2024-26932. Loveland Area Projects-Rate Order No. WAPA-212

Table 1—Comparison of Existing and Provisional Revenue Requirements and Composite Rate

LAP firm electric service	Existing under L-F12 as of Jan. 1, 2023	Provisional under L-F13 first step as of Jan. 1, 2025	First step percent change	Provisional under L-F13 second step as of Jan. 1, 2026	Second step percent change
Total Revenue Requirement 1 (in million $)	$74.6	$81.3	9.0	$87.9	8.1
Pick-Sloan—WD 1  2 Fry-Ark (in million $).	$58.5 $16.1	$62.6 $18.7	7.0 16.1	$66.3 $21.6	5.9 15.5
LAP Composite Rate 1 (mills/kWh)	36.61	39.84	8.8	43.10	8.2
1  Provisional values are estimates only based on using set/final Base and estimated Drought Adder components.
2  Additional information on the overall P-SMBP PRS and charge components can be found in Rate Order No. WAPA-213 and on the UGP's website at: www.wapa.gov/​about-wapa/​regions/​ugp/​ugp-rates/​2025-firm-rate-adjustment.

Firm Electric Service—Existing and Provisional Formula Rates

Under the existing and provisional rate methodology, rates for LAP firm electric service are designed to recover an annual Revenue Requirement that includes investment and replacement repayment (including aid to irrigation), interest, purchase power, O&M, and other expenses within the allowable period. The annual Revenue Requirement continues to be allocated equally between capacity and energy.

Base and Drought Adder Components

As a part of the existing and provisional rate schedule, RM provides for a formula-based adjustment of the Drought Adder component, with an annual increase of up to 2mills/kWh each year. The 2 mills/kWh cap places a limit on the amount the Drought Adder component can be adjusted upward relative to associated drought costs included in the Drought Adder formula rate for any 1-year cycle. The Drought Adder component may be adjusted downward by any amount. Continuing to identify the firm electric service Revenue Requirement using Base and Drought Adder components will assist the Regions in presenting the future impacts of droughts, demonstrate repayment of drought-related costs in the PRSs, and allow the Regions to be more responsive to changes caused by drought-related expenses. RM will continue to charge and bill its customers firm electric service rates for energy and capacity, which are the sum of the Base and Drought Adder components.

Under Rate Schedule L-F13, RM will continue to identify its LAP firm electric service Revenue Requirement using Base and Drought Adder components. The Base component is a fixed Revenue Requirement from each PRS that includes annual O&M, investment and replacement repayment, and associated interest, Normal Timing Power Purchases, and transmission costs. RM cannot adjust the Base component without a public process. The Drought Adder component is a formula-based Revenue Requirement from each PRS that includes costs attributable to drought conditions in the Regions. The Drought Adder component includes costs associated with future Non-timing Power Purchases to meet firm electric service contractual obligations not covered with available system generation due to a drought, previously incurred Deficits due to purchased power debt that resulted from Non-timing Power Purchases made during a drought, and the interest associated with drought-related Deficits. The Drought Adder component is designed to repay drought-related Deficits within 10 years from the time the Deficit was incurred, using balloon-payment methodology. For example, a drought-related Deficit incurred in FY2024 would be repaid by FY2034.

The annual Revenue Requirement calculation will continue to be summarized by the following formula: Annual Revenue Requirement = Base Revenue Requirement + Drought Adder Revenue Requirement.

Annual Drought Adder Adjustment Process

RM reviews the inputs for the P-SMBP and Fry-Ark PRS Base and Drought Adder components after the annual PRSs are complete, generally in the first quarter of the calendar year. If an adjustment to the LAP Base component is necessary, or if an incremental upward adjustment to the LAP Drought Adder component greater than the equivalent of 2 mills/kWh to the LAP Rate is necessary, RM will initiate a public process pursuant to 10 CFR part 903 prior to making an adjustment.

