[Federal Register Volume 59, Number 131 (Monday, July 11, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-16709]
[[Page Unknown]]
[Federal Register: July 11, 1994]
-----------------------------------------------------------------------
DEPARTMENT OF ENERGY
Western Area Power Administration
Revised Provo River Project Marketing Proposal
AGENCY: Western Area Power Administration, DOE.
ACTION: Revised Provo River Project marketing proposal summary.
-----------------------------------------------------------------------
SUMMARY: In December 1993, Western Area Power Administration (Western)
proposed to change the way it markets power and energy produced by the
Provo River Project (PRP) and to include it as one of the Salt Lake
City Area/Integrated Projects (Integrated Projects). During the comment
period on the proposal, comments were received which indicated that
customers of Western's Integrated Projects would not support inclusion
of the PRP in the Integrated Projects. Western has decided to modify
its original proposal to market this power and energy independent of
the Integrated Projects. Capacity and energy produced by the PRP will
be allocated to those members of Intermountain Consumers Power
Association (ICPA) and Utah Municipal Power Agency (UMPA) located in
Utah and Wasatch Counties in Utah. ICPA and UMPA are hereafter referred
to as potential contractors. Power would be allocated to these
potential contractors proportional to their load. Separate power sales
contracts would be offered to the potential contractors. Potential
contractors would pay all of the annual powerplant expenses of the PRP
including an amount to assist the Provo River Water Users Association
(Water Users) repayment of the United States original investment in the
PRP. In return, potential contractors would receive all of the
marketable output of the PRP.
DATES: Comments on Western's revised proposal must be received on or
before August 10, 1994.
A similar notice appears in today's Federal Register.
FOR FURTHER INFORMATION CONTACT:
Mr. John Harrington, Acting Area Manager, Salt Lake City Area Office,
Western Area Power Administration, P.O. Box 11606, Salt Lake City, UT
84147-0606, (801) 524-5497, or
Mr. Edmond Chang, Assistant Area Manager for Power Marketing, Salt Lake
City Area Office, Western Area Power Administration, P.O. Box 11606,
Salt Lake City, UT 84147-0606, (801) 524-5493
SUPPLEMENTARY INFORMATION:
Background
In a Federal Register notice dated December 13, 1993 (58 FR 65180-
65181), Western proposed to include the PRP with the Integrated
Projects and to market the power and energy produced by the PRP to
members of ICPA and UMPA within a marketing area comprised of Utah and
Wasatch Counties, Utah. Western accepted comments on its proposal until
January 12, 1994. A public information/comment/scoping meeting was held
in Spanish Fork, Utah, on January 4, 1994. As a result of comments
received, at both the meeting and in writing, Western is revising its
proposed marketing plan for the PRP.
Marketing Issues
One of the commentors, the Colorado River Energy Distributor's
Association (CREDA), an organization of many Integrated Projects
customers, commented that CREDA believes ``the same principles commonly
used in other Bureau of Reclamation (Reclamation) water projects having
power generation features should be applied to the extent lawful in the
instance of PRP.'' Western's review of the appropriate laws shows that
construction of the PRP and the methods of repaying the United States
for its investment in the project were first established in 1936, under
Contract No. Ilr-874 dated June 27, 1936 (1936 Contract). The 1936
Contract states that surplus revenue from the sale of surplus water and
power shall be applied to the repayment obligation of the Water Users.
No distinction was made in the contract that this payment was to be for
irrigation investment or for investment beyond the irrigators' ability
to pay as is common in other Reclamation projects. In fact, from the
beginning, almost three-fourths of the water developed by the project
was for municipal and industrial use. Western has agreed to pay from
power revenues $1.623 million toward the Water Users' obligation by
2008. Of this amount, $191,587 has been paid.
CREDA also stated that it did not believe Western had adequately
supported the need to integrate the projects. When Western established
the Integrated Projects in 1986, it intended to include the Colorado
River Storage Project (CRSP), the Collbran Project, the Rio Grande
Project, and the PRP. The PRP was not included because of uncertainty
associated with commitments to the Water Users. Western's intent was to
bring PRP into the Integrated Projects on an equal basis with the rest
of the projects. Western has agreed that it is not necessary to include
the PRP in the Integrated Projects.
