[Federal Register Volume 88, Number 129 (Friday, July 7, 2023)]
[Notices]
[Pages 43337-43347]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-14401]


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DEPARTMENT OF ENERGY

Southwestern Power Administration


Integrated System Power Rates--Rate Order No. SWPA-80

AGENCY: Southwestern Power Administration, DOE.

ACTION: Notice of rate order.

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SUMMARY: The Administrator, Southwestern Power Administration 
(Southwestern), has approved and placed into effect on an interim basis 
Rate Order No. SWPA-80 (Rate Order), which provides the following 
Integrated System Wholesale Rates for Hydro Peaking Power (P-13B) Rate 
Schedule: Rate Schedule P-13B, Wholesale Rates for Hydro Peaking Power 
(Rate Schedule P-13B).

DATES: Approval of Rate Schedule P-13B on an interim basis is effective 
July 15, 2023.

FOR FURTHER INFORMATION CONTACT: Ms. Fritha Ohlson, Senior Vice 
President, Chief Operating Officer, Office of Corporate Operations, 
(918) 595-6684 or [email protected].

SUPPLEMENTARY INFORMATION: Rate Order No. SWPA-80 is approved and 
placed into effect on an interim basis for the period July 15, 2023, 
through September 30, 2023, for the following rate schedule:
    Rate Schedule P-13B, Wholesale Rates for Hydro Peaking Power, which 
supersedes the existing Rate Schedule P-13A, Wholesale Rates for Hydro 
Peaking Power.
    Southwestern's Administrator determined that a change to the 
Peaking Energy Schedule Submission Time was needed to provide 
Southwestern with more flexibility and greater certainty when making 
replacement power purchases, and better align Southwestern with 
regional organized energy market considerations. Rate Schedule P-13B 
replaces the existing Rate Schedule P-13A and will expire on September 
30, 2023. Rate Schedule P-13B updates the Peaking Energy Schedule 
Submission time from 2:30 p.m. Central Prevailing Time (CPT) to 8:30 
a.m. CPT and allows the Southwestern's Administrator to change the 
Peaking Energy Schedule Submission Time no more than once per year to a 
time no earlier than 8:00 a.m. CPT and no later than 9:00 a.m. CPT. 
Additionally, in response to comments received, Rate Schedule P-13B 
includes a new Section 4.2.3 that, for a transition period of 
approximately two months, provides for customers to reduce their 
Peaking Energy schedules submitted for the next day after the 8:30 a.m. 
Peaking Energy Schedule Submission Time, provided that such 
adjustments: (1) do not increase the amount of Peaking Energy scheduled 
for any one hour; (2) are limited to a 25 percent reduction in Peaking 
Energy scheduled for any one hour; and (3) are coordinated with 
Southwestern's Scheduling and Operations staff no later than 2:00 p.m. 
on the day prior to schedule implementation. Additional responses to 
comments received on the proposed Rate Schedule P-13B published in the 
Federal Register on April 5, 2023 (Proposed Rate Schedule P-13B), are 
contained in the Rate Order.

United States of America

Department of Energy

Administrator, Southwestern Power Administration

In the matter of: Southwestern Power Administration, Integrated System 
Hydro Peaking Power Rate Schedule, Rate Order No. SWPA-80

Order Confirming, Approving and Placing Revised Power Rate Schedule in 
Effect on an Interim Basis (June 30, 2023)

    Pursuant to Sections 301(b) and 302(a) of the Department of Energy

[[Page 43338]]

Organization Act, Public Law 42 U.S.C. 7151(b) and 7152(a), the 
functions of the Secretary of the Interior and the Federal Power 
Commission under Section 5 of the Flood Control Act of 1944, 16 U.S.C. 
825s, relating to the Southwestern Power Administration (Southwestern), 
were transferred to, and vested in the Secretary of Energy. By 
Delegation Order No. S1-DEL-RATES-2016, effective November 19, 2016, 
the Secretary of Energy delegated: (1) the authority to develop power 
and transmission rates to Southwestern'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, or to 
remand or disapprove such rates, to the Federal Energy Regulatory 
Commission (FERC). By Delegation Order No. S1-DEL-S3-2023, effective 
April 10, 2023, the Secretary of Energy also delegated the authority to 
confirm, approve, and place such rates into effect on an interim basis 
to the Under Secretary for Infrastructure. By Redelegation Order No. 
S3-DEL-SWPA1-2023, effective April 10, 2023, the Under Secretary for 
Infrastructure redelegated the authority to confirm, approve, and place 
such rates into effect on an interim basis to the Southwestern 
Administrator.
    Pursuant to that delegated authority, the Southwestern 
Administrator has issued this interim rate order.

Background

    Originally established by Order 1865, Secretary of the Interior, 
dated August 31, 1943 and effective September 1, 1943 (8 FR 12142 
(Sept. 3, 1943)), Southwestern is authorized by Congress to market the 
hydroelectric power and energy from Federal dams controlled by the U.S. 
Army Corps of Engineers (Corps), pursuant to Section 302(a)(1) of the 
Department of Energy Organization Act (42 U.S.C. 7152(a)(1)), Section 5 
of the Flood Control Act of 1944 (16 U.S.C. 825s), and Public Law 95-
456 (16 U.S.C. 825s-3). Guidelines for preparation of power repayment 
studies are included in Department of Energy (DOE) Order No. RA 6120.2 
(Sept. 20, 1979), entitled Power Marketing Administration Financial 
Reporting. Procedures for public participation in power and 
transmission rate adjustments of the Power Marketing Administrations 
are found at title 10, part 903, subpart A of the Code of Federal 
Regulations (10 CFR part 903). Procedures for the confirmation and 
approval of rates for the Federal Power Marketing Administrations are 
found at title 18, part 300, subpart L of the Code of Federal 
Regulations (18 CFR part 300).
    Southwestern markets power from 24 multi-purpose reservoir projects 
with hydroelectric power facilities constructed and operated by the 
Corps. These projects are located in Arkansas, Missouri, Oklahoma, and 
Texas. Southwestern's marketing area includes these states plus Kansas 
and Louisiana. The costs associated with 22 of these 24 hydropower 
projects are repaid with revenues received under the Integrated System 
rates. These rates also cover the costs of Southwestern's transmission 
facilities that consist of 1,381 miles of high-voltage transmission 
lines, 27 substations, and 46 microwave and VHF radio sites. 
Additionally, Southwestern markets power from two hydropower projects 
in southeastern Texas, Sam Rayburn Dam and Robert D. Willis. These 
projects are isolated hydraulically, electrically, and financially from 
the Integrated System, and are repaid via separate rate schedules and 
therefore are not addressed in this Order.
    On September 30, 2013, in Rate Order No. SWPA-66, the Deputy 
Secretary of Energy placed into effect Southwestern's Integrated System 
rate schedules (P-13, NFTS-13, and EE-13) on an interim basis for the 
period October 1, 2013 to September 30, 2017. The Federal Energy 
Regulatory Commission (FERC) confirmed and approved Southwestern's 
interim Integrated System rates on a final basis on January 9, 2014 for 
a period ending September 30, 2017.
    Southwestern re-designated Integrated System rate schedule ``NFTS-
13'' as ``NFTS-13A'' with no revenue adjustment. In Rate Order No. 
SWPA-71, the Deputy Secretary of Energy placed into effect 
Southwestern's rate schedule NFTS-13A on an interim basis beginning 
January 1, 2017. FERC confirmed and approved NFTS-13A on a final basis 
on March 9, 2017.
    On September 13, 2017, in Rate Order No. SWPA-72, the Deputy 
Secretary of Energy extended all of Southwestern's Integrated System 
rate schedules (P-13, NTFS-13A, and EE-13) for two years, for the 
period of October 1, 2017 through September 30, 2019.
    Southwestern re-designated Integrated System rate schedule ``P-13'' 
as ``P-13A'' with no revenue adjustment. In Rate Order No. SWPA-73, the 
Assistant Secretary for Electricity placed into effect Southwestern's 
rate schedule P-13A on an interim basis beginning July 15, 2019. FERC 
confirmed and approved P-13A on a final basis on August 29, 2019.
    On September 22, 2019, in Rate Order No. SWPA-74, the Assistant 
Secretary for Electricity extended all of Southwestern's Integrated 
System rate schedules (P-13A, NFTS-13A, EE-13) for two years, for the 
period of October 1, 2019 through September 30, 2021.
    On August 30, 2021, in Rate Order No. SWPA-77, the Administrator, 
Southwestern, extended all of Southwestern's Integrated System rate 
schedules (P-13A, NFTS-13A, EE-13) for two years, for the period of 
October 1, 2021 through September 30, 2023.
    Southwestern must at times make replacement capacity and energy 
purchases to fulfill its contractual obligations associated with the 
delivery of Hydro Peaking Power as required through the majority of 
Power Sales Contracts that utilize Southwestern's Integrated System 
rate schedules. Historically, a significant portion of needed 
replacement power purchases were made through pre-arranged Purchase 
Power Agreements (PPAs), many of which were capacity and energy ``call 
options'' that allowed Southwestern to schedule the energy as needed 
after the historic Peaking Energy Schedule Submission Time of 2:00 p.m. 
Central Prevailing Time (CPT). In 2019, Southwestern implemented a rate 
schedule change to move the Peaking Energy Schedule Submission Time to 
2:30 p.m. CPT. To facilitate the 30-minute shift in the Peaking Energy 
Schedule Submission Time, Southwestern negotiated with its bilateral 
trading partners at the time to shift the call option strike time later 
by 30 minutes as well. Over the last several years, even prior to 2019, 
the role of FERC-approved reliability transmission organizations (RTOs) 
in Southwestern's marketing region has increased to the point where the 
majority of Southwestern's traditional bi-lateral trading partners are 
members of or participants in RTO energy markets. The regional 
organized day-ahead energy markets close by 9:30 a.m. CPT, which means 
that Southwestern's call option trading partners lose the opportunity 
to bid their resources into the day-ahead markets if they allow 
Southwestern to wait until the afternoon to determine whether to call 
on the capacity and energy. Additionally, the planning reserve margins 
for the RTOs surrounding Southwestern have either been increased or are 
in the process of being increased which has led to entities keeping 
their resources within their own portfolios to ensure their own 
resource adequacy. These two complications have led to increased 
pricing and decreased flexibility in the bilateral PPA offers available 
to

