E8-16744. Washoe Project-Rate Order No. WAPA-136

AGENCY:

Western Area Power Administration, DOE.

ACTION:

Notice of Order Concerning Non-Firm Power Formula Rate.

SUMMARY:

The Deputy Secretary of Energy confirmed and approved Rate Order No. WAPA-136 and Rate Schedule SNF-7, placing a non-firm power formula rate from the Stampede Powerplant (Stampede) of the Washoe Project of the Western Area Power Administration (Western) into effect on an interim basis. The provisional rate will be in effect until the Federal Energy Regulatory Commission (FERC) confirms, approves, and places it into effect on a final basis or until it is replaced by another rate. The provisional rate will provide sufficient revenue to pay all annual costs, including interest expense, and repayment of power investment within allowable periods.

DATES:

Rate Schedule SNF-7 will be placed into effect on an interim basis on the first day of the first full billing period beginning on or after August 1, 2008, and will be in effect until FERC confirms, approves, and places the rate schedule in effect on a final basis through July 31, 2013, or until the rate schedule is superseded.

FOR FURTHER INFORMATION CONTACT:

Mr. Thomas Boyko, Regional Manager, Sierra Nevada Customer Service Region, Western Area Power Administration, 114 Parkshore Drive, Folsom, CA 95630-4710, [phone] or Ms. Sonja A. Anderson, Power Marketing Manager, Sierra Nevada Customer Service Region, Western Area Power Administration, 114 Parkshore Drive, Folsom, CA 95630-4710, [phone], e-mail [e-mail].

SUPPLEMENTARY INFORMATION:

The Deputy Secretary of Energy approved existing Rate Schedule SNF-6, a non-firm power formula rate on August 16, 2005.^[1] Rate Schedule SNF-6 is effective from October 1, 2005, through September 30, 2010. Rate schedule SNF-6 links the existing non-firm power formula rate to a contract with the Sierra Pacific Power Company (Sierra). The index that Western uses in SNF-6 to set the “floor rate” in SNF-6 is linked to the same contract. Western terminated the contract with Sierra on July 31, 2007. As a result, it is necessary for Western to initiate a new rate case to align the non-firm power formula rate to future third-party contractors. As explained below, the provisional formula rate for Rate Schedule SNF-7 will rectify the mismatches to the terminated contract and will continue to calculate the Stampede annual transferred Power Revenue Requirement (PRR) as a cost transferred to the Central Valley Project (CVP).

In order to serve project use loads and effectively market the energy from Stampede, Western has contracted with a third party (Contractor) that provides for a Stampede Energy Exchange Account (SEEA). The SEEA is an annual energy exchange account for Stampede energy. Under this contract, the Contractor accepts delivery of all energy generated from Stampede and integrates this generation into its resource portfolio. The monthly calculation of revenue from Stampede energy received by the Contractor is credited into the SEEA at the SEEA Rate. Western can use the SEEA to benefit project use facilities and market energy from Stampede to CVP preference customers.

From 1994 to 2007, Sierra, through Contract 94-SAO-00010 (Contract 00010), has served as the Contractor integrating Stampede generation into its resource portfolio and serving station service and project use loads in Sierra's service territory. SNF-6 links the current non-firm power formula rate to Contract 00010 and the management of the SEEA. In addition, the index that was used in Rate Schedule SNF-6 to set the floor rate was contained in Contract 00010.

On May 10, 2007, the Truckee Donner Public Utility District (Truckee Donner) and the City of Fallon (Fallon), two preference customers located within Sierra's Balancing Authority, entered into a contract with Western that replaces Contract 00010. This new contract with Truckee Donner and Fallon (TDF), Contract 07-SNR-01026 (Contract 01026), uses a market index methodology as the basis for valuing Stampede generation. The effective date of Contract 01026 was August 1, 2007. The change in contractors and the “floor rate” definition makes it necessary for Western to initiate a new rate adjustment to update the non-firm power formula rate. In this new rate design, Western is using a general term of “Contractor” in the development of the formula rate and resulting rate schedule in order to provide flexibility in the event the Contractor changes in the future.