In accordance with the approved annual Drought Adder adjustment process, the PRS Drought Adder components are reviewed annually in early summer to determine if drought costs differ from those projected in the PRSs. In October, RM will determine if a change to the LAP Drought Adder component is necessary, either incremental or decremental. Any incremental adjustment to the Drought Adder component, up to 2mills/kWh, or any decremental adjustment will be implemented in the following January billing cycle. Although decremental adjustments to the Drought Adder component will occur as drought costs are repaid, the adjustments cannot result in a negative Drought Adder component. Implementing the Drought Adder component adjustment on January 1 of each year will help keep the drought-related Deficits from escalating as quickly, will lower the interest expense due to drought-related Deficits, will demonstrate responsible Deficit management, and will provide prompt drought-related Deficit repayments.

Revenue Requirement Changes

The Base component costs for the P-SMBP PRS have increased primarily due to increased O&M from WAPA and the generating agencies. The Base component costs for the Fry-Ark PRS have increased primarily due to ( print page 91727) increased annual expenses, mainly attributed to transmission purchases and O&M from both WAPA and the Bureau of Reclamation and increases in capital investment projections for the Mount Elbert Power Plant repairs/refurbishment.

The driver behind the P-SMBP Drought Adder component decrease is the USACE's 2024 AOP projecting less than average generation, despite the improvement to generation as projected in the WAPA-202 January 2023 rate. Planned repayment of both the Base and Drought Adder Deficits are in the same time frame (2027) as they were projected to be repaid under WAPA-202. Uncertainties with water inflows, hydro generation, and replacement energy prices continue to pose potential risks regarding the ability to satisfy firm power contractual commitments.

The net effect of these changes to the PRS Base and Drought Adder components results in an overall increase to the LAP rate. To implement the required rate increase over a two-year period/in two steps, the Base component Revenue Requirements and associated charges for each step are set values. For the Drought Adder component, RM is using estimated Revenue Requirements and associated charges for each step based on the USACE's 2024 AOP and drought costs projected in the Rate-Setting PRSs. In accordance with the approved annual Drought Adder adjustment process, these Drought Adder estimates are subject to change based upon updated AOPs/generation models and revised drought costs. A comparison of the existing and provisional charge component Revenue Requirements for firm electric service are shown in Table 2:

Table 2—Comparison of Existing and Provisional Charge Component Revenue Requirements

LAP firm electric service	Existing under L-F12 as of Jan.1, 2023 (in million $)	Provisional under L-F13 first step as of Jan. 1, 2025 (in million $)	First step percent change	Provisional under L-F13 second step as of Jan. 1, 2026 (in million $)	Second step percent change
Base Component	$67.8	$76.4	12.7	$85.1	11.4
Pick-Sloan—WD 1 Fry—Ark	51.7 16.1	57.7 18.7	11.6 16.1	63.5 21.6	10.1 15.5
Drought Adder Component 2	6.8	4.9	−27.9	2.8	−42.9
Pick-Sloan—WD 1  2 Fry—Ark 2	6.8 0.0	4.9 0.0	−27.9 0.0	2.8 0.0	−42.9 0.0
1  Additional information on the overall P-SMBP PRS and charge components can be found in Rate Order No.WAPA-213 and on UGP's website at: www.wapa.gov/​about-wapa/​regions/​ugp/​ugp-rates/​2025-firm-rate-adjustment.
2  Provisional values are estimates that may change during the existing annual Drought Adder adjustment process.

A summary of the provisional charge components is shown in Table 3:

Table 3—Summary of Two-Step Provisional Charge Components

	Provisional charges under rate schedule L-F13 first step as of Jan. 1, 2025			Provisional charges under rate schedule L-F13 second step as of Jan. 1, 2026
	Base component	Drought adder component 1	Total charge 2	Base component	Drought adder component 1	Total charge 2
Firm Capacity ($/kilowatt-month)	$4.91	$0.31	$5.22	$5.47	$0.18	$5.65
Firm Energy (mills/kWh)	18.72	1.20	19.92	20.86	0.69	21.55
1  Provisional values are estimates that may change during the existing annual Drought Adder adjustment process.
2  Provisional values are estimates only based on using final Base and estimated Drought Adder components.

