2011-5047. Cumberland System of Projects

AGENCY:

Southeastern Power Administration, DOE.

ACTION:

Notice of proposed rates, public forum, and opportunities for public review and comment.

SUMMARY:

Southeastern Power Administration (Southeastern) proposes to revise existing schedules of rates and charges applicable to the sale of power from the Cumberland System of Projects effective for a 2-year period, October 1, 2011, through September 30, 2013. Interested persons may review the rates and supporting studies and submit written comments. Southeastern will evaluate all comments received in this process.

DATES:

Written comments are due on or before June 6, 2011. A public information and comment forum will be held at 10 a.m., May 3, 2011. Persons desiring to attend the forum should notify Southeastern at least seven (7) days before the forum is scheduled. Persons desiring to speak at the forum should notify Southeastern at least three (3) days before the forum is scheduled, so that a list of forum participants can be prepared. Others may speak if time permits. If Southeastern has not been notified by close of business on April 26, 2011, that at least one person intends to be present at the forum, the forum will be canceled with no further notice.

ADDRESSES:

The forum will be held at the Embassy Suites Nashville—at Vanderbilt, 1811 Broadway, Nashville, Tennessee 37203 Phone [phone]. Written comments should be submitted to: Administrator, Southeastern Power Administration, Department of Energy, 1166 Athens Tech Road, Elberton, GA 30635-6711.

FOR FURTHER INFORMATION CONTACT:

J. W. Smith, Southeastern Power Administration, Department of Energy, 1166 Athens Tech Road, Elberton, Georgia 30635-6711, [phone].

SUPPLEMENTARY INFORMATION:

On May 6, 2009, the Federal Energy Regulatory Commission (FERC) confirmed and approved on a final basis, Wholesale Power Rate Schedules CBR-1-G, CSI-1-G, CEK-1-G, CM-1-G, CC-1-H, CK-1-G, and CTV-1-G applicable to Cumberland System of Projects power for a period ending September 30, 2013 (127 FERC 62,115). On May 17, 2010 Rate Schedule CTVI-1 was approved by the Administrator, Southeastern Power Administration, for a period ending September 30, 2013.

Discussion: The marketing policy for the Cumberland System of Projects provides peaking capacity, along with 1500 hours of energy annually with each kilowatt of capacity, to customers outside the Tennessee Valley Authority (TVA) transmission system. Due to restrictions on the operation of the Wolf Creek Project imposed by the U.S. Army Corps of Engineers as a precaution to prevent failure of the dam, Southeastern is not able to provide peaking capacity to these customers. Southeastern implemented an Interim Operating Plan for the Cumberland System to provide these customers with energy that did not include capacity.

The Corps of Engineers has provided Southeastern with a plan of replacements for the Cumberland System. With escalation, the total cost of these planned replacements is $843,000,000.

Existing rate schedules are predicated upon a July 2008 repayment study and other supporting data contained in FERC docket number EF08-3022-000. The revenue requirement in this study is $50,400,000. An updated repayment study, dated January 2011, shows that rates are not adequate to meet repayment criteria. Energy delivered in the Cumberland System in Fiscal Years 2008, 2009, and 2010 was 73 percent of forecast. As a result, total revenues were about 19 percent less than forecast. In addition, Corps' Operation & Maintenance Expense was about 33 percent higher than forecast.

A revised repayment study demonstrates that a revenue increase to $64,600,000 per year will meet repayment criteria. The increase in the annual revenue requirement is $14,200,000 per year, or about 28 percent.

Southeastern is proposing three rate scenarios per rate schedule. All of the rate alternatives have a revenue requirement of $64,600,000.

The first rate scenario includes the rates necessary to recover costs under the Interim Operating Plan. These rates are based on energy. The rate would be 20.87 mills per kilowatt-hour for all Cumberland energy. The customers would pay a ratable share of the transmission credit the Administrator of Southeastern Power Administration (Administrator) provides the Tennessee Valley Authority (TVA) as consideration for delivering capacity and energy for the account of the Administrator to points of delivery of Other Customers or interconnection points of delivery with other electric systems for the benefit of Other Customers, as agreed by contract between the Administrator and TVA. This rate would remain in effect as long as Southeastern is unable to provide capacity due to the Corps' imposed restrictions on the operation of the Wolf Creek Project.

The second rate scenario would recover cost from capacity and energy. The revenue requirement under this alternative would be $64,600,000 per year. This scenario would be in effect once the Corps raises the lake level at the Wolf Creek and Center Hill Projects. When the lake level rises and capacity is available, the capacity would be allocated to the customers.

The third rate scenario is based on the original Cumberland Marketing Policy. All costs are recovered from capacity and excess energy. The rates under this alternative would be as follows:

Cumberland System Rates

Third Scenario—Return to Original Marketing Policy

Inside TVA Preference Customers

Capacity and Base Energy: $3.148 per kW/Month

Additional Energy: 10.864 mills per kWh

Transmission: Pass-through

Outside TVA Preference Customers

(Excluding Customers served through Carolina Power & Light Company or East Kentucky Power Cooperative)

Capacity and Base Energy: $4.614 per kW/Month

Additional Energy: 10.864 mills per kWh

Customers Served through Carolina Power & Light Company

Capacity and Base Energy: $5.252 per kW/Month

Transmission: $1.2959 per kW/Month

(As of 1/1/2011 and provided for illustrative purposes)

East Kentucky Power Cooperative

Capacity: $3.256 per kW/Month

Energy: 10.864 mills per kWh

These rates would go into effect once the Corps lifts the restrictions on the operation of the Wolf Creek and Center Hill Projects and the Interim Operating Plan becomes unnecessary.

The referenced repayment studies are available for examination at 1166 Athens Tech Road, Elberton, Georgia 30635-6711. The Proposed Rate Schedules CBR-1-H, CSI-1-H, CEK-1-H, CM-1-H, CC-1-I, CK-1-H, CTV-1-H, and CTVI-1-A are also available.

Dated: February 28, 2011.

Kenneth E. Legg,

Administrator.