In a further comment, CREDA objected to all Integrated Projects
customers paying costs of the Water Users since these constitute
repayment of municipal and industrial water development costs. CREDA
had no objection to marketing the PRP resource to ICPA and UMPA under
separate contracts from the Integrated Projects. In fact, ICPA and UMPA
are both members of CREDA. Western has determined that it can still
meet its objectives of beneficially marketing the PRP through separate
contractual arrangements and has revised its proposal to do so. This
will require development of power sales contracts with potential
contractors.
Since the PRP has only been sold to Western's CRSP, a rate for the
capacity and energy produced has never been developed. A power
repayment study (PRS) has been prepared each year to determine the
revenues needed to meet project repayment, including operation,
maintenance, and replacement expenses. The CRSP purchased the energy
produced by the PRP for this amount. Western now proposes that the PRS
still be used to identify the annual revenue requirements of the PRP.
Potential contractors would pay their proportional share of one-twelfth
of the annual amount each month to Western. In addition, the potential
contractors would pay a total of $102,243.80 each year to Reclamation
to be applied toward the Water Users' payment obligations.
Two other Integrated Projects customers in Utah, the Weber Basin
Water Conservancy District (Weber Basin) and Bountiful City Light and
Power (Bountiful), operate generating plants on the Weber River. Both
claimed when water is diverted from the Weber River into the Provo
River under existing agreements, they incur losses in generation and
asked to be compensated for these losses. Western has determined that
the water diversions from the Weber River into the Provo River were
established before Weber Basin or Bountiful constructed generation on
the Weber River. Neither entity had a power right to the waters of the
Weber River. PacifiCorp, which is compensated for generating losses,
owned an operating generating plant on the Weber River and held power
rights to the flows of the river prior to the Provo River diversion.
Discussions with Reclamation and examination of Weber Basin and
Bountiful contracts have confirmed this position. Weber Basin and
Bountiful are not entitled to an allocation of PRP power to compensate
them for harm caused by reduced flows in the Weber River because their
plants have never been entitled to, or used, the diverted water.
Another commentor, Reclamation, stated that the marketing criteria
should consider arrangements for providing assistance to the Water
Users. Also, the amount of assistance should be included in the PRP
power marketing contracts, and arrangements made so that payment could
be made directly to Reclamation on behalf of the Water Users during the
contract period.
These issues are still subject to further discussions with the
Water Users and Reclamation. However, Western has committed to provide
a means for annual payment to be made toward project repayment on
behalf of the Water Users by the power purchasers.
Reclamation also noted that the amount of winter season surplus
energy is affected by several factors, including the agreement dated
May 16, 1986, known as the Interim Operating Agreement of Deer Creek
and Strawberry Exchange of Bonneville Unit Water (Interim Operating
Agreement), and future agreements on the operation of Deer Creek and
Jordanelle Reservoirs.
Reclamation has made it clear that the Interim Operating Agreement
and future agreements may severely impact the amount of generation
available from the PRP during the winter season. The Interim Operating
Agreement anticipated that compensation to PacifiCorp, for energy lost
when water is diverted from the Weber River into the Provo River, would
be affected and it provided a remedy. However, the Interim Operating
Agreement does not address compensation to the Water Users by Central
Utah Water Conservancy District (Central Utah) for other winter season
generation which would be lost. Draft language on an agreement for
joint operation of Deer Creek and Jordanelle Reservoirs provides a
means for Central Utah to compensate the Water Users for this
reduction. Drafts of this agreement stipulate that a separate agreement
among Central Utah, the Water Users, Western, PacifiCorp, and
Reclamation will be developed to provide for this compensation. It is
anticipated that this agreement will be completed prior to initial
service under Western's proposed marketing plan.
The Water Users commented that Western's criteria for marketing the
surplus power and energy of the Deer Creek Powerplant must fairly
compensate the Water Users for the value of the surplus electric power
and energy in the form of assistance on its repayment obligation.
Western's criteria specify that the annual revenue requirements,
including Western's commitment to the Water Users, will be recovered
from the potential contractors in return for all of the marketable
power and energy produced by the PRP.
The Water Users further commented that the rate for nonfirm energy
should be the same as the blended rate of firm energy. Western's
revised proposal would eliminate any distinction between firm and
nonfirm energy. All energy produced by the PRP would be delivered in
return for the potential contractors paying all of the PRP's annual
powerplant expenses.
All of the Water Users' comments are concerned with their claim to
a contractual obligation that surplus revenue from the sale of power be
applied toward the repayment obligation of the Water Users for the PRP.