Statement of Revenue and Related Expenses

The following Table 4 provides a summary of projected revenue and expense data for the Fry-Ark firm power service Revenue Requirement through the 5-year provisional rate approval periods:

( print page 91728)

The summary of the P-SMBP projected revenue and expenses for the 5-year rate-setting periods is included in the P-SMBP Statement of Revenue and Related Expenses that is part of Rate Order No. WAPA-213.

Sale of Surplus Products Rate Discussion

The sale of surplus products rate schedule is formula-based, providing for LAP Marketing Office to sell LAP surplus energy and capacity products. If LAP surplus products are available, as specified in the rate schedule, the charge will be based on market rates plus administrative costs. The customer will be responsible for acquiring transmission service necessary to deliver the product(s) for which a separate charge may be incurred. Rate Schedule L-M3 is being superseded by the Provisional Rate Schedule L-M4 and continues to allow for the sale of energy, frequency response, regulation, and reserves.

Comments

RM received four separate oral and/or written comments during the public consultation and comment period. The comments expressed have been paraphrased and/or combined, where appropriate, without compromising the meaning of the comments.

A. Comment: The customer association, member utility, and action agency commented that they understand a rate increase is necessary due to inflation on O&M and labor costs, along with increased debt principal costs and they support and appreciate the increase being implemented in two steps rather than one large increase.

Response: WAPA appreciates the recognition of the impacts many entities are facing due to increasing inflation and labor costs, the specific costs of the power repayment study, and the two-step implementation for the rate adjustment.

B. Comment: The customer association and the action agency commented that they have a concern with the addition of new Full-Time Employees (FTE) when many positions within WAPA remain unfilled. The customers encourage WAPA to evaluate its internal processes for cost control, seeking efficiencies in workflow and staffing.

Response: WAPA understands the concern raised with the addition of new FTEs and the impacts of the FTEs to the rate. WAPA is committed to finding ways to limit cost increases impacting its customers while still ensuring it has the positions needed to fulfill its mission.

C. Comment: The action agency commented that they lack an understanding of any compromises made within the budgeting process to meet the WAPA Administrator's guidance stating tradeoffs need to be made. The action agency also stated they believe that this guidance could have been followed as an element of cost control.

Response: WAPA appreciates the comment regarding the need for better cost control and that compromises in the budgeting process may be necessary ( print page 91729) to accomplish this effort. WAPA is committed to looking for ways to control its costs and will continue to communicate its funding priorities to its customers.

D. Comment: The action agency and the customer association commented that they have concerns about the long-term viability of the P-SMBP going forward as it faces significant financial and operational issues in the future including: (1) USACE's plan of rehabilitation of the Missouri River; (2) dam safety repairs; (3) Aid to Irrigation payments coming due; and (4) environmental impact issues from non-supporting stakeholders. They also expressed their concern that these issues could result in significant future rate impacts to the firm power customers and that WAPA needs to focus on cost control in the future.

Response: WAPA appreciates the concerns regarding the long-term stability and affordability of the P-SMBP beyond the 5-year rate window. WAPA is committed to continuing to focus on the impact of rising costs and to mitigate those costs when possible.

E. Comment: The customer organization commented that they appreciate WAPA engaging with the customers early in the ratemaking process, responding to Customer concerns and questions. The customer organization also commented that they encourage WAPA leadership to support their rates and finance teams who have long-standing working relationships with the customers.

Response: WAPA appreciates the comment regarding WAPA's commitment to engaging with the Customers on issues concerning the firm power rate.

Certification of Rates

I have certified that the Provisional Formula Rates for LAP firm electric service under Rate Schedule L-F13 and LAP sale of surplus products under Rate Schedule L-M4 are the lowest possible rates, consistent with sound business principles. The Provisional Formula Rates were developed following administrative policies and applicable laws.

