[Federal Register: August 15, 2005 (Volume 70, Number 156)]
[Notices]
[Page 47823-47836]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15au05-44]
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DEPARTMENT OF ENERGY
Western Area Power Administration
Salt Lake City Area Integrated Projects-Rate Order No. WAPA-117
AGENCY: Western Area Power Administration, DOE.
ACTION: Notice of Order Concerning Power Rates.
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SUMMARY: The Deputy Secretary of Energy confirmed and approved Rate
Order No. WAPA-117 and Rate Schedule SLIP-F8, placing firm power rates
for the Salt Lake City Area Integrated Projects (SLCA/IP) of the
Western Area Power Administration (Western) into effect on an interim
basis. The provisional rates will be in effect until the Federal Energy
Regulatory Commission (Commission) confirms, approves, and places them
into effect on a final basis or until they are replaced by other rates.
The provisional rates will provide sufficient revenue to pay all annual
costs, including interest expense, and repayment of power investment
and irrigation aid, within the allowable periods.
DATES: Rate Schedule SLIP-F8 will be placed into effect on an interim
basis on the first day of the first full billing period beginning on or
after October 1, 2005, and will be in effect until the Commission
confirms, approves, and places the rate schedules in effect on a final
basis through September 30, 2010, or until the rate schedule is
superseded.
FOR FURTHER INFORMATION CONTACT: Mr. Bradley S. Warren, CRSP Manager,
CRSP Management Center, Western Area Power Administration, P.O. Box
11606, Salt Lake City, UT 84147-0606, (801) 524-6372, e-mail
warren@wapa.gov, or Ms. Carol Loftin, Rates Manager, CRSP Management
Center, Western Area Power Administration, P.O. Box 11606, Salt Lake
City, UT 84147-0606, (801) 524-6380, e-mail loftinc@wapa.gov.
SUPPLEMENTARY INFORMATION: The Secretary of Energy approved existing
Rate Schedule SLIP-F7 for SLCA/IP firm power on September 12, 2002
(Rate Order No. WAPA-99). The Commission confirmed and approved the
rate schedule on November 14, 2003, in FERC Docket No. EF02-5171-000.
The existing rate schedule is effective from October 1, 2002, for a 5-
year period ending September 30, 2007.
The existing firm power Rate Schedule SLIP-F7 is being superseded
by Rate Schedule SLIP-F8. Under Rate Schedule SLIP-F7, the energy rate
is 9.5 mills per kilowatthour (mills/kWh), and the capacity rate is
$4.04 per kilowattmonth ($/kWmonth). The composite rate is 20.72 mills/
kWh. The provisional firm power rate consists of an energy charge of
10.43 mills/kWh and a capacity charge of $4.43 per kWmonth. The
provisional rates for SLCA/IP firm power in Rate Schedule SLIP-F8 will
result in an overall composite rate of 25.28 mills/kWh on October 1,
2005, and will result in an increase of about 22 percent when compared
with the existing SLCA/IP
[[Page 47824]]
firm power composite rate under Rate Schedule SLIP-F7.
The firm power rate will also include a cost recovery mechanism
called a Cost Recovery Charge (CRC). The CRC is necessary to adequately
maintain a sufficient cash balance in the Upper Colorado River Basin
Fund in times of financial hardship. The CRC is a charge on Sustainable
Hydropower (SHP) energy, as determined by financial conditions. Each
May, Western will provide Customers with information concerning the
anticipated CRC for the upcoming fiscal year. Firm power Customers may
choose to take less firm energy, and in exchange Western will waive the
CRC charge.
By Delegation Order No. 00-037.00, effective December 6, 2001, the
Secretary of Energy delegated: (1) The authority to develop power and
transmission rates to Western's Administrator, (2) the authority to
confirm, approve, and place such rates into effect on an interim basis
to the Deputy Secretary of Energy, and (3) the authority to confirm,
approve, and place into effect on a final basis, to remand or to
disapprove such rates to the Commission. Existing DOE procedures for
public participation in power rate adjustments (10 CFR part 903) were
published on September 18, 1985.
Under Delegation Order Nos. 00-037.00 and 00-001.00A, 10 CFR part
903, and 18 CFR part 300, I hereby confirm, approve, and place Rate
Order No. WAPA-117, the proposed SLCA/IP firm power rate, into effect
on an interim basis. The new Rate Schedule SLIP-F8 will be promptly
submitted to the Commission for confirmation and approval on a final
basis.
Dated: August 1, 2005.
Clay Sell,
Deputy Secretary.
Order Confirming, Approving, and Placing the Salt Lake City Area
Integrated Projects Firm Power Rate Into Effect on an Interim Basis
This rate was established in accordance with section 302 of the
Department of Energy (DOE) Organization Act (42 U.S.C. 7152). This Act
transferred to and vested in the Secretary of Energy the power
marketing functions of the Secretary of the Department of the Interior
and the Bureau of Reclamation (Reclamation) under the Reclamation Act
of 1902 (ch. 1093, 32 Stat. 388), as amended and supplemented by
subsequent laws, particularly section 9(c) of the Reclamation Project
Act of 1939 (43 U.S.C. 485h(c)), and other Acts that specifically apply
to the project involved.
By Delegation Order No. 00-037.00, effective December 6, 2001, the
Secretary of Energy delegated: (1) The authority to develop power and
transmission rates to Western'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 the Commission. Existing DOE procedures for
public participation in power rate adjustments (10 CFR part 903) were
published on September 18, 1985.
Acronyms and Definitions
As used in this Rate Order, the following acronyms and definitions
apply:
Administrator: The Administrator of the Western Area Power
Administration.
A.F.: Acre-feet.
AFC: Actual firming energy costs (MWh) as used in the PYA formula.
AHP: Available Hydropower.
Basin Fund: Upper Colorado River Basin Fund.
BFBB: Basin Fund Beginning Balance as used in the CRC formula.
BFTB: Basin Fund Target Balance as used in the CRC formula.
Capacity: The electric capability of a generator, transformer,
transmission circuit, or other equipment. It is expressed in kW.
Capacity Rate: The rate which sets forth the charges for capacity.
It is expressed in $/kWmonth and applied to each kW of CROD.
Commission: Federal Energy Regulatory Commission.
Composite Rate: The rate for firm power which is the total annual
revenue requirement for capacity and energy divided by the total
annual energy sales. It is expressed in mills/kWh and used for
comparison purposes.
CRC: Cost Recovery Charge.
CRCE: CRC Energy (GWh) as used in the CRC and PYA formulas.
CRCEP: CRC Energy Percentage of full SHP as used in the CRC and PYA
formulas.
CROD: Contract Rate of Delivery. The maximum amount of capacity made
available to a preference Customer for a period specified under a
contract.
CRSP: Colorado River Storage Project.
CRSP MC: The CRSP Management Center of Western.
CUP: Central Utah Project.
Customer: An entity with a contract that is receiving firm electric
service from Western's CRSP MC.
DOE: United States Department of Energy.
DOE Order RA 6120.2: An order outlining power marketing
administration financial reporting and ratemaking procedures.
DPR: Definite Plan Report of the CUP.
EA: SHP Energy Allocation (GWh) as used in the CRC formula.
EAC: Sum of Customers' energy allocations subject to the PYA
formula.
Energy: Measured in terms of the work it is capable of doing over a
period of time. It is expressed in kilowatthours.
Energy Rate: The rate which sets forth the charges for energy. It is
expressed in mills/kilowatthour and applied to each kilowatthour
delivered to each Customer.
FA: Funds Available as used in the CRC formula.
FA1: Basin Fund Balance Factor as used in the CRC formula.
FA2: Revenue Factor as used in the CRC formula.
FARR: Additional revenue to be recovered as used in the CRC formula.
FE: Forecasted purchase energy as used in the CRC formula.
FERC: The Commission.
FFC: Forecasted Firming Energy Cost per MWh as used in the CRC and
PYA formula.