[[Page 43339]]

Southwestern as well as a decrease in the availability of offers for 
firm, deliverable capacity and energy in recent months. As a strategy 
for addressing this issue, Southwestern has recently become a Market 
Participant of the Midcontinent Independent System Operator (MISO), 
which enables Southwestern to purchase physical and financial energy 
from the MISO Day-Ahead and Real-Time energy markets. Southwestern is 
also exploring becoming a Market Participant in the Southwest Power 
Pool (SPP). Both the MISO and SPP day-ahead energy markets close 
bidding at 9:30 a.m. CPT every day. In order to best utilize regional 
organized day-ahead energy markets as a cost-competitive and risk-
management option for replacement energy purchases, Southwestern must 
have increased certainty about its Peaking Energy obligations before 
9:30 a.m. the day before the Peaking Energy will be delivered. Further, 
Southwestern expects that earlier day-ahead certainty of Peaking Energy 
schedules will provide Southwestern with additional options when 
seeking new PPAs, as Southwestern could accept a strike time prior to 
the closing times of regional organized day-ahead energy markets and 
mitigate the lost opportunity concerns of trading partners. Ultimately, 
Southwestern's effective participation in regional organized day-ahead 
energy markets as well as the ability to attract more cost-competitive 
PPAs will best ensure Southwestern can procure sufficient energy to 
meet its contractual obligations at the lowest costs while limiting the 
purchase of unneeded energy. Reduced risk and greater surety in the 
delivery of Federal Power and Energy, as well as any cost savings 
realized by Southwestern, will be to the benefit of all Integrated 
System customers for which Southwestern has the contractual obligation 
to provide replacement power.
    Therefore, Southwestern's Administrator determined that Section 
4.2, Peaking Energy Schedule Submission Time, should be modified to 
establish the Peaking Energy Schedule Submission Time as on or before 
8:30 a.m. Central Prevailing Time (CPT) of the day preceding the day 
for delivery of Peaking Energy. Additionally, Section 4.2.2, Procedure 
for Adjusting the Peaking Energy Schedule Submission Time, which allows 
the Southwestern Administrator to adjust the Peaking Energy Schedule 
Submission Time no more than once annually should be updated to allow 
for a submission time no earlier than 8:00 a.m. CPT and no later than 
9:00 a.m. CPT. These updates are expected to provide Southwestern with 
more flexibility and greater certainty when making replacement power 
purchases, and better align Southwestern with regional organized energy 
market considerations. After considering comments received, 
Southwestern's Administrator determined that a new Section 4.2.3 should 
be added to provide for an approximate two-month transition period 
during which customers will be allowed to reduce their Peaking Energy 
schedules submitted for the next day after the 8:30 a.m. Peaking Energy 
Schedule Submission Time, provided that such adjustments: (1) do not 
increase the amount of Peaking Energy scheduled for any one hour; (2) 
are limited to a 25 percent reduction in Peaking Energy scheduled for 
any one hour; and (3) are coordinated with Southwestern's Scheduling 
and Operations staff no later than 2:00 p.m. on the day prior to 
schedule implementation. The changes to Rate Schedule P-13A, which will 
be delineated as Rate Schedule P-13B, is a change to a rate schedule in 
accordance with 18 CFR part 300.

Public Notice and Comment

    Notice of a proposed rate schedule change was published in the 
Federal Register April 5, 2023 (88 FR 20163). The notice advised 
parties of the Proposed Rate Schedule P-13B and an associated public 
consultation and comment period to provide for an open and transparent 
process. Comments were accepted through May 5, 2023. Southwestern 
received five responses containing comments on the Proposed Rate 
Schedule P-13B. In finalizing the Rate Schedule P-13B, Southwestern 
reviewed and considered all comments received during the public 
consultation and comment period. The following is a summary of comments 
received and Southwestern's response to those comments.
    Comment 1: Three commenters acknowledged the regional capacity 
challenges that Southwestern and other entities are facing: Arkansas 
Electric Cooperative Corporation (AECC) ``understands the capacity 
situation that exists''; City Water and Light Plant of the City of 
Jonesboro, Arkansas (Jonesboro) ``empathizes with the lack of capacity 
that [Southwestern] and other utilities in our region are facing''; and 
the Southwestern Power Resources Association (SPRA), which represents 
the interests of consumer-owned electric systems that are customers of 
Southwestern, ``recognize[s] the difficult position that [Southwestern] 
and all utilities in our region are facing with the lack of capacity.''
    Response 1: As stated above, regional capacity challenges are a 
driving factor for Southwestern's decision. Rate Schedule P-13B allows 
Southwestern to better align itself with the closing times of regional 
organized day-ahead energy markets, and therefore be better positioned 
to utilize those markets and/or enter into PPAs that provide 
consideration of those markets to ensure Southwestern is able to meet 
its mission of marketing Federal hydropower at the lowest possible 
costs.
    Comment 2: Four commenters noted that their Federal hydropower 
allocation is a valuable portion of their energy portfolios: AECC 
``appreciate[s] the great value that [Southwestern] has provided in the 
past few years''; Associated Electric Cooperative, Inc. (AECI) ``views 
its longstanding partnership with [Southwestern] as integral to AECI's 
mission to provide the lowest cost and reliable wholesale power to its 
membership''; Jonesboro's ``Federal Hydropower Allocation is a critical 
resource in [its] wholesale power portfolio''; and SPRA stated that 
``Federal hydropower is a valued piece of the portfolio for the members 
of SPRA.''
    Response 2: Southwestern works hard to maintain and improve the 
value of Federal hydropower in its region while providing wholesale 
power to its preference customers at the lowest possible costs.
    Comment 3: Three commenters expressed appreciation for their 
partnerships with Southwestern: AECC ``appreciates [Southwestern] 
working with customers''; Jonesboro and Southwestern ``have a long 
history or partnering to support the overall benefit of all 
[Southwestern's] customers'' and ``are very thankful for this 
partnership''; and SPRA has ``long enjoyed working with [Southwestern] 
to address concerns that could threaten the value or reliability of 
federal hydropower.''
    Response 3: Southwestern also appreciates and works hard to foster 
the collaborative relationship it has with its customers.
    Comment 4: ARKMO, a group consisting of five municipally-owned 
utilities, located in Northeast Arkansas and Southeast Missouri, all of 
which are Southwestern customers, stated that ``as small municipal 
utilities the ARKMO group members are impacted significantly through 
their [Southwestern] rates. Because of this, the ARKMO group is in 
support of moving the peaking schedule submission time to 8:30 a.m.''

