[Federal Register Volume 79, Number 156 (Wednesday, August 13, 2014)]
[Notices]
[Pages 47451-47453]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-19128]


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DEPARTMENT OF ENERGY

Western Area Power Administration


Boulder Canyon Project

AGENCY: Western Area Power Administration, DOE.

ACTION: Notice of Base Charge and Rates.

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SUMMARY: In this notice, the Deputy Secretary of Energy (Deputy 
Secretary) approves the Fiscal Year (FY) 2015 Base Charge and Rates for 
Boulder Canyon Project (BCP) electric service provided by the Western 
Area Power Administration (Western). The Base Charge will provide 
sufficient revenue to pay all annual costs, including interest expense, 
and repay investments within the allowable period.

DATES: The revised Base Charge and Rates will be effective the first 
day of the first full billing period beginning on or after October 1, 
2014, and will stay in effect through September 30, 2015, or until 
superseded.

FOR FURTHER INFORMATION CONTACT: Mr. Jack Murray, Rates Manager, Desert 
Southwest Customer Service Region, Western Area Power Administration, 
P.O. Box 6457, Phoenix, AZ 85005-6457, (602) 605-2442, email 
[email protected].

SUPPLEMENTARY INFORMATION: Hoover Dam, authorized by the Boulder Canyon 
Project Act (45 Stat. 1057, December 21, 1928), sits on the Colorado 
River along the Arizona and Nevada border. The Hoover Dam powerplant 
has 19 generating units (two for plant use) and an installed capacity 
of 2,078,800 kilowatts (kW) (4,800 kW for plant use). High-voltage 
transmission lines and substations connect BCP power to consumers in 
southern Nevada, Arizona, and southern California. BCP electric service 
rates are adjusted annually using an existing rate formula established 
on April 19, 1996. The rate formula requires the BCP contractors to pay 
a Base Charge (expressed in dollars), rather than a rate, for their 
power. The Base Charge is calculated to generate sufficient revenue to 
cover all annual costs and to repay investment obligations within 
allowable time periods. The Base Charge is allocated to each BCP 
Contractor in proportion to its allocation of Hoover power. A BCP 
composite power rate, expressed in mills per kilowatt-hour (mills/kWh), 
can be inferred by dividing the Base Charge by energy sales in the 
year; however, the rate is not used to determine customers' bills.
    Rate Schedule BCP-F8, Rate Order No. WAPA-150, effective October 1, 
2010, through September 30, 2015, allows for an annual recalculation of 
the Base Charge and Rates.\1\ This notice sets forth the recalculation 
for FY 2015. Under Rate Schedule BCP-F8, the existing composite rate, 
effective on October 1, 2013, is 20.18 mills/kWh. The current Base 
Charge is $76,108,019, the energy rate is 10.09 mills/kWh, and the 
capacity rate is $1.87 per kilowatt-month (kW-month).
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    \1\ FERC confirmed and approved Rate Schedule BCP-F8 on a final 
basis on December 9, 2010, in Docket No. EF10-7-000, See United 
States Department of Energy, Western Area Power Administration, 
Boulder Canyon Project, 133 FERC ] 62,229 (December 9, 2010).
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    The recalculated Base Charge for BCP electric service, effective 
October 1, 2014, is $61,008,518, an approximate 20 percent decrease 
from the FY 2014 Base Charge. The major contributing factor to the 
decrease is from the FY 2012 costs being lower than expected allowing 
additional funds to be carried over into FY 2013. FY 2013 costs were 
also lower than anticipated and other revenues from the Hoover Dam 
Visitor Center and Ancillary Services, which are used to offset costs 
to be recovered from power customers, were higher than expected. In 
addition, the BCP Contractors paid off the Visitor Facilities and Air 
Slots capitalized investment debt in FY 2014, which allowed additional 
funds from interest savings to be carried over into FY 2015, thus 
making it possible for the FY 2015 Base Charge to be reduced 
significantly from the current level. The FY 2015 composite rate of 
16.28 mills/kWh is a decrease of approximately 19 percent compared to 
the FY 2014 BCP composite rate of 20.18 mills/kWh. The FY 2015 energy 
rate of 8.14 mills/kWh is a decrease of approximately 19 percent 
compared to the existing energy rate of 10.09 mills/kWh. The FY 2015 
capacity rate of $1.61/kW-month is a decrease of approximately 14 
percent compared to the existing capacity rate of $1.87/kW-month. FY 
2015 Energy and Capacity sales have decreased compared with FY 2014, 
due to a forecast of continued poor hydrological conditions resulting 
in lower lake elevation. Although the energy and capacity sales for FY 
2015 are decreasing, the significant decrease in the revenue