Western has stated that it will consider $1.623 million by 2008 as a
repayment assistance to the PRP. The Water Users assert that there is
an obligation to develop surplus revenue from power sales that can be
applied to the repayment obligation of the Water Users beyond 2008
until all repayment obligations have been met. Western knows of no
legal basis for the Water Users' position. Resolution of these issues
are outside the scope of this proposed action. These issues have been
the focus of several meetings between the Water Users, Western, and
Reclamation. Western's proposal would provide a means to ensure that
the balance of the $1.623 million commitment is paid in annual
increments by 2008.
Other Issues
UMPA states that use of PRP energy in Utah County, Utah, will
result in reduced reliance on fossil fuels and will enhance the
environment, especially air quality.
This issue will be addressed in the environmental assessment which
will be done on the proposed action. However, because of the quantities
of energy involved in the proposal, it is unlikely that the action will
have a significant impact on air quality in Utah County.
The Stonefly Society (Society), a local environmental organization,
commented that operation of the PRP on the Provo, Duchesne, and Weber
Rivers has produced devastating impacts on these river systems. Among
these are: (1) Destruction of the Provo's natural channel and riparian
areas, (2) anoxic water discharge from Deer Creek Reservoir, (3)
dewatering of the Weber River, and (4) dewatering of the Duchesne
River. They state that three actions should be taken: (1) studies of
the environmental impacts of the PRP should be conducted immediately;
(2) funds should be allocated from Deer Creek Power revenues to correct
these serious problems; and (3) no funds should be allocated to the PRP
until these environmental impacts have been both assessed and
corrected.
Western's proposal is to only change the way power from the PRP is
marketed. It will have no effect on how the PRP is operated. The
Society's issues are concerned with the way the project is operated and
not on how power is marketed. Therefore, their comments are outside the
scope of this proposal.
The Society asked ``if the PRP were included in the Integrated
Projects, will the powerplant at Deer Creek Reservoir be operated
independently or will the operation be integrated with other Western
generating facilities? If its operation is integrated, will there be
environmental impacts at these other facilities?'' Western's proposal
is to market the PRP independently of the Integrated Projects. There
would be no operation connection between the projects. Furthermore,
since Deer Creek Powerplant is not controlled by Western, delivery of
power and energy to the customer would be, as always, on a run-of-the-
river basis.
Marketing Criteria
a. Applicability
Congress granted to the Secretary of Energy acting by and through
Western's Administrator the authority to market Federal power. In
response to requests from UMPA and ICPA to receive power produced by
the PRP, Western has examined the merits of reorganizing the marketing
of the PRP resource. Western believes these proposed marketing changes
will benefit both the potential contractors and the Water Users.
b. Marketable Resource
A contract among Reclamation, the Water Users, the Weber River
Water Users Association, and PacifiCorp dated December 20, 1938 (1938
Contract), provides for diversion of water from the Weber River into
the Provo River for storage in Deer Creek Reservoir and for use by the
Water Users. Because PacifiCorp operated generating units on the Weber
River below the point of diversion to the Provo River, PacifiCorp's
ability to generate was reduced when water was diverted. The 1938
Contract provides that PacifiCorp is to receive all of the electrical
generation of the PRP during the period of time that water is diverted.
This means that for up to 6 months, from October 15 to April 15 of each
year, there may be no marketable energy generated by the PRP.
Historically however, marketable energy has averaged 23,000,000
kilowatthours (kWh), with 15,000,000 kWh generated during summer
months, and the remaining 8,000,000 kWh from winter surplus energy.
Typically, about 3,000,000 kWh are available in each of the 3 peak
summer months of June, July, and August; approximately 1,000,000 kWh
are available in April; 2,500,000 kWh in May; and another 2,500,000 kWh
in September. ICPA and UMPA would receive all of the marketable energy
generated by the PRP each year in return for paying all of the PRP
powerplant expenses.
c. Marketing Area
Because of the size of the resource, Western proposes to limit the
marketing of this resource to preference entities within the drainage
area of the Provo River. All eligible utilities are members of ICPA and
UMPA, and are located in Utah and Wasatch Counties. Members of ICPA are
the cities of Heber City, Lehi, Payson, Springville, and the Strawberry
Electric Service District (Strawberry). Affected members of UMPA are
the cities of Provo, Salem, and Spanish Fork. It is anticipated that
marketing of the PRP resource to these potential contractors would
assure that each would receive a beneficial amount of power.
d. Class of Service
PRP generation is dependent upon water releases that are dictated
by minimum stream flow requirements and the Water Users' needs. No load
following ability exists. Since April 1, 1994, the PRP has been
included in Western's Upper Colorado Missouri Basin control area. With
the PRP in Western's control area, Western is able to enhance the
usability of the product and to allow it to be scheduled, even though
it has no control over PRP generation. Western provides control area
and regulating services for several other customers and has a developed
methodology to share the expenses of operating a control area and
providing for regulating capacity. Under the revised proposal, the PRP
would be required to pay for its share of these services. These costs
will be included in the PRS as an operating expense.
