[Federal Register Volume 63, Number 191 (Friday, October 2, 1998)]
[Notices]
[Pages 53045-53047]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-26466]
-----------------------------------------------------------------------
DEPARTMENT OF ENERGY
Western Area Power Administration
Boulder Canyon Project-Base Charge and Its Components
AGENCY: Western Area Power Administration, DOE.
ACTION: Notice of Base Charge and its components.
-----------------------------------------------------------------------
SUMMARY: Notice is given of the confirmation and approval by the Deputy
Secretary of the Department of Energy (DOE) placing the provisional
Base Charge and its components (Base Charge) for the Boulder Canyon
Project (BCP) firm power into effect for the fourth rate year under the
current rate methodology pursuant to Rate Schedule BCP-F5 as approved
by the Federal Energy Regulatory Commission (FERC) on April 19, 1996
(Rate Order No. WAPA-70). In accordance with Section 13.13 of the BCP
Implementation Agreement, the rate methodology and calculated rates for
the first rate year and each fifth fiscal year (FY) shall become
effective provisionally upon approval by the Deputy Secretary of
Energy, subject to final approval by the FERC. The rates for all other
FYs (second FY, third FY, and fourth FY) shall become effective on a
final basis upon approval by the Deputy Secretary of Energy. The
provisional FY 1999 Base Charge represents the charges for the fourth
FY since FERC approval of the current rate methodology. The provisional
Base Charge will provide sufficient revenue to pay all annual costs,
including interest expense, and repayment of required investment within
the allowable period.
DATES: The provisional Base Charge will be placed into effect on
October 1, 1998, and will be in effect through September 30, 1999.
FOR FURTHER INFORMATION CONTACT: Mr. Anthony H. Montoya, Power
Marketing Manager, Western Area Power Administration, Desert Southwest
Customer Service Region, 615 South 43rd Avenue, Phoenix, AZ 85009-5313,
(602) 352-2789, or Mr. Timothy J. Meeks, Power Marketing Liaison
Office, Room 8G-027, 1000 Independence Avenue SW., Washington, DC
20585, (202) 586-5581.
SUPPLEMENTARY INFORMATION: The Deputy Secretary of Energy approved the
existing Base Charge for firm power service on September 19, 1997. The
existing Base Charge was calculated in accordance with the methodology
approved under Rate Order WAPA-70. The Procedures for Public
Participation in Power and Transmission Rate Adjustments and
Extensions, 10 CFR Part 903, have been followed by the Western Area
Power Administration (Western) in determining the Base Charge. The FY
1999 provisional Base Charge for BCP firm power is based on an Annual
Revenue Requirement of $48,842,126. The provisional Base Charge
consists of an energy revenue requirement of $25,208,831, a forecasted
energy rate of 4.86 mills/kWh, a capacity revenue requirement of
$23,633,296, and a forecasted capacity rate of $1.01 per kilowattmonth
(kWmonth).
The following summarizes the steps taken by Western to ensure
involvement of all interested parties in the determination of the Base
Charge:
1. On March 30, 1998, a letter was mailed from Western's Desert
Southwest Customer Service Region to all BCP customers and other
interested parties announcing the informal customer meeting and the
public information and public comment forums.
2. A Federal Register notice (FRN) was published on April 21, 1998
(63 FR 19722), announcing the proposed Base Charge adjustment process,
initiating the public consultation and comment period, announcing the
public information and public comment forums, and presenting procedures
for public participation.
3. Discussion of the proposed Base Charge was initiated at an
informal BCP contractor meeting held on May 6, 1998, in Phoenix,
Arizona. At this informal meeting, representatives from Western and the
Bureau of Reclamation (Reclamation) explained the basis for estimates
used in the calculation of the Base Charge. A question and answer
session was convened for those persons attending.
4. At the public information forum held on May 14, 1998, in
Phoenix, Arizona, Western and Reclamation representatives explained the
proposed Base Charge for Rate Year 1999 in greater detail. A question
and answer session was convened for those persons attending.
5. A public comment forum was held on June 11, 1998, in Phoenix,
Arizona, to give the public an opportunity to comment for the record.
Three persons representing customers and customer groups made oral
comments.
