[Federal Register Volume 74, Number 133 (Tuesday, July 14, 2009)]
[Notices]
[Pages 34009-34012]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-16689]


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DEPARTMENT OF ENERGY

Western Area Power Administration


Loveland Area Projects--Rate Order No. WAPA-146

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 Loveland Area Projects (LAP) firm electric service. 
LAP consists of the Fryingpan-Arkansas Project (Fry-Ark) and the Pick-
Sloan Missouri Basin Program--Western Division (Pick-Sloan--WD), which 
were integrated for marketing and rate-making purposes in 1989. Current 
rates, under Rate Schedule L-F8, extend through December 31, 2013, but 
are not sufficient to meet LAP revenue requirements. The proposed rates 
will provide sufficient revenue to pay all annual costs, including 
interest expense, and repay 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 Schedule L-F9, would go into effect on January 1, 2010, and would 
remain in effect through December 31, 2014, or until superseded.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 
October 13, 2009. Western will present a detailed explanation of the 
proposed rates at a public information forum. The public information 
forum will be held on August 18, 2009, from 9 a.m. to 10:30 a.m. MDT, 
in Northglenn, Colorado. Western will accept oral and written

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comments at a public comment forum. The public comment forum will be 
held on August 18, 2009, from 11 a.m. to no later than 12 p.m. MDT, in 
Northglenn, Colorado. 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 the 
Regional Manager, Rocky Mountain Region, Western Area Power 
Administration, 5555 East Crossroads Boulevard, Loveland, CO 80538-
8986, or e-mail to [email protected]. Western will post information 
about the rate process on its Web site at http://www.wapa.gov/rm/ratesRM/2010/default.htm. Western will post comments received via 
letter and e-mail to its Web site after the close of the comment 
period. Written comments must be received by the end of the 
consultation and comment period to be considered by Western in its 
decision process. The location of the public information and comment 
forums is the Ramada Plaza Hotel, 10 East 120th Avenue, Northglenn, 
Colorado.

FOR FURTHER INFORMATION CONTACT: Ms. Sheila D. Cook, Rates Manager, 
Rocky Mountain Region, Western Area Power Administration, 5555 East 
Crossroads Boulevard, Loveland, CO 80538-8986, telephone (970) 461-
7211, e-mail [email protected] or [email protected].

SUPPLEMENTARY INFORMATION: The proposed rates for LAP firm electric 
service are designed to recover an annual revenue requirement that 
includes investment repayment, interest, purchase power, operation and 
maintenance (O&M), and other expenses. The projected annual revenue 
requirement for firm electric service is allocated equally between 
capacity and energy.
    The Acting Deputy Secretary of Energy approved existing Rate 
Schedule L-F8 for firm electric service on an interim basis on January 
8, 2009 (74 FR 3015, January 16, 2009), for a 5-year period beginning 
on February 1, 2009, and ending December 31, 2013, or until superseded. 
Under Rate Schedule L-F8, the composite rate is 37.24 mills per 
kilowatthour (mills/kWh), the firm energy rate is 18.62 mills/kWh, and 
the firm capacity rate is $4.88 per kilowattmonth (kWmonth). This Rate 
Schedule is formula based, providing for an increase in the Drought 
Adder rate component of up to 2 mills/kWh without a formal public 
process.
    The current rate, including a 2 mills/kWh increase provided for 
under the Drought Adder formula rate component, is not sufficient to 
meet the LAP revenue requirement. As a result, Western is entering into 
this rate adjustment process. The proposed rate adjustment reflects a 
rate increase based on the Fry-Ark and Pick-Sloan--WD revenue 
requirements derived from the Fiscal Year 2008 Power Repayment Studies 
(PRSs). The PRSs set the LAP annual revenue requirement for 2010 for 
firm electric service at $84.5 million, which is an 11.2 percent 
increase (1.6 percent Base and 9.6 percent Drought Adder).
    The 1.6 percent increase from the Base rate component is due to a 
slight increase in O&M costs, as well as the inclusion of additional 
transmission costs associated with the wheeling of Mt. Elbert 
generation in the Fry-Ark PRS. Previously, these transmission cost 
projections were only included through 2010, the expiration date of 
Western's contract with the transmission provider. In the 2004 rate 
adjustment process, it was decided that the Fry-Ark PRS would include 
three additional years of transmission cost projections, through 2013. 
In the current rate adjustment, Western is proposing to include 
transmission cost projections through 2024, the end of LAP's Marketing 
Plan. Transmission service will be needed beyond 2013, so it is 
appropriate to include those costs at least through the term of the LAP 
contracts. The additional transmission costs are partially offset by 
increases in projected ancillary service revenues. The 9.6 percent 
increase from the Drought Adder rate component is due to increased 
drought related costs.
    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.\1\ Western has prepared the proposed 
rate schedule for firm electric service (LF-9) 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 L-F9 is listed in Table 1.
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    \1\ Under the current Rate Schedule, 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 the entire rate increase.

