2010-2838. Provo River Project Rate Order No. WAPA-149

AGENCY:

Western Area Power Administration, DOE.

ACTION:

Notice of Rate Order Concerning a Power Rate Formula.

SUMMARY:

The Deputy Secretary of Energy confirmed and approved Rate Order No. WAPA-149 placing a power rate formula for the Provo River Project (PRP) of Western Area Power Administration (Western) into effect on an interim basis. The provisional power rate formula will remain in effect on an interim basis until the Federal Energy Regulatory Commission (FERC) confirms, approves, and places it into effect on a final basis, or until the power rate formula is replaced by another power rate formula.

DATES:

The provisional power rate formula will be placed into effect on an interim basis on April 1, 2010, and will be in effect until FERC confirms, approves, and places the provisional power rate formula in effect on a final basis for 5 years ending March 31, 2015, or until superseded.

FOR FURTHER INFORMATION CONTACT:

Ms. LaVerne Kyriss, Acting CRSP Manager, Colorado River Storage Project Management Center, Western Area Power Administration, 150 East Social Hall Avenue, Suite 300, Salt Lake City, UT 84111-1580, [phone], e-mail [e-mail], or Mr. Rodney Bailey, Rates Manager, Colorado River Storage Project Management Center, Western Area Power Administration, 150 East Social Hall Avenue, Suite 300, Salt Lake City, UT 84111-1580, [phone], e-mail [e-mail].

SUPPLEMENTARY INFORMATION:

The PRP, which includes Deer Creek Dam on the Provo River in Utah, was authorized in 1935. Construction of the dam began in 1938 and was completed in 1951. The Deer Creek Powerplant was authorized on August 20, 1951, construction began in 1956, and was completed in 1958; generation began that same year. Its maximum operating capacity is 5,300 kilowatts.

The PRP power is marketed according to a marketing plan that was approved and published in the Federal Register on November 21, 1994. This marketing plan allows Western to market the output of the PRP to customers of Utah Municipal Power Agency, Utah Associated Municipal Power Systems, and Heber Light and Power (Customers) in the Provo River drainage area.

Contract Nos. 94-SLC-0253, 94-SLC-0254, and 07-SLC-0601 between the United States and Customers require that the amount of each annual installment be established in advance by Western and submitted to the Customers on or before August 31 of the year preceding the appropriate fiscal year. Each fiscal year, Western will estimate the Deer Creek Powerplant (DCP) expenses by preparing a power repayment study, which will include estimates of operation, maintenance, and replacement costs for the DCP.

Each annual installment pays the annual amortized portion of the United States' investment in the Deer Creek Dam and Reservoir hydroelectric facilities with interest and the associated operation, maintenance, and replacement (OM&R) costs. Since the repayment schedule does not depend upon the power and energy made available for sale or the rate of generation each year, the Customers pay all OM&R expenses of the PRP and, in return, receive all of the energy produced by the PRP. Western will continue to provide the Customers a revised annual installment by August 31 of each year using the same methodology.

By Delegation Order No. 00-037.00, effective December 6, 2001, the Secretary of Energy delegated: (1) The authority to develop power and transmission rates to Western'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, to remand, or to disapprove such rates to FERC. Existing DOE procedures for public participation in power rate adjustments (10 CFR 903) were published on September 18, 1985.

Under Delegation Order Nos. 00-037.00 and 00-001.00C, 10 CFR 903, and 18 CFR 300, I hereby confirm, approve, and place Rate Order No. WAPA-149 into effect on an interim basis. The renewal of the power rate formula will be promptly submitted to FERC for confirmation and approval on a final basis.

Dated: February 1, 2010.

Daniel B. Poneman,

Deputy Secretary.

Order Confirming, Approving, and Placing the Power Rate Formula for the Provo River Project Into Effect on an Interim Basis

This rate was established in accordance with section 302 of the Department of Energy (DOE) Organization Act (42 U.S.C. 7152). This Act transferred to and vested in the Secretary of Energy the power marketing functions of the Secretary of the Department of the Interior and the Bureau of Reclamation under the Reclamation Act of 1902 (ch. 1093, 32 Stat. 388), as amended and supplemented by subsequent laws, particularly section 9(c) of the Reclamation Project Act of 1939 (43 U.S.C. 485h(c)), and other acts that specifically apply to the Provo River Project (PRP).