Availability of Information

Information used by RM to develop the Provisional Formula Rates is available for inspection and copying at the Rocky Mountain Regional Office, 5555 East Crossroads Boulevard, Loveland, Colorado. Many of these documents are also available on RM's Rates website at: www.wapa.gov/​about-wapa/​regions/​rm/​rm-rates/​2025-rate-adjustment-firm-electric-service.

Ratemaking Procedure Requirements

Environmental Compliance

WAPA has determined that this action fits within the following categorical exclusion listed in appendix B to subpart D of 10 CFR part 1021: B4.3 (Electric power marketing rate changes).^[3] Categorically excluded projects and activities do not require preparation of either an environmental impact statement or an environmental assessment. A copy of the categorical exclusion determination is available on WAPA's Rates website at: www.wapa.gov/​wp-content/​uploads/​2024/​10/​2025-001-Proposed-Loveland-area-FY25-Rate-adjustment-CX.pdf.

Determination Under Executive Order 12866

WAPA has an exemption from centralized regulatory review under Executive Order 12866; accordingly, no clearance of this notice by the Office of Management and Budget is required.

Submission to the Federal Energy Regulatory Commission

The Provisional Formula Rates herein confirmed, approved, and placed into effect on an interim basis, together with supporting documents, will be submitted to FERC for confirmation and final approval.

Order

In view of the above and under the authority delegated to me, I hereby confirm, approve, and place into effect, on an interim basis, Rate Order No. WAPA-212. The rates will remain in effect on an interim basis until: (1) FERC confirms and approves them on a final basis; (2) subsequent rates are confirmed and approved; or (3) such rates are superseded.

Signing Authority

This document of the Department of Energy was signed on November 12, 2024, by Tracey A. LeBeau, Administrator, Western Area 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 the Department of Energy. This administrative process in no way alters the legal effect of this document upon publication in the Federal Register .

Signed in Washington, DC, on November 14, 2024.

Treena V. Garrett,

Federal Register Liaison Officer, U.S. Department of Energy.

Rate Schedule L-F13

(Supersedes Rate Schedule L-F12 Effective January 1, 2023)

United States Department of Energy

Western Area Power Administration

Rocky Mountain Region

Loveland Area Projects

Firm Electric Service

(Approved Under Rate Order No. WAPA-212)

Effective

First Step: Beginning on the first day of the first full billing period beginning on or after January 1, 2025, through December 31, 2025.

Second Step: Beginning on January 1, 2026, and extending through December 31, 2029, or until superseded by another rate schedule, whichever occurs earlier.

Available

Within the marketing area served by the Loveland Area Projects (LAP) (consisting of the Fryingpan-Arkansas Project and the Pick-Sloan Missouri Basin Program—Western Division, which were integrated for marketing and rate-making purposes in 1989), parts of Colorado, Kansas, Nebraska, and Wyoming.

Applicable

To the LAP firm electric service delivered at specific point(s) of delivery, as established by contract.

Character

Alternating current, 60 hertz, three phase, delivered and metered at the voltages and points established by contract.

Formula Rate and Charge Components

LAP Firm Electric Service Rate (Rate) = Base component + Drought Adder component: ( print page 91730)

	First step January 1, 2025 monthly charges			Second step January 1, 2026 monthly charges
	Base component	Drought adder component	Total charge	Base component	Drought adder component 1	Total charge 2
Capacity Charge ($/kilowatt-month of billing capacity 3 )	$4.91	$0.31	$5.22	$5.47	$0.18	$5.65
Energy Charge (mills/kWh of monthly entitlement)	18.72	1.20	19.92	20.86	0.69	21.55
1  Values are estimates that are subject to change during the annual Drought Adder adjustment process.
2  Values are estimates only based on final Base and estimated Drought Adder components.
3  Unless otherwise specified by contract, the billing capacity will be the seasonal contract rate of delivery.