[[Page 47452]]

requirement for FY 2015 results in a decrease to the composite and 
energy and capacity rates. The proposed rates were calculated using 
Western's FY 2014 Final Master Schedule, which provides the FY 2015 
projections for energy and capacity sales.
    The following summarizes the steps taken by Western to ensure 
involvement of all interested parties in determining the Base Charge 
and Rates:
    1. A Federal Register notice was published on February 5, 2014 (79 
FR 6896), announcing the proposed rate adjustment process, initiating a 
public consultation and comment period, announcing public information 
and public comment forums, and presenting procedures for public 
participation.
    2. Discussion of the proposal was initiated at an informal BCP 
Contractor meeting held March 5, 2014, in Phoenix, Arizona. At this 
informal meeting, representatives from Western and the Bureau of 
Reclamation (Reclamation) explained the basis for the estimates used to 
calculate the Base Charge and Rates and held a question and answer 
session.
    3. At the public information forum held on March 26, 2014, in 
Phoenix, Arizona, Western and Reclamation representatives explained the 
proposed Base Charge and Rates for FY 2015 in greater detail and held a 
question and answer session.
    4. A public comment forum held on April 16, 2014, in Phoenix, 
Arizona, provided the public with an opportunity to comment for the 
record. Two individuals commented at this forum.
    5. Western received one comment letter during the 90-day 
consultation and comment period. The consultation and comment period 
ended May 6, 2014. The written comments were received from the 
following interested party representing various customers of the BCP 
Contractors:
     Irrigation & Electrical Districts Association of Arizona, 
Phoenix, Arizona.
    Comments and responses, paraphrased for brevity when not affecting 
the meaning of the statements, are presented below.
    Comment: A commenter expressed an on-going concern regarding 
requests for clarity and a better understanding of how Western's 
Corporate Service Office (CSO) costs are allocated to Western's 
projects, including the BCP, and requests further discussions on the 
subject. The commenter also expressed disquiet for the escalation in 
system-wide expenses, how it is calculated and allocated to BCP. The 
commenter requests Western provide an explanation of how these costs 
are allocated to BCP.
    Response: The process for allocating CSO costs (overhead) to 
Western's projects is basically accomplished through two primary 
methods. The first method is through General Western Allocation (GWA) 
overhead costs which are distributed to the regions through a 
percentage calculation by individual regional full time equivalent 
(FTE) count divided by total regional FTE count. Then Desert Southwest 
Customer Service Region (DSW) distributes that portion to its 
individual projects through a percentage calculation determined by 
number of direct labor hours charged to each individual project divided 
by total direct labor hours. In addition to the method GWA is 
allocated, Western's other overhead costs are allocated to projects 
through various burden rates (administrative, construction, and 
operation and maintenance). The burden rates are allocated to each 
project through direct labor charges which are calculated based on 
which customers benefit from the work being performed. Western's CSO 
Chief Finance Office gave a presentation on May 21, 2014, at the BCP 
Engineering and Operation Committee quarterly meeting demonstrating the 
process mentioned above and how CSO's costs are allocated to Western's 
regions. Western's goal was to give the customers another opportunity 
to clarify any questions and give a better understanding of this cost 
allocation process.
    Regarding the escalation of system-wide expenses, primarily two 
budget items contribute to the increases, system operations and load 
dispatching and power marketing costs. In 2011, a re-evaluation of the 
workload in Western's dispatch centers was undertaken to more 
accurately reflect the work being performed. The study results changed 
the budget allocation method for system operation and load dispatching 
to Western's power systems. During the period of September 10-20, 2011, 
Western presented to its customers the revised cost allocation 
methodology that impacted system-wide costs for all Western projects, 
including BCP, beginning in FY 2014. The revised allocations, based on 
nameplate generator capacity or transmission line miles, did not cause 
an increase in total costs, but the re-allocation resulted in some 
projects, including BCP being allocated a larger percentage of those 
costs than they had in the past. From a total regional perspective, 
DSW's share of the system operation and load dispatch costs remained 
relatively stable. The power marketing costs are increasing due to the 
post-2017 remarketing process which Western has addressed in its annual 
rate process.

BCP Electric Service Rates

    BCP Base Charge and the resulting calculated Rates for electric 
service are designed to recover an annual revenue requirement that 
includes operation and maintenance expenses, payments to states, 
visitor services, the uprating program, replacements, investment 
repayment, and interest expense. Western's power repayment study (PRS) 
allocates the projected annual revenue requirement for electric service 
equally between capacity and energy.

Availability of Information

    Information about this Base Charge and Rate adjustment, including 
the PRS, comments, letters, memorandums, and other supporting material 
developed or maintained by Western and used to develop the FY 2015 BCP 
Base Charge and Rates is available for public review at the Desert 
Southwest Customer Service Regional Office, Western Area Power 
Administration, 615 South 43rd Avenue, Phoenix, AZ 85009. The 
information is also available on Western's Web site at www.wapa.gov/dsw/pwrmkt/BCP/RateAdjust.htm.