Firm: A type of product and/or service guaranteed to be available in
accordance with the terms of the contract.
FRN: Federal Register notice.
FX: Forecasted energy purchase expense as used in the CRC formula.
FY: Fiscal year; October 1 to September 30.
GWh: Gigawatthour--the electrical unit of energy that equals 1
billion watthours or 1 million kWh.
HE: Forecasted hydro energy as used in the CRC formula.
Integrated Projects: The resources and revenue requirements of the
Collbran, Dolores, Rio Grande, and Seedskadee projects blended
together with the CRSP to create the SLCA/IP resources and rate.
kW: Kilowatt--the electrical unit of capacity that equals 1,000
watts.
kWh: Kilowatthour--the electrical unit of energy that equals 1,000
watts in 1 hour.
kWmonth: Kilowattmonth--the electrical unit of the monthly amount of
capacity.
Load: The amount of electric power or energy delivered or required
at any specified point(s) on a system.
M&I: Municipal and Industrial water.
Mill: A monetary denomination of the United States that equals one
tenth of a cent or one thousandth of a dollar.
Mills/kWh: Mills per kilowatthour--a unit of charge for energy.
MW: Megawatt--the electrical unit of capacity that equals 1 million
watts or 1,000 kilowatts.
NB: Net Balance as used in the CRC formula.
NEPA: National Environmental Policy Act of 1969 (42 U.S.C. 4321, et
seq.).
Non-firm: A type of product and/or service not always available at
the time requested by the Customer.
NR: Net Revenue. Revenue remaining after paying all annual expenses
as used in the CRC formula.
O&M: Operation and Maintenance.
OM&R: Operation, Maintenance & Replacements.
PAE: Projected Annual Expenses as used in the CRC formula.
PAR: Projected Annual Revenue ($) without CRC as used in the CRC
formula.
Participating Projects: The Dolores and Seedskadee projects
participating with CRSP according to the CRSP Act of 1956.
[[Page 47825]]
PFE: Prior year actual firming energy as used in the PYA formula.
PFX: Prior year actual firming expenses as used in the PYA formula.
Pinch Point: The nearest future year in the PRS where cumulative
expenses equal cumulative revenues.
Power: Capacity and energy.
Project Use: Power used to operate the CRSP Participating Projects
facilities under Reclamation Law.
Proposed Rate: A rate that has been recommended by Western to the
Deputy Secretary of DOE for approval.
Provisional Rate: A rate which has been confirmed, approved, and
placed into effect on an interim basis by the Deputy Secretary of
DOE.
PRS: Power Repayment Study.
PYA: Prior Year Adjustment.
RA: Revenue Adjustment as used in the PYA formula.
Rate Brochure: A document explaining the rationale and background
for the rate proposal contained in this Rate Order, dated February
2005.
Ratesetting PRS: The PRS used for the rate adjustment proposal.
Reclamation: United States Department of the Interior, Bureau of
Reclamation.
Reclamation Law: A series of Federal laws. Viewed as a whole, these
laws create the originating framework under which Western markets
power.
Revenue Requirement: The revenue required to recover annual
expenses, such as O&M, purchase power, transmission service
expenses, interest, deferred expenses, and repayment of Federal
investments, and other assigned costs.
SHP: Sustainable Hydropower.
SLCA/IP: Salt Lake City Area Integrated Projects--the resources and
revenue requirements of the Collbran, Dolores, Rio Grande, and
Seedskadee projects blended together with the CRSP to create the
SLCA/IP rate.
Supporting Documentation: A compilation of data and documents that
support the Rate Brochure and the rate proposal.
USDA: United States Department of Agriculture.
Western: United States Department of Energy, Western Area Power
Administration.
WL: Waiver Level as used in the CRC formula.
WLP: Waiver Level Percentage of full SHP as used in the CRC formula.
WPR: The Work Program Review is a draft estimate of costs that are
expected to be included in the Congressional Budget for Western and
Reclamation.
WRP: Western Replacement Power.
Effective Date
The new interim rates will take effect on the first day of the
first full billing period beginning on or after October 1, 2005, and
will remain in effect until September 30, 2010, pending approval by the
Commission on a final basis.
Public Notice and Comment
Western followed the Procedures for Public Participation in Power
and Transmission Rate Adjustments and Extensions, 10 CFR part 903, in
developing these rates. The steps Western took to involve interested
parties in the rate process were:
1. The proposed rate adjustment process began October 6, 2004, when
Western mailed a notice announcing an informal Customer meeting on
October 27, 2004, to all SLCA/IP Customers and interested parties.
2. On October 27, 2004, beginning at 1:30 p.m., an informal
Customer meeting was held to discuss the components and rationale for
the rate adjustment, present a rate design, and answer questions.
3. A Federal Register notice published on January 18, 2005 (70 FR
2858), announced the proposed rate adjustment for SLCA/IP. This
publication began a public consultation and comment period, and
announced the public information and public comment forums.
4. On February 7, 2005, Western's CRSP MC mailed letters to all
SLCA/IP preference Customers and interested parties transmitting the
Brochure for Proposed Rates.
5. On February 23, 2005, beginning at 1:30 p.m., Western held a
public information forum at the Quality Inn, Salt Lake City Airport in
Salt Lake City, Utah. Western provided detailed explanations of the
proposed SLCA/IP rates. Western provided rate brochures, supporting
documentation, and informational handouts.
6. On March 30, 2005, beginning at 1:30 p.m., Western held a
comment forum at the Quality Inn, Salt Lake City Airport in Salt Lake
City, Utah, to give the public an opportunity to comment for the
record. Five individuals commented at this forum.
7. Western received 21 comment letters during the consultation and
comment period, which ended April 18, 2005. All formally submitted
comments have been considered in preparing this Rate Order.
Comments
Written comments were received from the following organizations:
Ak-Chin Tribe, Arizona, Aspen City, Colorado, Bureau of Reclamation,
Upper Colorado Region, Utah, Colorado River Commission of Nevada,
Nevada, Colorado River Energy Distributors Association, Arizona,
Colorado Springs Utility, Colorado, Deseret Power Electric Cooperative,
Utah, Dolores Water Conservancy District, Colorado, Fleming City,
Colorado, Gunnison City, Colorado, Holyoke City, Colorado, Irrigation &
Electrical Districts Association of Arizona, Arizona, Mt. Wheeler
Power, Inc., Nevada, Navajo Tribal Utility Authority, Arizona, Oak
Creek, Town, Colorado, Ocotillo Water Conservation District, Arizona,
Platte River Power Authority, Colorado, Salt River Project, Arizona,
Tri-State Generation and Transmission Association, Inc., Colorado, Utah
Associated Municipal Power Systems, Utah, and White Mountain Apache
Tribe, Arizona.
Representatives of the following organizations made oral comments:
Colorado River Energy Distributors Association, Arizona, Deseret Power
Electric Cooperative, Utah, Dolores Water Conservancy District,
Colorado, Garkane Energy Incorporated, Utah, Utah Associated Municipal
Power Systems, Utah.
Project Description
The SLCA/IP consists of the CRSP and the Rio Grande and Collbran
projects. The CRSP includes two Participating Projects that have power
facilities, the Dolores and Seedskadee projects. Western integrated the
Rio Grande and Collbran projects with CRSP for marketing and ratemaking
purposes on October 1, 1987. The goals of integration were to increase
marketable resources, simplify contract and rate development and
project administration by creating one rate, and to ensure repayment of
the Projects' costs. All Integrated Projects maintain their individual
identities for financial accounting and repayment purposes, but their
revenue requirements are integrated into the SLCA/IP PRS for
ratemaking.
Power Repayment Study--Firm Power Rate
Western prepares a PRS each FY to determine if revenues will be
sufficient to repay, within the required time, all costs assigned to
the SLCA/IP revenue requirement. Repayment criteria are based on law,
policies including DOE Order RA 6120.2, and authorizing legislation.
