E9-16690. Pick-Sloan Missouri Basin Program-Eastern Division-Rate Order No. WAPA-147

AGENCY:

Western Area Power Administration, DOE.

ACTION:

Notice of Proposed Power Rates.

SUMMARY:

The Western Area Power Administration (Western) is proposing revised rates for Pick-Sloan Missouri Basin Program—Eastern Division (P-SMBP—ED) firm electric and firm peaking power service. Current rates, under Rate Schedules P-SED-F10 and P-SED-FP10, extend through December 31, 2013, but are not sufficient to meet the P-SMBP—ED revenue requirements. The proposed rates will provide sufficient revenue to pay all annual costs, including interest expense, and repay investments within the allowable periods. Western will prepare and make available a brochure that provides detailed information on the proposed rates. The proposed rates, under Rate Schedules P-SED-F11 and P-SED-FP11, would go into effect on January 1, 2010, and would remain in effect through December 31, 2014, or until superseded. Publication of this Federal Register notice begins the formal process for the proposed rate adjustment.

DATES:

The consultation and comment period begins today and will end October 13, 2009. Western will present a detailed explanation of the proposed rates at public information forums. Public information forum dates are:

1. August 18, 2009, 9 a.m. to 10:30 a.m. MDT, Northglenn, Colorado.

2. August 19, 2009, 9 a.m. to 10:30 a.m. CDT, Sioux Falls, South Dakota.

Western will accept oral and written comments at public comment forums. Public comment forums will be held on the following dates:

1. August 18, 2009, 11 a.m. to no later than 12 noon MDT, Northglenn, Colorado.

2. August 19, 2009, 11 a.m. to no later than 12 noon CDT, Sioux Falls, South Dakota.

Western will accept written comments any time during the consultation and comment period.

ADDRESSES:

Written comments and/or requests to be informed of Federal Energy Regulatory Commission (FERC) actions concerning the rates submitted by Western to FERC for approval should be sent to Mr. Robert J. Harris, Regional Manager, Upper Great Plains Region, Western Area Power Administration, 2900 4th Avenue North, Billings, MT 59101-1266, or e-mail at [e-mail]. Western will post information about the rate process on its Web site at http://www.wapa.gov/​ugp/​rates/​2010firmrateadjust. Western will post comments received via letter and e-mail to its Web site after the close of the comment period. Written comments must be received by the end of the consultation and comment period to be considered by Western in its decision process.

Public information and comment forum locations are:

1. Northglenn—Ramada Plaza Hotel, 10 East 120th Avenue, Northglenn, Colorado.

2. Sioux Falls—Holiday Inn, 100 West 8th Street, Sioux Falls, South Dakota.

FOR FURTHER INFORMATION CONTACT:

Ms. Linda Cady-Hoffman, Rates Manager, Upper Great Plains Region, Western Area Power Administration, 2900 4th Avenue North, Billings, MT 59101-1266, telephone [phone], e-mail [e-mail].

SUPPLEMENTARY INFORMATION:

The proposed rates for P-SMBP—ED firm electric and firm peaking service are designed to recover an annual revenue requirement that includes investment repayment, interest, purchase power, operation and maintenance, and other expenses.

The Acting Deputy Secretary of Energy approved existing Rate Schedules P-SED-F10 and P-SED-FP10 for firm electric and firm peaking service on an interim basis on January 8, 2009 (74 FR, 3022, January 16, 2009), for a 5-year period beginning on February 1, 2009, and ending December 31, 2013, or until superseded. FERC confirmed and approved those Rate Schedules on a final basis on April 28, 2009.^[1] Under Rate Schedule P-SED-F10 effective February 1, 2009, the composite rate is 29.34 mills per kilowatthour (mills/kWh), the firm energy rate is 16.71 mills/kWh, and the firm capacity rate is $6.80 per kilowattmonth (kWmonth). The projected revenue requirement for firm electric service is allocated equally between capacity and energy. Under Rate Schedule P-SED-FP10 effective February 1, 2009, the firm peaking capacity rate is $6.20/kWmonth. These Rate Schedules are formula-based, providing for an increase in the Drought Adder rate component of up to 2 mills/kWh without a formal public process.

