E8-18575. Boulder Canyon Project

AGENCY:

Western Area Power Administration, DOE.

ACTION:

Notice of Base Charge and Rates.

SUMMARY:

The Deputy Secretary of Energy approved the Fiscal Year (FY) 2009 Base Charge and Rates (Rates) for Boulder Canyon Project (BCP) electric service provided by the Western Area Power Administration (Western). The Rates will provide sufficient revenue to pay all annual costs, including interest expense, and repay investments within the allowable period.

DATES:

The Rates will be effective the first day of the first full billing period beginning on or after October 1, 2008. These Rates will stay in effect through September 30, 2009, or until superseded by other rates.

FOR FURTHER INFORMATION CONTACT:

Mr. Jack Murray, Rates Manager, Desert Southwest Customer Service Region, Western Area Power Administration, P.O. Box 6457, Phoenix, AZ 85005-6457, [phone], e-mail [e-mail].

SUPPLEMENTARY INFORMATION:

Rate Schedule BCP-F7, Rate Order No. WAPA-120, effective October 1, 2005, through September 30, 2010, allows for an annual recalculation of the rates.^[1]

Under Rate Schedule BCP-F7, the existing composite rate, effective on October 1, 2007, was 17.64 mills per kilowatthour (mills/kWh). The base charge was $66,975,283, the energy rate was 8.82 mills/kWh, and the capacity rate was $1.63 per kilowattmonth (kWmonth). The re-calculated rates for BCP electric service, to be effective October 1, 2008, will result in an overall composite rate of 18.62 mills/kWh. The proposed rates were calculated using the FY 2009 Final Ten-Year Operating Plan. This resulted in an increase of approximately 5.56 percent when compared with the existing BCP electric service composite rate. The increase is due to a decrease in the projected energy sales and an increase in the annual revenue requirement. The FY 2009 base charge is increasing to $70,213,497. The major contributing factor to the base charge increase is the increase in annual expenses. The FY 2009 energy rate of 9.31 mills/kWh is approximately a 5.56 percent increase from the existing energy rate of 8.82 mills/kWh. The increase in the energy rate is due to a decrease in the projected energy sales resulting from a decrease in projected water releases. The FY 2009 capacity rate of $1.73/kWmonth reflects an increase of approximately 6.13 percent compared to the existing capacity rate of $1.63/kWmonth. The increase in the capacity rate is due to dropping lake elevations. Another factor contributing to the increase in both the energy and capacity rates is the increase in the annual revenue requirement.

The following summarizes the steps taken by Western to ensure involvement of all Interested Parties in determining the Rates:

1. A Federal Register notice was published on February 1, 2008 (73 FR 6177), announcing the proposed rate adjustment process, initiating a public consultation and comment period, announcing public information and public comment forums, and presenting procedures for public participation.

2. On February 4, 2008, a letter was mailed from Western's Desert Southwest Customer Service Region to the BCP Contractors and other Interested Parties announcing an informal customer meeting and public information and comment forums.

3. Discussion of the proposed Rates was initiated at an informal BCP Contractor meeting held March 12, 2008, in Phoenix, Arizona. At this informal meeting, representatives from Western and the Bureau of Reclamation (Reclamation) explained the basis for estimates used to calculate the Rates and held a question and answer session.

4. At the public information forum held on April 2, 2008, in Phoenix, Arizona, Western and Reclamation representatives explained the proposed Rates for FY 2009 in greater detail and held a question and answer session.

5. A public comment forum held on April 23, 2008, in Phoenix, Arizona, provided the public an opportunity to comment for the record. Three individuals commented at this forum.

6. Western received one comment letter during the 90-day consultation and comment period. The consultation and comment period ended May 1, 2008. All comments were considered in developing the Rates for FY 2009. Written comments were received from:

Irrigation & Electrical Districts Association of Arizona, Phoenix, Arizona.

Comments and responses, paraphrased for brevity when not affecting the meaning of the statements, are presented below.

Rates Stability

Comment: BCP Contractors expressed concern that the composite rate has increased from 8.93 mills/kWh in 2000 to 18.53 mills/kWh in 2009. The BCP Contractors further suggested that since major projects at Hoover which resulted in increased spending are complete and Lake Mead water levels continue to be low, Western and Reclamation should postpone expenditures where possible and strive to structure budgets in such a way to levelize or reduce rates.

Response: Western and Reclamation appreciate the BCP Contractors' concern over reduced generation and increased spending. Much of the increased spending is aimed toward maintaining the reliability of the Hoover resource and achieving maximum energy and capacity even as Lake Mead water levels decline. However, Western and Reclamation will continue to partner with the Hoover Contractors, through the Engineering and Operating Committee and the Technical Review Committee, to seek ways to structure budgets in such a way to minimize cost increases while maintaining the safe and reliable operation of the project.

Security Costs Legislation

Comment: An Interested Party made a statement with regard to Senate Bill S. 2739. Section 513 of that bill contains post-September 11, 2001, security cost legislation which specifies the amount of security costs which will be considered non-reimbursable. The Interested Party requested that Western and Reclamation adjust their budgets to account for the legislation.

Response: The President of The United States signed Senate Bill S.2739 into law on May 8, 2008 (Pub. L. 110-229). Reclamation will determine if any reimbursable costs in Section 513 will be deemed non-reimbursable under this new law. If the determination is made prior to the finalization of the rate package, Western will implement appropriate changes, if necessary to the FY 2009 Rates. If the determination is made after the rate package is finalized, then any security costs deemed non-reimbursable will roll into carry over, reducing FY 2010 Rates.