Proposed rates for SLCA/IP firm power result in an overall
composite rate increase of approximately 22 percent on October 1, 2005,
when compared to the existing SLCA/IP firm power rates in Rate Schedule
SLIP-F7. The current composite rate under Rate Schedule SLIP-F7 is
20.72 mills/kWh; however, in actuality this effective composite rate is
25.10 mills/kWh as a result of a decrease in the contractual amount of
electrical service provided to the firm power Customers beginning in FY
2005. The proposed composite rate is 25.28 mills/kWh. The following
table
[[Page 47826]]
compares the current and proposed firm power rates:
Comparison of Current and Proposed Firm Power Rates
------------------------------------------------------------------------
Proposed
Current rate rate Increase
------------------------------------------------------------------------
Rate Schedule................. SLIP-F7 SLIP-F8 ............
Energy (mills/kWh)............ 9.50 10.43 .93
Capacity ($/kW month)......... 4.04 4.43 .39
Composite Rate (mills/kWh).... 20.72 25.28 4.56
------------------------------------------------------------------------
Cost Recovery Charge
Over the last several years, hydropower generation production has
been lower than expected, and purchased power prices have been higher
than forecasted. Reduced hydropower generation, due to extended drought
conditions in the region, has caused actual purchase power expenses to
be significantly higher than forecasts, resulting in cost-recovery
issues for the Basin Fund.
In the proposed Ratesetting PRS, purchased power expense beyond the
initial 5-year cost evaluation period has been reduced in anticipation
that return-to-normal water conditions will result in Western meeting
its firm power commitments through hydropower generation. However, in
the event that expenses significantly exceed estimates and in order to
adequately recover and maintain a sufficient balance in the Basin Fund,
Western proposes to implement a CRC on all SHP energy.
The CRC is strictly a Basin Fund cash analysis and is outside of
the PRS calculations. In calculating the CRC, Western will forecast the
amount of revenue available in the Basin Fund to purchase the energy
necessary to deliver the yearly SHP energy commitment in the next FY.
Western will estimate the availability of revenue in the Basin Fund, at
the beginning and end of the FY, to maintain a BFTB for the following
year, and to limit the annual loss to the Basin Fund. The BFTB will be
equal to 15 percent of the upcoming year's total expenses but not less
than $20 million. The allowable annual loss is limited to no more than
25 percent of the BFBB. Once Western determines the amount of revenue
available in the Basin Fund for anticipated expenses, it will determine
if additional revenue is needed and will include this amount in the
Customers' firm power bill through the assessment of a CRC. All
expenses are considered in the CRC, with the exception of non-
reimbursable program expenses, which are limited to $25 million per
year, indexed for inflation. This limitation is for CRC formula
calculation purposes only, and is not a cap on actual non-reimbursable
expenses.
Calculation of the CRC
Western will forecast the amount of purchased energy necessary to
deliver SHP energy, the corresponding expense, and determine the funds
available for firming purchases. In determining the forecasted funds
available, the impact on Net Revenue (projected annual revenue less
projected annual expenses), and the Basin Fund Net Balance (Basin Fund
FY beginning balance plus net revenue) will be analyzed. If the impact
on both of these fall short of the revenue and balance triggers
described above, the CRC will not apply during that FY. If the impact
on either net revenue or the Basin Fund balance is greater than the
allowable limits, the smaller factor will be used to determine the
additional revenue requirements. For FY 2006, the CRC charge is 0.0
mills/kWh. For purposes of explaining how the CRC is calculated, the
following example is provided:
Sample CRC Calculation
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Description Formula \1\
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Step One.--Determine the Net Balance Available in the Basin Fund
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BFBB............................ Basin Fund Beginning $27,900,000 Financial forecast.
Balance ($).
BFTB............................ Basin Fund Target Balance $27,665,550 $.15 * PAE (not less than $20
($). million).
PAR............................. Projected Annual Revenue $165,984,000 Financial forecast.
($) w/o CRC.
PAE............................. Projected Annual Expense $184,437,000 Financial forecast.
($).
NR.............................. Net Revenue ($)............ $(18,453,000) PAR-PAE.
NB.............................. Net Balance ($)............ $9,447,000 BFBB + NR.
---------------------------------
Step Two.--Determine the Forecasted Energy Purchase Expenses
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EA.............................. SHP Energy Allocation (GWh) 4,655 Customer contracts.
HE.............................. Forecasted Hydro Energy 4,218 Hydrologic & generation
(GWh). forecast.
FE.............................. Forecasted Energy Purchase 427 EA-HE.
(GWh).
FFC............................. Forecasted Avg. Energy $55.50 From commercially available
Price per MWh ($). price indices.
FX.............................. Forecasted Energy Purchase $24,253,500 PE * FFC.
Expense ($).
---------------------------------
Step Three.--Determine the Amount of Funds Available for Firming Energy Purchases, and Then Determine Additional
Revenue To Be Recovered. The Following Two Formulas Will Be Used To Determine FA, the Leader of the Two Will Be
Used
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FA1............................. Based Fund Balance Factor $6,034,950 If (NB > BFBB, FX, FX- (BFTB-
($). NB)).
[[Page 47827]]
FA2............................. Revenue Factor ($)......... $12,775,500 If (NR > -.25*BFBB, FX, FX + NR
+.25*BFBB).
FA.............................. Funds Available ($)........ $6,034,950 Lesser of FA1 or FA2 (not less
than $0).
FARR............................ Additional Revenue to be $18,218,550 FX-FA.
Recovered ($).
---------------------------------
Step Four.--Once the FA for Purchases Have Been Determined, the CRC Can Be Calculated, and the WL Can Be
Determined
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WL.............................. Waiver Level (GWh)......... 4,327 If (EA > HE, EA, HE + (FE*(FA/
FX))), but not less than HE.
WLP............................. Waiver Level Percentage of 93% WL/EA*100.
Full SHP.
CRCE............................ CRC Energy (GWh)........... 328 EA-WL.
CRCEP........................... CRC Energy Percentage of 7% CRCE/EA*100.
Full SHP.
CRC............................. Cost Recovery Charge (mills/ 3.91 FARR/(EA*1,000).
kWh).
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\1\ Some formulas in this table are based on standard Excel spreadsheet formatting.
Narrative CRC Example
Step One: Determine the Net Balance Available in the Basin Fund
BFBB--Determine the Basin Fund Beginning Balance for next FY. In
this example, Western estimates that the BFBB will be $27,900,000.
BFBB = $27,900,000
BFTB--Determine the Basin Fund Target Balance for the next FY. The
BFTB is 15 percent of Projected Annual Expenses for the coming FY, but
will not be less than $20 million.
BFTB = 0.15 * PAE
BFTB = 0.15 * $184,437,000
BFTB = $27,665,550
PAR-Projected Annual Revenue is an estimate of revenue for the next
FY.
PAR = $165,984,000
PAE--Projected Annual Expense is an estimate of total cash outlay
from the Basin Fund for the next FY. The PAE includes all cash outlay
from the Basin Fund including non-reimbursable expenses, which are
capped at $25 million per year plus an inflation factor. This
limitation is for CRC formula calculation purposes only, and is not a
cap on actual non-reimbursable expenses.
PAE = $184,437,000
NR--Net Revenue equals Projected Annual Revenues minus Projected
Annual Expenses.
NR = PAR-PAE
NR = $165,984,000-$184,437,000
NR = ($18,453,000)
NB--Net Balance is the Basin Fund Beginning Balance plus Net
Revenue.
NB = BFBB + NR
NB = $27,900,000 + ($18,453,000)
NB = $9,447,000
Step Two: Determine the Forecasted Energy Purchase Expenses
EA--The Sustainable Hydropower Energy Allocation. This does not
include Project Use Customers.
EA = 4,655 GWh
HE--The forecasted Hydro Energy available during the next FY.
