[Federal Register Volume 64, Number 131 (Friday, July 9, 1999)]
[Notices]
[Pages 37120-37136]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-17500]
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DEPARTMENT OF ENERGY
Proposed Rate Adjustment
AGENCY: Southeastern Power Administration, DOE.
ACTION: Notice of rate order.
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SUMMARY: The Secretary of Department of Energy, confirmed and approved,
on an interim basis, Rate Schedules CBR-1-D, CSI-1-D, CEK-1-D, CM-1-D,
CC-1-E, CK-1-D, CTV-1-D, and SJ-1-A. The rates were approved on an
interim basis through June 30, 2004, and are subject to confirmation
and approval by the Federal Energy Regulatory Commission on a final
basis.
DATES: Approval of rate on an interim basis is effective through June
30, 2004.
FOR FURTHER INFORMATION CONTACT: Leon Jourolmon, Assistant
Administrator, Finance & Marketing, Southeastern Power Administration,
Department of Energy, Samuel Elbert Building, 2 South Public Square,
Elberton, Georgia 30635-2496, (706) 213-3800.
SUPPLEMENTARY INFORMATION: The Federal Energy Regulatory Commission, by
Order issued December 14, 1994, in Docket No.EF94-3021-000, confirmed
and approved Wholesale Power Rate Schedules CBR-1-C, CSI-1-C, CK-1-C,
CC-1-D, CM-1-C, CEK-1-C, and CTV-1-C. By order issued August 11, 1997,
in Docket No. EF97-3021-000, the Federal Energy Regulatory Commission
confirmed and approved rate schedule SJ-1. Rate schedules CBR-1-D, CSI-
1-D, CEK-1-D, CM-1-D, CC-1-E, CK-1-D, CTV-1-D, and SJ-1-A replace these
schedules.
Dated: June 29, 1999.
Bill Richardson,
Secretary.
Southeastern Power Administration--Cumberland; Order Confirming and
Approving Power Rates on an Interim Basis
[Rate Order No. SEPA-38]
Pursuant to Sections 302(a) and 301(b) of the Department of Energy
Organization Act, Public Law 95-91, the functions of the Secretary of
the Interior and the Federal Power Commission under Section 5 of the
Flood Control Act of 1944, 16 U.S.C. 825s, relating to the Southeastern
Power Administration (Southeastern), were transferred to and vested in
the Secretary of Energy. On November 4, 1993, the Secretary of Energy
issued Amendment No. 3 to Delegation Order No. 0204-108, published
November 10, 1993 at 58 FR 59716, which delegated (1) The authority to
develop long-term power and transmission rates on a nonexclusive basis
to the Administrator of the Southeastern (Southeastern); (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 the Federal Energy Regulatory Commission
(FERC). By subsequent
[[Page 37121]]
Order effective April 15, 1999, the Secretary rescinded all delegations
of authority to the Deputy Secretary, whether contained in Delegation
Orders, Departmental Directives, or elsewhere, concerning the
Department's Power Marketing Administrations, including, but not
limited to, authority delegated or affirmed in Delegation Order No.
0204-108, as amended. Existing DOE procedures for public participation
in power rate adjustments are found at 10 CFR part 903. Procedures for
approving power marketing administration rates by FERC are found at 18
CFR part 300. This rate is issued by the Secretary by pursuant to said
notice.
Background
Power from the Cumberland System of Projects is presently sold
under Wholesale Power Rate Schedules CBR-1-C, CSI-1-C, CEK-1-C, CM-1-C,
CC-1-D, CK-1-C, CTV-1-C, and SJ-1. These rate schedules were approved
by the FERC on December 14, 1994 and August 11, 1997, for a period
ending June 30, 1999 (69 FERC 61333 and 80 FERC 62123).
Discussion
System Repayment
An examination of Southeastern's revised system power repayment
study, prepared in January 1999, for the Cumberland System shows that
with an annual revenue increase of $2,272,000 over the revenues in the
current repayment study using current rates, all system power costs are
paid within the 50-year repayment period required by existing law and
DOE Procedure RA 6120.2. The Administrator of Southeastern has
certified that the rates are consistent with applicable law and that
they are the lowest possible rates to customers consistent with sound
business principles.
Public Notice and Comment
Opportunity for Public Review and Comment on Wholesale Power Rate
Schedules CBR-1-D, CSI-1-D, CEK-1-D, CM-1-D, CC-1-E, CK-1-D, CTV-1-D,
and SJ-1-A, was announced by notice published in the Federal Register
February 9, 1999. A Public Information and Comment Forum was held March
16, 1999, in Nashville, Tennessee, and written comments were invited
through May 10, 1999. The notice proposed rates with a revenue increase
of $2,272,000 in Fiscal Year 1999 and all future years. Transcript of
the Public Information and Comment Forum is included as Exhibit A-4. A
review of comments is included as Exhibit A-5. The following is a
summary of the comments.
Staff Evaluation of Public Comments
Comments and questions from four sources were received at the
Public Comment Forum held in Nashville, Tennessee on March 16, 1999.
These are included in the Forum Transcripts which are included as
Exhibit A-4. Written comments and questions from four sources were
received by mail and facsimile during the comment period and are
attached. The comments were received pursuant to Federal Register
Notice 64 Fed. Reg. 6341 dated February 9, 1999.
Comments have been condensed into six major categories. An outline
of the six major categories and subcategories of each is as follows:
1. Justification of the TVA transmission rate
2. Rate design
A. Inclusion of the TVA transmission credit with the other costs
of providing service
B. Comparative value of service provided
C. Cost recovery from energy and capacity
D. Disproportionate impact on the Kentucky Utilities Municipals
E. Phase-in of the rate adjustment
3. SEPA Power Marketing Policy
A. Allocation of Energy
B. Ability to negotiate power contracts
4. SEPA's contract with TVA and TVPPA
A. Use of TVA transmission facilities
B. Amount of Capacity Wheeled
5. Cost of Service Issues
A. Budgeted replacements
B. CSRS
6. Rate Implementation
1. Justification of the TVA Transmission Rate
Comment 1: Historically, Southeastern Power Administration's (SEPA
or Southeastern) rate treatment of the SEPA transmission credit to TVA
resulted in TVA realizing significantly less than the total cost to TVA
of transmitting SEPA power across the TVA transmission system. This is
a problem that needs to be corrected.
Comment 2: TVA's proposed transmission charges to SEPA are plainly
excessive. When the current TVA transmission charges were established
about five year ago, the rate under TVA's transmission tariff (or
equivalent) was about $2.00 per kW/Month. In the intervening years,
TVA's tariff rate has decreased to about $1.57 per kW/Month, yet TVA
seeks an increase in its charges to SEPA of approximately $2.5 million,
for a total of about $9.5 million. On its face, TVA's proposed increase
is unjustified.
Comment 3: The purportedly cost-based TVA transmission charges
contain many elements that are excessive or questionable. For example:
a. TVA has not properly determined the facilities to be include
in transmission rate base for ratemaking purposes. For example, TVA
has improperly included generator step-up facilities and has not
justified its inclusion of such facilities as radial lines and
customer-specific facilities.
b. TVA exclusion of certain loads from its rate divisors and its
use of revenue credits for certain services, rather than allocating
costs to those services, tend to inflate TVA's transmission rates.
c. TVA's inclusion of a 10% margin is unjustified.
d. TVA's inclusion of a 5% ``factor'' for payments in lieu of
taxes has not been justified.
e. TVA's charges should be adjusted to reflect the limited
service that TVA provides in the transmission of SEPA allocations,
which include limitations on the amounts and scheduling of energy
associated with the capacity being purchased. Alternatively, if SEPA
and its customers are to be required to pay for transmission
capacity year-round, they should be entitled to make full use of the
transmission services for which they are paying.
f. The annual, levelized carrying charge rate implicit in TVA's
revenue requirement as a percentage of gross plant investment
appears excessive in relation to those of other utilities in the
region, even before taking into account the fact that TVA does not
pay income taxes.
g. With declining TVA transmission costs during recent years,
its proposed rates based upon a single year's costs should be
scrutinized for the applicability in SEPA rates that are to be in
effect for five years.
h. Administrative and general expenses do not appear to have
been properly functionalized prior to their allocation.
i. TVA's derivation of charges for scheduling service are not
supported and appear excessive in relation to corresponding charges
of other utilities.
j. TVA proposes to establish the new transmission rates
applicable to SEPA based upon fiscal year 1997, which ended
September 30, 1997, or nearly two years prior to the effective date
of TVA's proposed rate increase.
k. It is SeFPC's understanding that TVA is proposing to apply
its transmission tariff formula rate to SEPA's service and thus
change SEPA's rate annually. TVA's formula rate procedures under its
tariff call for annual rate changes effective January 1 of each year
based upon data for the second preceding fiscal year. For example,
rate changes under the tariff effective January 1, 1999 are based
upon fiscal year 1997 data. The lag is only fifteen (15) months.
Since adjustments to the rate applicable to SEPA would change each
July 1, this makes the lag twenty-one (21) months without
justification. If TVA is to use a formula rate which adjusts
annually on July 1, it is reasonable, under facts specific to SEPA,
to use a test year ending no earlier than the preceding fiscal year
(e.g., fiscal 1998 for rates effective July 1, 1999).
l. SeFPC questions the inclusion of facilities with voltage less
than 166 kV in the determination of TVA's proposed transmission
rate.
Response: Section 9.1 of the TVA-SEPA-TVPPA Contract, executed
[[Page 37122]]
October 1, 1997, allows TVA to adjust rates for delivering power to the
points of delivery to the ``Other Customers'' defined as customers
outside the TVA area. Section 9.1 does not provide any means for SEPA
to determine an appropriate transmission rate. TVA and the ``Other
Customers'' are disagreeing over the appropriateness of the rate
increase. SEPA's only recourse, when TVA and the Outside Customers
disagree, is to try to determine an equitable split of the costs;
therefore, SEPA has determined to allocate a comparable increase to all
customers. SEPA will support discussions between TVA and the customers
outside the TVA system in an effort to reach a negotiated settlement on
an appropriate amount for the TVA transmission charge.
2. Rate Design
A. Inclusion of the TVA Transmission Credit With the Other Costs of
Providing Service
Comment 1: TVA is paying approximately 60 percent of the increased
charges for TVA transmission service to transport SEPA power to other
SEPA customers. The proposed methodology fails to compensate TVA
adequately for the use of its transmission facilities to deliver SEPA
power to customers outside the TVA area and shifts costs from certain
of SEPA's customer to TVA distributors and directly served customers.
Comment 2: It is entirely inappropriate for TVA to bear the costs
for transmitting the SEPA power to others in what amounts to an
arbitrary assignment of costs to TVA and its customers.
Comment 3: The manner in which SEPA charges TVA for power the
Cumberland Projects results in discriminatory charges for use of TVA's
system.
Comment 4: SEPA's proposed rate would mean that those who receive
SEPA power over TVA's transmission system receive the benefit of firm
transmission service on the TVA system but do not pay their fair share
of TVA's cost-based transmission service, while TVA power customers and
other transmission customers pay a higher rate for the same type of
transmission service. This is an unfair shifting of costs.
Comment 5: The SEPA rate should pass through the TVA published
cost-based transmission charges to those SEPA preference customers
receiving power wheeled across the TVA system, as SEPA does with other
transmission providers' charges.
Comment 6: By combining together TVA's transmission charges with
the cost of SEPA's power, SEPA arbitrarily disregards Federal Energy
Regulatory Commission (FERC) policy and utility industry practice of
separating (unbundling new arrangements for) transmission charges from
power and energy charges. SEPA is similarly arbitrary in singling out
TVA transmission charges for this ``rolled in'' rate: those SEPA
customers served through the transmission system of Carolina Power &
Light Company (CP&L) have their transmission charge unbundled from the
SEPA power cost as a separate pass-through, as do other SEPA customers
taking power from projects other than the Cumberland Basin Projects.