[[Page 43340]]

    Response 4: Southwestern appreciates ARKMO's acknowledgement of the 
beneficial aspects of this rate schedule change on its Integrated 
System customers for which Southwestern has the contractual obligation 
to provide replacement power. As noted, the purpose of this change is 
to facilitate Southwestern's effective participation in regional 
organized day-ahead energy markets and increase Southwestern's ability 
to attract more cost-competitive PPAs.
    Comment 5: ARKMO stated that the proposed change will allow 
Southwestern ``to better manage their resources. The ARKMO group is in 
support of [Southwestern] making strategic decisions to help maintain 
lower rates for their customers.''
    Response 5: As noted above, this change allows Southwestern to 
better align itself with the closing times of regional organized day-
ahead energy markets. Southwestern's effective participation in 
regional organized day-ahead energy markets as well as the ability to 
attract more cost-competitive PPAs will best ensure Southwestern can 
procure sufficient energy to meet its contractual obligations at the 
lowest costs while limiting the purchase of unneeded energy. Reduced 
risk and greater surety in the delivery of Federal Power and Energy, as 
well as any cost savings realized by Southwestern, will be to the 
benefit of all Integrated System customers for which Southwestern has 
the contractual obligation to provide replacement power, and will 
ensure Southwestern meets its mission of marketing Federal hydropower 
at the lowest possible costs.
    Comment 6: Three commenters indicated a desire for Southwestern to 
revisit the need for the Peaking Energy Schedule Submission Time change 
in the future to look for a more mutually agreeable solution to 
Southwestern's capacity and energy concerns: AECC hopes the conditions 
which have caused the capacity situation that exists ``change soon to 
allow for a return to the scheduling timeline that exists today''; 
Jonesboro ``respectfully encourage[s] [Southwestern] to continue its 
partnership with the customers and evaluate solutions that (1) provide 
for the lowest cost power purchase adder and (2) provide for the 
overall maximum benefit for [Southwestern] customers''; and SPRA is '' 
looking forward to a robust conversation during SPRA's upcoming 
September meeting to analyze the data that was gathered during this 
time, and continuing to work with [Southwestern] to produce solutions 
which ensure the most value for all federal hydropower customers.''
    Response 6: Southwestern will evaluate the impact of the Peaking 
Energy Schedule Submission Time after implementation and will continue 
to informally and periodically discuss the change as well as other 
possible solutions with its customers. The ability to optimize energy 
purchases via regional organized day-ahead energy markets will help 
alleviate its capacity and energy shortage issues. Southwestern will 
continue to monitor its progress and engage its customers to ensure the 
most effective use of the Federal hydropower system consistent with 
sound business principles.
    Comment 7: Two commenters, Jonesboro and SPRA, stated that 
Southwestern should use a ``temporary solution that allows for the 
total reduction of a peaking schedule made to [Southwestern] by 8:30 
a.m. by no more than 25 percent of the total of each individual hour 
submitted. Any proposed reductions must be coordinated with 
[Southwestern] Operations and Merchant Staff and completed by no later 
than 2:00 p.m. the day prior to energy flow.''
    Response 7: As a result of informal discussion with customers and 
in response to comments received, to mitigate some of the immediate 
impact of this change Southwestern has included a new Section 4.2.3 in 
Rate Schedule P-13B that, for a transition period of approximately two 
months, allows customers to reduce their Peaking Energy schedules 
submitted for the next day after the 8:30 a.m. Peaking Energy Schedule 
Submission Time, provided that such adjustments: (1) do not increase 
the amount of Peaking Energy scheduled for any one hour; (2) are 
limited to a 25 percent reduction in Peaking Energy scheduled for any 
one hour; and (3) are coordinated with Southwestern's Scheduling and 
Operations staff no later than 2:00 p.m. on the day prior to schedule 
implementation.
    Comment 8: Two commenters noted that the Proposed Rate Schedule P-
13B will limit customers' ability to optimize their Federal hydropower 
resource in day-ahead markets: AECC ``estimates a loss in energy value 
of 15-20 percent'' and ``a trim on the capacity of 82%'' which ``would 
have been a loss in value for 2022 of 23%'', and AECI stated that 
``limiting [Southwestern] customers' flexibility to choose when to call 
on peaking power in this way will drive unnecessary cost increases to 
AECI's end-use members.''
    Response 8: Southwestern has determined that purchased power from 
regional organized energy markets is one of the more cost-effective and 
viable replacement power options available. Having more certainty about 
Southwestern's obligations to customers prior to the closing times of 
regional organized day-ahead energy markets will ensure that when a 
resource shortage occurs, Southwestern can procure sufficient energy to 
meet its obligations at the lowest costs while limiting the purchase of 
unneeded energy. Any cost savings realized by Southwestern will be to 
the benefit of all Integrated System customers for which Southwestern 
has the contractual obligation to provide replacement power.
    Comment 9: AECC stated it ``would appreciate [Southwestern's] 
further consideration of allowing for increased flexibility, such as 
allowing a customer to agree to trim capacity, keeping energy the same, 
in return for allowing for the customer to have the ability to offer 
the energy into the market.''
    Response 9: Although this proposal would lower Southwestern's 
capacity obligation, there would still be concerns regarding 
Southwestern's next-day energy obligation and Southwestern's limited 
ability to optimize regional organized day-ahead energy market 
purchases. Southwestern has determined that a Peaking Energy Schedule 
Submission Time that is prior to the closing times of regional 
organized day-ahead energy markets is in the best interest of 
Southwestern customers overall. Southwestern intends to move forward 
with Rate Schedule P-13B, which allows the Administrator to change the 
Peaking Energy Schedule Submission Time no more than once per year to a 
time no earlier than 8:00 a.m. CPT and no later than 9:00 a.m. CPT. 
Additionally, Rate Schedule P-13B includes a new Section 4.2.3 that, 
for a transition period of approximately two months, allows customers 
limited ability to reduce their Peaking Energy schedules submitted for 
the next day after the 8:30 a.m. Peaking Energy Schedule Submission 
Time.
    Comment 10: AECC provided a ``proposed revision to [Southwestern] 
Rate Schedule P-13A'' which updates Section 4.2.2 to state the 
``Peaking Energy Schedule Submission Time of 2:00 p.m. CPT, as noted in 
Section 4.2 of this Rate Schedule, may be adjusted by the 
Administrator, Southwestern, to a time no earlier than 8:30 a.m. CPT 
and no later than 2:00 p.m. CPT.''
    Response 10: Southwestern has determined that a Peaking Energy 
Schedule Submission Time that is prior to the closing times of regional 
organized day-ahead energy markets is in the best interest of 
Southwestern and its Integrated System customers for

[[Page 43341]]