By Delegation Order No. 00-037.00, effective December 6, 2001, the Secretary of Energy delegated: (1) The authority to develop power and transmission rates to Western's Administrator, (2) the authority to confirm, approve, and place such rates into effect on an interim basis to the Deputy Secretary, and (3) the authority to confirm, approve, and place into effect on a final basis, to remand, or to disapprove such rates to FERC. Existing DOE procedures for public participation in power rate adjustments (10 CFR part 903) were published on September 18, 1985.

Acronyms and Definitions

As used in this rate order, the following acronyms and definitions apply:

Administrator: The Administrator of the Western Area Power Administration.

CRSP: Colorado River Storage Project.

Contracts: Contract No. 94-SLC-0254 with Utah Municipal Power Agency effective December 22, 1994, Contract No. 94-SLC-0253 with Utah Associated Municipal Power System effective January 19, 1995, and Contract No. 07-SLC-0601 with Heber Light and Power effective April 1, 2007. The Contracts are effective through September 30, 2024.

Customers: Utah Associated Municipal Power Systems, Utah Municipal Power Agency, and Heber Light and Power.

DCP: Deer Creek Powerplant.

DOE: Department of Energy.

DOE Order RA 6120.2: A Department of Energy order dealing with power marketing administration financial reporting and ratemaking procedures.

FERC: Federal Energy Regulatory Commission.

FY: Fiscal year; October 1 to September 30.

Heber: Heber Light & Power.

Interior: United States Department of the Interior.

kW: Kilowatt—the electrical unit of capacity that equals 1,000 watts.

MW: Megawatt—the electrical unit of capacity that equals 1 million watts or 1,000 kilowatts.

NEPA: National Environmental Policy Act of 1969. (42 U.S.C. 4321, et seq.)

OM&R: Operation, Maintenance, and Replacement.

PRP: Provo River Project.

PRS: Power Repayment Study.

PRWUA: Provo River Water Users Association.

Reclamation: United States Department of the Interior, Bureau of Reclamation.

UAMPS: Utah Associated Municipal Power Systems.

UMPA: Utah Municipal Power Agency.

Western: United States Department of Energy, Western Area Power Administration.

Effective Date

This power rate formula takes effect on an interim basis beginning April 1, 2010, and will remain in effect pending FERC's approval of this or a substitute power rate formula on a final basis for a 5-year period ending March 31, 2015, or until superseded.^[1]

Public Notice and Comment

Paragraph 903.23(a) of 10 CFR 903 for rate extensions does not require either a consultation and comment period, or public information, or comment forums. Western considers this rate order a rate extension since the power rate formula is not changing; rather it is going through the course of a 5-year renewal. This request is for approval of the power rate formula renewal using the present methodology for calculating the annual installment. On April 20, 2009, Western met with the Customers and notified them of Western's intent to renew the present power rate formula. Western also discussed the FY 2010 budget and capital expenditures. The Customers expressed their desire to continue using the power rate formula methodology through letter notifications.

Project Description

Construction of the PRP began in May 1938, and the powerplant was completed in 1958. Presently, it has a generating capacity of 5,300 kW of power. Energy excess to the PRP purposes is marketed under a marketing plan published in the Federal Register on November 21, 1994. This marketing plan allows Western to market the output of the PRP to customers of UAMPS, UMPA, and Heber in the Provo River drainage area.

Power Repayment Studies

Each FY, Western will estimate DCP expenses by preparing a PRS that will include estimates of OM&R costs for the DCP for the next FY. The PRS determines if power revenues will be sufficient to pay, within the prescribed time periods, all costs assigned to the PRP power function. Repayment criteria are based on law, policies (including DOE Order RA 6120.2), and authorizing legislation.

Western calculates the annual installment based on 2 years of data. The calculation includes the projected costs of the rate installment year (future FY) and an adjustment from the last historic FY. The adjustment is the surplus or deficit that occurs in the last historic year when actual costs and repayment obligations are compared with actual revenues. This surplus or deficit is combined with the costs for the projected rate installment year to arrive at the annual rate installment. Each annual installment pays the annual amortized portion of the United States' investment in the Deer Creek Dam and Reservoir hydroelectric facilities with interest and the associated OM&R. This repayment schedule does not depend upon the power and energy made available for sale or the rate of generation each year.

Certification of Rates

Western's Administrator certified that the methodology for the provisional power rate formula renewal for the Provo River Project to calculate the annual installment is consistent with sound business principles. The methodology for the provisional power rate formula renewal was developed following administrative policies and applicable laws.