                        Table 1--LAP Firm Electric Service Revenue Requirement and Rates
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                                          Existing rates February 1,      Proposed rates January 1,     Percent
         Firm electric service                       2009                            2010                change
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Revenue Requirement...................  $75.9 million.................  $84.5 million................       11.2
Composite Rate........................  37.24 mills/kWh...............  41.42 mills/kWh..............       11.2
Firm Energy Rate......................  18.62 mills/kWh...............  20.71 mills/kWh..............       11.2
Firm Capacity Rate....................  $4.88/kWmonth.................  $5.43/kWmonth................       11.2
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    Under Rate Schedule L-F9, Western is proposing to continue to 
identify its firm electric service revenue requirement using Base and 
Drought Adder rate components and provide for an annual increase in the 
Drought Adder rate component of up to 2 mills/kWh. 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 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 drought conditions. The Drought Adder 
rate component includes costs associated with future non-timing 
purchases of additional power to meet 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

[[Page 34011]]

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 2008 will be repaid by 2018.
    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, 2010, the LAP annual revenue requirement 
equals $84.5 million and is comprised of a Base revenue requirement of 
$51.2 million plus a Drought Adder revenue requirement of $33.3 
million. A comparison of the current and proposed rate components is 
listed in Table 2.

                                                         Table 2--Summary of LAP Rate Components
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                                                  Existing rates February 1, 2009                            Proposed rates January 1, 2010
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                                             Firm energy                 Firm capacity                 Firm energy                 Firm capacity
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Base...............................  12.23 mills/kWh............  $3.21/kWmonth..............  12.54 mills/kWh...........  $3.29/kWmonth.
Drought Adder......................  6.39 mills/kWh.............  $1.67/kWmonth..............  8.17 mills/kWh............  $2.14/kWmonth.
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    Total LAP......................  18.62 mills/kWh............  $4.88/kWmonth..............  20.71 mills/kWh...........  $5.43/kWmonth.
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    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, demonstrate 
repayment of the drought related costs in the PRSs, 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 PRSs are 
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 
those projected in the PRSs, and, if so, whether an adjustment, either 
incremental or decremental, to the Drought Adder rate component is 
necessary. Western will notify customers by letter in 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 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.

Legal Authority

    Since the proposed rates constitute a major adjustment as defined 
by 10 CFR part 903, Western will hold a public information forum and a 
public comment forum. 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 rates for LAP 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 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 to develop the proposed rates are 
available for inspection and copying at the Rocky Mountain Regional 
Office, located at 5555 East Crossroads Boulevard, Loveland, Colorado. 
Many of these documents and supporting information are also available 
on Western's Web site under the ``Rates'' section located at http://www.wapa.gov/rm/ratesRM/2010/default.htm.

Ratemaking Procedure Requirements

Environmental Compliance

    In compliance with the National Environmental Policy Act (NEPA) of 
1969 (42 U.S.C. 4321-4347); the 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

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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: June 29, 2009.
Timothy J. Meeks,
Administrator.
 [FR Doc. E9-16689 Filed 7-13-09; 8:45 am]
BILLING CODE 6450-01-P