which Southwestern has the contractual obligation to provide 
replacement power. Southwestern intends to move forward with Rate 
Schedule P-13B, which allows the Administrator to change the Peaking 
Energy Schedule Submission Time no more than once per year to a time no 
earlier than 8:00 a.m. CPT and no later than 9:00 a.m. CPT. 
Additionally, in response to comments received, Southwestern included a 
new Section 4.2.3 in Rate Schedule P-13B that, for a transition period 
of approximately two months, allows customers limited ability reduce 
their Peaking Energy schedules submitted for the next day after the 
8:30 a.m. Peaking Energy Schedule Submission Time.
    Comment 11: AECI stated that the ``unilateral change to 
[Southwestern's] Peaking Power Rate Schedule does not constitute a 
minor rate adjustment as it fails to adequately consider the 
significant negative economic impact that removal of the 2:30 p.m. 
peaking energy submission time will have on integrated system 
customers.''
    Response 11: ``Minor rate adjustment'' is a defined term under 10 
CFR part 903.2. Under 10 CFR part 903.2, determinations as to whether a 
rate adjustment qualifies as ``minor'' are based upon the revenue 
change to Southwestern's Integrated System as a whole and not the 
subjective impacts on an individual customer or set of customers. This 
comment afforded Southwestern an opportunity to reexamine its initial 
classification of the proposed change as a ``minor rate adjustment.'' 
The terms ``rate,'' ``rate adjustment,'' and ``minor rate adjustment'' 
are all defined in 10 CFR 903.2. A pre-requisite to any change being 
qualified as a ``minor rate adjustment'' is that it involves a ``rate'' 
and that it constitutes a ``rate adjustment.'' Upon further review, 
Southwestern has determined that this action does not meet the 
definition of a ``rate adjustment,'' and thus should not be classified 
as a ``minor rate adjustment.'' Under 10 CFR 903.2 a ``rate 
adjustment'' is defined as ``a change in an existing rate or rates, or 
the establishment of a rate or rates for a new service.'' The 
definition goes on to expressly state a rate adjustment ``. . . does 
not include a change in rate schedule provisions or in contract terms . 
. .'' Instead, the action should be classified simply as a change in 
the terms or provisions of the ``Rate Schedule'' that does not change 
the existing ``rates'' (the monetary charges or formula for computing 
such charges) to Southwestern's customers as provided for in Rate 
Schedule P-13A.
    Comment 12: AECI stated Southwestern's ``assertion that switching 
to an earlier peaking power submission deadline will increase its 
ability to provide shortfall capacity pre-supposes that power will be 
available during those needed hours. Thus, [Southwestern's] plan would 
on-balance create at least as much uncertainty as it attempts to 
resolve and would expose [Southwestern] customers to greater price risk 
in the organized markets.''
    Response 12: Southwestern has been and is exposed to price risk 
through past and present PPAs that have a variable energy price based 
on a gas index or energy market nodal pricing. Additionally, such PPAs 
come with a capacity premium. The ability to optimize Southwestern's 
participation in regional organized day-ahead energy markets through an 
earlier Peaking Energy Schedule Submission Time while maintaining 
optionality with PPAs, as needed, will allow Southwestern to better 
manage risk than if Southwestern were to rely solely on the recent PPA 
offers it has received.
    Comment 13: AECI stated Southwestern ``provides no data showing 
there are significant and recurring capacity shortfalls.''
    Response 13: Southwestern has experienced recurring capacity 
shortfalls the last several years due to both scheduled and unscheduled 
maintenance outages. Long-term unit outages (defined as an outage 
anticipated to last longer than three months) are reported weekly to 
customers, including AECI, via a Monday Morning Report, and short-term 
outages were reported on that same report until October 2021. 
Additionally, Southwestern has provided outage information via regular 
reports to its customer organization, the Southwestern Power Resources 
Association (SPRA). Southwestern will make information supporting the 
assertion that it has experienced significant and recurring capacity 
shortfalls available on request.
    Comment 14: AECI stated that ``no supporting data and hence no 
substantial evidence underlies either assertion'' that `` `the number 
of PPAs available to Southwestern has decreased and the pricing of 
available PPAs has increased' ''.
    Response 14: In August 2022, Southwestern issued a request for 
proposals (RFP) for firm schedulable/dispatchable capacity and 
associated energy. No proposals were received. Southwestern issued an 
RFP for firm energy deliverable to Southwestern's transmission system 
in January and February 2023. Three proposals were received but only 
one of them met Southwestern's requested requirements but with energy 
pricing significantly higher than historical rates. In April 2023, 
Southwestern received additional proposals, none of which were for firm 
deliverable capacity. All proposals contained elements that were 
significantly higher in cost than historical responses. Even if more 
PPAs were available to Southwestern, participation in regional 
organized energy markets offers an additional tool for Southwestern to 
manage risk.
    Comment 15: AECI stated that Southwestern's ``scheduling rationale 
appears to ironically rely on creating `better options when seeking new 
PPAs' when the absence of previous PPAs is driving the change.''
    Response 15: The current need for Rate Schedule P-13B is to allow 
Southwestern to better optimize its participation in regional organized 
day-ahead energy markets while competitively priced, firm, deliverable 
capacity and energy options are limited. Southwestern plans to utilize 
both regional organized energy markets as well as PPAs, when 
competitive, to manage risk and meet its contractual obligations.
    Comment 16: AECI stated that ``amending the day-ahead peaking 
scheduling requirement on all days of the year for the entire capacity 
of the integrated system, to guard against a relatively rare 
convergence of high customer needs, insufficient hydropower resources, 
and insufficient market liquidity is unnecessary and inconsistent with 
[Southwestern's] mission under Section 5 of the Flood Control Act of 
1944 to encourage the most widespread use at the lowest possible rates 
of Federal hydropower consistent with sound business principles.''
    Response 16: As Southwestern moves towards increased participation 
in regional organized energy markets, it is anticipated that 
Southwestern will benefit from the earlier Peaking Energy Schedule 
Submission Time through having increased knowledge regarding Peaking 
Energy obligations prior to market close on a regular basis. This will 
help Southwestern prevent against either making purchases in excess of 
its energy needs, thereby unnecessarily increasing costs, or making 
purchases less than its energy needs, at which point the energy market 
liquidity is significantly reduced when procuring the remainder of 
needed energy. Furthermore, no matter the rarity of the situation at 
hand, Southwestern contends the certainty of energy delivery in 
accordance with our

[[Page 43342]]

contractual obligations is paramount to its mission in accordance with 
Section 5 of the Flood Control Act of 1944.
    Comment 17: AECI provided a ``proposed revision to [Southwestern] 
Rate Schedule P-13A'' Section 4.2.2 which would: (1) require that 
``Concurrent with the Peaking Energy Schedule Submission Time, 
customers designated by Administrator, Southwestern, are required to 
submit to Southwestern a preliminary Peaking Energy Schedule for the 
second following day'' in addition to the day-ahead peaking energy 
schedule by the then in-effect Peaking Energy Schedule Submission Time; 
(2) allow for the ``Peaking Energy Schedule Submission Time of 2:00 
p.m. CPT'' to be ``adjusted by the Administrator, Southwestern, to a 
time no earlier than 8:30 a.m. CPT and no later than 2:00 p.m. CPT''; 
(3) require that the Administrator ``make a determination daily on the 
need to adjust the Peaking Energy Schedule Submission Time, limited to 
the extent conditions required, based on preliminary Peaking Energy 
Schedules, regional energy market conditions, and/or operational 
considerations'' and (4) require that the Administrator ``notify 
customers of the determination to adjust the Peaking Energy Schedule 
Submission Time via electronic communication no later than 7:30 a.m. of 
the day the Peaking Energy Schedule Submissions are due.''
    Response 17: The suggested changes have been considered and 
Southwestern has chosen not to implement any of the changes for the 
following reasons: (1) the preliminary two-day-ahead schedule is 
allowed to change without any restrictions prior to being submitted as 
a final day-ahead schedule and therefore cannot be reliably used by 
Southwestern in making operational decisions; (2) the analysis of a 
preliminary schedule and daily determination of the Peaking Energy 
Schedule Submission Time creates a significant additional workload and 
administrative burden for Southwestern's staff with no corresponding 
benefit for customers overall; (3) submission of a two-day-ahead 
preliminary schedule is likely to create a burden for a majority of 
Southwestern's customers, which currently submit Peaking Energy 
schedules prior to 8:30 a.m. CPT rather than waiting until closer to 
the 2:30 p.m. CPT Peaking Energy Schedule Submission Time as permitted 
by the current Rate Schedule P-13A (although the comment allows for 
Southwestern's Administrator to select specific customers which are 
required to submit a two-day-ahead schedule, Southwestern applies rate 
schedule provisions equally to all customers); (4) frequent changes to 
the Peaking Energy Schedule Submission Time could easily cause 
confusion among Southwestern's customers; (5) Southwestern desires to 
develop rate schedules which are as consistent as possible for its 
customers, and frequent changes to the Peaking Energy Schedule 
Submission Time would increase volatility of daily operations; and (6) 
as noted previously, Southwestern has determined that a Peaking Energy 
Schedule Submission Time that is coordinated with the closing times of 
regional organized day-ahead energy markets is in the best interest of 
Southwestern and its Integrated System customers for which Southwestern 
has the contractual obligation to provide replacement power. 
Southwestern intends to move forward with Rate Schedule P-13B, which 
allows the Administrator to change the Peaking Energy Schedule 
Submission Time no more than once per year to a time no earlier than 
8:00 a.m. CPT and no later than 9:00 a.m. CPT.

Availability of Information

    Information regarding Rate Schedule P-13B, including public 
comments received, is available for public review in the offices of 
Southwestern Power Administration, One West Third Street, Suite 1500, 
Tulsa, Oklahoma 74103. Southwestern in-effect rate schedules are 
available on the Southwestern website at www.energy.gov/swpa.