HE = 4,218 GWh
FE--Forecasted Energy purchases are the difference between the
sustainable hydropower allocation and the forecasted hydro energy
available for the next FY, or the anticipated firming purchases for the
next year.
FE = EA-HE
FE = 4,655-4,218
FE = 437 GWh
FFC--The forecasted energy price for the next FY per MWh based on
commercially available price indices.
FFC = $55.50/WHh
FX--Forecasted Energy purchase power expenses based on the current year
April 24-month study, representing an estimate of the total cost of
firming purchases for the coming FY.
FX = FE * FFC * 1,000
FX = 437 * $55.50 * 1,000
FX = $24,253,500
Step Three: Determine the Amount of Funds Available for Firming Energy
Purchases, and Then Determine Additional Revenue To Be Recovered. The
Following Two Formulas Will Be Used To Determine FA, the Lesser of the
Two Will Be Used. Funds Available Shall Not Be Less Than Zero
A. Basin Fund Balance Factor (FA1)
The first formula ensures that the Net Balance will not go below 15
percent of the total expenses for that FY. If the net balance is
greater than the Basin Fund Target Balance, then the value for
forecasted energy purchase power expenses is used. If the net balance
is less than the Basin Fund Target Balance, then reduce the value of
the forecasted energy purchase power expenses by the difference between
the Basin Fund Target Balance and the Net Balance.
FA1 = If (NB > BFTB, FX, FX-(BFTB-NB))
If the Net Balance is greater than the Basin Fund Target Balance,
then
FA1 = FX
If the Net Balance is less than the Basin Fund Target Balance, then
FA1 = FX-(BFTB-NB)
Since the Net Balance, $9,447,000, is less than the Basin Fund
Target Balance, $27,665,550,
FA1 = FX-(BFTB-NB)
FA1 = $24,253,500-($27,665,550-$9,447,000)
FA1 = $6,034,950
B. Basin Fund Revenue Factor (FA2)
The second factor ensures that Net Revenue does not result in a
loss that exceeds 25 percent of the Basin Fund Beginning Balance. If
Net Revenue is greater than a minus 25 percent of the Basin Fund
Beginning Balance, then use the value for Forecasted Energy Purchase
Expense. If the Net Revenue is less than a minus 25 percent of the
Basin Fund Beginning Balance, then add the Net Revenue and 25 percent
of the Basin Fund Beginning Balance to the FX.
FA2 = If (NR > -0.25 * BFBB, FX, FX + NR + 0.25 * BFBB)
If the NR does not result in a loss that exceeds 25 percent of the
BFBB, then
FA2 = FX
If the NR results in a loss that exceeds 25 percent of the BFBB,
then
FA2 = FX + NR + 0.25 * BFBB
Since NR ($18,453,000) is less than a minus 25 percent of BFBB
($6,975,000)
FA2 = FX + NR + 0.25 * BFBB
[[Page 47828]]
FA2 = $24,253,500 + ($18,453,000) + $6,975,000
FA2 = $12,775,500
FA--Determine the Funds Available by using the lesser of FA1 and
FA2.
FA1 = $6,034,950
FA2 = $12,752,000
FA = FA1
FA = $6,034,950
FARR--Calculate the additional revenue to be recovered by
subtracting the Funds Available from the forecasted energy purchase
power expenses.
FARR = FX-FA
FARR = $24,253,500-$6,034,950
FARR = $18,218,550
Step Four: Once the Additional Revenue To Be Recovered Has Been
Determined, the Cost Recovery Charge Can Be Calculated, and the Waiver
Level Can Be Determined
A. Cost Recovery Charge (CRC)
The CRC will be a charge to recover the additional revenue required
as calculated in Step 3. The CRC will apply to all Customers who choose
not to request a waiver of the CRC, as discussed below. The CRC equals
the additional revenue to be recovered divided by the total energy
allocation to all Customers for the FY.
CRC = FARR/EA
CRC = $18,218,550/4655
CRC = 3.91 mills/kWh
B. Waiver Level (WL)
The WL provides Customers the ability for Western to reduce
purchased power expenses by scheduling less energy than their
contractual amount. Therefore, Western will establish an energy WL. For
those Customers who voluntarily schedule no more energy than their
proportionate share of the WL, Western will waive the CRC for that
year.
The WL will be set at the sum of the energy that can be provided
through hydro generation and purchased with Funds Available. The WL
will not be less than the Forecasted Hydro Energy.
WL = If (EA < HE, EA, HE + (FE * (FA/FX)))
If SHP Energy Allocation is less than forecasted HE available, then
WL = EA
If SHP Energy Allocation is greater than forecasted HE available,
then
WL = HE + (FE * (FA/FX))
Since HE 4,218 is less than SHP Energy Allocation, 4,655,
WL = HE + (FE * (FA/FX))
WL = 4,218 + (437 * ($6,034,950/$24,253,500))
WL = 4,327 GWh
Prior Year Adjustment (PYA) Calculation
Since the annual determination of the CRC is based upon estimates,
an annual PYA will also be calculated when the CRC is applied. The PYA
will be applied to those Customers who were charged the CRC. The CRC
PYA for subsequent years will be determined by comparing the prior
year's estimated firming energy cost to the prior year's actual firming
energy cost for the energy provided above the WL. The PYA will result
in an increase or decrease to a Customer's firm energy costs over the
course of the following year. Because there will not be a CRC for FY
2006, the PYA will not be needed in 2007. Below is an example of a PYA
calculation.
Sample PYA Calculation
------------------------------------------------------------------------
Description Formula
------------------------------------------------------------------------
Step One--Determine Actual Expenses and Purchases for Previous Year's
Firming. This Data Will Be Obtained From Western's Financial Statements
at the End of FY
------------------------------------------------------------------------
PFX................. Prior Year $27,950,000 Financial
Actual Firming Statements.
Expenses ($).
PF Prior Year 475 Financial
E. Actual Firming Statements.
Energy (GWh).
---------------------
Step Two--Determine the Actual Firming Cost for the CRC Portion.
------------------------------------------------------------------------
EAC................. Sum of the 2,500
energy
allocations of
Customers
subject to the
PYA (GWh).
FFC................. Forecasted 55.50 From CRC
Firming Energy Calculation.
Cost--($/MWh).
AFC................. Actual Firming 58.84 PFX/PFE.
Energy Cost--
($/MWh).
CRCEP............... CRC Energy 7% From CRC
Percentage. Calculation.
CRCE................ Purchased 176 EAC*CRCEP.
Energy for the
CRC (GWh).
---------------------
Step Three--Determine Revenue Adjustment (RA) and PYA.
------------------------------------------------------------------------
RA.................. Revenue $589,198 (AFC-FFC)*CRCE*
Adjustment ($). 1,000.
PYA................. Prior Year 0.24 (RA/EAC)/1,000.
Adjustment
(mills/kWh).
------------------------------------------------------------------------
Narrative PYA Example Only (Assumes That a CRC Was needed for the
Previous Year)
Step One: Determine actual expenses and purchases for previous year's
firming. This data will be obtained from Western's financial statements
at end of FY.
PFX--Prior year actual firming expense,
PFX = $27,950,000
PFE--Prior year actual firming energy,
PFE = 475 GWh
Step Two: Determine the actual firming cost for the Cost Recovery
Charge portion.
EAC--Sum of the energy allocations of Customers who were assessed
the Cost Recovery Charge for the prior year.
EAC = 2,500 GWh
CRCE--The amount of CRC Energy needed, so
CRCE = EAC * CRCEP
CRCE = 2500 * .07
CRCE = 176 GWh
AFC--The Actual Firming Energy Cost is the PFX divided by the PFE
AFC = (PFX / PFE) / 1,000
AFC = ($27,950,000 / 475) / 1,000
AFC = $58.84
Step Three: Determine Revenue Adjustment and PYA.
RA--The Revenue Adjustment is Actual Firming Energy Cost less
Forecasted Firming Energy Cost times Purchased Energy for the CRC.