Comment 7: The CP&L transmission cost component is clearly broken
out as a separate charge in the very same rate proposal in which TVA's
transmission cost component is deceptively buried. SEPA does not
provide a reasoned basis for this arbitrarily disparate ratemaking
treatment of transmission charges attributable to TVA.
Comment 8: The proposed SEPA methodology would have the effect of
allowing the customers outside the TVA area to obtain a type of premium
on-peak firm transmission service at charges that do not fully recover
the costs of providing such service and that are less than charges that
would be charged others requesting other types of premium service
(point-to-point firm transmission service).
Comment 9: While TVA recognizes that ratemaking is a highly complex
process, one basic premise is that customers should not be forced to
pay for services or benefits provided for other customers. If the costs
of providing services to one group are different from the costs of
serving another, the two groups are, in one important respect,
different, and it is appropriate for that difference to be addressed in
the ratemaking process. TVA recommends remedying this defect in SEPA's
proposed rates by treating TVA's transmission costs solely as a pass-
through, like those of CP&L, rather than adjusting the energy charge,
which effectively results in TVA paying some 53 percent of the
increased costs of providing transmission service to SEPA customers
outside the TVA area.
Comment 10: SEPA arbitrarily disregards FERC and industry practice
of transmission unbundling.
Comment 11: To the extent that TVA does not recover from SEPA the
costs for SEPA's use of TVA's transmission facilities to wheel power to
SEPA's preference customers outside the TVA region, the those costs are
unfairly and unlawfully shifted to TVPPA member systems. TVPPA opposes
such cost-shifting to its members.
Response: SEPA will support continued discussions between TVA and
the customers outside the TVA system in an effort to reach a negotiated
settlement on an appropriate amount of the TVA transmission charge.
TVA's proposed transmission charge appears to be substantially higher
than the transmission charges SEPA pays to investor owned utilities in
the southeastern region. TVA's transmission rates are not subject to
the same review as investor owned utilities. Considering these factors,
SEPA does not at this time consider it appropriate to treat the TVA
transmission charges as a pass-through rate, which is how SEPA treats
most of the transmission charges of other utilities. Rather, SEPA has
determined to allocate a comparable increase to all customers.
B. Comparative Value of Service Provided
Comment 1: SEPA's allocation of energy has resulted in TVA
receiving greater value from the Cumberland River System Projects than
the customers outside the TVA area. This has not been taken into
consideration in the development of the rate.
Comment 2: Please provide an explanation of why the energy
allocation values were not considered in the development of the rate.
Response: Energy allocations are a part of the Southeastern Power
Marketing Policy for the Cumberland System of Projects published in the
Federal Register August 5, 1993, 58 FR 41762, and are not subject to
review in these proceedings. A determination of the value of these
allocations in the development of the rates would require an assessment
of market rates for power in the relevant markets. SEPA is required to
market power at cost-based rates, rather than at market-based rates.
SEPA does not believe it can appropriately assess the relative value of
the energy allocations.
C. Cost Recovery From Energy and Capacity
Comment: SEPA distorts transaction economics and arbitrarily
disregards ratemaking practice by assigning significant fixed costs to
energy charges.
Response: Traditional utility rate design practice assigns fixed
costs to capacity charges and variable costs to energy charges. In a
hydroelectric system, where there is no fuel cost and almost all of the
costs are fixed, the capacity charge would be designed to recover
nearly 100 percent of the cost. Having only a capacity charge is not a
[[Page 37123]]
common method of setting rates, and does not provide an incentive for
the customers to manage energy wisely. SEPA looked for a more equitable
way to allocate costs. For the period from 1984 to 1994, SEPA compared
its rates to the wholesale rates charged by utilities in the
Southeastern portion of the United States. Based on these results, a
rate design that recovered 40 percent of the costs from capacity and 60
percent from energy. In 1994 TVA objected to this rate design. After
negotiations between SEPA, TVA, and the customers outside the TVA
system, a rate design that included 1500 hours of energy with each
kilowatt of capacity and an additional energy charge for energy above
1500 hours use was implemented as a negotiated settlement. SEPA is
proposing to continue this rate design to allow for equal sharing of
the cost increase.
D. Disproportionate Impact on the Kentucky Utilities Municipals
Comment: SEPA's rate design imposes a disproportionate increase on
the KU Area Preference Customers. Given that the KU Area Preference
Customers were denied access to the benefits of SEPA power for years
(because of the actions of Kentucky Utilities Company, not of SEPA), it
seems unfair for these utilities to bear the greatest percentage rate
increase, after receiving the power for only two and one-half years. To
the extent that any rate increase is found to be justified, an equal
percentage increase to all customers would be more equitable and more
consistent with the principles of cost-based ratemaking.
Response: The Kentucky Utilities Municipals are unique among the
customers outside the TVA area. They are the only group that receives
more than 1500 hours use per kilowatt per year. The Kentucky Utilities
Municipals receive 1800 hours use, which means that they incur an
additional energy charge for 300 hours use per kilowatt per year.
Because of this additional energy, the rate increase for the Kentucky
Utilities Municipals is slightly higher (7% versus 6%) than for the
other customers of the Cumberland System.
E. Phase-in of the Rate Adjustment
Comment: SEPA should allow its customers the option of phasing in
the proposed rate increase over the five-year period.
Response: The total rate adjustment is an increase of about seven
percent to the most adversely affected customer group, which is the
municipal customer in the Kentucky Utilities area. Because of the
continued disagreement over the TVA transmission costs, it is very
likely the rate will be modified prior to expiration of the 5 year
rate. SEPA does not believe it is appropriate to use a phase-in of a
rate adjustment for an increase of this relatively small magnitude.
3. SEPA Power Marketing Policy
A. Allocation of Energy
Comment: TVA was already overcompensated for transmission services
under the existing arrangement, which includes not only charges to SEPA
for services, but also make available ``excess'' energy to TVA in
substantial amounts. TVA's transmission charges are unjustified, even
without consideration of these additional benefits to TVA not reflected
in the charges SEPA pays to TVA.
Response: The comment links the allocation of energy from the
Cumberland System with TVA's compensation for providing transmission.
The allocation of energy, which is a part of Southeastern Power
Marketing Policy for the Cumberland System of Projects published in the
Federal Register August 5, 1993, 58 FR 41762, is not subject to review
in these proceedings. These proceedings pertain only to the rates for
Cumberland System Power.
B. Ability to Negotiate Power Contracts
Comment: SEPA should allow SEPA's customers an option to purchase
transmission service directly from TVA, with a corresponding reduction
in the price of SEPA power to eliminate the currently bundled component
for TVA transmission charges that is included in SEPA's proposed rates.
Response: SEPA negotiates transmission service contracts in behalf
of SEPA's customers when it is determined to be in the best interest of
the customers for SEPA to do so. If the customers wish to negotiate for
transmission service in their own behalf, SEPA will support their
efforts. Such arrangements may require modification or replacement of
existing contracts between SEPA, the preference customers involved, TVA
and TVPPA, and other area utilities.
4. SEPA's Contract With TVA and TVPPA
A. Use of TVA Transmission Facilities
Comment 1: Customer's outside the TVA area are being asked to pay
what is described as TVA's full transmission costs. Yet the customers
outside the TVA area have firm use of that transmission capacity for
only 1500 hours per year.
Comment 2: SeFPC believes the 1500 hours limitation on the annual
use of TVA's transmission system is unreasonable and does not represent
the true value of the availability.
Comment 3: SeFPC customers should be allowed to utilize this excess
capacity reservation to engage in non-firm transactions to other
customers and fully utilize TVA's transmission system.
Response: These comments relate to the use of headroom, or the
difference in the capacity that SEPA has reserved on the TVA system and
the capacity that SEPA is actually using in any given hour. The current
contract between SEPA, TVA, and TVPPA does not allow the use of
headroom. SEPA is willing to negotiate modifications to the existing
agreement that will allow the use of headroom.
B. Amount of Capacity Wheeled
Comment 1: SEPA has previously indicated that, notwithstanding
TVA's clear contractual commitment to transmit up to 475 MW for the
SEPA customers outside TVA, TVA somehow actually transmits less than
that amount because two of SEPA's Cumberland projects are directly
connected to two systems receiving Cumberland output (Big Rivers
Electric Corporation and East Kentucky Power Cooperative). Contrary to
SEPA's contentions, TVA's commitment to transmit 475 MW of power to the
periphery is not lessened because of the location of specific
Cumberland projects on the TVA system since the fully integrated TVA
transmission system (not isolated pieces of the system) is utilized in
providing the service.
Comment 2: TVA allocates 475,000 kW of transmission capacity to
SEPA each month of the contract year. SeFPC believes that there are
months or periods during the month that the full 475,000 kW of
transmission capacity is not required by TVA.
Response: The current contract between SEPA, TVA, and TVPPA
provides for the delivery of 475 MW of capacity at the TVA border. This
includes the delivery of 190 MW to Big Rivers Electric Corporation,
which has an interconnection with the Barkley Project, and 100 MW to
East Kentucky Power Cooperative, which has an interconnection with the
Wolf Creek Project. TVA has the right to schedule the output of eight
of the ten Cumberland Projects, including these two projects. The
output of the Barkley Project is 158 MW, and the output of the Wolf
Creek Project is 274 MW. Big Rivers could receive 158 MW of their
delivered capacity from the Barkley Project without utilization of the
TVA
[[Page 37124]]
transmission system, and East Kentucky could receive all 100 MW of
their delivered capacity from the Wolf Creek Project without
utilization of the TVA transmission system. Under the existing contract
between SEPA, TVA, and TVPPA it is unclear how much capacity is being
transmitted across the TVA system. Reducing the amount of capacity
transmitted would likely require modification of the existing
agreement. This is a contractual matter, and is not appropriately
addressed in these proceedings, which pertain to rates for the
Cumberland System capacity and energy.
5. Cost of Service Issues
A. Budgeted Replacements
Comment: SEPA has paid into the treasury over $62 million
cumulatively which has been applied to reduce the long-term debt owed
by SEPA. SeFPC requests that SEPA review its construction expenditures
budget to collect only those revenues required to meet its actual
construction requirements.
Response: The DOE Order RA6120.2 requires SEPA to include the cost
of replacements in the repayment studies used to support rate filings.
SEPA has used the best estimates that were available over the years to
determine the levels of future replacement costs. Over the years,
SEPA's estimates have been in excess of the actual replacement costs,
and by end of fiscal year 1998, the difference between estimated and
actual replacement cost has grown to $62 million for the Cumberland
System of projects. SEPA agrees with this comment and has joined with
the Corps and the customers' organized committees to examine the future
rehabilitation of the projects. SEPA is using the best estimates of the
Corps in this repayment study. The Corps is estimating that a large
amount of replacements will occur in the near future.
B. CSRS
The preference customers have objected to the inclusion of Civil
Service Retirement System Costs and Health Benefit Costs (CSRS) that
are funded by the Office of Personnel Management (OPM) in a prior SEPA
rate filing. The Georgia-Alabama-South Carolina Rates were filed with
the Commission on September 22, 1998, and approved by the Commission on
February 26, 1999. See Southeastern Power Administration 86 FERC
para.61,195 (1999). The customers have requested a rehearing and the
request is currently pending before the Commission. Many of these
issues were responded to in the prior rate filing. We will respond to
each comment individually.
Comment 1: The members of the SeFPC do not believe that the
collection of CSRS costs remains within the cost recovery guidelines
which the PMAs must follow.
Response: On July 1, 1998, DOE General Counsel Mary Anne Sullivan
responded to the issue of SEPA's discretion to collect the full CSRS
costs in rates by a memorandum opinion of same date entitled, ``PMA
Authority To Collect In Rates, and Reimburse To Treasury, Government's
Full Costs of Post Retirement Benefits' (Opinion). The Opinion is cited
hereafter as (Mem. Opinion, July 1, 1998). A copy of the Memorandum
Opinion is included as Attachment 1 to this notice, as well as part of
the Administrator's record of decision as Exhibit A-5 filed with the
Federal Energy Regulatory Commission (FERC) pursuant to 18 CFR 300.10
et seq. in support of this rate action. The Opinion concludes at page
4:
* * * that it is reasonable to interpret the term ``cost'' in
the organic statutes to include the total costs to the Government of
post retirement benefits for PMA-related employees.
