[Federal Register Volume 60, Number 143 (Wednesday, July 26, 1995)]
[Proposed Rules]
[Pages 38289-38291]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-18330]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
18 CFR Part 35
[Docket Nos. RM95-8-000 and RM94-7-001]
Promoting Wholesale Competition Through Open Access Non-
Discriminatory Transmission Services by Public Utilities and Recovery
of Stranded Costs by Public Utilities and Transmitting Utilities;
Notice of Fixed Charge Rate Methodology
Issued July 14, 1995.
AGENCY: Federal Energy Regulatory Commission.
ACTION: Notice of proposed rulemaking and supplemental notice of
proposed rulemaking; notice of fixed charge rate methodology.
-----------------------------------------------------------------------
SUMMARY: The Federal Energy Regulatory Commission's notice of proposed
rulemaking in this proceeding in footnote 403 (60 FR 17662 at 17720,
April 7, 1995) referred to the representative transmission fixed charge
rate of 17.5 percent. This notice demonstrates the derivation of that
rate.
DATES: Comments on the proposed rule are due on or before August 7,
1995; reply comments are due on or before October 4, 1995.
FOR FURTHER INFORMATION CONTACT:
David D. Withnell (Legal Information), Federal Energy Regulatory
Commission, Office of the General Counsel, 825 North Capitol St., N.E.,
Washington, D.C. 20426, Telephone: (202) 208-2063
Patricia M. Alexander (Technical Information), Office of Electric Power
Regulation, 825 North Capitol Street, N.E., Washington, D.C. 20426,
Telephone: (202) 208-0750
ADDRESSES: Send comments to: Office of the Secretary, Federal Energy
Regulatory Commission, 825 N. Capitol St., NE, Washington, DC 20426.
SUPPLEMENTARY INFORMATION: In addition to publishing the full text of
this document in the Federal Register, the Commission also provides all
interested persons an opportunity to inspect or copy the contents of
this document during normal business hours in Room 3104, at 941 North
Capitol Street, N.E., Washington, D.C. 20426.
The Commission Issuance Posting System (CIPS), an electronic
bulletin board service, provides access to the texts of formal
documents issued by the Commission. CIPS is available at no charge to
the user and may be accessed using a personal computer with a modem by
dialing (202) 208-1397. To access CIPS, set your communications
software to 19200, 14400, 12000, 9600, 7200, 4800, 2400 or 1200bps,
full duplex, no parity, 8 data bits, and 1 stop bit. The full text of
this document will be available on CIPS in ASCII and WordPerfect 5.1
format. The complete text on diskette in WordPerfect format may also be
purchased from the Commission's copy contractor, La Dorn Systems
Corporation, also located in Room 3104, 941 North Capitol Street, N.E.,
Washington, D.C. 20426.
Docket No. RM95-8-000: Derivation of 17.5% Fixed Charge Rate
The following narrative describes the fixed charge rate referenced
in footnote 403 in the Stage One implementation section of the NOPR and
explains the basis for the Commission's proposed uniform fixed charge
rate of 17.5%.
A fixed charge rate is the ratio of a utility's annual fixed costs
[depreciation, return (overall and on equity) on investment, taxes, and
operating and administrative expenses] to its investment (plant-in-
service). To determine the annual fixed costs of providing transmission
service, the fixed charge rate is multiplied by the
[[Page 38290]]
original cost of transmission investment. This number is then divided
by the capability of the transmission system to compute an annual rate
for transmission service stated in $/kW. Charges for shorter periods
can be derived from this figure, e.g., a monthly rate would be computed
by dividing the annual rate by 12.
Annual fixed costs can be calculated using either a levelized or
nonlevelized fixed charge rate. With a levelized fixed charge rate, the
capital recovery component of the rate does not vary from year to year.
Instead, the rate is designed using essentially the same method used to
develop fixed-rate home mortgage payments, i.e., the monthly payment
does not vary. Most of the monthly payment reflects interest (return on
investment in the context of utility rates) in the early years, and
most of the monthly payment reflects principal repayment (depreciation
in the context of utility rates) in the later years. In contrast,
nonlevelized rates decline over time. In the early years of a
facility's life, nonlevelized rates will be higher than levelized rates
and, in the later years of the facility's service life, nonlevelized
rates will be lower than levelized rates. However, under either
approach, the utility recovers, on a net present value basis, the same
total revenues. See Maine Public Service Company, 71 FERC para. 61,249
(1995).
As explained in the NOPR, the levelized fixed charge method used by
many utilities and the Commission is available on the Commission's
Bulletin Board in spreadsheet format. This method is the basis for both
of the Stage One options proposed in the NOPR. One option uses the
levelized fixed charge method to compute a company-specific
transmission cost using company-specific Form No. 1 data.
The other option uses a uniform 17.5% fixed charge rate for all
companies. The 17.5% rate is based upon an average of the results of
suspension analyses \1\ over the last two years using the levelized
fixed charge method to evaluate public utility filings involving either
transmission service or the transmission component of a power sale.\2\
For those filings, the Commission's preliminary fixed charge rate
analyses ranged from 13.3% to 29.8% and the arithmetic average was 17%.
