studies of the major Federal water resources development agencies.
    Since Empire has successfully completed the relicensing process 
several times for the project and there are no known environmental or 
safety issues at the project, there is no reason to believe that the 
project would not be relicensed again in the future. Empire has stated 
its intends to continue operation of the project and pursue the 
relicensing effort when needed. Empire has recently invested heavily in 
upgrading the power facility with the installation of new turbines.
    The non-Federal licensee provided the following response at the 
request of Southwestern: ``Empire agrees that our current license will 
expire in 2022. Empire and its predecessors have operated and 
maintained this plant since it became commercial in 1913. It is our 
intention to apply for and receive a new FERC license in 2022. Our 
conversations with FERC staff in Chicago and Washington, DC indicate 
that every expiring license in the Midwest that has been applied for in 
the last 20 years has been renewed and that given Empire's excellent 
record of compliance it would be highly unlikely that Ozark Beach's 
license would not be renewed. We are not aware of any other energy 
option that may materialize that would be more cost beneficial than 
hydroelectric power. The law as enacted requires compensation to Empire 
for the future lifetime costs to our customers. It is our belief that a 
dam will continue to exist at the location of the present Ozark Beach 
dam as long as society exists. Even if a new dam were constructed, 
there would be 5 feet less head and the new dam would have much less 
economic value. The economic and biological impacts of removing the 
Ozark Beach dam would be large.''
    Regarding the legality of paying Empire for losses beyond the 14 
years remaining on its current license, Southwestern believes the law 
is very explicit that payment to Empire be based on the ``future 
lifetime replacement costs of the electrical energy and capacity'' loss 
``caused by the storage reallocation at Bull Shoals Lake.'' The 
legislation places no condition on the status of Empire's license.

F. Carbon Tax and Renewable Portfolio Standard

    1. Comment. The non-Federal licensee reiterated previous comments 
concerning a carbon tax and renewable risk premium and requested ``that 
a methodology be implemented to compensate it for the loss of renewable 
capacity and energy associated with the White River Reallocation at its 
Ozark Beach dam.''
    Response: Southwestern maintains the position stated in its 
response to the previous comments in its Federal Register Notice (73 FR 
38198) dated July 3, 2008: Since there is no way to reliably estimate 
if, when, or how a carbon dioxide tax would be implemented, 
Southwestern did not include losses based on a carbon dioxide tax. The 
impacts to both Federal and non-Federal hydropower should be quantified 
and included in the compensation calculation if any carbon dioxide tax 
legislation is implemented before the final payment or offset is 
completed.
    Also, since there is no way to reliably estimate if, when, or how a 
renewable portfolio standard would be implemented, the impacts would be 
difficult to quantify. At the time of Southwestern's Draft and Proposed 
Determinations, the state of Missouri had a voluntary standard for 
adopting renewable energy but no mandatory targets. Voters in Missouri 
approved a state renewable energy standard in November 2008, and the 
voluntary standard was repealed. However, the Ozark Beach project does 
not appear to qualify under the new standard. Southwestern maintains 
the same position on a renewable risk premium as on a possible carbon 
dioxide tax: If a state or Federal mandatory renewable portfolio 
standard that qualifies any of the three projects studied is 
implemented before the final payment or offset is completed, the 
impacts to both Federal and non-Federal hydropower should be quantified 
and included in the compensation calculation.
    The authorizing legislation for the White River Minimum Flows 
project states that Empire will be compensated with a one-time payment 
``on the basis of the present value of the estimated future lifetime 
replacement costs of the electrical energy and capacity at the time of 
implementation of the White River Minimum Flows project.'' If the 
compensation to Empire were changed from a one-time payment to payments 
over a number of years, compensation for the impacts of a carbon 
dioxide tax or a renewable portfolio standard for the remainder of the 
payments should be computed and applied if either were implemented 
during that series of payments.

[[Page 4188]]

G. Operational Considerations

    1. Comment. The commenter stated that they ``support Southwestern's 
analysis and recommendations concerning the operational considerations 
in Section 8.''
    Response: Concur.
    2. Comment. ``In Section 8.2 Water Temperature Control states 
minimum flows should be considered meeting a portion of the 3-day, 
6,000 cfs-day generation releases designed to maintain suitable water 
temperatures in the downstream trout fishery and SWPA's generation 
requirements should be reduced accordingly, or additional compensation 
provided. We agree releases are needed to maintain suitable water 
temperatures and commend SWPA for providing these releases. However, we 
do not agree these volumes should be reduced since (1) seasonal pools 
have been provided to mitigate SWPA for these generations, (2) neither 
the timing nor volume of these releases are optimal for addressing 
temperature needs of the downstream trout fishery.''
    Response: Southwestern does not concur. The 3-day requirement is 
for a specific amount of water to be released over each 3-day period. 
The modeling and computation performed by both the Corps and 
Southwestern of the hydropower impacts and associated compensation were 
based upon the assumption that the minimum flow releases would be used 
to help meet those downstream requirements. If it is decided that such 
an operation is not desirable, then the assumption would need to be 
changed, the impact to hydropower would need to be recomputed, and the 
compensation increased accordingly.

 [FR Doc. E9-1454 Filed 1-22-09; 8:45 am]
BILLING CODE 6450-01-P