The July 1, 1998 Opinion also concludes, at page 7:
DOE policy, FASB principles, and FERC ratemaking policy indicate
the inclusion in rates applicable for a given period of all employer
costs accruing in that period is a reasonable interpretation of the
statutory obligation to recover costs.
Comment 2: The failure to follow Financial Accounting Standards
Board represents an unexplained departure from the existing regulations
which pertain to the recovery of costs by the PMAs.
Response: As explained more fully at page 4 of the July 1, 1998 DOE
General Counsel's Opinion, there was no ``articulated legal judgment''
to bar to the inclusion of the cost of unfunded post-retirement
benefits in rates. As explained in said Opinion, and in SEPA's
responses to comments 4 and 16, SEPA is implementing the said Opinion
to recover in our rates such costs.
The July 1, 1998 Opinion concluded on page 10, that ``* * * monies
received from power rates to recover costs of unfunded liabilities from
power marketed by SEPA * * *, would be deposited into the general fund
of the Treasury as miscellaneous receipts,'' and that such ``* * *
(p)ayments would therefore offset the appropriation for unfunded
liability made to the OPM Funds.''
In accordance with such Opinion, SEPA is including a component in
our rates which will operate as an offset against the annual
appropriations by Congress to the Office of Personnel Management to
fund post-retirement benefits promised to Federal retirees under
existing law.
In the view of SEPA, such actions as we are undertaking for the
second time since the July 1, 1998 Opinion was issued, were in
accordance with the Congressional mandate, applicable law, and the
requirements of DOE Order RA 6120.2 that SEPA establish its rates in
accordance with generally accepted accounting principles as adopted by
the Financial Accounting Standards Board (FASB).
Comment 3: Information SEPA has relied upon in calculating the rate
increase [regarding CSRS] fails to comport with the regulations that
SEPA and other PMAs must follow.
Response: SEPA used the best estimates for future years of the CSRS
costs by estimating that future years would be the same as the actual
1998 CSRS cost of $818,991. The actual costs for 1998 were determined
by using the ratio of OPM's share of the costs applied to the actual
annual salaries for each Corps employee allocated to power. The same
method was used to compute SEPA's CSRS cost. It should be noted that
this comment was directed toward estimated costs used in the proposed
rate filing presented to the customers at the rate forum. The estimate
at that time was $789,000.
Comment 4: The inclusion of CSRS costs in the proposed rate
increase also raises questions whether SEPA may recover CSRS costs for
Corps employees. By operation of law, each federal agency makes
deductions, contribution and deposits for retirement benefits for the
agency's federal employees. The SEFPC submits that the discretion
afforded by the Flood Control Act of 1944 to collect (full) CSRS costs
must yield to the more explicit statutes, i.e. 5 U.S.C. 8334, placing
an obligation upon the employing agency to deduct a percentage of the
employee's pay and to contribute an equal amount from the appropriation
or fund used to pay the employee to fund retirement costs.
Response: The Department of Energy has made a determination that it
is appropriate for the PMAs to include the CSRS costs and pension
health benefits costs that are funded by the OPM in the rates charged
to customers. Therefore, SEPA has included the costs in the repayment
study and thereby included them in the rates that SEPA proposes to
charge to the customers. The DOE General Counsel's July 1, 1998 Opinion
[[Page 37125]]
reviewed SEPA's statutory framework to determine whether SEPA, under
current law, (1) may collect in rates the costs of post-retirement
benefits, and (2) pay these rates revenues into a non-revolving
Treasury account ``* * * as an effective offset to appropriations
1 into the OPM funds from which these benefits are
financed.''
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\1\ The Government's full costs of the post retirement benefits
not recovered by employer-employee contributions to the OPM Funds
are funded by permanent and mandatory ``such sums as may be
necessary'' annual appropriations to these funds. There are three
such funds.
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The July 1, 1998 DOE General Counsel's Opinion synopsized them as
follows:
A. The Civil Service Retirement Act provides retirement and
disability benefits for federal employees. The employing agency
deducts a percentage of an employee's basic pay, combines it with an
equal amount contributed by the appropriate governmental agency, and
deposits it in the Treasury to the credit of the Civil Service
Retirement and Disability Fund (Retirement Fund), citing Clark v.
United States, 691 F.2d 837, 841 (7th Cir. 2d 1982), 5 U.S.C.
Sec. 8334. Mem. Opinion (July 1, 1998), at 2;
B. The Federal Employees' Health Benefits Fund (Health Fund)
consists of funds withheld from employees plus specified
contributions by the employing agencies, citing 5 U.S.C. 8906, 8909.
Id. at 2; and
C. The Employees' Life Insurance Fund (Insurance Fund) consists
of funds withheld from employees plus specified contributions by the
employing agencies. 5 U.S.C. 8707, 8708, 8714. Id. at 2.
Congress provides in annual appropriations acts, as part of the
appropriations to the OPM ``such sums as may be necessary'' for
payments, to retirees to the extent these funds are underfunded. See,
e.g., Omnibus Consolidated and Emergency Supplemental Appropriations
Act, FY 1999, 112 Stat. 2681-509, Pub. L. No. 105-277, Act of October
21, 1998; and Treasury and General Government Appropriations Act, 1998;
111 Stat. 1303, Pub. L. No. 105-61, Act of October 10, 1997.
The DOE General Counsel took cognizance of the fact that at present
the four PMAs are recovering in rates the cost of their own direct
contributions to the three OPM funds with respect to their own
employees.
The DOE General Counsel cited the statute, 5 U.S.C. 8334 (a)(1),
establishing the Civil Service Retirement and Disability Fund, stating
that it provides that ``* * * government contributions for an employee
shall be `contributed from the appropriation or fund used to pay the
employee' * * *'' Mem. Opinion, (July 1, 1998) at 3, and that the
statutes, 5 U.S.C. 8708(a) and 8906(f)(1), creating the Insurance and
Health Funds ``contain similar language,'' Mem. Opinion (July 1, 1998),
at 3. Also, with ``* * * respect to Bureau of Reclamation (Bureau) and
Corps of Engineers (Corps) employees that are involved in power
operations and maintenance, the Bureau and Corps make the agency
contributions to the OPM Funds directly.'' Mem. Opinion (July 1, 1998),
at 3. The General Counsel also noted that the four PMAs were recovering
in rates the cost of their own ``* * * direct contributions to the
three OPM funds with respect to their own employees.'' See id. at 6.
The General Counsel likewise noted that the PMAs were ``* * *
recovering in rates the power-related operation and maintenance
expenses of the Corps and the Bureau,'' including ``* * * contributions
by those two agencies to the OPM funds to the extent that their
employees conduct these functions.'' See Id. at 6. There was a problem
by reason of the fact that (1) PMA rates ``* * * generally have not
reflected the cost to the Government of the unfunded liability related
to the Retirement Fund or post-retirement health and life insurance
benefits,'' and (2) that these under-collected amounts are eleven
percent in the case of Civil Service Retirement System employees. Mem.
Opinion (July 1, 1998), at 1, 2 and 6.
The General Counsel reviewed the 1969 Congressional enactment,
i.e., 5 U.S.C. 8348(f), which ``* * * addressed the problem of
potential shortfalls in the sufficiency of funding for retiree benefits
by authorizing a permanent indefinite appropriation for transfer of
general funds from the Treasury.'' Mem. Opinion (July 1, 1998), at 2.
The opinion noted that, ``* * * prior to 1969 * * *, the Retirement
Fund had an unfunded deficit created ``by the Government's failure to
contribute sufficient funds, the gradual increase in liability caused
by past increased retirement benefits and salary increases.' '' Mem.
Opinion (July 1, 1998), at 2. The General Counsel concluded, after an
extensive review of all relevant factors, that the PMAs, including
SEPA, have sufficient statutory authority to include unfunded costs in
their rates and can deposit such funds into an appropriate Treasury
account so as to effectively ``offset'' the said ``such sums as
necessary'' appropriations made to the OPM funds from which these post-
retirement costs are paid to retirees. Mem. Opinion (July 1, 1998), at
2, 7, 10, and 11.
The General Counsel noted that SEPA is required to set rates for
electric power that cover costs, and the relevant statutes leave
``considerable discretion'' to the PMAs in applying this standard. The
General Counsel cited Section 5 of the Flood Control Act of 1944, which
applies to projects built by the Army Corps of Engineers, and power
marketed by SEPA, provides that the rates ``shall be set `having regard
to the recovery * * * of the cost of producing and transmitting such
electric energy.' '' `` 16 U.S.C. 825s. Mem. Opinion (July 1, 1998), at
3. The General Counsel emphasized that, under Section 12 of DOE Order
No. RA6120.2, ``rates for a power system are adequate if, and only if,
a power repayment study indicates that expected revenues are at least
sufficient to recover, inter alia, `(all) costs of operating and
maintaining the power system during the year in which such costs are
incurred,' '' and that the said order further ``requires the PMAs to
use accounting practices consistent with the principles prescribed by
the Financial Accounting Standards Board.'' Mem. Opinion (July 1,
1998), at 5, citing Section 6 of RA6120.2. The General Counsel also
observed that, ``* * * the requirement to set rates consistent with the
DOE order has been judicially recognized,'' citing Overton Power Dist.
No. 5 v. Watkins, 829 F. Supp. 1523, 1530 n. 5 (D. Nev. 1993).'' Mem.
Opinion (July 1, 1998), at 5.
The FASB, whose principles are referenced in DOE Order RA6120.2, in
December 1985, established standards for financial reporting and
accounting of employee pension benefits. The standard is Statement of
Accounting Standards No. 87 (FAS 87). Under FAS 87, ``* * * `a company
must recognize future pension benefits earned by current employees as
current pension costs rather than when the pension benefits are
actually paid.' '' Southwestern Bell Telephone Company, Missouri Public
Service Commission, (Case No. TC-93-224), 2 Mo. P.S.C. 3d 479; 1993 Mo.
P.S.C. Lexis 62 (Dec. 17, 1993). See also, SEPA Georgia-Alabama-South
Carolina System Rate Order No. SEPA-37, 63 Fed. Reg. 53,409, 53,413
(October 5, 1998). The ``* * * `FASB 87 recognizes that unfunded
pensions promised to current and retired employees are actual
liabilities' * * * `so that there must be recognition as a cost in any
period of the actuarial present value of benefits attributed by the
pension benefit formula to employee service during the period,' ''
Southwestern Bell Telephone Co., at 5, f.n. 5. See also, SEPA Rate
Order 37, 63 Fed. Reg. 53,413.
FAS No. 106, * * * ``changes generally accepted accounting
principle * * * for post retirement, medical and life insurance
benefits from accounting on a pay-as-you-go basis to an accrual
basis.'' Pennsylvania Public Utility
[[Page 37126]]
Commission v. Metropolitan Edison Company. (Case No. R-00922314) 78
Penn, PUC 124; 141 P.U.R. 4th 336 (January 21, 1993). See also, SEPA
Rate Order 37, 63 Fed. Reg. 53,413, supra. The General Counsel, citing
Section 106 of FASB Statement No. 106, stated that ``FASB has
recognized post-retirement benefits to be broader than simply pensions,
issuing in December 1990 standards regarding post-retirement benefits
other than pensions.'' Mem. Opinion (July 1, 1998), at 5, f.n. 5. The
General Counsel, who noted that under FAS 106, ``* * * post retirement
benefits include post-retirement health care and life insurance
provided outside a pension plan to retirees,'' also stated that under
FAS 106, ``* * * `(a) post retirement benefit is part of the
compensation paid to an employee for services rendered.' Thus, under
FAS 106, ``* * * `the cost of providing the benefits should be
recognized over those employee service periods.' This was ``* * *
`(b)ecause the obligation to provide benefits arises as employees
render services * * *' '' Mem. Opinion (July 1, 1998), at 5, f.n.5.