Administration's Certification

    Rate Schedule P-13B will repay all costs of the Integrated System 
including amortization of the power investment consistent with the 
provisions of Department of Energy Order No. RA 6120.2. In accordance 
with Delegation Order No. 00-037.00B, effective November 19, 2016, and 
Section 5 of the Flood Control Act of 1944, the Administrator has 
determined that Rate Schedule P-13B is consistent with applicable law 
and the lowest possible rates consistent with sound business 
principles.

Environment

    Southwestern previously determined that the rate change actions, 
placed into effect on October 1, 2013, fit within the following class 
of categorically excluded actions as listed in Appendix B to Subpart D 
of 10 CFR part 1021, DOE's Implementing Procedures and Guidelines of 
the National Environmental Policy Act of 1969, as amended (42 U.S.C. 
4321-4347): B4.4 (Electric power marketing rate changes). Categorically 
excluded actions do not require preparation of either an environmental 
impact statement or an environmental assessment. On June 13, 2023, 
Southwestern determined that categorical exclusion B4.4 applies to the 
current action as well.

Order

    In view of the foregoing, and pursuant to delegated authority from 
the Secretary of Energy, I hereby confirm, approve, and place into 
effect on an interim basis, effective July 15, 2023, the Southwestern 
Integrated System Rate Schedule P-13B which shall remain in effect on 
an interim basis through September 30, 2023, or the FERC confirms and 
approves the rates on a final basis.

Signing Authority

    This document of the Department of Energy was signed on June 30, 
2023, by Mike Wech, Administrator for Southwestern Power 
Administration, pursuant to delegated authority from the Secretary of 
Energy. That document, with the original signature and date, is 
maintained by DOE. For administrative purposes only, and in compliance 
with requirements of the Office of the Federal Register, the 
undersigned DOE Federal Register Liaison Officer has been authorized to 
sign and submit the document in electronic format for publication, as 
an official document of DOE. This administrative process in no way 
alters the legal effect of this document upon publication in the 
Federal Register.

    Signed in Washington, DC, on July 3, 2023.
Treena V. Garrett,
Federal Register Liaison Officer, U.S. Department of Energy.

United States Department of Energy

Southwestern Power Administration

Rate Schedule P-13B \1\ **
---------------------------------------------------------------------------

    \1\ Supersedes Rate Schedule P-13A.
    ** Extended through September 30, 2023 by approval of Rate Order 
No. SWPA-77 by the Administrator, Southwestern Power Administration.
---------------------------------------------------------------------------

Wholesale Rates for Hydro Peaking Power

Effective

    During the period October 1, 2013, through September 30, 2023,** 
in accordance with Federal Energy Regulatory Commission (FERC) order 
issued in Docket No. EF14-1-000 (Jan. 9, 2014), extension approved 
by the Deputy Secretary in Docket No. EF14-1-002 (Sept. 13, 2017), 
modification approved by FERC in Docket No. EF14-1-003 (Aug. 29, 
2019), extension approved by Assistant Secretary for Electricity in 
Rate Order No. 74 (Sept. 22, 2019), and extension approved by the 
Administrator in Rate Order No. 77 (August 30, 2021).

[[Page 43343]]

Available

    In the marketing area of Southwestern Power Administration 
(Southwestern), described generally as the States of Arkansas, 
Kansas, Louisiana, Missouri, Oklahoma, and Texas.

Applicable

    To wholesale Customers which have contractual rights from 
Southwestern to purchase Hydro Peaking Power and associated energy 
(Peaking Energy and Supplemental Peaking Energy).

Character and Conditions of Service

    Three-phase, alternating current, delivered at approximately 60 
Hertz, at the nominal voltage(s), at the point(s) of delivery, and 
in such quantities as are specified by contract.

1. Definitions of Terms

1.1. Ancillary Services

    The services necessary to support the transmission of capacity 
and energy from resources to loads while maintaining reliable 
operation of the System of Southwestern in accordance with good 
utility practice, which include the following:

1.1.1. Scheduling, System Control, and Dispatch Service

    Is provided by Southwestern as Balancing Authority Area operator 
and is in regard to interchange and load-match scheduling and 
related system control and dispatch functions.

1.1.2. Reactive Supply and Voltage Control From Generation Sources 
Service

    Is provided at transmission facilities in the System of 
Southwestern to produce or absorb reactive power and to maintain 
transmission voltages within specific limits.

1.1.3. Regulation and Frequency Response Service

    Is the continuous balancing of generation and interchange 
resources accomplished by raising or lowering the output of on-line 
generation as necessary to follow the moment-by-moment changes in 
load and to maintain frequency within a Balancing Authority Area.

1.1.4. Spinning Operating Reserve Service

    Maintains generating units on-line, but loaded at less than 
maximum output, which may be used to service load immediately when 
disturbance conditions are experienced due to a sudden loss of 
generation or load.

1.1.5. Supplemental Operating Reserve Service

    Provides an additional amount of operating reserve sufficient to 
reduce Area Control Error to zero within 10 minutes following loss 
of generating capacity which would result from the most severe 
single contingency.

1.1.6. Energy Imbalance Service

    Corrects for differences over a period of time between schedules 
and actual hourly deliveries of energy to a load. Energy delivered 
or received within the authorized bandwidth for this service is 
accounted for as an inadvertent flow and is returned to the 
providing party by the receiving party in accordance with standard 
utility practice or a contractual arrangement between the parties.

1.2. Customer

    The entity which is utilizing and/or purchasing Federal Power 
and Federal Energy and services from Southwestern pursuant to this 
Rate Schedule.

1.3. Demand Period

    The period of time used to determine maximum integrated rates of 
delivery for the purpose of power accounting which is the 60-minute 
period that begins with the change of hour.

1.4. Federal Power and Energy

    The power and energy provided from the System of Southwestern.

1.5. Hydro Peaking Power

    The Federal Power that Southwestern sells and makes available to 
the Customers through their respective Power Sales Contracts in 
accordance with this Rate Schedule.

1.6. Peaking Billing Demand

    The quantity equal to the Peaking Contract Demand for any month 
unless otherwise provided by the Customer's Power Sales Contract.

1.7. Peaking Contract Demand

    The maximum rate in kilowatts at which Southwestern is obligated 
to deliver Federal Energy associated with Hydro Peaking Power as set 
forth in the Customer's Power Sales Contract.

1.8. Peaking Energy

    The Federal Energy associated with Hydro Peaking Power that 
Southwestern sells and makes available to the Customer in accordance 
with the terms and conditions of the Customer's Power Sales 
Contract.

1.9. Peaking Energy Schedule Submission Time

    The time by which Southwestern requires the Customer to submit 
Peaking Energy schedules to Southwestern as provided for in this 
Rate Schedule and in accordance with the terms and conditions of the 
Customer's Power Sales Contract.

1.10. Power Sales Contract

    The Customer's contract with Southwestern for the sale of 
Federal Power and Federal Energy.

1.11. Supplemental Peaking Energy

    The Federal Energy associated with Hydro Peaking Power that 
Southwestern sells and makes available to the Customer if determined 
by Southwestern to be available and that is in addition to the 
quantity of Peaking Energy purchased by the Customer in accordance 
with the terms and conditions of the Customer's Power Sales 
Contract.

1.12. System of Southwestern

    The transmission and related facilities owned by Southwestern, 
and/or the generation, transmission, and related facilities owned by 
others, the capacity of which, by contract, is available to and 
utilized by Southwestern to satisfy its contractual obligations to 
the Customer.

1.13. Uncontrollable Force

    Any force which is not within the control of the party affected, 
including, but not limited to failure of water supply, failure of 
facilities, flood, earthquake, storm, lightning, fire, epidemic, 
riot, civil disturbance, labor disturbance, sabotage, war, act of 
war, terrorist acts, or restraint by court of general jurisdiction, 
which by exercise of due diligence and foresight such party could 
not reasonably have been expected to avoid.

2. Wholesale Rates, Terms, and Conditions for Hydro Peaking Power, 
Peaking Energy, Supplemental Peaking Energy, and Associated 
Services

    Unless otherwise specified, this Section 2 is applicable to all 
sales under the Customer's Power Sales Contract.

2.1. Hydro Peaking Power Rates, Terms, and Conditions

2.1.1. Monthly Capacity Charge for Hydro Peaking Power

    $4.50 per kilowatt of Peaking Billing Demand.

2.1.2. Services Associated With Capacity Charge for Hydro Peaking Power

    The capacity charge for Hydro Peaking Power includes such 
transmission services as are necessary to integrate Southwestern's 
resources in order to reliably deliver Hydro Peaking Power and 
associated energy to the Customer. This capacity charge also 
includes two Ancillary Services charges: Scheduling, System Control, 
and Dispatch Service; and Reactive Supply and Voltage Control from 
Generation Sources Service.