The existing non-firm power Rate Schedule set the SEEA rate (previously known as the floor rate in SNF-6) at 17.89 mills per kilowatthour (mills/kWh). Western estimates the proposed formula rate for non-firm power for the Washoe Project in Rate Schedule SNF-7 will result in an average SEEA Rate for the rate period of 47.85 mills/kWh. This will result in an increase of 167 percent when compared with the existing Washoe Project non-firm power SEEA Rate under Rate Schedule SNF-6.

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. DOE published its existing procedures for public participation in power rate adjustments on September 18, 1985 (10 CFR Part 903 (2008)).

Pursuant to paragraph 1.5 of Delegation Order No. 00-037.00, Western's Administrator approved the power formula rate for the sale of short-term, non-firm power to TDF effective August 1, 2007. The Administrator's approval provided interim rate authority between the effective date of the new contract, August 1, 2007, and the effective date of the interim rate, August 1, 2008. The Administrator's approval will expire on July 31, 2008.

Under Delegation Order Nos. 00-037.00 and 00-001.00C, 10 CFR Part 903, and 18 CFR Part 300, I hereby confirm, approve, and place Rate Order No. WAPA-136, the Washoe non-firm power formula rate into effect on an interim basis. The new Rate Schedule SNF-7 will be promptly submitted to FERC for confirmation and approval on a final basis.

Dated: July 14, 2008.

Jeffrey F. Kupfer,

Acting Deputy Secretary.

Department of Energy Deputy Secretary

In the matter of: Western Area Power Administration, Rate Adjustment for the Washoe Project, Stampede Division Non-Firm Power Formula Rate; Rate Order No. WAPA-136

Order Confirming, Approving, and Placing the Washoe Project, Stampede Division, Non-Firm Power Formula Rate 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 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 project 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 Area Power Administration's (Western) 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. DOE published its existing procedures for public participation in power rate adjustments (10 CFR Part 903) on September 18, 1985.

Acronyms and Definitions

As used in this Rate Order, the following acronyms and definitions apply:

2004 Power Marketing Plan: The 2004 Power Marketing Plan (64 FR 34417) effective January 1, 2005.

Administrator: The Administrator of the Western Area Power Administration.

Capacity: The electric capability of a generator, transformer, transmission circuit, or other equipment expressed in kilowatts.

Composite Rate: The rate for non-firm power which is the total annual revenue requirement for capacity and energy divided by the total annual energy sales. It is expressed as mills/kWh and used for comparison purposes.

Contractor: The third party(ies) who, under contract with Western, are responsible for (1) managing the Stampede Energy Exchange Account (SEEA) (2) integrating Stampede generation into their resource portfolio, and (3) ensuring that station service and project use loads are served for the Washoe Project.

Customer: An entity with a contract that receives service from Western's Sierra Nevada Customer Service Region (SNR).

CVP: Central Valley Project—A multipurpose Federal water development project extending from the Cascade Range in northern California to the plains along the Kern River south of Bakersfield, California.

Deficits: Unpaid or deferred annual or interest expenses.

DOE: United States Department of Energy.

DOE Order RA 6120.2: An order outlining power marketing administration financial reporting and ratemaking procedures.

Energy: Measured in terms of the work it is capable of doing over a period of time. It is expressed in kilowatthours.

FERC: The Federal Energy Regulatory Commission.

Floor Rate: Per Contract 00010 with Sierra, is equal to 85 percent of the then effective, non-time differentiated rate provided in Sierra's California Quarterly Short-Term Purchase Price Schedule for as-available purchases from qualifying facilities with capacities of 100 kilowatts (kW) or less.

FRN: Federal Register notice.

FY: Fiscal Year; October 1 to September 30.

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

kWh: Kilowatthour—The electrical unit of energy that equals 1,000 watts delivered or used in 1 hour.

Load: The amount of electric power or energy delivered or required at any specified point(s) on a transmission or distribution system.

Mill: A monetary denomination of the United States that equals one-tenth of a cent or one-thousandth of a dollar.

Mills/kWh: Mills per kilowatthour. The unit of charge for energy.

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.).

Non-firm: A type of product and/or service not always available at the time requested by the customer.

O&M: Operation and Maintenance.

Power: Capacity and Energy.

Preference: The provisions of Reclamation Law which require Western to first make Federal power available to certain entities. For example, section 9(c) of the Reclamation Project Act of 1939 states that preference in the sale of Federal power shall be given to municipalities and other public corporations or agencies and also to cooperatives and other nonprofit organizations financed in whole or in part by loans made under the Rural Electrification Act of 1936 (43 U.S.C. 485h(c)).