The DOE General Counsel emphasized that ``* * * FERC has recognized
that the obligation for such retiree benefits is legitimately treated
as a cost,'' and that ``FERC recognizes, as a component of cost-based
rates, allowances for prudently-incurred costs of post-retirement
benefits other than pensions (PBOPs) that are consistent with the
accounting principles set forth in FASB Statement No. 106 (1991).''
Mem. Opinion (July 1, 1998), at 5, citing 61 FERC para.61,330, at
62,200 (1992). Further, FERC ``interpreted the FASB statement to find
`that PBOP plans are deferred compensation arrangements whereby an
employer promises to exchange future benefits for employees' current
service and that their cost should be recognized over that employee's
service periods for financial accounting and reporting purposes,' ''
Mem. Opinion (July 1, 1998), at 6, citing 61 FERC at 62,199.
The DOE General Counsel found it very significant that FERC had
concluded that, ``PBOP are a form of deferred compensation to employees
for the services that they provide during their working years * * *
Therefore, * * * the costs of providing these benefits are properly
included in the cost of service during the period that the benefits are
earned.'' Mem. Opinion (July 1, 1998), at 6, citing 61 FERC, at 62,201.
Also, ``FERC's uniform system of accounts recognizes accruals to
provide for pensions as an element of operation and maintenance
expenses where the utility has, by contract, committed to a pension
plan.'' Mem. Opinion (July 1, 1998), at 6, citing 18 CFR 101.926.
The General Counsel stated that, under case law precedent courts,
``* * * in reviewing actions of the PMA's, `give' substantial deference
to PMA interpretations of their organic statute,'' Mem. Opinion (July
1, 1998), citing Department of Water & Power of the City of Los Angeles
v. Bonneville Power Administration, 759 F.2d. 684, 690-91 [9th Cir.
1985] and that, ``* * * the courts need not find that an agency's
interpretation of its organic statutes `* * * is the only reasonable
one, or even that it is the result [the court] would have reached had
the question arisen in the first instance in judicial proceedings.'
``Id., citing Alcoa v. Central Lincoln Peoples'' Util. Dist., 467 U. S.
380, 389 (1994). Id. at 4. The court ``* * * need only conclude that
the interpretation is a reasonable one,'' Id. at 4, citing Chevron v.
Natural Resources Defense Council, 467 U.S. at 845. The relevant
statute, i.e., Section 5 of the Flood Control Act of 1944 and DOE Order
RA 6120.2, provides that the PMAs must set rates that fully recover
costs. Because the statutes provide little direction as to how the
agencies are to interpret the term ``costs,'' this confers discretion
upon DOE and SEPA. There is no indication that Congress intended to
preclude the collection of full costs. Congress appropriates such sums
as may be necessary to OPM to provide promised post retirement
benefits. 2 Congress provides additional sums to OPM to
supply benefits to retirees whose costs are only partially recovered by
the Government agency and its employees' contributions to the OPM
funds.
---------------------------------------------------------------------------
\2\ See discussion at f.n. 1.
---------------------------------------------------------------------------
Chevron, Inc. v. National Resources Defense Council, Inc., supra,
is the landmark case in determining judicial deference to
administrative interpretation of statutes. See Thomas W. Merrill,
Judicial Deference to Executive Precedent, 101 Yale L.J. 969, 975
(1992). In Chevron, the Supreme Court adopted a two-step analysis for
determining whether to defer to agency interpretation of statutes. See
Chevron, 467 U.S. at 842-43. First, the court determines whether
Congress has ``directly spoken'' on the issue. If the court concludes
that the intent of Congress is clear, it must enforce the ascertained
intent. See id. at 842-43. If the court determines that Congress has
not directly spoken on the issue, or has been silent or ambiguous, the
court merely asks whether the agency's interpretation is reasonable.
The General Counsel reasoned that, ``* * * post retirement benefits
`are part of the compensation paid to an employee for services
rendered,' '' Mem. Opinion (July 1, 1998), at 5, f.n.5. The FASB ``
`believes that the cost of providing the benefits should be recognized
over those employee service periods.' '' Id. citing FASB 106.03 and
106.18). The obligation ``* * * `to provide benefits arises as
employees render services * * *' '' Id. at 5, f.n. 5. Further, the DOE
General Counsel was of the view that, ``On a practical, common sense
level, there seems little room to dispute that the full amount of the
retiree benefits is a `cost' of hiring the employees to operate and
maintain the PMA power systems'' and that, ``* * * recovering those
costs in rates is entirely consistent with the congressional objective
that the PMAs operate on a fiscally self-supporting basis.'' Mem.
Opinion (July 1, 1998), at 5, citing Department of Water & Power v.
BPA, 759 F.2d at 695 (9th Cir. 1985). It is entirely reasonable that
agencies like SEPA be required to recover in their rates a component
for costs attributable to retirement benefits of Federal employees
producing power in the period covered by the rates, where such charges
offset the appropriation of funds necessary to provide promised
benefits to all retirees, including such future SEPA and Corps of
Engineers retirees who are engaged in producing power sold by SEPA in
the period covered by such rates.
The DOE General Counsel, concluding by way of summary, stated that
the above-described DOE ratemaking policy, FASB 87 and FASB 106
Accounting Principles, and FERC ratemaking policy, ``indicate that the
inclusion in rates `in a given period of' all employer costs,
`including unfunded post-retirement costs' accruing in that period is a
reasonable interpretation of the statutory obligation to recover
costs.'' Mem. Opinion (July 1, 1998), at 6-7. Since DOE's General
Counsel has upheld the reasonableness of the recovery of all such SEPA
employer costs by the said July 1, 1998 Memorandum Opinion, SEPA must
reject this objection.
Comment 5: Deposits into the Treasury of SEPA's charge for post-
retirement benefits in rates violates the principle of cost-based rate
making that there be a matching of costs collected with costs actually
incurred. At page 19 of their May 10, 1999 comments, the Southeastern
Federal Power Customers object to the collection of a separate post
retirement component for post retirement benefits in rates. They
stated:
[[Page 37127]]
Cost-based ratemaking requires a matching of costs collected
with costs actually incurred. With respect to the PMA's, the
collection of CSRS in rates, deposited in the Treasury, provides no
assurance that amounts paid by ratepayers will match the benefits
actually paid.
Response: The commenters fail to understand the matching principle
in the context of FAS 106 as interpreted by FERC and the courts. The
matching principle within ratemaking, as defined by Kohler's A
Dictionary for Accountants, is `` * * * identifying related revenue and
expense with the same accounting period.'' Accrual basis of accounting,
as defined by the same dictionary, is, ``The method of accounting
whereby revenues and expenses are identified with specific periods of
time, such as a month or year * * *'' In the case of CSRS costs and
post-retirement health benefits costs, the expenditures for these costs
will be in the future after employees retire. However, accrual
accounting would require that the current expenses should be recorded
for these future costs.
Historically, for many organizations not including the Federal
Government or SEPA, post-retirement benefit expenses have been
recognized on a cash basis for both ratemaking and accounting purposes.
Under the cash basis approach, the cost of post-retirement benefits
``provided to retirees (and their dependents and beneficiaries) is
included in a utility's rates when the benefits are actually received
by the retirees after retirement, i.e., when cash expenditures are made
from general corporate assets in satisfaction of the company's
obligation to provide such benefits.'' New England Power Company, 61
FERC para.61,331, at 62,207. Under the cash method, these expenses are
not recognized for ratemaking purposes (or for accounting purposes)
during the current period if no cash outlay has been made. Id. at
62,207.
In December 1990, the FASB issued Statement of Financial Accounting
Standards No. 106, Employers' Accounting for Postretirement Benefits
Other than Pensions (FAS 106), which requires all companies subject to
FASB accounting standards with over 500 plan participants to adopt
accrual accounting for PBOP expenses no later than fiscal years
beginning after December 15, 1992. FAS 106 applies to both regulated
and unregulated companies. New England Power Company, 61 FERC at
62,207.
Under FAS 106, companies will be required, for financial reporting
purposes, to recognize PBOP expenses as a current expense during the
years an employee provides service to the employer (and, accordingly,
earns such benefits) rather than when they are actually paid. FERC
stated that ``FAS 106 requires that each accounting period be charged
with the present value of the cost * * *'' [of post retirement
benefits] ``* * * earned by the employees during that period.'' New
England Power Company, 61 FERC para.61,331, at 62,207.
FAS 106 instructed companies to adopt the accrual accounting method
for determining post-retirement benefit. This method prescribes that
companies must ``account now for the post-retirement benefits they
expect to pay in the future to their current employees.'' Town of
Norwood, 53 F.3d at 377, 378 (D.C. Cir. 1995).
The protestants are wrong when they assert that cost-based
ratemaking requires a matching costs actually incurred. Such assertion
is not necessarily so, in a case where the utility is attempting to
apply FAS 106. In New England Power Company, the Commission recognized
that the matching principle was not violated, even though rate payers
in future rates would become liable for both costs of prior service,
referred to as the transition obligation, and costs of current service,
even though the costs of prior services far exceeded the cost of
current service by nearly three and one-half times. See, 60 FERC
para.63,006, at 65,084 (A.L.J. initial decision) and 61 FERC
para.61,331 at 62,213-15.
The development of SEPA's rate does not involve the complicated
step of calculating costs of prior service involved in their
calculation of the transition obligation.3 No such
complication is presented by SEPA's rates. SEPA, under Administration
policy, looks only to recovery of future costs for current service in
rates to be approved as provided for in the subject Cumberland rates.
As FERC stated:
\3\ In the case of a private utility (but not of SEPA) an
``integral component of conversion to the accrual method is the
calculation of (and recovery schedule for) the PBOP obligation
associated with the past service of employees and retirees (known as
the transition obligation). The transition obligation represents a
company's accumulated liability for PBOP expenses for both present
employees and current retirees during the period up to the date of
conversion from a cash to an accrual method which had been deferred
for future periods.''
Under FAS 106, companies have the option either to expense the
transition obligation immediately or to recognize the expense over
time (i.e., to amortize the transition obligation over a specified
period of time). If recognized over time, a company has the further
option to amortize the transition obligation on a straight-line
basis over the average remaining service period of active plan
participants over 20 years if greater. New England Power Company, 61
FERC para.61,331 at 62,208.
The Federal Government has always been on an accrual basis and
therefore no transition obligation is necessary.
---------------------------------------------------------------------------
When the accrual method is employed, the company first estimates
the future liability of the PBOPs for the current employees, and
then, collects the costs for that liability from current
ratepayers.'' Note effects of Financial Accounting Standard 106 on
Electric Ratemaking, 64, George Washington Law Review 1180, 1183
(1966) citing Town of Norwood, 53 F.3d 378-79.
SEPA need only take the first step in the accrual accounting
system. This requires that the future costs for current service be
calculated. The policy of matching has as its purpose to have
``ratepayers * * * pay for the production of the services they
receive.'' Id., citing Town of Norwood, 53 F.3d 381 (D.C. Cir. 1995).
In SEPA's case, this means calculation of those future costs which
are not recovered from the SEPA's and the employees' contributions to
the Civil Service Retirement Fund, the Life Insurance Fund, and the
Federal Employees Health Benefits Fund, described above. SEPA, in
accordance with Administration policy, only recovers in this rate the
costs of current service of those of its employees and the Corps of
Engineers employees, who render services to the Cumberland rate payers
over the period of the effectiveness of the Cumberland rate which are
not recovered pursuant to the aforementioned laws. The OPM provides the
instructions for the recording of accrual basis of costs for pension
expense and for post-retirement health benefits. The cost factor
applicable for CSRS employees for 1998 was 24.2% of the salary. The
amount withheld from employees was 7.0% for part of the year and 7.25%
for part of the year, and the amount paid by SEPA was 8.51% of the
salary for the entire year. Therefore, the amount paid by the OPM was
9.69% for part of the year and 9.44% for the rest of the year. This
9.69% and 9.44% was multiplied times the salaries of the SEPA employees
during the appropriate period for the employees during 1998. The post-
retirement health benefits costs was computed by taking actual
enrollment in FEHB on 10-1-97, 3-31-98, & 9-30-98. The number of
enrollees on 10-1-97 and on 9-30-97 was multiplied times one (1), and
the number of enrollees on 3-31-98 was multiplied times two (2). The
total was divided by four (4), thereby creating an average enrollment
for the year. The product is multiplied times the cost factor provided
by the OPM of $2,493. Life benefits funded by OPM are computed by
multiplying the salaries of the enrollees by two percent (2%). We have
[[Page 37128]]
confirmed that the Corps is using a similar method for fiscal year 1998
to determine their actual costs.