Statement of Revenue and Related Expenses

The revenue requirements for the PRP are based on PRS calculations for future requirements, which will be adjusted when FY actuals are known. The following table summarizes revenues and expenses for the current 6-year power rate formula and the actual revenues and expenses for the same period.

Provo River—Comparison of 6-Year Total Revenues and Revenue Distribution FY 2004-2009

[$1,000]

Item	Projected 1	Actual 2	Change
Total Revenues	1,857	1,532	(325)
Revenues Distribution:
O&M	1,217	1,510	293
Transmission	179	108	(71)
Interest	165	23	(142)
Investment Repayment	264	316	52
Surplus Revenues	32	(425)	(457)
Total Revenues Distribution	1,857	1,532	(325)
1 Taken from FY 2003 Final PRS.
2 Although the rate process seeks approval for a 5-year period, 6 years of data are shown in the above table because FY 2009 is an estimate and is used for the current 2009 rate installment. Actual data is taken from the FY 2008 Final PRS.

The following table provides a summary of the projected revenues and expenses during the provisional power rate formula period.

Provo River Project 6-Year Projections Total Revenues and Revenue Distribution FY 2010-2015

[$1,000]

	FY 2010-2015 projections
Total Revenues 1	$1,799
Revenue Distribution:
O&M	1,799
Interest 2	0
Investment Repayment 2	0
Total Revenue Distribution	1,799
1 Although the rate process seeks approval for a 5-year period (FY 2010-2015), 6 years of data are shown in the above table because FY 2010 is an estimate and is used for the current 2010 rate installment.
2 All capitalized investments are repaid and none are planned through 2015; therefore, no interest or principal payments are projected.

Basis for Rate Development

Each Customer is billed for electric service calculated every FY, payable in 12 equal monthly payments. Every FY, Western will estimate the PRP expenses by preparing a PRS which will include estimates of OM&R costs for the DCP. The amount of each monthly payment will be established in advance by Western and submitted to the Customers on or before August 31 of the year preceding the appropriate FY.

The calculation of the annual installment and the monthly payments will include adjustments to the revenue requirements estimates. These adjustments deal with the difference between estimated and actual revenue requirements. If the revenue requirements are underestimated, an amount equal to the difference must be added to the next annual installment. Conversely, if revenue requirements are overestimated, the amount would be deducted from the next installment.

In accordance with the Contracts, minor replacements and additions are included in the revenue requirements of the DCP. If major replacements and additions exceeding $5,000 but not greater than $25,000 are needed, the Customers will be given the option of financing their share of the cost or having the cost capitalized and amortized over the life of the replacement or addition. If the Customers select the latter, the costs will be capitalized at the current interest rate prescribed by DOE, under RA 6120.2, Paragraph 11B, “Basic Policy for Rate Adjustment; Interest Rate Formula,” in the fiscal year in which the replacement or addition is made. Such costs will be based on prudent and businesslike management practices and following established electric industry operation and maintenance practices. If extraordinary replacements exceeding $25,000 are needed, the Customers will consult with Reclamation, PRWUA, and Western about financing the replacement.

The rate does not depend upon the power and energy made available for sale; instead, the Customers will pay the total PRP's annual powerplant revenue requirements in return for the total marketable PRP production. Each Customer will pay its proportional share of the revenue requirements identified in the PRS in 12 monthly installments.

Availability of Information

Information about this power rate formula renewal is available for public review at the Colorado River Storage Project Management Center, Western Area Power Administration, 150 East Social Hall Avenue, Suite 300, Salt Lake City, Utah or at http://www.wapa.gov/​crsp/​ratescrsp/​adjustments.htm under CRSP rate adjustment documents for the Provo River Project's section.

Ratemaking Procedure Requirements

Environmental Compliance

In compliance with the National Environmental Policy Act (NEPA) of 1969 (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 has 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.

Submission to Federal Energy Regulatory Commission

The interim power rate formula renewal 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 as the Deputy Secretary of Energy, I confirm and approve on an interim basis, effective April 1, 2010, a renewal of the rate formula for the Provo River Project of the Western Area Power Administration. The power rate formula shall remain in effect on an interim basis, pending FERC's confirmation and approval of it or a substitute rate on a final basis, through March 31, 2015.

Dated: February 1, 2010.

Daniel B. Poneman,

Deputy Secretary.

Footnotes

1.  FERC confirmed and approved the present Provo River Project rate on April 25, 2005, for a period through March 31, 2010 (111 FERC ¶ 62089).