2.1.3. Secondary Transmission Service Under Capacity Associated With 
Hydro Peaking Power

    Customers may utilize the transmission capacity associated with 
Peaking Contract Demand for the transmission of non-Federal energy, 
on a non-firm, as-available basis, at no additional charge for such 
transmission service or associated Ancillary Services, under the 
following terms and conditions:
    2.1.3.1. The sum of the capacity, for any hour, which is used 
for Peaking Energy, Supplemental Peaking Energy, and Secondary 
Transmission Service, may not exceed the Peaking Contract Demand;
    2.1.3.2. The non-Federal energy transmitted under such secondary 
service is delivered to the Customer's point of delivery for Hydro 
Peaking Power;
    2.1.3.3. The Customer commits to provide Real Power Losses 
associated with such deliveries of non-Federal energy; and
    2.1.3.4. Sufficient transfer capability exists between the point 
of receipt into the System of Southwestern of such non-Federal 
energy and the Customer's point of delivery for Hydro Peaking Power 
for the time period that such secondary transmission service is 
requested.

2.1.4. Adjustment for Reduction in Service

    If, during any month, the Peaking Contract Demand associated 
with a Power Sales Contract in which Southwestern has the obligation 
to provide 1,200 kilowatthours of Peaking Energy per kilowatt of 
Peaking Contract Demand is reduced by

[[Page 43344]]

Southwestern for a period or periods of not less than two 
consecutive hours by reason of an outage caused by either an 
Uncontrollable Force or by the installation, maintenance, 
replacement or malfunction of generation, transmission and/or 
related facilities on the System of Southwestern, or insufficient 
pool levels, the Customer's capacity charges for such month will be 
reduced for each such reduction in service by an amount computed 
under the formula:

R = (C x K x H) / S

with the factors defined as follows:

R = The dollar amount of reduction in the monthly total capacity 
charges for a particular reduction of not less than two consecutive 
hours during any month, except that the total amount of any such 
reduction shall not exceed the product of the Customer's capacity 
charges associated with Hydro Peaking Power times the Peaking 
Billing Demand.
C = The Customer's capacity charges associated with Hydro Peaking 
Power for the Peaking Billing Demand for such month.
K = The reduction in kilowatts in Peaking Billing Demand for a 
particular event.
H = The number of hours duration of such particular reduction.
S = The number of hours that Peaking Energy is scheduled during such 
month, but not less than 60 hours times the Peaking Contract Demand.

    Such reduction in charges shall fulfill Southwestern's 
obligation to deliver Hydro Peaking Power and Peaking Energy.

2.2. Peaking Energy and Supplemental Peaking Energy Rates, Terms, and 
Conditions

2.2.1. Peaking Energy Charge

    $0.0094 per kilowatthour of Peaking Energy delivered plus the 
Purchased Power Adder as defined in Section 2.2.3 of this Rate 
Schedule.

2.2.2. Supplemental Energy Charge

    $0.0094 per kilowatthour of Supplemental Peaking Energy 
delivered.

2.2.3. Purchased Power Adder

    A purchased power adder of $0.0059 per kilowatthour of Peaking 
Energy delivered, as adjusted by the Administrator, Southwestern, in 
accordance with the procedure within this Rate Schedule.

2.2.3.1. Applicability of Purchased Power Adder

    The Purchased Power Adder shall apply to sales of Peaking 
Energy. The Purchased Power Adder shall not apply to sales of 
Supplemental Peaking Energy or sales to any Customer which, by 
contract, has assumed the obligation to supply energy to fulfill the 
minimum of 1,200 kilowatthours of Peaking Energy per kilowatt of 
Peaking Contract Demand during a contract year (hereinafter 
``Contract Support Arrangements'').

2.2.3.2. Procedure for Determining Net Purchased Power Adder Adjustment

    Not more than twice annually, the Purchased Power Adder of 
$0.0059 (5.9 mills) per kilowatthour of Peaking Energy, as noted in 
this Rate Schedule, may be adjusted by the Administrator, 
Southwestern, by an amount up to a total of $0.0059 (5.9 
mills) per kilowatthour per year, as calculated by the following 
formula:

ADJ = (PURCH-EST + DIF) / SALES

with the factors defined as follows:

ADJ = The dollar per kilowatthour amount of the total adjustment, 
plus or minus, to be applied to the net Purchased Power Adder, 
rounded to the nearest $0.0001 per kilowatthour, provided that the 
total ADJ to be applied in any year shall not vary from the then-
effective ADJ by more than $0.0059 per kilowatthour;
PURCH = The actual total dollar cost of Southwestern's System Direct 
Purchases as accounted for in the financial records of the 
Southwestern Federal Power System for the period;
EST = The estimated total dollar cost ($13,273,800 per year) of 
Southwestern's System Direct Purchases used as the basis for the 
Purchased Power Adder of $0.0059 per kilowatthour of Peaking Energy;
DIF = The accumulated remainder of the difference in the actual and 
estimated total dollar cost of Southwestern's System Direct 
Purchases since the effective date of the currently approved 
Purchased Power Adder set forth in this Rate Schedule, which 
remainder is not projected for recovery through the ADJ in any 
previous periods;
SALES = The annual Total Peaking Energy sales projected to be 
delivered (2,241,300,000 KWh per year) from the System of 
Southwestern, which total was used as the basis for the $0.0059 per 
kilowatthour Purchased Power Adder.

2.3. Transformation Service Rates, Terms, and Conditions

2.3.1. Monthly Capacity Charge for Transformation Service

    $0.46 per kilowatt will be assessed for capacity used to deliver 
energy at any point of delivery at which Southwestern provides 
transformation service for deliveries at voltages of 69 kilovolts or 
less from higher voltage facilities.

2.3.2. Applicability of Capacity Charge for Transformation Service

    Unless otherwise specified by contract, for any particular 
month, a charge for transformation service will be assessed on the 
greater of (1) that month's highest metered demand, or (2) the 
highest metered demand recorded during the previous 11 months, at 
any point of delivery. For the purpose of this Rate Schedule, the 
highest metered demand will be based on all deliveries, of both 
Federal and non-Federal energy, from the System of Southwestern, at 
such point during such month.

2.4. Ancillary Services Rates, Terms, and Conditions

2.4.1. Capacity Charges for Ancillary Services

2.4.1.1. Regulation and Frequency Response Service

    Monthly rate of $0.07 per kilowatt of Peaking Billing Demand 
plus the Regulation Purchased Adder as defined in Section 2.4.5 of 
this Rate Schedule.

2.4.1.2. Spinning Operating Reserve Service

    Monthly rate of $0.0146 per kilowatt of Peaking Billing Demand.
    Daily rate of $0.00066 per kilowatt for non-Federal generation 
inside Southwestern's Balancing Authority Area.

2.4.1.3. Supplemental Operating Reserve Service

    Monthly rate of $0.0146 per kilowatt of Peaking Billing Demand.
    Daily rate of $0.00066 per kilowatt for non-Federal generation 
inside Southwestern's Balancing Authority Area.

2.4.1.4. Energy Imbalance Service

    $0.0 per kilowatt for all reservation periods.

2.4.2. Availability of Ancillary Services

    Regulation and Frequency Response Service and Energy Imbalance 
Service are available only for deliveries of power and energy to 
load within Southwestern's Balancing Authority Area. Spinning 
Operating Reserve Service and Supplemental Operating Reserve Service 
are available only for deliveries of non-Federal power and energy 
generated by resources located within Southwestern's Balancing 
Authority Area and for deliveries of all Hydro Peaking Power and 
associated energy from and within Southwestern's Balancing Authority 
Area. Where available, such Ancillary Services must be taken from 
Southwestern; unless, arrangements are made in accordance with 
Section 2.4.4 of this Rate Schedule.

2.4.3. Applicability of Charges for Ancillary Services

    For any month, the charges for Ancillary Services for deliveries 
of Hydro Peaking Power shall be based on the Peaking Billing Demand.
    The daily charge for Spinning Operating Reserve Service and 
Supplemental Operating Reserve Service for non-Federal generation 
inside Southwestern's Balancing Authority Area shall be applied to 
the greater of Southwestern's previous day's estimate of the peak, 
or the actual peak, in kilowatts, of the internal non-Federal 
generation.