All SEPA must do is to take the first step, which is the
establishment of reasonable estimate of the costs of post-retirement
benefits currently earned by those utility employees serving SEPA's
customers during the period of effectiveness of SEPA's proposed
Cumberland rates, to the extent such costs are not covered in the
future by said laws. SEPA has done this.
Comment 6: SEPA's CSRS proposal contains none of the customer
protections that FERC has required.
Response: SEPA believes that the protection that FERC requires is
that the cost be a true actual cost. The actual costs for Fiscal Year
1998 were $818,991, and SEPA has projected this amount for all future
years. However, the actual cost that is recorded by SEPA and the Corps
in future years will be the costs the customers actually repay
according to the repayment recovery criteria set forth in DOE Order RA
6120.2.
Comment 7: Moneys collected go to the Treasury and are available
for general purpose along with all other taxpayer receipts. They are
not separately accounted for or held like Treasury payments or the
illusory Social Security ``trust funds.'' They would be bookkeeping
entries at best, nothing more. SEPA's proposal contains none of the
protections that arise from ``irrevocable external trust funds[s]''
such as FERC has required to be established in the case of post-
retirement benefits collected by regulated utilities from rate payers.
Response: SEPA can, under existing law, make no disposition of its
post-retirement benefit collection, other than payment into
miscellaneous receipts account. The DOE General Counsel recognizes that
Section 5 of the Flood Control Act requires all SEPA revenues,
``received in rates to recover costs of unfunded liabilities would be
deposited directly into the Treasury as miscellaneous receipts fund of
the Treasury, and could not be expended without further
appropriation.'' Mem. Opinion (July 1, 1998), at 7, citing 31 U.S.C.
3302(b). SEPA must comply with this requirement, as it is not subject
to the Federal Power Act, pursuant to which FERC adopted such an
irrevocable trust requirement for utilities subject to FERC
jurisdiction. SEPA is exempt from FERC's Federal Power Act
jurisdiction.
Payments of SEPA revenues into the Treasury, including the
component thereof for unfunded retirement benefits, constitutes, in the
view of DOE General Counsel, an ``offset'' to the appropriations to the
OPM funds to meet the large unfunded liability of the Government for
retirement benefits. Id. at 10 and 11. Congress meets this obligation
by annual ``such sums as may be necessary'' appropriations to the
Office of Personnel Management's Funds to assure retirement benefits
are paid.
The Opinion addresses the authority of the Power Marketing
Administrations (PMA) to collect in rates an amount that would offset
the Government's full cost of post-retirement employee benefits. It
stated, quoting the Testimony of William E. Flynn, Associate Director
for Retirement and Insurance of the Office of Personnel Management
Before the Senate Committee on Governmental Affairs, Subcommittee on
Post Office and Civil Service (May 15, 1995), that:
The elements of the historically under collected amounts are
approximately 11 percent of salary for CSRS employees (cost of
approximately 25 percent of salary less the 7 percent employee
contribution and the 7 percent agency contribution), plus the FY
1998 accrual for the Government's share of post retirement health
and life insurance benefits for current employees.
The DOE General Counsel, citing 5 U.S.C. 8348 (f), Pub. L. 91-93,
Act of October 20, 1969, 83 Stat. 136, noted that, ``In 1969,
Congress,'' had ``authorize(d) appropriations to the Retirement Fund to
finance the unfunded liability'' for retiree benefits ``* * *by
authorizing a permanent indefinite appropriation for transfer of
general funds from the Treasury.'' Mem. Opinion (July 1, 1998), at 2.
Since FY 1998, Congress has, by a separate line item in
Appropriations Acts to the Office of Personnel Management, pursuant to
the authority of said 1969 Act, appropriated ``such sums as may be
necessary'' to finance the unfunded Civil Service Retirement Fund
obligation. See the Omnibus Consolidated and Emergency Supplemental
Appropriations Act for FY 1999, Pub. L. 105-277, Act of October 21,
1998; 112 Stat 2681, 2681-509. This Act states:
Payment to Civil Service Retirement and Disability Fund
For financing the unfunded liability of new and increased
annuity benefits becoming effective on or after October 20, 1969, as
authorized by 5 U.S.C. 8348, and annuities under special Acts to be
credited to the Civil Service Retirement and Disability Fund, such
sums as may be necessary: Provided, The annuities authorized by the
Act of May 29, 1994, as amended, and the Act of August 19, 1950, as
amended (33 U.S.C. 771-775), may hereafter be paid out of the Civil
Service Retirement and Disability Fund.'' Id.
See, also the Treasury and General Government Appropriations Act, for
FY 1998 (PL 105-61; Act of October 10, 1997; 111 Stat. 1303) which
states:
Payment to Civil Service Retirement and Disability Fund
For financing the unfunded liability of new and increased
annuity benefits becoming effective on or after October 20, 1969, as
authorized by 5 U.S.C. 8348, and annuities under special Acts to be
credited to the Civil Service Retirement and Disability Fund, such
sums as may be necessary: Provided, The annuities authorized by the
Act of May 29, 1944, as amended, and the Act of August 19, 1950, as
amended (33 U.S.C. 771-775), may hereafter be paid out of the Civil
Service Retirement and Disability Fund.
The underlying Office of Personnel Management Budget Justification
for FY 1998, in support of the FY 1998 Appropriation to the Civil
Service Retirement Fund to meet the annual unfunded liability, stated
that this was a mandatory appropriation. OPM estimated that $8.3
billion would be needed for this purpose in FY 1998. See, Hearings
Before a Subcommittee of House Committee on Appropriations on Treasury,
Postal Service and General Government Appropriations for FY 1998, 105th
Congress, 1st Session, 732 (1997).
The statement of Honorable Janice R Lachance, Director, OPM, before
the Subcommittee on Treasury, Postal Service, and General Government
Committee on Appropriations, U. S. House of Representatives on OPM's
Fiscal Year 1999 Appropriations Request stated:
``* * * as mandated by the financing system established in 1969
by Public Law 91-93, we are requesting a `such sums as may be
necessary' appropriation for the civil service retirement and
disability fund. This payment, which we estimate to be $8.7 billion,
represents the 30-year amortization of liabilities resulting from
changes since 1969 (principally pay increases) which affected
benefits.'' See Hearings Before a Subcommittee of the House
Committee on Appropriations on Treasury, Postal Service, and General
Government Appropriations for fiscal year 1999, 105th Congress, 2d
Session 636 (1998).
The General Counsel noted the other two funds that provide benefits
to retirees. These are funds for health and insurance benefits, which
are likewise underfunded. Congress, likewise, makes provisions for
them. The said FY 1999 Appropriations Act, appropriating funds to OPM,
makes appropriations for the unfunded health and life insurance
benefits. This Act provides:
Government Payment for Annuitants, Employees Health Benefits
For payment of Government contributions with respect to retired
employees, as
[[Page 37129]]
authorized by chapter 89 of title 5, United States Code, and the
Retired Federal Employees Health Benefits Act (74 Stat. 849), as
amended, such sums as may be necessary.
See Public Law 105-277; Act of October 21, 1998, 112 Stat 2681-509.
Government Payment for Annuitants, Employee Life Insurance
For payment of Government contributions with respect to
employees retiring after December 31, 1989, as required by chapter
87 of title 5, United States Code, such sums as may be necessary.
Id. at 112 Stat at 2681-509.
The FY 1999 Budget Statement of OPM Director Lachance stated:
``As always, the OPM budget request includes mandatory
appropriations to pay the government's contributions to the federal
employee life insurance and health benefits programs on behalf of
annuitants since those enrollees have no employing agencies to
contribute the government's share for them. We are requesting a
`such sums as may be necessary' appropriation for each of these
accounts because of their mandatory nature. We estimate that $35.2
million will be required for the 323,000 non-postal annuitants
retiring after 1989 and electing post retirement life insurance,
while an estimated $4.6 billion will be needed to finance the
government's contribution toward health benefits coverage for the
1.9 million participating annuitants.'' See FY 1999 House Treasury ,
Postal Service, and General Government Appropriations Hearings,
supra, at 635-636.
So long as Congress continues to provide all retirees these health
and life insurance benefits, SEPA's retirees and Corps retirees engaged
in the production of power, will not suffer.
As indicated, payments of SEPA revenues into the Treasury,
including the component thereof for unfunded retirement benefits,
constitutes in the view of DOE's General Counsel an offset against the
large unfunded liability of the government for retirement benefits. The
General Counsel stated:
All PMA rate revenues are required to be deposited in a
statutorily specified fund or account of the Treasury. Pursuant to
Flood Control Act requirements, monies received from power rates to
recover costs of unfunded liabilities from power marketed by SEPA *
* * would be deposited into the general fund of the Treasury as
miscellaneous receipts. Payments into the general fund from these
sources would therefore offset the appropriation for unfunded
liability made to the OPM funds.
See Mem. Opinion (July 1, 1998), at 10.
The comments are a basic attack against the Administration decision
to charge ratepayers for unfunded post-retirement benefit liabilities.
So long as Congress honors the federal government's commitments to all
its retirees, SEPA's retirees and Corps retirees engaged in the
production of power will receive the benefits as promised. The only
difference is that SEPA's customers will bear the total estimated
future government cost thereof attributable to current SEPA and Corps
employees providing electric service to SEPA customers who retire in
the future.
The DOE General Counsel Opinion states in detail how Administrator
policy respecting post-retirement benefits in PMA rates may be legally
implemented. SEPA must prepare its rates accordingly. It must reject
the Southeastern Power Customers' challenge to SEPA's treatment of
post-retirement benefits, as they embody Administration policy as set
forth in the DOE General Counsel's Opinion.
Comment 8: SEPA's imposition of the post-benefit retirement charge
fails to meet the requirement of the FERC rule that funds so collected
be placed in an irrevocable trust.
Response: SEPA is not bound by such FERC rule, which is applicable
to utilities subject to the Federal Power Act. See New England Power
Company, 61 FERC para. 61,331, at 62,213 (1992). FERC stated:
We will require, however, that NEP use external funding in
irrevocable trusts for all amounts collected for PBOP obligations as
a condition of rate recovery under the accrual method. External
funding in irrevocable trust will remove any incentive for NEP to
overestimate its costs because NEP will not have use of the funds
for any other corporate purpose. Moreover, external funding will
ensure that the revenues collected will be available for their
intended purpose--to provide post retirement benefits to employees.
Additionally, to the extent that overfunding ever occurs, NEP is
also directed to reserve any over-collection expressly for the
benefit of customers, through reduced expense projections in
subsequent filings. Id. at 62,213 (footnotes omitted).
The jurisdiction conferred by the Federal Power Act (FPA) (18
U.S.C. 824 et seq.) upon FERC to regulate electric and natural gas
public utilities does not apply to the PMAs. Jurisdiction to review PMA
rates is conferred and limited by a delegation from the Secretary of
Energy to FERC. See Department of Energy Delegation Order No. 0204-108,
as amended. 58 FR 59716 (November 10, 1993). Hence, the foregoing rule
has no application to SEPA. All SEPA can do under applicable law, is to
place the post-retirement benefits it receives into miscellaneous
receipts account of the treasury. This becomes an offset against annual
``such sums as may be necessary'' appropriations to OPM to finance
unfunded but promised benefits. Mem. Opinion (July 1, 1998), at 10-11.