Ratemaking Procedure Requirements

    BCP electric service rates are developed under the Department of 
Energy Organization Act (42 U.S.C. 7101-7352), through which the power 
marketing functions of the Secretary of the Interior and Reclamation 
under the Reclamation Act of 1902 (ch. 1093, 32 Stat. 388), as amended 
and supplemented by subsequent enactments, particularly section 9(c) of 
the Reclamation Project Act of 1939 (43 U.S.C. 485h(c)), and other acts 
that specifically apply to the project involved, were transferred to 
and vested in the Secretary of Energy, acting by and through Western.
    By Delegation Order No. 00-037.00A, effective October 25, 2013, the 
Secretary of Energy delegated: (1) The authority to develop long-term 
power and transmission rates on a non-exclusive basis to Western's 
Administrator; (2) the authority to confirm, approve, and place such 
rates into effect on an interim basis to the Deputy Secretary; and (3) 
the authority to confirm, approve, and place into effect on a final 
basis, to remand, or to disapprove such rates to the Federal Energy 
Regulatory Commission (FERC). Existing Department of Energy procedures 
for public participation in electric service rate adjustments are 
located at 10 CFR part 903, effective September 18, 1985 (50 FR 37835).

[[Page 47453]]

Department of Energy procedures were followed by Western in developing 
the rate formula approved by FERC on December 9, 2010, at 133 FERC ] 
62,229.\2\
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    \2\ The existing rate-setting formula was established in Rate 
Schedule BCP-F5 (Rate Order No. WAPA-70) on April 19, 1996, in 
Docket No. EF96-5091-000, at 75 FERC ] 62,050, for the period 
beginning November 1, 1995, and ending September 30, 2000. Rate 
Schedule BCP-F6 (Rate Order No. WAPA-94, extending the existing 
rate-setting formula beginning on October 1, 2000, and ending 
September 30, 2005), was approved on July 31, 2001, in Docket No. 
EF00-5092-000, at 96 FERC ] 61,171. Rate Schedule BCP-F7 (Rate Order 
No. WAPA-120, extending the existing rate-setting formula for 
another five-year period beginning on October 1, 2005, and ending 
September 30, 2010), was approved on June 22, 2006, in Docket No. 
EF05-5091-000 at 115 FERC ] 61,362. Rate Schedule BCP-F8 (Rate Order 
No. WAPA-150, extending the existing rate-setting formula for 
another five-year period beginning on October 1, 2010), was approved 
on December 9, 2010, in Docket No. EF10-7-000 at 133 FERC ] 62,229.
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    The Boulder Canyon Project Implementation Agreement (BCPIA) 
requires that Western determine the annual base charge and rates for 
the next fiscal year before October 1 of each rate year. The rates for 
the first rate year, and each fifth rate year thereafter, become 
effective provisionally upon approval by the Deputy Secretary and 
subject to final approval by FERC. For all other rate years, the rates 
become effective on a final basis upon approval by the Deputy 
Secretary. Because FY 2015 is an interim year, these rates become 
effective on a final basis upon approval by the Deputy Secretary.
    Western will continue to provide annual rates to the BCP 
Contractors by October 1 of each year using the same rate-setting 
formula. In accordance with 10 CFR part 904, effective June 1, 1987 (57 
FR 43154), and the BCPIA, the rates are reviewed annually and adjusted 
upward or downward to assure sufficient revenues are collected to 
achieve payment of all costs and financial obligations associated with 
the project. Each fiscal year, Western prepares a PRS for the BCP to 
update actual revenues and expenses, including interest, estimates of 
future revenues, operating expenses, and capitalized costs.
    The BCP rate-setting formula includes a base charge, an energy 
rate, and a capacity rate. The rate-setting formula was used to 
determine the BCP FY 2015 Base Charge and Rates.
    Western proposed a FY 2015 Base Charge of $61,008,518, an energy 
rate of 8.14 mills/kWh, and a capacity rate of 1.61/kW-month.
    Consistent with procedures set forth in 10 CFR part 903 and 904 and 
18 CFR part 300, Western held a consultation and comment period. The 
notice of the proposed FY 2015 Base Charge and Rates for electric 
service was published in the Federal Register on February 5, 2014 (79 
FR 6896).
    Under Delegation Order Nos. 00-037.00A and 00-001.00C, and in 
compliance with 10 CFR part 903, I hereby approve the FY 2015 Base 
Charge and Rates for BCP Electric Service on a final basis under Rate 
Schedule BCP-F8 through September 30, 2015.

    Issued in Washington, DC, on August 7, 2014.
Daniel B. Poneman,
Deputy Secretary of Energy.
[FR Doc. 2014-19128 Filed 8-12-14; 8:45 am]
BILLING CODE 6450-01-P