The arithmetic average of the common equity returns reflected in those
fixed charge rates was about 10%.
\1\ If the Commission's preliminary review of a rate filing
indicates that it may not be just and reasonable, the Commission can
suspend the rate for up to five months and set it for hearing. The
preliminary analysis used to determine the need for a hearing and
the appropriate length of any suspension period is called a
suspension analysis.
\2\ The Appendix contains a list of those filings.
---------------------------------------------------------------------------
For purposes of Stage One implementation, the Commission proposed
setting the fixed charge rate at 17.5% to reflect the fact that current
equity returns (and related income taxes) are somewhat higher than the
preliminary equity returns used in the surveyed analyses.
Lois D. Cashell,
Secretary.
Appendix--Transmission Fixed Charge Rates
------------------------------------------------------------------------
Transmission
Company Docket No. fixed charge
rate (%)
------------------------------------------------------------------------
Arizona Public Service Co..... ER94-1681-000 17.18
Atlantic City Electric Co..... ER93-927-000 21.75
Boston Edison Co.............. ER95-108-000 17.64
Black Hills Power & Light Co.. ER94-1542-000 15.65
Carolina Power & Light Co..... ER95-10-000 14.04
Central Illinois Public ER94-1611-000 14.64
Service Co.
Central Maine Power Co........ ER94-1153-000 17.88
Commonwealth Edison Co........ ER95-5-000 16.13
Consolidated Edison Co. of New ER94-1666-000 22.05
York.
Dayton Power & Light Co....... ER94-1469-000 17.78
Delmarva Power & Light Co..... ER94-1501-000 16.52
Duke Power Co................. ER94-1429-000 16.77
Edison Sault Electric Co...... ER94-1502-000 20.63
Energy Operating Co.'s........ ER94-1440-000 15.91
Fitchburg Gas & Electric Light ER94-1203-000 13.34
Co.
Florida Power Corp............ ER95-100-000 15.46
Green Mountain Power Corp..... ER95-84-000 20.11
Idaho Power Co................ ER94-1231-000 14.94
Interstate Power Co........... ER94-1346-000 14.82
Kentucky Utilities Co......... ER94-1678-000 15.45
Louisville Gas & Electric Co.. ER94-1480-000 14.75
Madison Gas & Electric Co..... ER94-1147-000 14.25
Maine Public Service Co....... ER94-1481-000 21.81
Midwest Power Systems......... ER94-1278-000 15.29
Minnesota Power & Light Co.... ER94-1556-000 17.61
Mississippi Power & Light Co.. ER94-1306-000 16.43
Missouri Public Service Co.... ER94-1692-000 17.34
Montana Power Co.............. ER94-1189-000 17.96
New England Power Co.......... ER94-1338-000 18.37
Niagara Mohawk Power Corp..... ER94-1641-000 20.96
Northern States Power Co.'s ER94-1622-000 19.95
(Wisc./Minn.).
New York State Electric & Gas ER95-108-000 17.65
Corp.
Ohio Power Co................. ER94-1555-000 19.02
Oklahoma Gas & Electric Co.... ER94-1266-000 15.06
Orange & Rockland Utilities ER94-1262-000 29.83
Inc.
Otter Tail Power Co........... ER94-1147-000 17.90
PacifiCorp.................... ER94-1233-000 13.54
[[Page 38291]]
Pacific Gas & Electric Co..... ER94-1430-000 17.75
Pennsylvania Electric Co...... ER94-1436-000 18.53
Pennsylvania Power & Light Co. ER94-1398-000 16.62
Potomac Electric Power Co..... ER94-900-000 18.20
Portland General Electric Co.. ER93-462-000 16.10
Public Service Co. of Oklahoma ER94-949-000 15.06
Public Service Co. of Colorado ER95-88-000 15.08
Public Service Electric & Gas ER93-667-000 18.21
Co.
Puget Sound Power & Light Co.. ER94-528-000 16.39
Rochester Gas & Electric Corp. ER94-1279-000 20.13
Sierra Pacific Power Co....... ER94-1195-000 12.20
Southern California Edison Co. ER94-1608-000 17.48
South Carolina Electric & Gas ER95-104-000 16.04
Co.
Southwestern Public Service Co ER94-1152-000 14.07
Texas-New Mexico Power Co..... ER94-1326-000 14.11
Tucson Electric Power Co...... ER94-1424-000 13.50
Washington Water Power Co..... ER94-183-000 13.50
Western Resources, Inc........ ER94-1010-000 15.24
West Texas Utilities Co....... ER95-245-000 16.78
Wisconsin Electric Power Co... ER94-1626-000 16.15
Wisconsin Power & Light Co.... ER94-1204-000 16.73
------------------------------------------------------------------------
[FR Doc. 95-18330 Filed 7-25-95; 8:45 am]
BILLING CODE 6717-01-P