RA = (AFC-FFC) * CRCE * 1,000
RA = ($58.84-$55.50) * 176 * 1,000
RA = $589,198
PYA--The PYA is the Revenue Adjustment divided by the SHP Energy
[[Page 47829]]
Allocation for the Cost Recovery Charge Customers only.
PYA = (RA / EAC) / 1,000
PYA = ($589,198 / 2,500) / 1,000
PYA = .24 mills/kWh
The Customers' PYA will be based on their prior year's energy
multiplied by the PYA mills/kWh to determine the dollar value that will
be assessed. The Customer will be charged or credited for this dollar
amount equally in the remaining months of the next year's billing
cycle. Western will attempt to complete this calculation by December of
each year. Therefore, if the PYA is calculated in December, the charge/
credit will be spread over the remaining 9 months of the FY (January
through September).
CRC Schedule: Western will provide its Customers with information
concerning the anticipated CRC each May prior to the beginning of the
effective FY. The established CRC will be in effect for the entire FY.
The table below displays the time frame for determining the amount of
purchases needed, notifying Customers of the CRC, and the deadline for
requesting a waiver of the CRC. This schedule has been changed to
reflect Customer concerns that the proposed schedule did not allow them
enough time to make a decision about requesting a waiver of the CRC.
CRC Schedule
------------------------------------------------------------------------
Task Date each year
------------------------------------------------------------------------
April 24--Month Study (Forecast to Model April 1.
Projections).
CRC Notice to Customers................... May 1.
Waiver Request Submitted By Customers..... June 15.
Schedules Effective....................... October 1.
------------------------------------------------------------------------
Existing and Provisional Rates
A comparison of the existing and provisional firm power rates
follows:
Comparison of Existing and Provisional Salt Lake City Area/Integrated Projects Firm Power and Cost Recovery
Charge
----------------------------------------------------------------------------------------------------------------
Current rate October 1, 2003- Proposed rate October 1, 2005- Percent
Rate schedule September 30, 2007 (SLIP-F7) September 30, 2010 (SLIP-F8) change
----------------------------------------------------------------------------------------------------------------
Energy (mills/kWh)................. 9.5........................... 10.43......................... 10
CRC (if applicable)................ N/A........................... varies........................ ...........
Total Energy Charge................ 9.5........................... varies........................ N/A
Capacity ($/kWmonth)............... 4.04.......................... 4.43.......................... 10
----------------------------------------------------------------------------------------------------------------
Certification of Rates
Western's Administrator certified that the interim rates for SLCA/
IP firm power are the lowest possible rates consistent with sound
business principles. The provisional rates were developed following
administrative policies and applicable laws.
SLCA/IP Firm Power Rate Discussion
According to Reclamation Law, Western must establish power rates
sufficient to recover operation, maintenance, purchased power expenses,
interest expenses, and repayment of power investment and irrigation
aid.
The existing rate for SLCA/IP firm power under Rate Schedule SLIP-
F7 expires September 30, 2007, a new rate to recover increased costs
will be effective October 1, 2005, and Rate Schedule SLIP-F7 will be
superseded by the new rates in Rate Schedule SLIP-F8. The provisional
rates for SLCA/IP firm power consist of a capacity rate and an energy
rate. The provisional capacity rate is $4.43 per kWmonth, and the
provisional energy rate is 10.43 mills/kWh.
Statement of Revenue and Related Expenses
The following table provides a summary of projected revenue and
expense data for the SLCA/IP firm power rate through the 5-year
provisional rate approval period.
SLCA/IP Firm Power Comparison of 5-Year Rate Period (FY 2006-FY 2010) Total Revenues and Expenses
----------------------------------------------------------------------------------------------------------------
Existing rate Proposed rate Difference
($000) ($000) ($000)
----------------------------------------------------------------------------------------------------------------
Total Revenues................................................. $775,642 $815,494 $39,852
----------------------------------------------------------------
Revenue Distribution
----------------------------------------------------------------------------------------------------------------
Expenses:
O&M........................................................ 292,755 305,198 12,443
Purchased Power and Wheeling............................... 55,426 131,529 76,103
Integrated Projects Requirements........................... 45,250 38,582 (6,668)
Interest................................................... 134,559 80,003 (54,556)
Other...................................................... 19,660 18,488 (1,172)
-----------------
Total Expenses......................................... 547,650 573,800 26,150
Principal Payments:
Capitalized Expenses (deficits)............................ 0 0 0
Original Project and Additions............................. 214,278 99,970 (114,308)
Replacements............................................... 13,714 141,724 128,010
Irrigation................................................. 0 0 0
Total Principal Payments............................... 227,992 241,694 13,702
-----------------
[[Page 47830]]
Total Revenue Distribution............................. 775,642 815,494 39,852
----------------------------------------------------------------------------------------------------------------
Basis for Rate Development
The existing rates for SLCA/IP firm power in Rate Schedule SLIP-F7
no longer provide sufficient revenues to pay all annual costs,
including interest expense, and repay investment and irrigation aid
within the allowable periods. The adjusted rates reflect increases
primarily in O&M costs, purchase power costs, and a reduction in energy
sales. The costs are offset by changes in interest and principal
payments that are a result of a reconstruction of the PRS that ensured
all principal payments and interest were applied correctly in the PRS.
The provisional rates will provide sufficient revenue to pay all annual
costs, including interest expense, and repayment of power investment
and irrigation aid within the allowable periods. The provisional rates
will take effect on October 1, 2005, to correspond with the start of
the Federal FY, and will remain in effect through September 30, 2010.
Provisions for transformer losses adjustment, power factor
adjustment, WRP administrative charge, and Customer Displacement Power
administrative charge adjustments are part of the provisional rates for
SLCA/IP firm power. Western will not modify the provisions and
methodologies for these adjustments, which will remain as specified in
SLIP-F7.
Comments
The comments and responses regarding the firm power rate,
paraphrased for brevity when not affecting the meaning of the
statement(s), are discussed below. Direct quotes from comment letters
are used for clarification where necessary. The rate process issues
discussed are (1) Base Rate and (2) Cost Recovery Charge.
1. Base Rate
A. Comment: A Customer representative wanted to know if the
salinity costs of the USDA were in the FY 2006 President's Budget and
if the same amount is being used in the PRS.
Response: The USDA and Natural Resource Conservation Service
salinity program costs are included in the FY 2006 President's Budget.
The total Upper Basin Fund obligation for salinity in the FY 2006
President's Budget is estimated at $2.2 million, which includes
Reclamation's salinity program costs. Expenses included in the
Ratesetting PRS are from the FY 2006 WPR, which included $2.6 million
for salinity program costs. The minimal reduction in the FY 2006
President's Budget for salinity costs would have almost no impact on
the firm power rate. This would impact the rate less than .01 mill/kWh.
B. Comment: A Customer group requests the final CUP DPR for the
Bonneville Unit be included in the PRS and costs allocated to temporary
irrigation be reclassified as M&I for repayment purposes. Another
commenter was concerned about using the DPR in the PRS stating that the
DPR has a significant impact on the proposed rate, yet the costs
associated with the DPR are tentative, with cost estimates based on
preliminary engineering designs and final cost allocations remaining
uncertain. To reduce the impact of the DPR on the rate, a Customer
group recommended that all costs in the final DPR allocated to
irrigation be included beyond the ratesetting period. The commenter
suggested that the DPR should be incorporated into a future PRS when
the numbers are more certain.
