00-28627. Proposed Salt Lake City Area Integrated Projects Firm Power Rate Formula Adder

AGENCY:

Western Area Power Administration, DOE.

ACTION:

Notice of proposed rates.

SUMMARY:

The Western Area Power Administration's (Western) Colorado River Storage Project (CRSP) Management Center (MC) is proposing a rate formula adder to the existing rate for firm long-term sales of Salt Lake City Area Integrated Projects (SLCA/IP) power. The SLCA/IP consists of the CRSP, Collbran, and Rio Grande Projects which were integrated for marketing and ratemaking purposes on October 1, 1987. The CRSP described here includes two CRSP participating projects which have power facilities, Dolores and Seedskadee Projects.

In the long term, the existing SLCA/IP composite rate of 17.57 mills/kilowatthour (kWh) is sufficient to pay for all costs including operation, maintenance, replacement, and interest expenses and to repay investment and irrigation assistance obligations within the required period. CRSP MC staff will continue to monitor the long-term firm power rate for the SLCA/IP to determine if a long-term rate adjustment will need to be placed into effect.

The proposed rate formula adder is needed to provide additional revenue in the CRSP Basin Fund, a revolving fund in the United States Treasury, to pay for near-term purchase power costs and to increase the working capital in the CRSP Basin Fund. The proposed rate formula adder scheduled to go into effect on February 1, 2001, will remain in effect until September 30, 2003, or until superseded by another rate adjustment, whichever occurs first. This Federal Register notice initiates the formal process for the proposed rate formula adder.

DATES:

The consultation and comment period will begin when this Federal Register notice is published and will end December 8, 2000. Public information forum and public comment forum meeting dates are scheduled for these locations:

1. Public information forum—November 20, 2000, 10:30 a.m., Salt Lake City, Utah; Public comment forum—November 20, 2000, 2 p.m., Salt Lake City, Utah.

2. Public information forum—November 21, 2001, 10:30 a.m., Phoenix, Arizona; Public comment forum—November 21, 2001, 2 p.m., Phoenix, Arizona.

ADDRESSES:

The address for the Salt Lake meetings is at the Sheraton Hotel (formerly the Hilton), 150 West 500 South, Salt Lake City, Utah. The address for the meetings in Phoenix is Western Area Power Administration, Desert Southwest Region, 615 South 43rd Avenue, Phoenix, Arizona. Written comments may be sent to: Mr. Dave Sabo, CRSP Manager, CRSP Management Center, Western Area Power Administration, P.O. Box 11606, Salt Lake City, UT 84147-0606, e-mail [e-mail]. Western should receive written comments by the end of the consultation and comment period to be assured they are considered. Oral comments will be received at the public comment meetings.

FOR FURTHER INFORMATION CONTACT:

Ms. Carol Loftin, Rates Manager, CRSP Management Center, Western Area Power Administration, P.O. Box 11606, Salt Lake City, UT 84147-0606, telephone [phone], e-mail [e-mail], or visit CRSP MC's home page at: www.wapa.gov/​crsp/​crsp.htm.

SUPPLEMENTARY INFORMATION:

The existing long-term rate for SLCA/IP firm power is designed to recover an annual revenue requirement based on repaying power investment; paying interest, purchased power, operation, maintenance, and replacement expenses; and repaying irrigation assistance costs, as required by law.

The Deputy Secretary of the Department of Energy (DOE) approved the existing Rate Schedule SLIP-F6 for SLCA/IP firm power on March 23, 1998 (Rate Order No. WAPA-78). The Federal Energy Regulatory Commission (FERC) confirmed and approved the rate schedule on July 17, 1998, in FERC Docket No. EF98-5171-000. The existing Firm Power Rate Schedule expires on March 31, 2003. Under Rate Schedule SLIP-F6, the energy rate is 8.10 mills/kWh, and the capacity rate is $3.44 per kilowattmonth (kWmonth). The composite rate (revenue requirements per kWh usage) is 17.57 mills/kWh.

The proposed rate formula adder is needed to provide additional revenue to fund near-term purchased power costs and to increase the working capital balance in the CRSP Basin Fund. Higher-than-normal purchased power expenses have resulted from lower-than-expected hydrology conditions, higher-than-normal purchase power prices, and the summer test release for endangered fish from Glen Canyon Dam (GCD).