Project Use: Power used to operate Washoe Project facilities under Reclamation Law.

Provisional Rate: A rate which has been confirmed, approved, and placed into effect on an interim basis by the Deputy Secretary.

PRR: Power Revenue Requirement—The annual revenue that must be collected to recover annual expenses such as O&M, purchase power, transmission service expenses, interest, deferred expenses, and repay Federal investments and other assigned costs.

PRS: Power Repayment Study.

Rate Brochure: A document explaining the rationale and background for the rate proposal contained in this Rate Order dated February 2008.

Ratesetting PRS: The PRS used for the rate adjustment proposal.

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

Reclamation Law: A series of Federal laws. Viewed as a whole, these laws create the originating framework under which Western markets power.

Revenue Requirement: The revenue required to recover annual expenses such as O&M, purchase power, transmission service expenses, interest, deferred expenses, and repay Federal investments and other assigned costs.

SEEA: The Stampede Energy Exchange Account.

SEEA Rate: The rate at which Stampede project generation is valued and credited to the SEEA. The SEEA Rate replaces the floor rate (WAPA Order No. 119).

Sierra: Sierra Pacific Power Company also known as Nevada Power and Sierra Pacific Resources.

SNR: The Sierra Nevada Customer Service Region of Western.

Stampede: Power system facilities of Washoe Project, Stampede Division.

Stampede Annual PRR: The total Power Revenue Requirement for Stampede required to repay all reimbursable annual costs, including interest and the investment within the allowable period.

Stampede Revenue: Revenue generated from applying the SEEA Rate to project generation under the methodology established in a contract.

Supporting Documentation: A compilation of data and documents that support the Rate Brochure and the rate proposal.

TDF: Truckee Donner Public Utility District and City of Fallon—As of August 1, 2007, TDF is the third-party Contractor responsible for the management of the SEEA and Stampede generation.

Washoe Project: A Reclamation project located in the Lahontan Basin in west-central Nevada and east-central California.

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

Effective Date

The new provisional formula rate will take effect on the first day of the first full billing period beginning on or after August 1, 2008, and will remain in effect until July 31, 2013, pending approval by FERC on a final basis.

Public Notice and Comment

Western followed the Procedures for Public Participation in Power and Transmission Rate Adjustments and Extensions, 10 CFR part 903, in developing these rates. The steps Western took to involve interested parties in the rate process included:

1. A FRN published on February 6, 2008 (73 FR 6958), announced the proposed change of the non-firm power formula rate. This notice began the public consultation and comment period.

2. On February 6, 2008, Western e-mailed the FRN (73 FR 6958) to the SNR Preference Customers and interested parties explaining that this was a minor rate adjustment. While there was no public information or comment forum for this rate process (10 CFR part 903), Western informed interested parties of Western's availability to explain the rationale for the rate adjustment and to discuss the studies that support the proposal for the change to the formula rate.

3. On February 6, 2008, Western also mailed letters to the SNR Preference Customers and interested parties transmitting the Web site address to obtain a copy of the FRN and providing instructions on how to receive a copy of the Rate Brochure.

4. Western communicated clarifying information on the proposed rate adjustment with the following Preference Customers and/or interested parties. This information is included in the record:

Northern California Power Agency, California.

Redding Electric Utility, California.

Sacramento Municipal Utility District, California.

5. Western received no comment letters during the consultation and comment period, which ended on March 7, 2008.

Project Description

The Stampede Dam and Reservoir are located on the Little Truckee River immediately below the mouth of Davies Creek and approximately 8 miles above the confluence of the Little Truckee and Truckee Rivers. The dam and reservoir are in Sierra County, California, approximately 11 miles northeast of the town of Truckee. The water source for Stampede Reservoir is the Little Truckee River drainage basin containing about 136 square miles of densely wooded slopes and grass meadowlands.

On August 1, 1956, as part of the Washoe Project, Congress authorized the Stampede Dam and Reservoir project, including hydroelectric power development. (70 Stat. 755 (1956)). When the United States built the Stampede Dam, it did not construct the power facilities because the power function was not economically justified.