Response: The results of the Final Supplement to the 1988 DPR for
the Bonneville Unit of the CUP have been included in the PRS and are
final numbers from Reclamation. In the draft Bonneville Unit DPR, there
was mention of a block of water (temporary irrigation) amounting to
20,000 A.F. The DPR mentioned that this water has been used for
irrigation since 1996 and would continue through 2030. In 2030, this
20,000 A.F. would be converted to M&I use, along with 10,000 additional
A.F. earmarked for M&I use. The 30,000 A.F. would be used for M&I
through the remainder of the evaluation period (FY 2115). The draft DPR
used an accounting method that compared the allocation of the water
between irrigation and M&I water as follows:
----------------------------------------------------------------------------------------------------------------
Irrigation M&I Total
----------------------------------------------------------------------------------------------------------------
Acre--Feet...................................................... 20,000 30,000 50,000
Percent......................................................... 40% 60% 100%
----------------------------------------------------------------------------------------------------------------
These percentages, as shown in the table above, were used to
allocate ``assigned joint costs'' between irrigation and M&I in the
draft DPR. The draft DPR added the benefit (water) used by irrigation
and the total water eventually used by M&I and computed a percent of
each to the sum of the two or total water use. Irrigation's use of the
water was 20,000 A.F., and M&I's was 30,000 A.F. for a total of 50,000
A.F. This was incorrect since there is only a total of 30,000 A.F.
(20,000 A.F. initially used by irrigation and the 10,000 A.F. reserved
for M&I use that was never used by irrigation). The final DPR now
included in the PRS uses a present value of water supply approach. This
brings the two uses of the water back to a present value based on
historical and future use. The present values were compared to each
other for allocation purposes as follows:
----------------------------------------------------------------------------------------------------------------
Irrigation M&I Total
----------------------------------------------------------------------------------------------------------------
Acre--Feet...................................................... 293,598 318,383 611,981
Percent......................................................... 47.98% 52.02% 100%
----------------------------------------------------------------------------------------------------------------
[[Page 47831]]
In the final DPR, weight is given to the timing and uses of the
temporary irrigation water. The present value method, as opposed to the
method used in the draft DPR, actually yields an increase in the
percentage allocation to irrigation.
C. Comment: Several Customers commented that they support Western's
inclusion of $2 million per year of purchased power costs in the PRS in
those years beyond FY 2009.
Response: Western appreciates the support. As discussed in the rate
brochure, Western has provided notice to its Customers that it may
change the SHP allocations in FY 2009 to where little or no purchased
power costs will be necessary except for operational purposes. Western
will continue to work with its Customers and provide ample notice
regarding SHP allocations.
D. Comment: A Customer representative encouraged Western to
consider potential rate and cash flow impacts prior to including
expenses such as replacement of the Flaming Gorge transformers in its
WPR. The representative stated the purpose and intent of the 1992 WPR
and joint transmission planning principles are to promote ``rate impact
planning,'' so full consideration is given to potential project and
rate impacts prior to decisions being made to include the costs in CRSP
WPR documents. Specifically, Western should provide study results
identifying the cause of the overload condition at Flaming Gorge and
should actively seek cost sharing from other entities in the affected
region prior to including the full cost of the transformers in the WPR.
In addition, several Customers believe that Western needs to reduce its
O&M and construction costs, including travel expenses.
Response: Replacement of the Flaming Gorge transformers is
necessary due to system overload conditions. Western believes these
replacements are necessary to keep the system intact. On June 28, 2005,
Western hosted a meeting with all of the affected parties to discuss
the history of the Flaming Gorge transformers as well as the operating
history under steady-state and N-1 outage conditions. Western will
continue to work with the affected parties as part of the process for
replacing the Flaming Gorge transformers. The rate impact of including
a $3 million replacement cost in FY 2006 is approximately .02 mills/
kWh. Western will continue to pursue cost-reduction opportunities;
however, it must also maintain system reliability. Western believes the
WPR process it conducts with its Customers has been beneficial in
reducing both Reclamation's and Western's O&M and Construction costs.
Western will continue to look for ways to reduce its O&M costs and
consult with Customers on program costs. Travel expenses are being
managed carefully, and discretionary travel is being deferred and/or
conference calls are being used more frequently.
E. Comment: Several Customers suggest that Western and Reclamation
suspend CRSP power revenue contributions to ``discretionary''
environmental programs during drought conditions and seek alternative
sources of funding, such as appropriations. To the extent the agencies
can influence actual spending for the Colorado River Basin Salinity
Control Program, they should urge reduced spending during drought
conditions. In addition, the agencies should not support or implement
experimental or operational changes that have a negative impact on the
Basin Fund cash flow during periods of drought.
Response: Western and Reclamation also support the concept of
seeking alternative sources of funding to assist with funding shortages
resulting from the continuing drought and will work with power
Customers and other interests in seeking acceptable solutions; however,
Western and Reclamation do not believe their obligation to fund the
environmental programs is discretionary.
F. Comment: A Customer group recommends that Western adopt a policy
of solving the PRS to the nearest 100th of a mill as opposed to
rounding the rate up to the nearest 10th of a mill.
Response: Western agrees and has solved the proposed rate to the
nearest 100th of a mill.
G. Comment: A Project Use Customer commented that irrigators are
getting a ``double hit,'' meaning that they have no water and their
Project Use rates are going up 25 to 30 percent. The commenter asked
that Western and Reclamation explore other options.
Response: Western does not directly charge Project Use Customers.
Reclamation determines this charge. Historically, Reclamation has
chosen to charge Project Use Customers the same rate as Western charges
its firm power Customers. Project Use Customers will see an increase of
10 percent because their energy allocations have not been reduced like
firm electric service Customers.
H. Comment: A Customer stated that Reclamation's Upper Colorado
Region's Project Use rate (UCP-2) should not be increased so that it
equals the proposed SLCA/IP rate. The Customer further stated that the
practice of having Reclamation's rate equaling the SLCA/IP rate should
be discontinued and that participating irrigation projects should be
given relief from the proposed rate increase.
Response: Project Use Customers are currently charged under
Reclamation rate schedule UCP-2. Reclamation determines this rate.
I. Comment: Some Customers commented that much of the impetus for
the proposed rate increase stems from the acceleration of the pinch-
point year from FY 2060 to FY 2025.
Response: The change in the pinch point is not a cause for the rate
increase. The current SLCA/IP firm power rate PRS has two pinch-point
years, the dominant one in FY 2060 and a secondary one in FY 2025.
These pinch points are caused by project repayment obligations. These
obligations stem mostly from requirements of the CUP Bonneville Unit
irrigation blocks.
In the current Ratesetting PRS, repayment of the Duchesne block of
the Bonneville Unit is due in FY 2025 and amounts to $104.8 million.
The Southern Utah County and Juab-Mona-Nephi blocks come due with
obligations of $152.3 million and $205.6 million in FY 2057 and FY
2060, respectively.
As a result of the changes in the final DPR, the revised
Ratesetting PRS shows that the Duchesne block due in FY 2025 is reduced
to $97.5 million, and the Southern Utah County and Juab-Mona-Nephi
blocks are replaced by the Starvation block of $13.7 million in FY
2055, the Southern Utah County block of $91.2 million in FY 2057, and
the Uintah Basin Replacement block of $11.4 million also in FY 2057.
In summary, the Duchesne block is reduced by $7.3 million in FY
2025, and the other blocks in and around FYs 2055-2060 are reduced by
$241.6 million, from $357.9 million to $116.3 million.
These changes cause the Duchesne block of $97.5 million due in FY
2025 to become the primary pinch point in the revised PRS. The pinch-
point year that previously occurred in FY 2060 no longer affects the
rate. The FY 2025 pinch-point decrease of $7.3 million has the effect
of reducing the firm power rate by 0.25 mills per kWh.
J. Comment: A few Customers requested that Western use the most up-
to-date purchase power estimates in the PRS.
Response: The future purchased power estimates for FY 2007-2009
have been updated by using the long-term hydrology projections current
as of April 13, 2005. FY 2006 purchased power estimates are based on
[[Page 47832]]
Reclamation's April 2005 24-month study.
2. Cost Recovery Charge
A. Comment: Several Customers commented that the time schedule for
determining if they wanted to request a waiver of the CRC was too
short; they suggested that they be given at least 1 month to respond.