The rate formula adder will be applied during the next 3 fiscal years (FY) from February 1, 2001, through September 30, 2003. The following proposed formulas will be used to determine the rate formula adder:

(1) BB + ER—PP—O&M = EB

BB = CRSP Basin Fund balance at the beginning of the FY

ER = expected revenues for the current FY

PP = estimated purchase power costs which could include non-reimbursable purchase power costs

O&M = operation and maintenance expenses which includes non-reimbursable expenses, replacements, and transmission expenses

EB = CRSP Basin Fund balance at the end of the FY

(2) RB—EB = RN

RB = minimum required balance in the CRSP Basin Fund at the end of the FY (FY 2001 = $35 million, FY 2002 = $50 million, FY 2003 = $60 million)

RN = additional revenue needed

The RN is divided by the projected energy sales as shown in the existing ratesetting study to determine the additional composite rate needed.

Rate Formula Adder Estimated By Fiscal Year

[$1,000,000]

	FY 2001 February 1, 2001- September 30, 2001	FY 2002 October 1, 2001- September 30, 2002	FY 2003 October 1, 2002- September 30, 2003
Beginning Balance	45.2	35.0	50.0
Expected Revenue 1	140.0	140.0	140.0
Expected Costs:
Purchased Power 2	108.8	108.8	108.8
OM&R 3	79.1	79.1	79.1
Unbudgeted Costs 4	2.0	2.0	2.0
Total Costs	189.9	189.9	189.9
Ending Balance	(4.7)	(14.9)	0.1
Minimum Required Balance	35.0	50.0	60.0
Revenue Needed	39.7	64.9	59.9
Rate Adder Needed: 5
Composite (mills/kWh)	11.02	10.52	9.70
1 Current revenue based on FY 1999 Sales and Revenue Report.
2 Based on latest 10/20/00 estimate.
3 As currently budgeted (2002). Includes budgeted Recovery Implementation Program costs.
4 Cost required by recent HR 2348, legislation, Upper Colorado Fish Recovery Program.
5 Based on power sales as projected in existing rate PRS (FY 1997).

Based upon the most recent data available at the time of this publication, the proposed rate formula adder for FY 2001 (which is proposed to be effective February 1, 2001) is expected to be an additional 5.1 mills/kWh for energy and $2.17 per kWmonth for capacity. The proposed composite rate adder is 11.02 mills/kWh.

At the end of FY 2001, an update of the data in the rate formula adder will indicate the adder for the following FY. At the end of the Winter Season each year, FY data and current projections will be reviewed to determine if the FY rate formula adder needs to be revised. If needed, a mid-FY revision to the adder would be made at this time. The Winter Season is the period from October 1 to March 31. The Summer Season is the period from April 1 to September 30. The rate formula adder calculations that are updated each FY will provide for an increase in the CRSP Basin Fund working capital balance until it reaches $60 million by the end of FY 2003. Customers will be notified in September of each year as to the next FY rate formula adder. In March of each year, the customers will be notified if a mid-FY revision is required. The rate formula adder will be charged by adding an additional capacity and energy rate to the SLIP-F6 rate. The table below displays the existing rate and the estimated rate formula adders for the next 3 FYs.

Total SLCA/IP Firm Power Rate Estimated By Fiscal Year

	FY 2001 February 1, 2001- September 30, 2001			FY 2002 October 1, 2001- September 30, 2002		FY 2003 October 1, 2002- September 30, 2003
	Existing rate	Adder	Total	Adder	Total	Adder	Total
Energy rate (mills/kWh)	8.1	5.1	13.2	4.8	12.9	4.5	12.6
Capacity rate ($/kWmonth)	3.44	2.17	5.61	2.07	5.51	1.91	5.35
Composite rate (mills/kWh)	17.57	11.02	28.59	10.52	28.09	9.70	27.27

At the public information forums on November 20 and 21, 2000, in Salt Lake City and Phoenix, CRSP MC staff will explain in detail the rate formula adder and its application for the period of February 1, 2001, through September 30, 2001, and also provide estimates for the following 2 FYs.

The proposed rate formula adder is highly dependent upon hydrology conditions of the Upper Colorado River Basin, volatility of purchased power prices, potential of continuing test flows this summer at GCD, and the CRSP Basin Fund cash balance. A discussion of these issues follows.

Hydrology Conditions

Water year (WY) 2000 ended on September 30, 2000. The unregulated inflow to Lake Powell during the run-off season was 4.35 million acre-feet (maf) or 56 percent of average.

Hydrological assumptions are used in preparing estimates for generation from the SLCA/IP facilities. This, combined with contractual commitments, gives Western its purchased power requirements. Releases assumed by Western for the Winter Season 2001 are from the 24-month study prepared by the Bureau of Reclamation in October 2000. For the Summer Season 2001, Western assumed an amount of water release which, when added to the Winter season releases, totaled 8.23 maf from GCD. Summer releases were patterned by month using a dry-year pattern. For all other SLCA/IP power facilities, the Reclamation 24-month study was used.

