[Federal Register Volume 74, Number 108 (Monday, June 8, 2009)]
[Notices]
[Pages 27135-27137]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-13322]


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DEPARTMENT OF ENERGY

Southwestern Power Administration


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

AGENCY: Southwestern Power Administration, DOE.

ACTION: Notice of public review and comment.

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SUMMARY: Southwestern Power Administration (Southwestern) has developed 
a draft addendum to its January 2009 Final Determination Report 
concerning the Federal and non-Federal hydropower impacts of the White 
River Minimum Flows project. The draft addendum documents proposed 
changes to Southwestern's final determination. The proposed changes 
include: (1) Accounting for the impacts that the increase in average 
pool elevation has on the operation of the Federal Bull Shoals and 
Norfork projects, and (2) the inclusion of an additional discount rate 
source to be used by Southwestern in determination of the present value 
of the losses to both Federal projects and Federal Energy Regulatory 
Commission (FERC) Project No. 2221.
    Assuming a January 1, 2011, date of implementation for the White 
River Minimum Flows project and current values for the specified 
parameters, Southwestern's modified final determination results in a 
present value of $22,340,800 for the estimated future lifetime 
replacement costs of the electrical energy and capacity at FERC Project 
No. 2221. Southwestern's modified final determination results in a 
present value of $60,851,800 for the estimated future lifetime 
replacement costs of the electrical energy and capacity for Federal 
hydropower.

DATES: The consultation and comment period will begin on the date of 
publication of this Federal Register notice and will end on July 8, 
2009.

ADDRESSES: Written comments on Southwestern's draft addendum to its 
final determination should be submitted to George Robbins, Director, 
Division of Resources and Rates, Southwestern Power Administration, 
U.S. Department of Energy, One West Third Street, Tulsa, Oklahoma 
74103, or e-mail [email protected]. Comments will be accepted 
only on the proposed changes in the draft addendum and not on any other 
aspect of Southwestern's final determination.

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:

I. Discussion

    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 (Corps). These projects are located in the 
states of Arkansas, Missouri, Oklahoma, and Texas. Southwestern's 
marketing area includes these states plus Kansas and Louisiana.
    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 Corps' White River Minimum Flows Reallocation Study 
Report, Arkansas and Missouri, dated July 2004. The law provides that 
the

[[Page 27136]]

Administrator of 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 FERC 
Project No. 2221 caused by the storage reallocation at Bull Shoals 
Lake. Further, the licensee of Project No. 2221 is to be fully 
compensated by the Corps 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 provides that losses to the Federal hydropower purpose 
at the Bull Shoals and Norfork Projects shall be offset by a reduction 
in the costs allocated to the Federal hydropower purpose. Further, such 
reduction in costs 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.
    In accordance with the legislation, 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. Input from affected parties and from the public was 
invited and utilized in the development of the determination.
    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, by Federal Register 
Notice (73 FR 46901) dated August 12, 2008. All public comments 
received were considered in revising the proposed determination and 
developing Southwestern's final determination.
    Southwestern's final determination was published by Federal 
Register Notice (74 FR 4183) on January 23, 2009. Southwestern's final 
determination is fully documented in its Final Determination Report 
dated January 2009, which was prepared in consultation with the non-
Federal licensee and the relevant public utility commissions. The 
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.
    As a result of an extensive internal review of its calculations in 
the final determination, Southwestern discovered an inadvertent 
omission of a portion of the energy benefits associated with the higher 
pools at the Federal Bull Shoals and Norfork projects. A detailed 
review of the energy loss calculations revealed that a portion of the 
energy benefits at the Federal projects which were believed to be 
included in the calculations had been inadvertently omitted from the 
calculations. While the gains from the increase in head (the vertical 
distance between the lake, or pool elevation, and the river, or 
tailwater elevation) that resulted from the higher pool elevations were 
included in the computation of benefits received from the generation of 
minimum flows releases at Bull Shoals, including an additional gain 
from a lower tailwater, the head gains were omitted for the remainder 
of the generation. Southwestern's draft addendum corrects the 
computation of energy loss and associated replacement costs for both 
Federal projects to include those gains.
    The portion of the energy benefits due to higher head from the 
raised pools that were omitted amounted to an additional 11,669 
megawatt-hours (MWh) at Bull Shoals and 1,459 MWh at Norfork. Inclusion 
of those benefits reduces the net energy losses at Bull Shoals and 
Norfork, respectively. The net annual energy loss at Bull Shoals will 
be 12,186 MWh, and the net annual energy loss at Norfork will be 12,065 
MWh. As discussed in Southwestern's Final Determination Report, all of 
the lost energy at Bull Shoals is considered off-peak energy, and the 
lost energy at Norfork is considered one-half on-peak energy and one-
half off-peak energy. There are no changes in the capacity loss at 
Norfork or in the capacity or energy loss at the non-Federal project.
    As part of its review of the impacts that the average pool 
elevation increase has on the normal operation of the Federal projects, 
Southwestern also believed it should quantify dissolved oxygen (DO) 
impacts due to the average increase in pool elevation. In 
Southwestern's final determination it was recognized that generation at 
both Bull Shoals and Norfork is impacted annually due to low DO 
conditions. It was also noted that the higher pool elevations at both 
projects will cause the hypolimnion to be higher relative to the 
penstock elevations at both projects, causing water with lower DO 
levels to flow through the turbines during generation. Southwestern 
noted but did not quantify the value of the potential DO impact in its 
final determination.
    Southwestern has developed a procedure for quantifying the 
estimated impacts and costs of lower DO levels on Federal hydropower. 
The procedure estimates the costs of mitigating the DO impacts 
resulting from the increased pool elevations at the Federal projects. A 
number of alternative solutions have been proposed for improving DO 
levels downstream of the Federal projects. Southwestern considered the 
initial capital cost and annual operation and maintenance expenses 
associated with these systems in determining the total impacts of the 
White River Minimum Flows project on hydropower production. The 
procedure is based on historical DO level data and is detailed in 
Southwestern's draft addendum. Based on the procedure and on current 
values of the specified parameters, the present value of the lifetime 
impact of lower DO levels on Federal hydropower is $10,207,900. It 
should be noted that the $10,207,900 amount only addresses the 
incremental impact of the increased pool elevation on DO levels and is 
not representation of an amount to satisfy all DO issues at the Federal 
projects.
    Southwestern is also proposing to include an additional source for 
the discount rate to be used in the present value computation for all 
three projects. The 30-year Treasury bond rates in effect at the time 
of publication of Southwestern's draft, proposed, and final 
determinations were as high as 5.0 percent. The recent changes in the 
investment sector have resulted in the current rate being artificially 
lowered. In early 2009, the rate dropped as low as 3.5 percent. The 
rate is currently 4.25 percent. The discount rate used should be 
reflective of the ``cost of cash'' during the period of analysis. If 
the discount rate drops below the cost of long-term debt for either the 
Federal or non-Federal projects it is reasonable to assume that any 
offset or compensation would wisely be used to pay off those debts 
rather than invest the funds in