Subsequently, in July 1976, the United States re-evaluated constructing a powerplant at Stampede and published its findings in a special Reclamation report: Adding Powerplants at Existing Federal Dams in California. In the report, Reclamation recommended constructing a Stampede powerplant. As a result, Reclamation initiated definitive plan studies in FY 1977, and Reclamation completed construction in 1987. A one-half mile 60-kV transmission line interconnects the Stampede power facilities with Sierra's transmission system.

Reclamation operates Stampede Dam and Reservoir for four specific purposes: Flood control, fisheries enhancement, recreation, and power generation. The powerplant has a 3.65 MW generator and it provides approximately 12 million kWh of energy annually. The energy generated by the powerplant is first used to serve designated Washoe Project use loads. Western markets all remaining energy generation. Due to the nature of Washoe Project (run of the river), the energy produced is non-firm. To maximize the value of the non-firm energy, Western, in consultation with Reclamation, markets the energy under the conditions outlined in Western's contract with a third-party Contractor.

The Lahontan National Fish Hatchery and the Marble Bluff Fish Facility are the project use facilities entitled to energy from the Stampede Powerplant. The Marble Bluff Fish Hatchery is located on the Truckee River about 3.5 miles upstream from Pyramid Lake. The Lahontan National Fish Hatchery is located off the Carson River just south of Carson City in Gardnerville, Nevada. The loads at these facilities are projected to be approximately 2 million kWh annually.

Section 2 of the Washoe Project Act outlined the repayment period to be “* * * over a period of not more than fifty years * * *” (70 Stat. 775). In addition, Section 4 stated the cost of Fish and Wildlife facilities, including the operations and maintenance, shall be non-reimbursable. (70 Stat. 776). Public Law No. 101-618 dated November 16, 1990, further made all Washoe Project Facilities except Stampede Powerplant non-reimbursable. This was necessary because a 1982 court order requires that Stampede be operated for the benefit of endangered or threatened fish at Pyramid Lake.

Power Repayment Study

Western prepares a PRS each FY to determine if revenues are sufficient to repay, within the required time, all costs assigned to the Washoe Project power function. Repayment criteria are based on law, applicable policies, including DOE Order RA 6120.2, and authorizing legislation.

To serve project use loads and effectively market the energy from Stampede, Western has entered into a contract with a third party (Contractor) that provides for an energy banking arrangement and establishes the SEEA. The SEEA is an annual energy exchange account for Stampede energy. Under this third-party contract, the Contractor accepts delivery of all energy generated from Stampede. The monthly calculation of revenue from Stampede energy received by the Contractor is credited into the SEEA at the SEEA Rate. Western can use the SEEA to benefit project use facilities and market energy from Stampede to CVP Preference Customers.

In the SEEA, the revenues from sales (generation revenues) made at the SEEA Rate are reduced by the project use and station service power costs and SEEA administrative costs. In accordance with Western's Letter of Agreement (LOA) with Reclamation (LOA 07-SNR-01036), Western applies the ratio of projected project use costs to the projected generation revenue recorded in the SEEA to determine a non-reimbursable percentage. One hundred percent minus this non-reimbursable percentage establishes a reimbursable percentage. This reimbursable percentage is then applied to the appropriate power-related costs to determine the reimbursable costs for repayment. The reimbursable costs are then netted against generation revenues made at the SEEA Rate.

Beginning in August 2007, due to the change in the SEEA Rate, Western anticipates a reduction in the non-reimbursable percentage for the Washoe Project. This condition will subsequently increase reimbursable costs to the Preference Customers. Western estimates that the reimbursable O&M costs could increase between $97,000 and $284,000 annually due to the change in generation revenues.

The proposed formula rate will increase the Stampede Revenue for repayment of the Washoe Project, which is directly attributable to the increased SEEA Rate. Under the 2004 Power Marketing Plan and the provisional formula rate, Western transfers any reimbursable costs remaining after netting them against Stampede Revenue to the CVP PRR. Western transfers revenues collected through the CVP PRR for Stampede reimbursable costs from the CVP to the Washoe Project annually.

Existing and Provisional Rates and Revenue Requirement

Rate schedule SNF-6 links the existing non-firm power formula rate to the terminated contract with Sierra. In addition, the index that Western uses in SNF-6 to set the “floor rate” in SNF-6 is linked to language contained in the terminated contract. These two conditions make it necessary for SNR to initiate a new rate case to align the non-firm power formula rate to future third-party contractors. The provisional formula rate SNF-7 will rectify the mismatches to the terminated contract and will continue to calculate the Stampede annual transferred PRR as a cost transferred to the CVP. The following table compares the existing and provisional non-firm power formula rate components as listed under the existing SNF-6 and provisional SNF-7 rate schedules.