2.4.4. Provision of Ancillary Services by Others

    Customers for which Ancillary Services are made available as 
specified above, must inform Southwestern by written notice of the 
Ancillary Services which they do not intend to take and purchase 
from Southwestern, and of their election to provide all or part of 
such Ancillary Services from their own resources or from a third 
party.
    Subject to Southwestern's approval of the ability of such 
resources or third parties to meet Southwestern's technical and 
operational requirements for provision of such Ancillary Services, 
the Customer may change the Ancillary Services which it takes from 
Southwestern and/or from other sources at the beginning of any month 
upon the greater of 60 days notice or upon completion of any 
necessary equipment modifications necessary to accommodate such 
change; Provided, That, if the Customer chooses not

[[Page 43345]]

to take Regulation and Frequency Response Service, which includes 
the associated Regulation Purchased Adder, the Customer must pursue 
these services from a different host Balancing Authority; thereby 
moving all metered loads and resources from Southwestern's Balancing 
Authority Area to the Balancing Authority Area of the new host 
Balancing Authority. Until such time as that meter reconfiguration 
is accomplished, the Customer will be charged for the Regulation and 
Frequency Response Service and applicable Adder then in effect. The 
Customer must notify Southwestern by July 1 of this choice, to be 
effective the subsequent calendar year.

2.4.5. Regulation Purchased Adder

    Southwestern has determined the amount of energy used from 
storage to provide Regulation and Frequency Response Service in 
order to meet Southwestern's Balancing Authority Area requirements. 
The replacement value of such energy used shall be recovered through 
the Regulation Purchased Adder. The Regulation Purchased Adder 
during the time period of January 1 through December 31 of the 
current calendar year is based on the average annual use of energy 
from storage \1\ for Regulation and Frequency Response Service and 
Southwestern's estimated purchased power price for the corresponding 
year from the most currently approved Power Repayment Studies.
---------------------------------------------------------------------------

    \1\ The average annual use of energy from storage for Regulation 
and Frequency Response Service is based on Southwestern studies.
---------------------------------------------------------------------------

    The Regulation Purchased Adder will be phased in over a period 
of four (4) years as follows:

------------------------------------------------------------------------
                                     Regulation purchased adder for the
               Year                   incremental replacement value of
                                          energy used from storage
------------------------------------------------------------------------
2014..............................  \1/4\ of the average annual use of
                                     energy from storage x 2014
                                     Purchased Power price.
2015..............................  \1/2\ of the average annual use of
                                     energy from storage x 2015
                                     Purchased Power price.
2016..............................  \3/4\ of the average annual use of
                                     energy from storage x 2016
                                     Purchased Power price.
2017 and thereafter...............  The total average annual use of
                                     energy from storage x the
                                     applicable Purchased Power price.
------------------------------------------------------------------------

2.4.5.1. Applicability of Regulation Purchased Adder

    The replacement value of the estimated annual use of energy from 
storage for Regulation and Frequency Response Service shall be 
recovered by Customers located within Southwestern's Balancing 
Authority Area on a non-coincident peak ratio share basis, divided 
into twelve equal monthly payments, in accordance with the formula 
in Section 2.4.5.2.
    If the Regulation Purchased Adder is determined and applied 
under Southwestern's Rate Schedule NFTS-13, then it shall not be 
applied here.

2.4.5.2. Procedure for Determining Regulation Purchased Adder

    Unless otherwise specified by contract, the Regulation Purchased 
Adder for an individual Customer shall be based on the following 
formula rate, calculated to include the replacement value of the 
estimated annual use of energy from storage by Southwestern for 
Regulation and Frequency Response Service.

RPA = The Regulation Purchased Adder for an individual Customer per 
month, which is as follows:

[(LCustomer / LTotal) x RPTotal ] / 
12

with the factors defined as follows:

LCustomer = The sum in MW of the following three factors:
    (1) The Customer's highest metered load plus generation used to 
serve the Customer's load that is accounted for through a reduction 
in the Customer's metered load (referred to as `generation behind 
the meter') during the previous calendar year, and
    (2) The Customer's highest rate of Scheduled Exports \2\ during 
the previous calendar year, and
---------------------------------------------------------------------------

    \2\ Scheduled Exports and Scheduled Imports are transactions, 
such as sales and purchases respectively, which are in addition to a 
Customer's metered load that contribute to Southwestern's Balancing 
Authority Area need for regulation.
---------------------------------------------------------------------------

    (3) The Customer's highest rate of Scheduled Imports \2\ during 
the previous calendar year.
LTotal = The sum of all LCustomer factors for 
all Customers that were inside Southwestern's Balancing Authority 
Area at the beginning of the previous calendar year in MW.
RPTotal = The ``net'' cost in dollars and cents based on 
Southwestern's estimated purchased power price for the corresponding 
year from the most currently approved Power Repayment Studies 
multiplied by the average annual use of energy from storage, as 
provided for in the table in Section 2.4.5, to support 
Southwestern's ability to regulate within its Balancing Authority 
Area. The ``net'' cost in dollars and cents shall be adjusted by 
subtracting the product of the quantity of such average annual use 
of energy from storage in MWh and Southwestern's highest rate in 
dollars per MWh for Supplemental Peaking Energy during the previous 
calendar year.

    For Customers that have aggregated their load, resources, and 
scheduling into a single node by contract within Southwestern's 
Balancing Authority Area, the individual Customer's respective 
Regulation Purchased Adder shall be that Customer's ratio share of 
the Regulation Purchased Adder established for the node. Such ratio 
share shall be determined for the Customer on a non-coincident basis 
and shall be calculated for the Customer from their highest metered 
load plus generation behind the meter.

2.4.6. Energy Imbalance Service Limitations

    Energy Imbalance Service primarily applies to deliveries of 
power and energy which are required to satisfy a Customer's load. As 
Hydro Peaking Power and associated energy are limited by contract, 
the Energy Imbalance Service bandwidth specified for Non-Federal 
Transmission Service does not apply to deliveries of Hydro Peaking 
Power, and therefore Energy Imbalance Service is not charged on such 
deliveries. Customers who consume a capacity of Hydro Peaking Power 
greater than their Peaking Contract Demand may be subject to a 
Capacity Overrun Penalty.

3. Hydro Peaking Power Penalties, Terms, and Conditions

3.1. Capacity Overrun Penalty

3.1.1. Penalty Charge for Capacity Overrun

    For each hour during which Hydro Peaking Power was provided at a 
rate greater than that to which the Customer is entitled, the 
Customer will be charged a Capacity Overrun Penalty at the following 
rates:

------------------------------------------------------------------------
                                                             Rate per
              Months associated with charge                  kilowatt
------------------------------------------------------------------------
March, April, May, October, November, December..........           $0.15
January, February, June, July, August, September........            0.30
------------------------------------------------------------------------

3.1.2. Applicability of Capacity Overrun Penalty

    Customers which have loads within Southwestern's Balancing 
Authority Area are obligated by contract to provide resources, over 
and above the Hydro Peaking Power and associated energy purchased 
from Southwestern, sufficient to meet their loads. A Capacity 
Overrun Penalty shall be applied only when the formulas provided in 
Customers' respective Power Sales Contracts indicate an overrun on 
Hydro Peaking Power, and investigation determines that all 
resources, both firm and non-firm, which were available at the time 
of the apparent overrun were insufficient to meet the Customer's 
load.

3.2. Energy Overrun Penalty

3.2.1. Penalty Charge for Energy Overrun

    $0.1034 per kilowatthour for each kilowatthour of overrun.

3.2.2. Applicability of Energy Overrun Penalty

    By contract, the Customer is subject to limitations on the 
maximum amounts of Peaking Energy which may be scheduled under the 
Customer's Power Sales Contract. When the Customer schedules an 
amount in

[[Page 43346]]

excess of such maximum amounts, such Customer is subject to the 
Energy Overrun Penalty.

3.3. Power Factor Penalty

3.3.1. Requirements Related to Power Factor

    Any Customer served from facilities owned by or available by 
contract to Southwestern will be required to maintain a power factor 
of not less than 95 percent and will be subject to the following 
provisions.