Response: Western agrees and has changed the schedule. The CRC
notice will be provided to the Customers on May 1 of each year, and the
Customers will have until June 15 of each year to request a waiver.
B. Comment: A Customer suggested the CRC be added to the base rate
so there would be a single energy rate.
Response: Western will apply the CRC only when it is needed during
financial hardship situations. This approach is beneficial to the
Customers because the Customers can avoid the CRC by taking less
energy.
C. Comment: Several Customers expressed concern that the CRC should
be tied to purchase power costs only instead of all costs. They are
concerned that Reclamation and Western will be able to put other
expenses into the CRC.
Response: The expenses that are included in the CRC calculation are
Congressional Budget amounts for that current year. These expenses have
been reviewed by the Customers, OMB, and Congress each year.
Specifically, by Attachment No. 5 of the SLCA/IP contracts, Customers
participate in the WPR. Western and Reclamation will continue to
consult with Customers on program cost and formulate work plans through
the review process. A PRS is calculated each year to determine if the
current rate is sufficient to repay all costs within the allowable time
period throughout the ratesetting period. If not, then Western will
begin a rate process.
D. Comment: A Customer commented that the composite rate had been
approximately 28 mills/kWh in previous proposals; but after the CRC was
proposed, the composite rate dropped to approximately 25 mills/kWh. The
Customer asked how much of that drop was attributable to the CRC
proposal versus changes in cost.
Response: The composite rate was projected to be 28.65 mills/kWh
during the informal rate process; it is now 25.28 mills/kWh. This is a
difference of 3.37 mills/kWh. A reduction in aid-to-irrigation costs
reduced the rate by .25 mills/kWh. The remaining 3.12 mills/kWh
reduction was primarily due to lower purchase power costs estimates. In
the proposed Ratesetting PRS, purchased power expense beyond the
initial 5-year, cost-evaluation period has been reduced in anticipation
that return-to-normal water conditions will result in Western meeting
its firm power commitments through hydropower generation. In addition,
Western has provided notice to its Customers that it may change the SHP
allocations in FY 2009 to where little or no purchased power costs will
be necessary except for operational purposes.
E. Comment: A Customer asked for clarification of Western's 3-year
strategic purchase plan for firming energy. The Customer also asked if
Customer input would be involved before making these purchases.
Response: In order to guard against rising energy prices, Western
is considering making some purchases on a 3-year cycle. Western will
consult with Customers when developing the details of this plan.
F. Comment: A Customer group suggested that the BFTB should not be
fixed at $30 million. The BFTB should be a fluid number that would
change with varying circumstances (e.g. hydrology, market prices,
replacements, non-reimbursable expenses, etc.). Another Customer noted
that rather than maintaining the lower limit of the Basin Fund at $30
million, the Basin Fund could be set at $15 million during drought
periods to help stabilize rates and provide additional firming energy
during drought conditions.
Response: Western agrees that the BFTB should vary based on
financial conditions and, therefore, has revised the BFTB to be 15
percent of the total cash-outlay target for the upcoming FY, but not
less than $20 million. For example, FY 2006 forecasted expenses are
$151 million. Fifteen percent of this sum is $22.7 million. The
calculated amount will be included in the yearly CRC proposal sent to
the Customers on May 1 of each year.
G. Comment: Several Customers requested that non-reimbursable costs
included in the CRC's annual-projected expenses be reduced to zero
before any reduction in purchase power expense occurred. Another
Customer stated that the CRC discriminates against Customers and is
arbitrary because it only reduces purchase power costs, while other
controllable costs, such as non-reimbursable expenses, are given
priority at the expense of Customers paying higher rates.
Response: The CRC was developed to help reduce financial hardship
in the Basin Fund; therefore, all revenues and all expenses need to be
considered when determining the CRC. Western recognizes that non-
reimbursable expenses can have considerable impact on the CRC rate and,
therefore, has revised its formula to cap the non-reimbursable expense
included in the CRC calculation at $25 million each year, plus the cost
of inflation. The CRC is charged to all Customers receiving their full
SHP entitlements. Western will grant a waiver of the CRC to those
Customers who voluntarily schedule no more than their proportionate
share of the energy at the WL for a given year. Granting a waiver to an
individual Customer neither increases nor decreases the CRC charge to
other Customers.
H. Comment: A few Customers believe that the purpose of the CRC is
to market a hydro-only product, stating it is a change from the
traditional rate method and departs from SHP allocations. They believe
that the CRC also circumvents the rates process so that rates can be
changed without a public rate process.
Response: The CRC provides Western the ability to pay for the
firming energy necessary to meet its contractual obligations while
still maintaining an appropriate cash balance in the Basin Fund. Since
Western is obligated to provide the contracted amount of energy, this
is a firm product. Western will continue, as required by DOE
regulations, to calculate a PRS each year to determine if the rates are
sufficient to recover costs. If it is necessary to adjust the rate,
Western will begin a rate process. All historical and future expenses
will continue to be included in the PRS as in the past.
I. Comment: A Customer stated that the CRC makes it appear as if
there are sufficient funds to cover all costs.
Response: In any year, the Basin Fund must have sufficient revenues
to cover all costs. The CRC is developed to help ensure that a minimum
balance is maintained and that the Basin Fund does not deplete rapidly.
Western believes this is a positive step to help alleviate Basin Fund
cash balance concerns.
J. Comment: Some Customers asked Western to abandon the CRC and
instead offer a contract to those Customers who want hydro only.
Response: In order to offer a hydro only contract, Western would
need to reopen the contracts and the Post-2004 Marketing Plan. These
are not actions that are warranted at this time. Western will continue
to market the SLCA/IP as described in the Post-2004 Marketing Plan. The
CRC is designed to allow Customers some flexibility to choose if they
want reduced energy deliveries rather than pay a higher cost for some
of the firming expenses. The CRC helps maintain a certain minimum level
in the Basin Fund and also protects the Basin
[[Page 47833]]
Fund from dramatic reductions in any given year. The CRC also assumes
that the base rate is not affected by the Basin Fund balance. Western
will continue to firm SHP as necessary. However, under certain
financial hardship conditions, as determined by the CRC formulas, it
may be necessary to implement the CRC to ensure sufficient revenue so
that Western can meet its SHP obligation.
K. Comment: A few Customers believe the WL can go below the HE if
the costs are increased.
Response: The WL will not be less than the HE. Western has
corrected the CRC formula to prevent this from occurring.
L. Comment: A Customer commented that implementation of the CRC
must also include a complete review process so Customers have
safeguards to ensure that cost recovery is limited only to the purpose
for which the CRC was intended and that the CRC only be used in extreme
circumstances.
Response: Western believes safeguards are already in place under
Attachment No. 5 to the SLCA/IP contracts because Customers can
participate in the WPR process each year.
M. Comment: A Customer commented that the CRC is not a fair method
of creating a secure Basin Fund. It is particularly unfair to smaller
Customers, because their limited alternative resources effectively
eliminate the opportunity of opting out of the CRC.
Response: Each Customer will be allowed to make its own choice to
opt out of the CRC on a yearly basis. All Customers will continue to be
given the opportunity to purchase WRP if they believe that the CRC is
too expensive. Western believes it is to the Customer's advantage to
have a lower base rate and an occasional CRC charge than to have a
higher base rate all of the time.
N. Comment: A Customer commented that it does not support the CRC
and believes that Customers should not be required to pay a higher rate
while relieving Western of its obligations to minimize other costs.
Response: The CRC will only be implemented in years in which a
financial hardship exists. Western will continue to consult with
Customers about controlling costs in the WPR.
O. Comment: A Customer commented that the CRC is a departure from
historic practice. Rates have historically included purchase power
costs.