This proposed rate adjustment reflects a rate increase based on the P-SMBP Fiscal Year 2008 Power Repayment Study (PRS). The PRS sets the total annual P-SMBP—ED revenue requirement for 2010 for firm electric and firm peaking power service at $320.2 million, or a 13.1 percent increase for a composite rate of 33.25 mills/kWh. The current rates, including a 2 mills/kWh increase provided for under the Drought Adder formula rate component, are not sufficient to meet the P-SMBP—ED revenue requirements. Given the need for a Base rate component increase and the size of the Drought Adder rate component increase, Western is required to initiate a formal public process.^[2] Western has prepared the proposed rate schedules for firm electric service (P-SED-F11) and firm peaking service (P-SED-FP11) for consideration and comment during this public process. A comparison of the existing revenue requirement and rates and the proposed revenue requirement and rates under P-SED-F11 and P-SED-FP11 is listed in Table 1.

Table 1—P-SMBP—ED Firm Electric and Firm Peaking Power Service Revenue Requirement and Rates

Firm electric service	Existing rates as of Feb. 1, 2009	Proposed rates Jan. 1, 2010	Percent change
Firm and Firm Peaking Revenue Requirement	$283.0 million	$320.2 million	13.1
Composite Rate	29.34 mills/kWh	33.25 mills/kWh	13.3
Firm Capacity Rate	$6.80/kWmonth	$7.65/kWmonth	12.5
Firm Energy Rate	16.71 mills/kWh	19.05 mills/kWh	14.0
Firm Peaking Capacity Rate	$6.20/kWmonth	$6.90/kWmonth	11.3
Firm Peaking Energy Rate 1	16.71 mills/kWh	19.05 mills/kWh	14.0
1 Firm peaking energy is normally returned. This will be assessed in the event firm peaking energy is not returned.

Under Rate Schedule P-SED-F11, Western is proposing to continue to identify its firm electric service revenue requirement using Base and Drought Adder rate components and provide for an annual increase in the Drought Adder rate component of up to 2 mills/kWh. The Base rate component is a revenue requirement that includes annual operation and maintenance expenses, investment repayment and associated interest, normal timing power purchases, and transmission costs. Western's normal timing power purchases are due to operational constraints (e.g., management of endangered species habitat, water quality, navigation, etc.) and are not associated with the current drought. The Drought Adder rate component is a formula-based revenue requirement that includes costs attributable to the past and present drought conditions. The Drought Adder rate component includes costs associated with future non-timing purchases of additional power to firm obligations not covered with available system generation due to the drought, previously incurred deficits due to purchased power debt that resulted from non-timing power purchases made during this drought, and the interest associated with the previously incurred and future drought debt. The Drought Adder rate component is designed to repay Western's drought debt within 10 years from the time the debt was incurred, using balloon-payment methodology. For example, the drought debt incurred by Western in 2008 will be repaid by 2018.

The annual revenue requirement calculation will continue to be summarized by the following formula: Annual Revenue Requirement = Base Revenue Requirement + Drought Adder Revenue Requirement. Under this proposal, effective January 1, 2010, the P-SMBP—ED annual revenue requirement equals $332.8 million and is comprised of a Base revenue requirement of $166.0 million plus a Drought Adder revenue requirement of $166.8 million. Both the Base and Drought Adder rate components recover portions of the firm power revenue requirement, firm peaking power, and associated 5 percent discount revenue necessary to equal the P-SMBP—ED revenue requirement. A comparison of the current and proposed rate components is listed in Table 2.

Table 2—Summary of P-SMBP—ED Rate Components

	Existing rates as of February 1, 2009			Proposed rates January 1, 2010
	Base rate component	Drought Adder rate component	Total	Base rate component	Drought Adder rate component	Total
Firm Capacity Rate (/kWmonth)	$3.80	$3.00	$6.80	$3.80	$3.85	$7.65
Firm Energy Rate (mills/kWh)	9.27	7.44	16.71	9.53	9.52	19.05
Firm Peaking Capacity Rate (/kWmonth)	$3.40	$2.80	$6.20	$3.45	$3.45	$6.90
Firm Peaking Energy Rate (mills/kWh)1	9.27	7.44	16.71	9.53	9.52	19.05
1 Firm peaking energy is normally returned. This will be assessed in the event firm peaking energy is not returned.