[[Page 27137]]

lower interest bearing accounts. Therefore, using the lower 30-year 
Treasury bond rate for the present value calculation would not be 
appropriate and would result in too much compensation for the losses. 
Southwestern's draft addendum revises the discount rate selection for 
calculation of the present value of the losses as follows: In 
calculating the present value of the Federal and non-Federal losses, 
Southwestern will use the higher of the current 30-year Treasury bond 
rate or each entity's, Southwestern and Empire, respectively, cost of 
long-term debt.
    Based on an analysis of the long-term debt for Southwestern, the 
current 30-year Treasury bond rate is higher than Southwestern's cost 
of long-term debt. Using the updated procedure, the current discount 
rate to be used in the calculation of the present value of the Federal 
hydropower losses is the 30-year Treasury bond rate. Based on an 
analysis of the long-term debt for the non-Federal licensee utilizing 
information in its filings with FERC, the current 30-year Treasury bond 
rate is lower than the non-Federal licensee's cost of long-term debt. 
The updated procedure results in the use of the non-Federal licensee's 
cost of long-term debt as the current discount rate in the calculation 
of the present value of the non-Federal hydropower losses.
    Southwestern's draft addendum details the proposed changes to 
Southwestern's final determination. Assuming a January 1, 2011 date of 
implementation for the White River Minimum Flows project and current 
values for the specified parameters, Southwestern's modified final 
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 $22,340,800. Southwestern's modified final 
determination results in a present value for the estimated future 
lifetime replacement costs of the electrical energy and capacity for 
Federal hydropower of $60,851,800. The actual compensation values are 
to be calculated using the method presented in Southwestern's modified 
final determination and current values for the specified parameters 
based on the official implementation date.
    II. Public Review and Comment Procedures
    Opportunity is presented for interested parties to receive copies 
of Southwestern's draft addendum detailing the proposed changes to 
Southwestern's final determination of the Federal and non-Federal 
hydropower impacts. If you desire a copy of the draft addendum, submit 
your request to Mr. George Robbins, Director, Division of Resources and 
Rates, Southwestern Power Administration, One West Third Street, Tulsa, 
OK 74103, (918) 595-6680, [email protected].
    Written comments on Southwestern's draft addendum are due on or 
before July 8, 2009. Comments should be submitted to George Robbins, 
Director, Division of Resources and Rates, Southwestern, at the above-
mentioned address for Southwestern's offices. Comments will be accepted 
only on the proposed changes in the draft addendum and not on any other 
aspect of Southwestern's final determination.
    Southwestern will review and address the written comments, making 
any necessary changes to the draft addendum. The Administrator will 
publish the results of Southwestern's finalized addendum in the Federal 
Register.

    Dated: June 1, 2009.
Jon C. Worthington,
Administrator.
[FR Doc. E9-13322 Filed 6-5-09; 8:45 am]
BILLING CODE 6450-01-P