3.3.2. Determination of Power Factor

    The power factor will be determined for all Demand Periods and 
shall be calculated under the formula:
[GRAPHIC] [TIFF OMITTED] TN07JY23.004

with the factors defined as follows:

PF = The power factor for any Demand Period of the month.
kWh = The total quantity of energy which is delivered during such 
Demand Period to the point of delivery or interconnection in 
accordance with Section 3.3.4.
rkVAh = The total quantity of reactive kilovolt-ampere-hours (kVARs) 
delivered during such Demand Period to the point of delivery or 
interconnection in accordance with Section 3.3.4. {tc\l ``2.2 
Reservation Priority For Existing Firm Service Customers''{time} 

3.3.3. Penalty Charge for Power Factor

    The Customer shall be assessed a penalty for all Demand Periods 
of a month where the power factor is less than 95 percent lagging. 
For any Demand Period during a particular month such penalty shall 
be in accordance with the following formula:

C = D x (0.95-LPF) x $0.10

with the factors defined as follows:

C = The charge in dollars to be assessed for any particular Demand 
Period of such month that the determination of power factor ``PF'' 
is calculated to be less than 95 percent lagging.
D = The Customer's demand in kilowatts at the point of delivery for 
such Demand Period in which a low power factor was calculated.
LPF = The lagging power factor, if any, determined by the formula 
``PF'' for such Demand Period.

    If C is negative, then C = zero (0).

3.3.4. Applicability of Power Factor Penalty

    The Power Factor Penalty is applicable to radial 
interconnections with the System of Southwestern. The total Power 
Factor Penalty for any month shall be the sum of all charges ``C'' 
for all Demand Periods of such month. No penalty is assessed for 
leading power factor. Southwestern, in its sole judgment and at its 
sole option, may determine whether power factor calculations should 
be applied to (i) a single physical point of delivery, (ii) a 
combination of physical points of delivery where a Customer has a 
single, electrically integrated load, (iii) or interconnections. The 
general criteria for such decision shall be that, given the 
configuration of the Customer's and Southwestern's systems, 
Southwestern will determine, in its sole judgment and at its sole 
option, whether the power factor calculation more accurately 
assesses the detrimental impact on Southwestern's system when the 
above formula is calculated for a single physical point of delivery, 
a combination of physical points of delivery, or for an 
interconnection as specified by an Interconnection Agreement.
    Southwestern, at its sole option, may reduce or waive Power 
Factor Penalties when, in Southwestern's sole judgment, low power 
factor conditions were not detrimental to the System of Southwestern 
due to particular loading and voltage conditions at the time the 
power factor dropped below 95 percent lagging.

4. Hydro Peaking Power Miscellaneous Rates, Terms, and Conditions 
{tc\12 ``2 Initial Allocation and Renewal Procedures''{time} 

4.1. Real Power Losses {tc\13 ``2.1 Initial Allocation and Renewal 
Procedures''{time} 

    Customers are required to self-provide all Real Power Losses for 
non-Federal energy transmitted by Southwestern on behalf of such 
Customers under the provisions detailed below.
    Real Power Losses are computed as four (4) percent of the total 
amount of non-Federal energy transmitted by Southwestern. The 
Customer's monthly Real Power Losses are computed each month on a 
megawatthour basis as follows:

ML = 0.04 x NFE

with the factors defined as follows:

ML = The total monthly loss energy, rounded to the nearest 
megawatthour, to be scheduled by a Customer for receipt by 
Southwestern for Real Power Losses associated with non-Federal 
energy transmitted on behalf of such Customer; and
NFE = The amount of non-Federal energy that was transmitted by 
Southwestern on behalf of a Customer during a particular month.

    The Customer must schedule or cause to be scheduled to 
Southwestern, Real Power Losses for which it is responsible subject 
to the following conditions:
    4.1.1. The Customer shall schedule and deliver Real Power Losses 
back to Southwestern during the second month after they were 
incurred by Southwestern in the transmission of the Customer's non-
Federal power and energy over the System of Southwestern unless such 
Customer has accounted for Real Power Losses as part of a metering 
arrangement with Southwestern.
    4.1.2. On or before the twentieth day of each month, 
Southwestern shall determine the amount of non-Federal loss energy 
it provided on behalf of the Customer during the previous month and 
provide a written schedule to the Customer setting forth hour-by-
hour the quantities of non-Federal energy to be delivered to 
Southwestern as losses during the next month.
    4.1.3. Real Power Losses not delivered to Southwestern by the 
Customer, according to the schedule provided, during the month in 
which such losses are due shall be billed by Southwestern to the 
Customer to adjust the end-of-month loss energy balance to zero (0) 
megawatthours and the Customer shall be obliged to purchase such 
energy at the following rates:

------------------------------------------------------------------------
                                                             Rate per
              Months associated with charge                kilowatthour
------------------------------------------------------------------------
March, April, May, October, November, December..........           $0.15
January, February, June, July, August, September........            0.30
------------------------------------------------------------------------

    4.1.4. Real Power Losses delivered to Southwestern by the 
Customer in excess of the losses due during the month shall be 
purchased by Southwestern from the Customer at a rate per 
megawatthour equal to Southwestern's rate per megawatthour for 
Supplemental Peaking Energy, as set forth in Southwestern's then-
effective Rate Schedule for Hydro Peaking Power to adjust such 
hourly end-of-month loss energy balance to zero (0) megawatthours.

4.2. Peaking Energy Schedule Submission Time

    Southwestern's Peaking Energy Schedule Submission Time is on or 
before 8:30 a.m. Central Prevailing Time (CPT), as adjusted by the 
Administrator, Southwestern, in accordance with Section 4.2.2 in 
this Rate Schedule, of the day preceding the day for the delivery of 
Peaking Energy. The Peaking Energy Schedule Submission Time 
supersedes the Peaking Energy schedule submission time provided in 
the Customer's Power Sales Contract, pursuant to Section 4.2.1 of 
this Rate Schedule. Reductions to Peaking Energy schedules may be 
made in accordance with Section 4.2.3 of this Rate Schedule.

4.2.1. Applicability of Peaking Energy Schedule Submission Time

    The Peaking Energy Schedule Submission Time shall apply to the 
scheduling of Peaking Energy. The Peaking Energy Schedule Submission 
Time shall not apply to the scheduling of Supplemental Peaking 
Energy or to Contract Support Arrangements.

4.2.2. Procedure for Adjusting the Peaking Energy Schedule Submission 
Time

    Not more than once annually, the Peaking Energy Schedule 
Submission Time of 8:30 a.m. CPT, as noted in Section 4.2 of this 
Rate Schedule, may be adjusted by the Administrator, Southwestern, 
to a time no earlier than 8:00 a.m. CPT and no later than 9:00 a.m. 
CPT.

4.2.2.1. Determination of Need To Adjust the Peaking Energy Schedule 
Submission Time

    The Administrator, Southwestern, will make a determination on 
the need to adjust the Peaking Energy Schedule Submission Time based 
on Southwestern's studies involving financial analysis, regional 
energy market conditions, and/or operational considerations.

4.2.2.2. Notification of Peaking Energy Schedule Submission Time 
Adjustment

    The Administrator, Southwestern, will notify customers of the 
determination to adjust the Peaking Energy Schedule Submission Time 
in writing no later than 30 calendar days prior to the effective 
date of

[[Page 43347]]

the Peaking Energy Schedule Submission Time adjustment.

4.2.3. Reductions to Peaking Energy Schedules After the Peaking Energy 
Schedule Submission Time

    Customers may reduce Peaking Energy Schedules submitted for July 
15, 2023, through September 15, 2023, after the Peaking Energy 
Schedule Submission Time in accordance with this Section 4.2.3. Such 
changes must be coordinated with Southwestern Scheduling and 
Operations staff no later than 2:00 p.m. CPT the day prior to 
schedule implementation.
    4.2.3.1. Customers must submit a Peaking Energy Schedule by the 
Peaking Energy Schedule Submission Time.
    4.2.3.2. For hours the Customer has scheduled a non-zero energy 
amount, the Customer may reduce the amount of Peaking Energy 
scheduled for that same hour by no more than 25 percent. Customers 
may not increase the Peaking Energy scheduled for any hour.
    4.2.3.3. For determining the 25 percent Peaking Energy hourly 
reduction limit, fractional megawatt reductions will round to the 
nearest whole megawatt. Values ending in 0.01 to 0.49 will round 
down and values ending in 0.50 to 0.99 will round up.
    4.2.3.4. Customers choosing to reduce the Peaking Energy 
Schedule must adjust the applicable transaction tag to reflect the 
desired reductions no later than 2:00 CPT the day prior to schedule 
implementation.

[FR Doc. 2023-14401 Filed 7-6-23; 8:45 am]
BILLING CODE P