As set forth in Table 2 above, under proposed Rate Schedule P-SED-FP11, the firm peaking capacity rate will increase to $6.90/kWmonth, or an 11.3 percent increase for the proposed January 1, 2010, rate adjustment. Peaking energy is either returned to Western or paid for in accordance with the terms of the contract between Western and the peaking power customer.

Continuing to identify the firm electric service revenue requirement using Base and Drought Adder rate components will assist Western in the presentation of the impacts of the drought within the Pick-Sloan Program, demonstrate repayment of the drought related costs in the PRS, and allow Western to be more responsive to changes in drought related expenses. Western 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 rate components.

Western reviews its firm electric service rates annually. Western will review the Base rate component after the annual PRS is completed, generally in the first quarter of the calendar year. If an adjustment to the Base rate component is necessary, Western will initiate a public process pursuant to 10 CFR part 903 prior to making an adjustment.

In accordance with the original implementation of the Drought Adder rate component, Western will continue to review the Drought Adder rate component each September to determine if drought costs differ from those projected in the PRS, and, if so, whether an adjustment, either incremental or decremental, to the Drought Adder rate component is necessary. Western will notify customers by letter in October of the planned incremental or decremental adjustment and implement the adjustment in the January billing cycle. Although decremental adjustments to the Drought Adder rate component will occur as drought costs are repaid, the adjustments cannot result in a negative Drought Adder rate component. To give customers advance notice, Western will conduct a preliminary review of the Drought Adder rate component in early summer and notify customers by letter of the estimated change to the Drought Adder rate component for the following January, with the final Drought Adder rate component adjustment verified with notification in the October letter to the customers. Implementing the Drought Adder rate component adjustment on January 1 of each year will help keep the drought deficits from escalating as quickly, will lower the interest expense due to drought deficits, will demonstrate responsible deficit management, and will provide prompt drought deficit repayments.

As a part of the current and proposed rate schedules, Western provides for a formula-based adjustment of the Drought Adder rate component of up to 2 mills/kWh. The 2 mills/kWh cap is intended to place a limit on the amount the Drought Adder formula can be adjusted relative to associated drought costs without having to go through a public process to recover costs attributable to the Drought Adder formula rate for any 1-year cycle.

Legal Authority

Since the proposed rates constitute a major rate adjustment as defined by 10 CFR part 903, Western will hold public information forums and public comment forums. Western will review all timely public comments and make amendments or adjustments to the proposal as appropriate. Proposed rates will be forwarded to the Deputy Secretary of Energy for approval on an interim basis.

Western is establishing firm electric service and peaking rates for P-SMBP—ED under the Department of Energy Organization Act (42 U.S.C. 7152); 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)); section 5 of the Flood Control Act of 1944 (16 U.S.C. 825s); and other acts that specifically apply to the projects involved.

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 part 903) were published on September 18, 1985.

Availability of Information

All brochures, studies, comments, letters, memorandums, or other documents that Western initiates or uses to develop the proposed rates are available for inspection and copying at the Upper Great Plains Regional Office, located at 2900 4th Avenue North, Billings, Montana. Many of these documents and supporting information are also available on Western's Web site under the “2010 Firm Rate Adjustment” section located at http://www.wapa.gov/​ugp/​rates/​2010firmrateadjust.

Ratemaking Procedure Requirements

Environmental Compliance

In compliance with the National Environmental Policy Act (NEPA) of 1969 (42 U.S.C. 4321-4347), Council on Environmental Quality Regulations (40 CFR parts 1500-1508), and DOE NEPA Regulations (10 CFR part 1021), Western is in the process of determining whether an environmental assessment or an environmental impact statement should be prepared or if this action can be categorically excluded from those requirements.

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.

Dated: June 29, 2009.

Timothy J. Meeks,

Administrator.

Footnotes

1.  FERC confirmed and approved Rate Order No. WAPA-140 on April 28, 2009, in Docket No. EF09-5031-000. See United States Department of Energy, Western Area Power Administration, Pick-Sloan Missouri Basin Program, 127 FERC ¶62075 (April 28, 2009).

2.  Under the current Rate Schedules, Western had the option of increasing the Drought Adder rate component by up to 2 mills/kWh outside of a formal public process and only initiating the formal public process for the Base rate component increase and the incremental increase of the Drought Adder rate component above 2 mills/kWh. Instead, Western has opted to initiate the formal public process for this rate increase.