Purchased Power Prices

Western may need to purchase electrical power from other utilities to support its minimum contractual commitment referred to as Sustainable Hydro Power (SHP). Given the water conditions previously described, Western developed estimates of the purchased power amounts required to provide the SHP amounts for each season. For the Winter Season 2001, Western included purchased power prices for which Western has already contracted. For the Summer Season 2001, Western's estimates of purchased power prices were derived from the New York Merchantile Exchange's (NYMEX) Palo Verde Electricity futures prices at the time the analysis was prepared.

Test Flows

Test flows at GCD are possible again next summer, as a result of an obligation the Bureau of Reclamation has under the conditions of a biological opinion (a requirement under the Endangered Species Act). Test flows occur in minimum-flow years. The probability of such an occurrence in FY 2001 is 34 percent.

CRSP Basin Fund Cash Balance

The CRSP Basin Fund ended FY 2000 with a balance of about $42.5 million in cash. The lower-than-normal balance was mainly due to the high cost of purchased power prices during July, August, and September 2000. The need to purchase additional power was compounded by the low environmental test flows from GCD.

Purchase arrangements for energy needed to meet contractual obligations have been made for the Winter Season 2001. These purchases were at much higher costs than normal and adversely affected the CRSP Basin Fund's cash flow. Monthly revenues into the CRSP Basin Fund normally run from $10 million to $14 million per month; expenditures for purchased power are now at these levels. Any spending on transmission, replacements, and operation and maintenance costs will result in a negative cash flow during months when purchased energy costs are equivalent to or greater than revenue inflows.

In the event of another year where hydrology conditions are significantly below average and where low test flows from GCD are required, the CRSP Basin Fund working capital would be insufficient at the present rate.

Procedural Requirements

Since the proposed rate formula adder constitutes a major rate adjustment as defined at 10 CFR 903.2, both public information forums and public comment forums will be held. However, the consultation and comment period has been shortened because of the financial hardship faced by the CRSP Basin Fund. After reviewing public comments, Western will recommend that the proposed rate formula adder or a revised proposed rate formula adder be approved on an interim basis by the DOE Deputy Secretary.

The proposed rate formula adder to the SLCA/IP firm power rates is being established pursuant to the Department of Energy Organization Act, 42 U.S.C. 7101-7352; the Reclamation Act of 1902, ch. 1093, 32 Stat. 388, as amended and supplemented by subsequent enactments, particularly section 9(c) of the Reclamation Project Act of 1939, 43 U.S.C. 485h(c); and other acts specifically applicable to the projects involved.

By Amendment No. 3 to Delegation Order No. 0204-108, published November 10, 1993 (58 FR 59716), the Secretary of DOE delegated (1) the authority to develop long-term power and transmission rates on a nonexclusive basis to the Administrator of Western; and (2) the authority to confirm, approve, and place into effect on a final basis, to remand, or to disapprove such rates to FERC. In Delegation Order No. 0204-172, effective November 24, 1999, the Secretary of Energy delegated the authority to confirm, approve, and place such rates into effect on an interim basis to the Deputy Secretary. Existing DOE procedures for public participation in power rate adjustments are found at 10 CFR part 903.

Availability of Information

All studies, comments, letters, memorandums, or other documents made or kept by Western for developing the proposed rates are and will be made available for inspection and copying at the CRSP Management Center, located at 150 East Social Hall Avenue, Suite 300, Salt Lake City, UT 84111-1534.

Regulatory Procedural Requirements

Regulatory Flexibility Analysis

The Regulatory Flexibility Act of 1980 (5 U.S.C. 601, et seq.) requires Federal agencies to perform a regulatory flexibility analysis if a final rule is likely to have a significant economic impact on a substantial number of small entities and there is a legal requirement to issue a general notice of proposed rulemaking. Western has determined that this action does not require a regulatory flexibility analysis since it is a rulemaking of particular applicability involving rates or services applicable to public property.

Environmental Compliance

In compliance with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321, et seq.); Council on Environmental Quality Regulations (40 CFR parts 1500-1508); and DOE NEPA Regulations (10 CFR part 1021), Western determined that this action is categorically excluded from the preparation of an environmental assessment or an environmental impact statement.

Determination Under Executive Order 12866

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

Small Business Regulatory Enforcement Fairness Act

Western has determined that this rule is exempt from Congressional notification requirements under 5 U.S.C. 801 because the action is a rulemaking of particular applicability relating to rates or services and involves matters of procedure.

Dated: October 27, 2000.

Michael S. Hacskaylo,

Administrator.