6. Twelve comment letters were received during the 90-day
consultation and comment period. The consultation and comment period
ended July 20, 1998. Although all formally submitted comments were not
specifically pertinent to the Base Charge adjustment, they have been
considered in the preparation of this FRN. Most of the comments
received during the public meetings, or in the written correspondence,
dealt with agency processes, specific cost components, and the power
repayment study (PRS) comparisons. All comments were considered in
developing the Base Charge for FY 1999. Written comments were received
from the following sources:
Metropolitan Water District of Southern California (California)
Utility Resource Services (Arizona)
Arizona Power Authority (Arizona)
Ryley, Carlock & Applewhite (Arizona)
Harquahala Valley Power District (Arizona)
[[Page 53046]]
Roosevelt Irrigation District (Arizona)
Electrical District Number Five (Arizona)
Irrigation & Electrical Districts Association of Arizona (Arizona)
Maricopa-Stanfield Irrigation & Drainage District (Arizona)
Electrical District Number Four (Arizona)
Electrical District Number Eight (Arizona)
McMullen Valley Water Conservation & Drainage District (Arizona)
The comments and responses, paraphrased for brevity, are presented
below.
Agency Processes
Comment: A commentor stated that Reclamation needs to change its
budgeting process from escalating estimates for future years to using
actual data. It was suggested that Reclamation begin budgeting on a
zero-based budget concept. Zero-based budgeting requires justification
for every position and every process.
Response: Reclamation will continue to improve its justification
process for all facets of the budget. Estimates are based on the latest
actual data available at the time of budget formulation. This data is
analyzed and modified based on anticipated changes in workload,
personnel and various requirements necessary for the budget period.
Comment: A commentor suggested that Reclamation reevaluate its
organizational structure and develop an organization that is effective
for Reclamation and its customers.
Response: Reclamation agrees that an organization must be effective
for the future. Reclamation continues to evaluate its organization and
make changes as appropriate, recognizing that its core mission remains
fairly stable. Reclamation's goal is to satisfy water and water related
demands while optimizing power generation.
Comment: A few commentors expressed concern that all participants
on the Engineering and Operating Committee and 10-Year Operating Plan
Committee need to renew their commitment to allow these committees to
function as planned, and all participants need to provide the necessary
resources.
Response: Western and Reclamation agree that all participants
should renew their commitment in order for the processes to be
successful.
Comment: A commentor has expressed concern over the high number
(143) of Bureau Full Time Equivalents (FTE) charged to administrative
and general expense (support services) in FY 1997.
Response: Hoover Dam has responsibilities, well beyond power
generation, which include flood control, irrigation, security, visitors
and maintaining the structure. Most of the 143 FTEs work to carry out
these functions. The 1997 ``Hydroelectric Generation Benchmarking
Program'' Report shows that Hoover's support costs are well below
average. This indicates a positive result, in that other like-size
hydro powerplants are much higher in their support service costs.
Reclamation recognizes that improvements can be made and will continue
to work towards that end.
Specific Cost Components
Comment: Several commentors stated concern that there is no
existing legal authority by which Western can collect and transfer
funds for the post-retirement benefit costs from the Colorado River Dam
Fund to the Office of Personnel Management. Based on these concerns,
many of the contractors are requesting Western to exclude the post-
retirement benefit costs in this rate process.
Response: In a memorandum dated July 1, 1998, the Department of
Energy's General Counsel concluded that Western has the authority to
collect in rates an amount that would offset the United States
Government's full costs of post-retirement benefits. Accordingly, in
this rate process, Western is collecting its post-retirement benefit
costs and these funds will be deposited into the Colorado River Dam
Fund.
Comment: A commentor expressed concern that the proposed rates only
reflect Western's post-retirement benefit costs and not Reclamation's
portion. Also, the commentor stated that these costs should have been
presented and disclosed in the 10-year planning process prior to being
implemented in the rate process.
Response: Western first disclosed the issue of the unfunded portion
of the post-retirement benefit costs, and the plan for implementation
of these costs at a March 5, 1998, Engineering and Operating Committee
meeting. On May 6, 1998, and May 14, 1998, Western identified its
portion of these costs and again disclosed that the costs would be
included in the current rate process. Although Reclamation has not
allocated its post-retirement benefit costs, upon doing so, Western
will include the costs in the power rates.
Comment: A commentor expressed concern for the cost picture of the
BCP resource and stated that the BCP costs cannot remain static and
still remain competitive. The commentor requested Reclamation and
Western open a dialogue with their customers regarding what the
competitive future looks like in the southwest, and where this resource
fits in.
Response: Western and Reclamation believe that appropriate forums
are already in place which allow for dialogue with the customers to
discuss the future costs of the BCP resource and the competitive
market. Western, Reclamation, and all BCP contractors are represented
on a 10-Year Operating Plan Committee, and an Engineering and Operating
Committee where this type of dialogue is held. Western and Reclamation
encourage the BCP contractors to share the meeting minutes of these two
committees with their customers, and also encourage the need for more
open dialogue among the BCP contractors, their customers and
consultants.