SEPA is required by Flood Control Act of 1944, as well as the
Miscellaneous Receipts Act (31 U.S.C. 33020), to deposit all monies
received to the Treasury of United States as miscellaneous receipts. It
is, therefore, not possible for SEPA to establish an ``irrevocable
external trust fund'' for these monies, as FERC has in some instances
required of regulated electric and gas public utilities.
Comment 9: The data relied upon by SEPA illustrates how the
proposed rate increase fails to comply with RA6120.2.
Response: RA 6120.2 says SEPA must recover costs. The Legal Opinion
defines CSRS costs as reasonable costs. See response to 1 above.
Comment 10: Because SEPA has failed to incorporate any provisions
that would adjust or modify CSRS rates on an annual basis which would
ensure a more accurate representation of CSRS costs to SEPA, the
customers have no assurances that the costs of operating and
maintaining the system are incurred during the year in which the rates
are effective.
Response: The customer will pay the actual CSRS costs. See response
to 6 above.
Comment 11: Because a significant component of the CSRS costs
includes cost recovery for Corps employees, the SeFPC requested
background information from the Corps pertaining to the Corps's
calculations of CSRS costs.
Response: The Corps has provided SEPA actual costs for FY 1998,
which were used to estimate costs in future years.
Comment 12: SeFPC notes that there appear to be inconsistencies in
the determination of Full-Time Equivalents (``FTEs''). SeFPC wishes to
raise this specific issue to express its overall concern with its
inability to determine (based upon the data provided to date) whether
the CSRS costs are reasonable and whether the assumptions are
justified. Absent such determination, and for other reasons explained
by SeFPC, SEPA should not be allowed to flow-through the CSRS cost to
its customers.
Response: The Corps and SEPA have determined actual costs of CSRS
of $818,991 for fiscal year 1998.
Comment 13: SeFPC submits that recovery of CSRS costs for Corps
employees is without legal basis and constitutes an illegal
augmentation of both the Corps' and OPM's appropriations. SeFPC asks
SEPA to explain how the discretion afforded by the Flood Control Act of
1944 allows
[[Page 37130]]
DOE to augment the appropriations of the Corps and OPM without
violating statutory restrictions against augmenting appropriations.
Government is in essence ``double-dipping'' into taxpayer's pockets to
pay the costs of the retirement program.
Response: The legal basis for the recovery of costs of Corps and
SEPA employees is set forth in SEPA's response to Comment 4.
There is no double dipping by the Government of the taxpayer. The
simple fact of the matter is that employer-employee contribution to the
three OPM funds fails to recover benefits of all Federal retirees,
including SEPA employees and Corps employees whose efforts are
attributable to production of Cumberland power. Congress must supply
from general revenues of the Government the unfunded portion of such
costs. SEPA's inclusion of component in its rates for unfunded
liabilities, by reason of the fact that SEPA's revenues are deposited
into miscellaneous receipts in the Treasury, offsets the amount that
must be appropriated.
Congress places no dollar limits on appropriations from the general
fund to assure full funding of these employee retirement benefits.
SEPA's inclusion in rates of a component to recover unfunded retirement
properly assigns to the SEPA customers the full costs of the post-
retirement benefits of Federal employees producing the power which such
customers consume. This reduces the burden on Federal taxpayers, and is
justified by reason of the fact that SEPA customers enjoy the benefits
of SEPA power.
There is no augmentation of appropriations. Congress appropriates
``such sums as may be necessary'' to fully fund retirement benefits.
The Flood Control Act requires that SEPA's power revenues be
deposited in the miscellaneous receipts of the Treasury. The
Miscellaneous Receipts Act is a general statute of like effect. The
purpose of the Miscellaneous Receipts Act is to ensure that the
Congress retains control of the public purse, and to effectuate
Congress' constitutional authority to appropriate monies. See in Matter
of Nuclear Regulatory Commission's Authority to Mitigate Civil
Penalties, B-238419, 70 Comp. Gen. 17; 1990 U.S. Comp. Gen. Lexis 1060
(October 9, 1990).
The reason for the prohibition against augmentation of
appropriation is to protect Congress' power of the purse and its
prerogative to determine the level at which an agency of Federal
programs may operate. See Nolan: Public Interest, Private Income:
Conflicts and Control Unit on the Outside Income of Government
Officials, 87 Nw. U.L. Rev. 57,122 (1992). The prohibition against
augmentation of appropriation would not apply. Congress places no
dollar limit on what OPM spends. OPM is free to draw from the Treasury
such sums as may be necessary to pay the retirement benefits Congress
has promised Federal retirees. Use of SEPA's component for unfunded
retirement benefits in rates, as a source to pay these benefits, does
not violate the power of Congress to determine how much shall be spent.
Congress has agreed to allow OPM to spend what is needed to pay
promised retirement benefits.
Comment 14: Until SEPA clears up the glaring discrepancies with
existing legal authority to recover CSRS costs for SEPA and the Corps
and sets forth a clear understanding of how the estimated figures for
the Corps employees was determined and relates to the actual costs of
the Corps in the future, SeFPC submits that the proposed rate increase
should not include CSRS costs at this time.
Response: The Department of Energy has determined that it is
appropriate for the PMA's to include CSRS costs in rates charged to
customers. Therefore, SEPA has included the costs in the repayment
study and thereby included them in rates that SEPA proposes to charge
to the customers.
Comment 15: SeFPC submits that the statutory duty for the Corps to
collect and pay retirement benefits obviates the need for SEPA to
recover CSRS costs for the Corps. In different terms, if the federal
government already imposes an obligation of the Corps to deduct funds
for benefits, in addition to paying the remaining balance from
appropriations, SEPA has imposed a burden on the customers of the
Cumberland System of Projects.
Response: SEPA interprets Section 5 of the Flood Control Act of
1944, RA6120.2 and FAS 87 and 106 to mean that the full cost of post-
retirement benefits of Corps of Engineers and SEPA employees, engaged
in the production of power which SEPA markets, must be covered in
SEPA's rates. As demonstrated in Responses to Comment 5, the
statutorily-mandated deductions for retirement benefits and employee
contributions for these purposes do not fully recover the costs or
retirement benefits. To meet the gap, SEPA is of the view that it must
add a component to recoup in rates being established by this rate order
to fund the cost of future unfunded retirement benefits attributable to
its current employees and current Corps employees who are engaged in
the production of power during the effective period of such rate. See
Response to Comment 5.
Comment 16: Due process of law, as interpreted by United States
Circuit Court of Appeals decisions, i. e., Sacred Heart Medical Center
vs. Sullivan, 958 F.2d 537 (3rd Cir. 1992) (holding that an agency must
offer a ``reasoned justification'' for the change in its interpretation
of statute or modification of its policy); and Mobil Oil Corporation
vs. EPA, 871 F. 2d 129 (D. C. Cir. 1989) (requiring an agency to
acknowledge and explain the departure from its prior views) obligates
SEPA to ``* * * explain how the proposal to collect pension and health
benefit costs comports with existing FASB guidance which requires the
creation of separate accounts.''
Response: We interpret this due process of law assertion to at
least require an explanation by SEPA why SEPA did not establish an
irrevocable trust from the portion of SEPA's Cumberland rate
attributable to unfunded retirement benefits earned by current SEPA and
Corps employees who market and produce the power SEPA sells.
The use of revenues from SEPA rates is governed by the Flood
Control Act of 1944 which provides that ``* * * [a]ll moneys received
from * * * (electric) sales shall be deposited in the Treasury of the
United States as miscellaneous receipts.'' 16 U. S. C. 825s. Because
SEPA is required by Flood Control Act of 1944 as well as the
Miscellaneous Receipts Act (31 U. S. C. 3302) to deposit all monies
received to the Treasury of United States as miscellaneous receipts, it
is not possible for SEPA to establish an ``irrevocable external trust
fund'' for these monies as FERC has in some instances required of
regulated electric and gas public utilities.
Such ``sums as may be necessary'', in the view of the
Administration and DOE General Counsel Sullivan, offset the general
fund of the Treasury made to the OPM Funds for unfunded retirement
liabilities. Given the permanent and mandatory nature of the ``such
sums as may be necessary'' appropriations to the three OPM funds
identified in SEPA's Response to Comments 1, 4, 5, and 7. The use of
such funds to ``offset'' appropriations of unfunded liabilities
achieves the same purpose that an irrevocable trust would, were it
legally possible for SEPA to create such a trust. Mem. Opinion (July 1,
1998), at 10-11. To the extent that an explanation is required of SEPA
why it decided to include unfunded benefit costs in rates, SEPA states
by way of historical
[[Page 37131]]
explanation. SEPA did not, prior to 1998, include in its rate the
unfunded portion of employee benefit costs. It did so in the Georgia-
Alabama-South Carolina (GA-AL-SC) rates in 1998. At that time SEPA
first proposed recovery of CSRS costs. The rate increase for the
Georgia-Alabama-South Carolina system was considered by FERC in Docket
No. EF98-3011-000. FERC approved the inclusion of unfunded retirement
benefits in SEPA rates in United States Department of Energy--
Southeastern Power Administration, 86 FERC para. 61,195 (1999). On
April 23, 1999, the Commission issued an order in this docket granting
rehearing for the limited purpose of further consideration of SeFPC's
request.
SEPA continues to include the unfunded portion of its employee
benefit costs in the case of the subject Cumberland rate order for many
of the same reasons. See In the Matter of Southeastern Power
Administration-Georgia-Alabama-South Carolina System Power Rates, Rate
Order No. SEPA-37, signed by Deputy Secretary Elizabeth A. Moler, on
September 18, 1998, 63 Fed. Reg. 53409 (October 5, 1998). It also does
so in light of Administration policy, as set forth in and confirmed by
General Counsel Mary Anne Sullivan's July 1, 1998 Memorandum Opinion,
referenced above in SEPA's responses to Comments 4.
The Financial Accounting Standards Board (FASB) in December 1985
Statement of Accounting Standards N. 87 (FAS 87) states that, under FAS
87, ``* * * `a company must recognize future pension benefits earned by
current employees as current pension costs rather than when the pension
benefits are actually paid.' '' See Southeastern Power Administration-
Georgia-Alabama-South Carolina System Power Rates, Rate Order No. SEPA-
37 at 53,413. In 1991, the Financial Accounting Standards Board issued
FAS No. 106, (``FAS 106''). This ``* * * `changes generally accepted
accounting principles * * * for post retirement, medical and life
insurance benefits from accounting on a pay-as-you-go basis to an
accrual basis.' '' Id. at 53,413.
The DOE General Counsel has concluded that under FASB 106.18, ``* *
* `a post retirement benefit is part of the compensation paid to an
employee for services rendered * * *' '' and that, under FASB 106.03,
``* * * `the cost of providing the benefits should be recognized over
those employee service periods.' '' Mem. Opinion (July 1, 1998), at 5,
f.n.5. In the view of SEPA and the DOE General Counsel, under Section 5
of the Flood Control Act of 1944, DOE Order RA6120.2 and the said FASB
accounting principles, SEPA has an obligation to provide post-
retirement benefits in its rates as its employees and those of the Corp
render services by producing power that SEPA sells.
The Cumberland rates, as were the Georgia-Alabama-South Carolina
rates, were prepared by SEPA in light of DOE's guidance, both as to
interpretation of statues and DOE orders, as well as in accordance with
Administration policy.
6. Rate Implementation
Comment: KU Area Preference Customers request that SEPA include an
express commitment, as part of its implementation of the rates, that
SEPA will refund and flow through to its customers any and all
reductions that are achieved in TVA's charges to SEPA.
Response: SEPA cannot make a commitment regarding any future rate
filings; however, SEPA will be more than willing to listen to any
suggestions as to how any reductions in TVA charges to SEPA should be
handled.
Environmental Impact
SEPA has reviewed the possible environmental impacts of the rate
adjustment under consideration and has concluded that, because the
adjusted rates would not significantly affect the quality of the human
environment within the meaning of the National Environmental Policy Act
of 1969, the proposed action is not a major federal action for which
preparation of an Environmental Impact Statement is required.