Comparison of Existing and Provisional Floor/SEEA Rate and Revenue Requirement Washoe Project, Stampede Powerplant

Non-firm energy sales and PRR	Existing rates	Provisional rates (effective 8/1/08)	Percent change
Rate Schedule	SNF-6	SNF-7
Floor Rate or Average SEEA Rate (Mills/kWh) for the Rate Period	0.01789	0.04785	167
Average Estimated Stampede Annual Transferred PRR ($) for Rate Period	323,139	250,194	−23

Certification of Rates

Western's Administrator certified the provisional non-firm power formula rate for Stampede is the lowest possible rate consistent with sound business principles. Western developed the provisional formula rate following administrative policies and applicable laws.

Non-Firm Power Formula Rate and PRR Discussion

According to Reclamation Law, Western must establish rates sufficient to recover O&M, other annual and interest expenses, and repay power investment and irrigation aid.

Statement of Revenue and Related Expenses

The following table provides a summary of projected revenues and expenses data for the Stampede non-firm power formula rate through the 5-year provisional rate approval period.

Stampede Non-Firm Power Formula Rate Revenue Requirement Comparison of 5-Year Rate Period (August 1, 2008-July 31, 2013)

[Total revenues and expenses ¹]

	Existing revenue requirement ($000)	Provisional revenue requirement ($000)	Difference ($000)
Generation Revenue	$1,073	$2,886	$1,813
Stampede Annual Transferred PRR (CVP Transfer Revenue)	1,939	1,501	(438)
Total Revenues	3,012	4,387	1,375
Revenue Distribution
Expenses:
O&M 2	0	1,371	1,371
Project Use Expense	1,199	1,199	0
Interest	549	557	8
Total Expenses	1,748	3,127	1,379
Principal Payments: 3
Capitalized Deficits 4	1,264	1,260	(4)
Original Project and Additions	0	0	0
Replacements	0	0	0
Irrigation	N/A	N/A	N/A
Total Principal Payments	1,264	1,260	(4)
Total Revenue Distribution	3,012	4,387	1,375
1 Existing and proposed rates are based on a historical generation average. The difference between the two rates is (1) different generation valuation rates and (2) different reimbursable percentages as a result of the generation value.
2 Western's LOA with Reclamation (SNR-07-01036) articulates the calculation methodology for determining non-reimbursable costs for Stampede. Based on this LOA, the reimbursable percentage was calculated at 0.0 percent for the existing rates and 59 percent for the proposed rate adjustment.
3 For illustrative purposes, capital repayment for the existing and proposed ratesetting PRSs were set at identical levels in an effort to identify the impact of this rate adjustment on the Stampede Annual Transferred PRR.
4 Deficits are projected to be repaid by 2014.

Basis for Rate Development

In the SEEA, the revenues from sales (generation revenues) made at the SEEA Rate are reduced by the project use and station service power costs and SEEA administrative costs. Western applies the ratio of project use costs to the generation revenue recorded in the SEEA to determine a non-reimbursable percentage. One hundred percent minus this non-reimbursable percentage establishes a reimbursable percentage. This reimbursable percentage is then applied to the appropriate power-related costs to determine the reimbursable costs for repayment. The reimbursable costs are then netted against generation revenues made at the SEEA Rate. As stipulated under the 2004 Power Marketing Plan, any remaining reimbursable costs, to include interest and annual capital costs, are then transferred to the CVP for incorporation into the CVP PRR.

The provisional formula rate for Stampede power is:

Stampede Annual Transferred PRR = Stampede Annual PRR − Stampede Revenue

Where:

Stampede Annual Transferred Power Revenue Requirement (PRR) = Stampede Annual PRR as identified as a cost transferred to the CVP.

Stampede Annual PRR = The total PRR for Stampede required to repay all annual costs, including interest, and the investment within the allowable period.

Stampede Revenue = Revenue from applying the SEEA rate to project generation.