Comment: A commentor requested justification of Visitor Center
costs. The commentor stated that he does not understand how temporary
employees are included in the budget or how fringe benefits are
calculated. Also, the commentor requested an explanation and
justification for spending almost $500,000 a year on janitorial
services.
Response: Classification and staffing requirements change in regard
to workload needs. In planning for future years' workload, temporary
employees may be budgeted for, rather than allocating a permanent full-
time employee. The Hoover Public Services uses a variety of staffing
classifications in order to best accommodate increased workload in an
efficient manner.
Benefits are accrued based on work appointment status
(classification) and length of work schedule. Permanent full time
employees receive full benefits. Temporary employees receive benefits
when they have worked longer than 1 year and benefits for part-time
employees are prorated based on hours actually worked.
Janitorial Services
The Visitor Center, Parking Garage and Tour Route include 425,049
square feet of area. Janitorial services for this area were performed
by in-house staff for the first 6 months of operation. At that time, a
review determined these services could best be performed by a private
contract.
A contract was awarded for $417,957 in May 1996 to the lowest
qualified bidder. Modifications have since been made to the contract to
cover cleaning of the Exhibit Level, Theater Area, an additional area
in the Parking Garage, and Department of Labor wage increases.
[[Page 53047]]
Comment: A commentor expressed concern that the Visitor's Center is
not producing all the revenues projected by Reclamation.
Response: In a September 1996 report to the Senate Appropriations
Committee, Reclamation outlined its commitments: ``* * * to, within the
best of its ability and legal authorities, establish and maintain user
fees sufficient to fund all of the visitor program's operation,
maintenance, and replacement (OM&R) costs, as well as a portion of the
annual debt service.'' The goal was to ``establish a visitor program
that will produce $9 million in revenues annually.'' This revenue level
would cover the visitor program's estimated $4 million annual OM&R
cost, and provide $5 million for debt service repayment, thus reducing
the ratepayer's burden by approximately 50 percent.
The management of the Public Services Office is continually
reviewing operational costs. Revenue enhancing opportunities are also
being explored, evaluated, and implemented where advantageous. These
activities are necessary to ensure efficient operation and a quality of
service that meets customers' expectations. They are also necessary in
order to meet Reclamation's goal of repaying approximately 50 percent
of the debt service.
Expenditures for FY 1996 were $3,988,000; revenues were $4,913,000.
The amount available for debt service was $925,000. In FY 1997,
expenditures were $4,367,000; revenues were $6,736,000. The amount
available for debt service was $2,369,000. Based on FY 1998 actual
expenditures and revenues to date, the amount available for debt
service is $3,719,000 through June.
Power Repayment Study
Comment: A commentor stated that the appropriate comparison of the
PRS for the public process would have been to compare the current
proposed May 1998 PRS to the final February 1998 BCP 10-Year Operating
Plan PRS.
Response: The PRS comparison presented at the informal and public
process rate meetings comparing the previous ratebase PRS with the
current ratebase PRS is the most appropriate comparison between the
PRSs. Western and Reclamation have previously stated that the PRS
included in the annual final 10-year plan has no purpose other than to
give the customers a point-in-time look at the costs, and the impact to
the power rates and revenue requirements at that particular time
period. There are other factors such as year end actuals, crosswalk
adjustments, and updated budget numbers which impact a rate year that
are not included in the annual Final 10-Year Operating Plan PRS.
Therefore, utilizing the 10-Year Operating Plan PRS during the rate
process will provide an inaccurate characterization of the real impact
on the proposed Base Charge.
By Amendment No. 3 to Delegation Order No. 0204-108, published
November 10, 1993 (58 FR 59716), the Secretary of Energy (Secretary)
delegated (1) the authority to develop long-term power and transmission
rates on a nonexclusive basis to the Administrator of Western; (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 FERC. Existing DOE procedures for public
participation in power rate adjustments (10 CFR Part 903) became
effective on September 18, 1985 (50 FR 37835).
These charges and rates are established pursuant to section 302(a)
of the DOE Organization Act, 42 U.S.C. 7152(a), through which the power
marketing functions of the Secretary of the Interior and Reclamation
under the Reclamation Act of 1902, 43 U.S.C. 371 et seq., 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
specifically applicable to the project system involved, were
transferred to and vested in the Secretary.
Dated: September 18, 1998.
Elizabeth A. Moler,
Deputy Secretary.
[FR Doc. 98-26466 Filed 10-1-98; 8:45 am]
BILLING CODE 6450-01-P