Hydrology

Comment: An Interested Party sought assurance that Western, in its base charge and rates calculation, take into account the new Reclamation 24-month study. The revised study should show equalization releases from Lake Powell beginning in May and continuing through September. The end result could be increased efficiencies and a reduction in the per-unit cost for capacity charged to customers.

Response: Western will utilize the final master schedule which includes the most current 24-month study prior to submitting the rate package for approval. The final master schedule is normally completed in early June and will have the most up to date information available at that time.

BCP Electric Service Rates

BCP electric service rates are designed to recover an annual revenue requirement that includes operation and maintenance expenses, payments to states, visitor services, the uprating program, replacements, investment repayment, and interest expense. Western's Power Repayment Study (PRS) allocates the projected annual revenue requirement for electric service equally between capacity and energy.

Availability of Information

Information about this base charge and rate adjustment, including power repayment studies, comments, letters, memorandums, and other supporting material developed or maintained by Western that was used to develop the FY 2009 BCP Rates, is available for public review in the Desert Southwest Customer Service Regional Office, Western Area Power Administration, 615 South 43rd Avenue, Phoenix, Arizona. The information is also available on Western's Web site at http://www.wapa.gov/​dsw/​pwrmkt/​BCP/​RateAdjust.htm.

Ratemaking Procedure Requirements

BCP electric service rates are developed under the Department of Energy Organization Act (42 U.S.C. 7101-7352), through which the power marketing functions of the Secretary of the Interior and Reclamation under the Reclamation Act of 1902 (ch. 1093, 32 Stat. 388), as amended and supplemented by subsequent enactments, particularly section 9(c) of the Reclamation Project Act of 1939 (43 U.S.C. 485h(c)), and other acts that specifically apply to the project involved, were transferred to and vested in the Secretary of Energy, acting by and through Western.

By Delegation Order No. 00-037.00, effective December 6, 2001, the Secretary of Energy delegated: (1) The authority to develop long-term power and transmission rates on a non-exclusive basis to Western's Administrator, (2) the authority to confirm, approve, and place such rates into effect on an interim basis to the Deputy Secretary of Energy, and (3) the authority to confirm, approve, and place into effect on a final basis, to remand or to disapprove such rates to FERC. Existing DOE procedures for public participation in electric service rate adjustments are located at 10 CFR part 903, effective September 18, 1985 (50 FR 37835), and 18 CFR part 300. DOE procedures were followed by Western in developing the rate formula approved by FERC on June 22, 2006, at 115 FERC ¶ 61362.^[2]

The Boulder Canyon Project Implementation Agreement requires that, prior to October 1 of each rate year, Western determine the annual rates for the next fiscal year. The rates for the first rate year, and each fifth rate year thereafter, will become effective provisionally upon approval by the Deputy Secretary of Energy subject to final approval by FERC. For all other rate years, the rates will become effective on a final basis upon approval by the Deputy Secretary of Energy.

Western will continue to provide annual rates to the BCP Contractors by October 1 of each year using the same ratesetting formula. The rates are reviewed annually and adjusted upward or downward to assure sufficient revenues are collected to achieve payment of all costs and financial obligations associated with the project. Each fiscal year, Western prepares a PRS for the BCP to update actual revenues and expenses including interest, estimates of future revenues, expenses, and capitalized costs.

The BCP ratesetting formula includes a base charge, an energy rate, and a capacity rate. The ratesetting formula was used to determine the BCP FY 2009 Rates.

Western proposes a FY 2009 base charge of $70,213,497, an energy rate of 9.31 mills/kWh, and a capacity rate of $1.73/kWmonth be approved on a final basis.

Consistent with procedures set forth in 10 CFR part 903 and 18 CFR part 300, Western held a consultation and comment period. The notice of the proposed FY 2009 Rates for electric service was published in the Federal Register on February 1, 2008 (73 FR 6177).

Under Delegation Order Nos. 00-037.00 and 00-001.00B, and in compliance with 10 CFR part 903 and 18 CFR part 300, I hereby approve the FY 2009 Rates for BCP Electric Service on a final basis under Rate Schedule BCP-F7 through September 30, 2009.

Dated: August 1, 2008.

Jeffrey F. Kupfer,

Acting Deputy Secretary.

Footnotes

1.  WAPA-120 was approved by the Deputy Secretary of Energy on August 11, 2005 (70 FR ¶ 71280), and confirmed and approved by the Federal Energy Regulatory Commission (FERC) on a final basis on August 26, 2005, in Docket No. EF05-5091-000 (115 FERC ¶ 61362).

2.  The existing ratesetting formula was established in Rate Order No. WAPA-70 on April 19, 1996, in Docket No. EF96-5091-000 at 75 FERC ¶ 62050, for the period beginning November 1, 1995, and ending September 30, 2000. Rate Order No. WAPA-94, extending the existing ratesetting formula beginning on October 1, 2000, and ending September 30, 2005, was approved on July 31, 2001, in Docket No. EF00-5092-000 at 96 FERC ¶ 61171. Rate Order No. WAPA-120, extending the existing ratesetting formula for another five-year period beginning on October 1, 2005, and ending September 30, 2010, was approved on June 22, 2006, in Docket No. EF05-5091-000 at 115 FERC ¶ 61362.