Availability of Information
The rates hereinafter confirmed and approved on an interim basis,
together with supporting documents, will be submitted promptly to the
Federal Energy Regulatory Commission for confirmation and approval on a
final basis for a period beginning on July 1, 1999, and ending no later
than June 30, 2004.
Order
In view of the foregoing and pursuant to the authority vested in me
as the Secretary of Energy, I hereby confirm and approve on an interim
basis, effective July 1, 1999, attached Wholesale Power Rate Schedules
CBR-1-D, CSI-1-D, CEK-1-D, CM-1-D, CC-1-E, CK-1-D, CTV-1-D, and SJ-1-A.
The Rate Schedules shall remain in effect on an interim basis through
June 30, 2004, unless such period is extended or until the FERC
confirms and approves them or substitutes Rate Schedules on a final
basis.
Dated: June 29. 1999.
Bill Richardson,
Secretary.
Wholesale Power Rate Schedule CBR-1-D
Availability
This rate schedule shall be available to Big Rivers Electric
Corporation and includes the City of Henderson, Kentucky, (hereinafter
called the Customer).
Applicability
This rate schedule shall be applicable to electric capacity and
energy available from the Dale Hollow, Center Hill, Wolf Creek,
Cheatham, Old Hickory, Barkley, J. Percy Priest and Cordell Hull
Projects (all of such projects being hereinafter called collectively
the ``Cumberland Projects'') and sold in wholesale quantities.
Character of Service
The electric capacity and energy supplied hereunder will be three-
phase alternating current at a nominal frequency of sixty hertz. The
power shall be delivered at nominal voltages of 13,800 volts and
161,000 volts to the transmission system of Big Rivers Electric
Corporation.
Points of Delivery
Capacity and energy delivered to the Customer will be delivered at
points of interconnection of the Customer at the Barkley Project
Switchyard, at a delivery point in the vicinity of the Paradise steam
plant and at such other points of delivery as may hereafter be agreed
upon by the Government and TVA.
Monthly Rate
The monthly rate for capacity and energy sold under this rate
schedule shall be:
Demand Charge: $2.900 per kilowatt/month of total contract demand
Energy Charge: None
Energy To Be Furnished by the Government
The Government shall make available each contract year to the
customer from the Projects through the customer's interconnections with
TVA and the customer will schedule and accept an allocation of 1,500
kilowatt-hours of energy delivered at the TVA border for each kilowatt
of contract demand. A contract year is defined as the 12 months
beginning July 1 and ending at midnight June 30 of the following
[[Page 37132]]
calendar year. The energy made available for a contract year shall be
scheduled monthly such that the maximum amount scheduled in any month
shall not exceed 240 hours per kilowatt of the customer's contract
demand and the minimum amount scheduled in any month shall not be less
than 60 hours per kilowatt of the customer's contract demand. The
customer may request and the Government may approve energy scheduled
for a month greater than 240 hours per kilowatt of the customer's
contract demand; provided, that the combined schedule of all SEPA
customers outside TVA and served by TVA does not exceed 220 hours per
kilowatt of the total contract demands of these customers.
Billing Month
The billing month for power sold under this schedule shall end at
2,400 hours CDT or CST, whichever is currently effective, on the last
day of each calendar month.
Conditions of Service
The customer shall at its own expense provide, install, and
maintain on its side of each delivery point the equipment necessary to
protect and control its own system. In so doing, the installation,
adjustment, and setting of all such control and protective equipment at
or near the point of delivery shall be coordinated with that which is
installed by and at the expense of TVA on its side of the delivery
point.
Service Interruption
When delivery of capacity is interrupted or reduced due to
conditions on the Administrator's system beyond his control, the
Administrator will continue to make available the portion of his
declaration of energy that can be generated with the capacity
available.
For such interruption or reduction due to conditions on the
Administrator's system which have not been arranged for and agreed to
in advance, the demand charge for capacity made available will be
reduced as to the kilowatts of such capacity which have been
interrupted or reduced in accordance with the following formula:
[GRAPHIC] [TIFF OMITTED] TN09JY99.040
July 1, 1999
Wholesale Power Rate Schedule CSI-1-D
Availability
This rate schedule shall be available to Southern Illinois Power
Cooperative (hereinafter the Customer).
Applicability
This rate schedule shall be applicable to electric capacity and
energy available from the Dale Hollow, Center Hill, Wolf Creek,
Cheatham, Old Hickory, Barkley, J. Percy Priest and Cordell Hull
Projects (all of such projects being hereinafter called collectively
the ``Cumberland Projects'') and sold in wholesale quantities.
Character of Service
The electric capacity and energy supplied hereunder will be three-
phase alternating current at a nominal frequency of sixty hertz. The
power shall be delivered at nominal voltages of 13,800 volts and
161,000 volts to the transmission system of Big Rivers Electric
Corporation.
Points of Delivery
Capacity and energy delivered to the Customer will be delivered at
points of interconnection of the Customer at the Barkley Project
Switchyard, at a delivery point in the vicinity of the Paradise steam
plant and at such other points of delivery as may hereafter be agreed
upon by the Government and TVA.
Monthly Rate
The monthly rate for capacity and energy sold under this rate
schedule shall be:
Demand Charge: $2.900 per kilowatt/month of total contract demand
Energy Charge: None
Energy To Be Furnished by the Government
The Government shall make available each contract year to the
customer from the Projects through the customer's interconnections with
TVA and the customer will schedule and accept an allocation of 1,500
kilowatt-hours of energy delivered at the TVA border for each kilowatt
of contract demand. A contract year is defined as the 12 months
beginning July 1 and ending at midnight June 30 of the following
calendar year. The energy made available for a contract year shall be
scheduled monthly such that the maximum amount scheduled in any month
shall not exceed 240 hours per kilowatt of the customer's contract
demand and the minimum amount scheduled in any month shall not be less
than 60 hours per kilowatt of the customer's contract demand. The
customer may request and the Government may approve energy scheduled
for a month greater than 240 hours per kilowatt of the customer's
contract demand; provided, that the combined schedule of all SEPA
customers outside TVA and served by TVA does not exceed 220 hours per
kilowatt of the total contract demands of these customers.
Billing Month
The billing month for power sold under this schedule shall end at
2400 hours CDT or CST, whichever is currently effective, on the last
day of each calendar month.
Service Interruption
When delivery of capacity is interrupted or reduced due to
conditions on the Administrator's system beyond his control, the
Administrator will continue to make available the portion of his
declaration of energy that can be generated with the capacity
available.
For such interruption or reduction due to conditions on the
Administrator's system which have not been arranged for and agreed to
in advance, the demand charge for capacity made available will be
reduced as to the kilowatts of such capacity which have been
interrupted or reduced in accordance with the following formula:
[GRAPHIC] [TIFF OMITTED] TN09JY99.041
[[Page 37133]]
July 1, 1999
Wholesale Power Rate Schedule CEK-1-D
Availability
This rate schedule shall be available to East Kentucky Power
Cooperative (hereinafter called the Customer).
Applicability
This rate schedule shall be applicable to electric capacity and
energy available from the Dale Hollow, Center Hill, Wolf Creek,
Cheatham, Old Hickory, Percy Priest and Cordell Hull Projects (all of
such projects being hereinafter called collectively the ``Cumberland
Projects'') and power available from the Laurel Project and sold in
wholesale quantities.
Character of Service
The electric capacity and energy supplied hereunder will be three-
phase alternating current at a nominal frequency of sixty hertz. The
power shall be delivered at nominal voltages of 161,000 volts to the
transmission systems of the Customer.
Points of Delivery
The points of delivery will be the 161,000 volt bus of the Wolf
Creek Power Plant and the 161,000 volt bus of the Laurel Project. Other
points of delivery may be as agreed upon.
Monthly Rate
The monthly rate for capacity and energy sold under this rate
schedule from the Cumberland Projects shall be:
Demand charge: $2.900 per kilowatt/month of total contract demand
Energy Charge: None
Energy To Be Furnished by the Government
The Government shall make available each contract year to the
customer from the Projects through the customer's interconnections with
TVA and the customer will schedule and accept an allocation of 1,500
kilowatt-hours of energy delivered at the TVA border for each kilowatt
of contract demand plus 369 kilowatt-hours of energy delivered for each
kilowatt of contract demand to supplement energy available at the
Laurel Project. A contract year is defined as the 12 months beginning
July 1 and ending at midnight June 30 of the following calendar year.
The energy made available for a contract year shall be scheduled
monthly such that the maximum amount scheduled in any month shall not
exceed 240 hours per kilowatt of the customer's contract demand and the
minimum amount scheduled in any month shall not be less than 60 hours
per kilowatt of the customer's contract demand. The customer may
request and the Government may approve energy scheduled for a month
greater than 240 hours per kilowatt of the customer's contract demand;
provided, that the combined schedule of all SEPA customers outside TVA
and served by TVA does not exceed 220 hours per kilowatt of the total
contract demands of these customers.
Billing Month
The billing month for power sold under this schedule shall end at
2,400 hours CDT or CST, whichever is currently effective, on the last
day of each calendar month.
Conditions of Service
The customer shall at its own expense provide, install, and
maintain on its side of each delivery point the equipment necessary to
protect and control its own system. In so doing, the installation,
adjustment and setting of all such control and protective equipment at
or near the point of delivery shall be coordinated with that which is
installed by and at the expense of TVA on its side of the delivery
point.
Service Interruption
When delivery of capacity is interrupted or reduced due to
conditions on the Administrator's system beyond his control, the
Administrator will continue to make available the portion of his
declaration of energy that can be generated with the capacity
available.
For such interruption or reduction due to conditions on the
Administrator's system which have not been arranged for and agreed to
in advance, the demand charge for capacity made available will be
reduced as to the kilowatts of such capacity which have been
interrupted or reduced in accordance with the following formula:
[GRAPHIC] [TIFF OMITTED] TN09JY99.042
July 1, 1999
Wholesale Power Rate Schedule CM-1-D
Availability
This rate schedule shall be available to the South Mississippi
Electric Power Association and Municipal Energy Agency of Mississippi
(hereinafter called the Customers).
Applicability
This rate schedule shall be applicable to electric capacity and
energy available from the Dale Hollow, Center Hill, Wolf Creek,
Cheatham, Old Hickory, Barkley, J. Percy Priest and Cordell Hull
Projects (all of such projects being hereinafter called collectively
the ``Cumberland Projects'') and sold in wholesale quantities.
Character of Service
The electric capacity and energy supplied hereunder will be three-
phase alternating current at a nominal frequency of sixty hertz. The
power shall be delivered at nominal voltages of 161,000 volts to the
transmission systems of Mississippi Power and Light.
Points of Delivery
The points of delivery will be at interconnection points of the
Tennessee Valley Authority system and the Mississippi Power and Light
system. Other points of delivery may be as agreed upon.
Monthly Rate
The monthly rate for capacity and energy sold under this rate
schedule shall be:
Demand Charge: $2.900 per kilowatt/month of total contract demand
Energy Charge: None
Energy To Be Furnished by the Government
The Government shall make available each contract year to the
Customer from the Projects through the Customer's interconnections with
TVA and the Customer will schedule and accept an allocation of 1,500
kilowatt-hours of energy delivered at the TVA border for each kilowatt
of contract demand. A contract year is defined as the 12 months
beginning July 1 and ending at midnight June 30 of the following
calendar year. The energy made available for a contract year shall be
scheduled monthly such that the maximum amount scheduled in any month
shall not exceed 240 hours per
[[Page 37134]]
kilowatt of the Customer's contract demand and the minimum amount
scheduled in any month shall not be less than 60 hours per kilowatt of
the Customer's contract demand. The Customer may request and the
Government may approve energy scheduled for a month greater than 240
hours per kilowatt of the Customer's contract demand; provided, that
the combined schedule of all SEPA Customers outside TVA and served by
TVA does not exceed 220 hours per kilowatt of the total contract
demands of these Customers.