Western will review the PRR for the Stampede Powerplant semiannually in or around March and September each year. Western will also review the CVP PRR in March and September of each year (71 FR 45821). The CVP rate procedures stipulate that Western will analyze the CVP financial data from October through February, to the extent information is available, as well as forecasted data for March through September. In the case of Stampede, Western will use the most current PRS and the disposition of the SEEA account up through February and estimate March through September and other financial data, to the extent information is available, to determine the amount of costs to include in the CVP PRR. In September, when the next review occurs, Western will use the same methodology to include costs in the CVP PRR for the following year.

Comments

Western received no comments on the rate proposal during the public comment and consultation period that ended on March 7, 2008.

Availability of Information

Information about this rate adjustment, including power repayment studies, comments, letters, memorandums, and other supporting material made or kept by Western and used to develop the provisional rate, is available for public review in the Sierra Nevada Regional Office, Western Area Power Administration, 114 Parkshore Drive, Folsom, California.

Ratemaking Procedure Requirements

Environmental Compliance

In compliance with the National Environmental Policy Act (NEPA) of 1969 (42 U.S.C. 4321, et seq.); the Council on Environmental Quality Regulations for implementing NEPA (40 CFR Parts 1500-1508); and DOE NEPA Implementing Procedures and Guidelines (10 CFR Part 1021), Western has determined that this action is categorically excluded from preparing 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 the Federal Energy Regulatory Commission

The interim rate herein confirmed, approved, and placed into effect, together with supporting documents, will be submitted to FERC for confirmation and final approval.

Order

In view of the foregoing and under the authority delegated to me, I confirm and approve on an interim basis, effective August 1, 2008, Rate Schedule SNF-7 for the Washoe Project, Stampede Division of the Western Area Power Administration. The rate schedule shall remain in effect on an interim basis, pending FERC's confirmation and approval of them or substitute rate on a final basis through July 31, 2013.

Dated: July 14, 2008.

Jeffrey F. Kupfer,

Acting Deputy Secretary.

Rate Schedule SNF-7

(Supersedes Schedule SNF-6)

United States Department of Energy Western Area Power Administration

Washoe Project, Stampede Division

Schedule of Rate for Non-Firm Power Formula Rate

Effective

The first day of the first full billing period beginning on or after August 1, 2008, through July 31, 2013, or until superseded by another rate schedule, whichever occurs earlier.

Available

Within the marketing area served by the Sierra Nevada Customer Service Region.

Applicable

To preference customers under the 2004 Power Marketing Plan and the applicable third party(ies) who are under contract (Contractor) with Western.

Character and Conditions of Service

Alternating current, 60 hertz, three-phase, delivered and metered at the voltages and points established by contract.

Non-Firm Power Formula Rate

In order to serve project use loads and effectively market the energy from Stampede, Western has contracted with a third-party Contractor that provides for a Stampede Energy Exchange Account (SEEA). The SEEA is an annual energy exchange account for Stampede energy. In the SEEA, the revenues from sales (generation revenues) made at the SEEA Rate are reduced by the project use and station service power costs and SEEA administrative costs. Western applies the ratio of project use costs to the generation revenue recorded in the SEEA to determine a non-reimbursable percentage. One hundred percent minus this non-reimbursable percentage establishes a reimbursable percentage. This reimbursable percentage is then applied to the appropriate power-related costs to determine the reimbursable costs for repayment. The reimbursable costs are then netted against generation revenues made at the SEEA Rate. As stipulated under the 2004 Power Marketing Plan, any remaining reimbursable costs, to include interest and annual capital costs, are then transferred to the Central Valley Project for incorporation into the CVP Power Revenue Requirement.

The provisional formula rate for Stampede power is:

Stampede Annual Transferred PRR = Stampede Annual PRR−Stampede Revenue

Where:

Stampede Annual Transferred Power Revenue Requirement (PRR) = Stampede Annual PRR as identified as a cost transferred to the CVP.

Stampede Annual PRR = The total PRR for Stampede required to repay all annual costs, including interest, and the investment within the allowable period.

Stampede Revenue = Revenue from applying the SEEA Rate to project generation.

Billing

Billing for the SEEA Rate will be as specified in the service agreement.

Adjustment for Losses

Losses will be accounted for under this rate schedule as stated in the service agreement.

Footnotes

1.  Rate Order No. WAPA-119, August 29, 2005. FERC confirmed and approved the rate schedule on May 4, 2006, under FERC Docket EF05-5161-000.