Energy will be scheduled to the potential contractors in megawatts
in accordance with anticipated generation levels from the PRP. When
variations occur, the hourly schedules will be adjusted to reflect
actual operation.
Western will maintain an energy deviation account between the PRP
and the Integrated Projects. At the end of each year, an accounting of
scheduled and generated energy will be made. Differences between the
two projects will be made up by adding to or subtracting from the
following year's schedules to the potential contractors. The potential
contractors will be responsible for reserves in accordance with Inland
Power Pool requirements.
e. Resource Allocation
Western proposes to allocate PRP resources in proportion to the
historical sales of each of the ICPA and UMPA members. UMPA members
serve approximately 70 percent of the load in the marketing area, and
the city of Provo is by far the largest member. ICPA members serve
approximately 30 percent of the marketing area load. Proportional
allocation of the PRP's average annual output of 23,000,000 kWh would
mean UMPA members could expect an average of 16,100,000 kWh and 3,500
kilowatts (kW) of contingent capacity, and ICPA members could expect an
average of 6,900,000 kWh and 1,500 kW of contingent capacity. Of ICPA
members' 30 percent, Heber City would receive 6 percent, Lehi 2.7
percent, Springville 12.9 percent, Payson 4.8 percent, and Strawberry
3.6 percent. Of UMPA members' 70 percent, Provo would receive 60.9
percent, Salem 1.4 percent, and Spanish Fork 7.7 percent. Western would
develop firm power sales contracts with ICPA and UMPA on behalf of
their members which would specify the terms and conditions of receiving
PRP power. The power sales contracts would be structured such that if a
member withdraws from either ICPA or UMPA, it would be able to retain
its entitlement of PRP power.
f. Contract Terms
ICPA and UMPA would pay the PRP's total annual powerplant expenses
in return for the total marketable PRP production. Each would pay its
proportional share of the operation, maintenance, and replacement
expenses identified in the PRS in 12 monthly installments. In addition,
before January 1 of each year, ICPA would pay $30,685.71 and UMPA
$71,600.00 to Reclamation to be applied toward the Water Users annual
payment.
g. Term of Contract
The power sales contracts would become effective on October 1,
1994, and terminate on September 30, 2008.
Process
Western will accept comments on its proposed revised marketing plan
until August 10, 1994. Following this comment period, Western will
prepare the appropriate contracts and other agreements that may be
necessary to implement its proposal. A notice in the Federal Register
will announce Western's final decisions on marketing PRP power. The
marketing plan will be effective 30 days following publication of that
notice. Western intends to begin initial service under these contracts
on October 1, 1994.
ENVIRONMENTAL COMPLIANCE: Western will comply with the National
Environmental Policy Act of 1969 through preparation of an
environmental assessment (EA) on the impacts of the proposed marketing
changes.
Western has no operational control over the PRP. Deer Creek Dam is
operated primarily for the benefit of water storage and delivery. Power
production is a secondary benefit and does not influence dam operations
in any manner. Therefore, the proposed PRP marketing changes will have
no effect on dam operations.
REGULATORY FLEXIBILITY ANALYSIS: Pursuant to the Regulatory Flexibility
Act of 1980 (5 U.S.C. 601 et seq.), each agency, when publishing a
proposed rule, is further required to prepare and make available for
public comment an initial regulatory flexibility analysis to describe
the impact of the rule on small entities. Western has determined that:
(1) This rulemaking relates to services offered by Western and,
therefore, is not a rule within the purview of the Act, and (2) the
impacts of an allocation from Western would not cause an adverse
economic impact to such entities.
DETERMINATION UNDER EXECUTIVE ORDER 12866: DOE has determined this is
not a significant regulatory action because it does not meet the
criteria of Executive Order 12866, 58 FR 51735. 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.
Issued in Golden, Colorado, June 22, 1994.
William H. Clagett,
Administrator.
[FR Doc. 94-16709 Filed 7-8-94; 8:45 am]
BILLING CODE 6450-01-P