In the event that any portion of the capacity allocated to the
Customers is not initially delivered to the Customers as of the
beginning of a full contract year, the 1500 kilowatt hours shall be
reduced 1/12 for each month of that year prior to initial delivery of
such capacity.
Billing Month
The billing month for power sold under this schedule shall end at
2400 hours CDT or CST, whichever is currently effective on the last day
of each calendar month.
Service Interruption
When delivery of capacity is interrupted or reduced due to
conditions on the Administrator's system beyond his control, the
Administrator will continue to make available the portion of his
declaration of energy that can be generated with the capacity
available.
For such interruption or reduction due to conditions on the
Administrator's system which have not been arranged for and agreed to
in advance, the demand charge for capacity made available will be
reduced as to the kilowatts of such capacity which have been
interrupted or reduced in accordance with the following formula:
[GRAPHIC] [TIFF OMITTED] TN09JY99.043
July 1, 1999
Wholesale Power Rate Schedule CC-1-E
Availability
This rate schedule shall be available to public bodies and
cooperatives served through the facilities of Carolina Power & Light
Company, Western Division (hereinafter called the Customers).
Applicability
This rate schedule shall be applicable to electric capacity and
energy available from the Dale Hollow, Center Hill, Wolf Creek,
Cheatham, Old Hickory, Barkley, J. Percy Priest and Cordell Hull
Projects (all of such projects being hereinafter called collectively
the ``Cumberland Projects'') and sold in wholesale quantities.
Character of Service
The electric capacity and energy supplied hereunder will be three-
phase alternating current at a nominal frequency of sixty hertz. The
power shall be delivered at nominal voltages of 161,000 volts to the
transmission system of Carolina Power & Light Company, Western
Division.
Points of Delivery
The points of delivery will be at interconnecting points of the
Tennessee Valley Authority system and the Carolina Power & Light
Company, Western Division system. Other points of delivery may be as
agreed upon.
Monthly Rate
The monthly rate for capacity and energy sold under this rate
schedule shall be:
Demand Charge: $3.301 per kilowatt/month of total contract demand
Energy Charge: None
Transmission Charge: $1,2828 per kilowatt of total contract demand
The transmission rate is subject to annual adjustment on April 1 of
each year and will be computed subject to the formula in Appendix A
attached to the Government-Carolina Power & Light Company contract.
Energy To Be Furnished by the Government
The Government will sell to the customer and the customer will
purchase from the Government energy each billing month equivalent to a
percentage specified by contract of the energy made available to
Carolina Power & Light Company (less six percent (6%) losses). The
Customer's contract demand and accompanying energy allocation will be
divided pro rata among its individual delivery points served from the
Carolina Power & Light Company's, Western Division transmission system.
Billing Month
The billing month for power sold under this schedule shall end at
2,400 hours CDT or CST, whichever is currently effective, on the last
day of each calendar month.
July 1, 1999
Wholesale Power Rate Schedule CK-1-D
Availability
This rate schedule shall be available to public bodies served
through the facilities of Kentucky Utilities Company, (hereinafter
called the Customers.)
Applicability
This rate schedule shall be applicable to electric capacity and
energy available from the Dale Hollow, Center Hill, Wolf Creek,
Cheatham, Old Hickory, Barkley, J. Percy Priest and Cordell Hull
Projects (all of such projects being hereinafter called collectively
the ``Cumberland Projects'') and sold in wholesale quantities.
Character of Service
The electric capacity and energy supplied hereunder will be three-
phase alternating current at a nominal frequency of sixty hertz. The
power shall be delivered at nominal voltages of 161,000 volts to the
transmission systems of Kentucky Utilities Company.
Points of Delivery
The points of delivery will be at interconnecting points between
the Tennessee Valley Authority system and the Kentucky Utilities
Company system. Other points of delivery may be as agreed upon.
Monthly Rate
The monthly rate for capacity and energy sold under this rate
schedule shall be:
Demand Charge: $2.900 per kilowatt/month of total contract demand
Energy Charge: None
Additional Energy Charge: 8.631 mills per kilowatt-hour
Energy To Be Furnished by the Government
The Government shall make available each contract year to the
Customer from the Projects through the Customer's interconnections with
TVA and the Customer will schedule and accept an
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allocation of 1,500 kilowatt-hours of energy delivered at the TVA
border for each kilowatt of contract demand. A contract year is defined
as the 12 months beginning July 1 and ending at midnight June 30 of the
following calendar year. The energy made available for a contract year
shall be scheduled monthly such that the maximum amount scheduled in
any month shall not exceed 240 hours per kilowatt of the Customer's
contract demand and the minimum amount scheduled in any month shall not
be less than 60 hours per kilowatt of the Customer's contract demand.
The Customer may request and the Government may approve energy
scheduled for a month greater than 240 hours per kilowatt of the
Customer's contract demand; provided, that the combined schedule of all
SEPA Customers outside TVA and served by TVA does not exceed 220 hours
per kilowatt of the total contract demands of these Customers. In the
event that any portion of the capacity allocated to the Customers is
not initially delivered to the Customers as of the beginning of a full
contract year, the 1500 kilowatt hours shall be reduced \1/12\ for each
month of that year prior to initial delivery of such capacity.
For billing purposes, each kilowatt of capacity will include 1500
kilowatt-hours energy per year. Customers will pay for additional
energy at the additional energy rate.
Billing Month
The billing month for power sold under this schedule shall end at
2400 hours CDT or CST, whichever is currently effective on the last day
of each calendar month.
July 1, 1999
Wholesale Power Rate Schedule CTV-1-D
Availability
This rate schedule shall be available to the Tennessee Valley
Authority (hereinafter called TVA).
Applicability
This rate schedule shall be applicable to electric capacity and
energy generated at the Dale Hollow, Center Hill, Wolf Creek, Old
Hickory, Cheatham, Barkley, J. Percy Priest, and Cordell Hull Projects
(all of such projects being hereafter called collectively the
``Cumberland Projects'') and the Laurel Project sold under agreement
between the Department of Energy and TVA.
Character of Service
The electric capacity and energy supplied hereunder will be three-
phase alternating current at a frequency of approximately 60 Hertz at
the outgoing terminals of the Cumberland Projects' switchyards.
Monthly Rates
The monthly rate for capacity and energy sold under this rate
schedule shall be:
Demand Charge: $1.434 per kilowatt/month of total demand as determined
by the agreement between the Department of Energy and TVA.
Energy Charge: None
Additional Energy Charge: 8.631 mills per kilowatt-hour
Energy To Be Made Available
The Department of Energy shall determine the energy that is
available from the projects for declaration in the billing month.
To meet the energy requirements of the Department of Energy's
customers outside the TVA area (hereinafter called Other Customers),
749,400 megawatt-hours of net energy shall be available annually
(including 36,900 megawatt-hours of annual net energy to supplement
energy available at Laurel Project) provided, that if additional energy
is required to make a marketing arrangement viable for other customers
which do not own generating facilities and which are within service
areas of Kentucky Utilities Company and Carolina Power & Light Company,
Western Division, such additional energy required shall be made
available from the Cumberland Projects and shall not exceed 300
kilowatt-hours per kilowatt per year. The energy requirement of the
Other Customers shall be available annually, divided monthly such that
the maximum available in any month shall not exceed 220 hours per
kilowatt of total Other Customers contract demand, and the minimum
amount available in any month shall not be less than 60 hours per
kilowatt of total Other Customers demand.
In the event that any portion of the capacity allocated to Other
Customers is not initially delivered to the Other Customers as of the
beginning of a full contract year, (July through June), the 1500 hours,
plus any such additional energy required as discussed above, shall be
reduced \1/12\ for each month of that year prior to initial delivery of
such capacity.
The energy scheduled by TVA for use within the TVA System in any
billing month shall be the total energy delivered to TVA less (1) an
adjustment for fast or slow meters, if any, (2) an adjustment for
Barkley-Kentucky Canal of 15,000 megawatt-hours of energy each month
which is delivered to TVA under the agreement from the Cumberland
Projects without charge to TVA, (3) the energy scheduled by the
Department of Energy in said month for the Other Customers plus losses
of two (2) percent, and (4) station service energy furnished by TVA.
Each kw of capacity received by TVA includes 1500 kwh of energy.
Energy received in excess of 1500 kwh will be subject to an additional
energy charge identified in the monthly rates section of this rate
schedule.
Billing Month
The billing month for capacity and energy sold under this schedule
shall end at 2400 hours CDT or CST, whichever is currently effective,
on the last day of each calendar month.
Contract Year
For purposes of this rate schedule, a contract year shall be as in
Section 13.1 of the Southeastern Power Administration--Tennessee Valley
Authority Contract.
Service Interruption
When delivery of capacity to TVA is interrupted or reduced due to
conditions on the Department of Energy's system which are beyond its
control, the Department of Energy will continue to make available the
portion of its declaration of energy that can be generated with the
capacity available.
For such interruption or reduction (exclusive of any restrictions
provided in the agreement) due to conditions on the Department of
Energy's system which have not been arranged for and agreed to in
advance, the demand charge for scheduled capacity made available to TVA
will be reduced as to the kilowatts of such scheduled capacity which
have been so interrupted or reduced for each day in accordance with the
following formula:
The agreement capacity related to the 76,000 kilowatts of capacity
allocated to the Other Customers in the Carolina Power & Light Company
and Kentucky Utilities service areas shall, irrespective of sale to
Other Customers, remain in effect in the formula throughout the term of
this rate schedule.
Power Factor
TVA shall take capacity and energy from the Department of Energy at
such power factor as will best serve TVA's system from time to time;
provided, that TVA shall not impose a power factor of
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less than .85 lagging on the Department of Energy's facilities which
requires operation contrary to good operating practice or results in
overload or impairment of such facilities.
July 1, 1999
Wholesale Power Rate Schedule
SJ-1-A
Availability
This rate schedule shall be available to Monongahela Power Company
for energy from the Stonewall Jackson Project (hereinafter called the
Project).
Applicability
This rate schedule shall be applicable to energy made available by
the Government from the Project and sold in wholesale quantities.
Character of Service
The electric capacity and energy supplied hereunder will be three-
phase alternating current at a nominal frequency of 60 cycles per
second delivered at the delivery points of the customer.
Monthly Rate
The monthly rate for energy made available or delivered under this
rate schedule shall be the lower of:
(a) The energy equivalent rate of Cumberland Rate Schedule CC-1-E,
which is 34.2 mills per kwh, or;
(b) The sum, as reasonably determined by Monongahela Power Company
(Buyer), of (1) and (2) below calculated for each period as to which
the determination is being made, (normally monthly) based on costs and
net generation of Buyer and other regulated subsidiaries of Allegheny
Power System, Inc. to produce energy from: Ft. Martin Units Nos. 1 and
2, Hatfield Ferry Units Nos. 1, 2, and 3, Harrison Units Nos. 1, 2, 3,
and Pleasants Units Nos. 1 and 2.
(1) The accrued expense in FERC Account 501 (fuel expense) or such
appropriate similar account as the FERC may from time to time establish
for fuel expense for steam power generation, divided by the actual net
generation in kilowatt-hours, exclusive of plan use, plus
(2) One-half of the accrued expenses in FERC Accounts 510-514
(maintenance expense), inclusive, of such other appropriate similar
accounts as FERC may from time to time establish for maintenance
expense for steam power generation, divided by the actual net
generation in kilowatt-hours, exclusive of plant use.
Energy Made Available
Project energy generated by the District at the Project except
energy use in the production of such energy or utilized by the District
for its operations at the location of the project.
Billing Month
Buyer shall read the metering devices within three business days of
the end of each calendar month will render payment within 15 days of
such reading.
Conditions of Service
The customer shall at its own expense provide, install, and
maintain on its side of each delivery point the equipment necessary to
protect and control its own system. In so doing, the installation,
adjustment, and setting of all such control and protective equipment at
or near the point of delivery shall be coordinated with that which is
installed by and at the expense of the Monongahela Power Company on its
side of the delivery point.
July 1, 1999
[FR Doc. 99-17500 Filed 7-8-99; 8:45 am]
BILLING CODE 6450-01-P