Response: Purchase power costs are still included in the firm power
rate. The CRC is a new approach to deal with financial hardships that
focuses on the Basin Fund Cash Balance. In the past, when financial
hardships have occurred, Western has consulted with Customers on
passing through firming costs or reducing energy deliveries. Western
believes the CRC is a more certain method of dealing with financial
hardships.
P. Comment: A Customer commented that Western stated in its
``Notice of Determination of the Post-2004 Marketable Resources'' that
the yearly energy levels would be supported by necessary firming
purchases in an appropriate firm power rate and energy allocations
would only be changed by giving proper notice as set forth in the
contract. The Customer believes the CRC circumvents this process.
Responses: Firming purchases are included in the firm power rate,
and the Customers' energy allocations will not change. The ability to
obtain a waiver from the CRC will allow Customers to make their own
decisions if they want to take their full SHP energy allocations or, if
they would prefer, take less energy at a reduced rate.
Q. Comment: A Customer commented that the CRC will not result in
the lowest possible rate, consistent with sound business practices.
Responses: Western believes the proposed firm power rate results in
the lowest possible rate, consistent with sound business principles.
The CRC will only be in place during financial hardship conditions. By
adding the CRC only during these conditions, it will keep the rate
lower during most years than if Western implemented a higher base rate.
R. Comment: A commenter suggested Western abandon the CRC and
instead develop a surcharge, with the amount fixed in advance of rate
implementation that would be available for Western to implement in the
event a Basin Fund shortfall was forecasted.
Response: Western considers the CRC to be a superior option than a
fixed surcharge. The CRC is variable in order to deal with the severity
of the hardship and only charged during financial hardship conditions.
S. Comment: Many Customers expressed support for the CRC.
Response: Western appreciates the support it has received from the
majority of Customers and believes that the CRC is a positive step to
keep the Basin Fund solvent.
T. Comment: A commenter supported the CRC, providing that each
Customer is afforded a waiver opportunity.
Response: Each May 1, all Customers will be notified if a CRC will
be implemented and will be given the option to receive less energy in
exchange for a waiver of the CRC for that year.
U. Comment: Reclamation stated that the variable nature of the CRC
diminishes the collaborative ratesetting processes between the two
agencies. Furthermore, the CRC should not apply to power provided to
Reclamation project loads. Because the project loads have priority in
the use of Federal hydropower, these should not be affected by purchase
power costs.
Response: Western has no intention of changing the collaborative
nature of the ratesetting process between the two agencies. Western
looks forward to continuing to work with Reclamation on rate issues as
it has done in the past and does not plan to change any of the
processes in working with Reclamation, specifically the WPR. Western
agrees that project loads should not be affected by purchase power
costs and has agreed to not include Project Use loads in the CRC
calculation.
Availability of Information
Information about this rate adjustment, including power repayment
studies, comments, letters, memorandums, and other supporting material
made or kept by Western and used to develop the provisional rates, is
available for public review in the Colorado River Storage Project
Management Center, Western Area Power Administration, 150 East Social
Hall Avenue, Suite 300, Salt Lake City, Utah.
Regulatory Procedure Requirements
Regulatory Flexibility Analysis
The Regulatory Flexibility Act of 1980 (5 U.S.C. 601, et seq.)
requires Federal agencies to perform a regulatory flexibility analysis
if a final rule is likely to have a significant economic impact on a
substantial number of small entities and there is a legal requirement
to issue a general notice of proposed rulemaking. Western has
determined that this action does not require a regulatory flexibility
analysis since it is a rulemaking of particular applicability involving
rates or services applicable to public property.
Environmental Compliance
In compliance with the National Environmental Policy Act (NEPA) of
1969 (42 U.S.C. 4321, et seq.); Council on Environmental Quality
Regulations (40 CFR parts 1500-1508); and DOE NEPA Regulations (10 CFR
part 1021), Western has determined that this action is categorically
excluded from preparing an environmental assessment or an environmental
impact statement.
[[Page 47834]]
Determination Under Executive Order 12866
Western has an exemption from centralized regulatory review under
Executive Order 12866; accordingly, no clearance of this notice by the
Office of Management and Budget is required.
Small Business Regulatory Enforcement Fairness Act
Western has determined that this rule is exempt from congressional
notification requirements under 5 U.S.C. 801 because the action is a
rulemaking of particular applicability relating to rates or services
and involves matters of procedure.
Submission to the Federal Energy Regulatory Commission
The interim rates herein confirmed, approved, and placed into
effect, together with supporting documents, will be submitted to the
Commission for confirmation and final approval.
Order
In view of the foregoing and under the authority delegated to me, I
confirm and approve on an interim basis, effective October 1, 2005,
Rate Schedule SLIP-F8, for the Salt Lake City Area Integrated Projects
of the Western Area Power Administration. The rate schedule shall
remain in effect on an interim basis, pending the Commission's
confirmation and approval of them or substitute rates on a final basis
through September 30, 2010.
Dated: August 1, 2005.
Clay Sell,
Deputy Secretary.
Salt Lake City Area Integrated Projects, Arizona, Colorado, Nevada, New
Mexico, Utah, Wyoming; Schedule of Rates for Firm Power Service
Effective: The first day of the first full billing period beginning
on or after October 1, 2005, and extending through September 30, 2010,
or until superseded by another rate schedule, whichever occurs earlier.
Available: In the area served by the Salt Lake City Area Integrated
Projects.
Applicable: To the wholesale power Customer for firm power service
supplied through one meter at one point of delivery, or as otherwise
established by contract.
Character and Conditions of Service: Alternating current, 60 hertz,
three-phase, delivered and metered at the voltages and points
established by contract.
Monthly Rate:
Demand Charge: $4.43 per kilowatt of billing demand.
Energy Charge: 10.43 mills per kilowatthour of use.
Cost Recovery Charge: This charge will be recalculated annually
before May 1 and Western will provide notification to the Customers.
The charge, if needed, will be placed into effect from October 1
through September 30, and will be calculated as follows:
CRC Calculation
------------------------------------------------------------------------
Description Formula \1\
------------------------------------------------------------------------
Step One--Determine the Net Balance Available in the Basin Fund
------------------------------------------------------------------------
BFBB.... Basin Fund Beginning Financial forecast.
Balance ($).
BFTB...................... Basin Fund Target .15 * PAE (not less
Balance ($). than $20 million).
PAR....................... Projected Annual Financial forecast.
Revenue ($).
w/o CRC..............
PAE....................... Projected Annual Financial forecast.
Expense ($).
NR........................ Net Revenue ($)...... PAR-PAE.
NB........................ Net Balance ($)...... BFBB + NR.
---------------------------
Step Two--Determine the Forecasted Energy Purchase Expenses
------------------------------------------------------------------------
EA........................ SHP Energy Allocation Customer contracts.
(GWh).
HE........................ Forecasted Hydro Hydrologic &
Energy (GWh). generation forecast.
FE........................ Forecasted Energy EA-HE.
Purchase (GWh).
FFC....................... Forecasted Avg Energy From commercially
Price per MWh($). available price
indices.
FX........................ Forecasted Energy FE * FFC.
Purchase Expense ($).
---------------------------
Step Three--Determine the Amount of Funds Available for Firming Energy
Purchases, and Then Determine Additional Revenue To Be Recovered. The
Following Two Formulas Will Be Used To Determine FA, the Lesser of the
Two Will Be Used
------------------------------------------------------------------------
FA1....................... Basin Fund Balance If (NB>BFBB,FX,FX -
Factor ($). (BFTB-NB)).
FA2....................... Revenue Factor ($)... If
(NR>.25*BFBB,FX,FX+N
R+.25*BFBB).
FA........................ Funds Available ($).. Lesser of FA1 or FA2
(not less than $0).
FARR...................... Additional Revenue to FX-FA.
be Recovered ($).
---------------------------
Step Four--Once the FA for Purchases Have Been Determined, the CRC Can
Be Calculated, and the WL Can Be Determined
------------------------------------------------------------------------
WL........................ Waiver Level (GWh)... If
(EA< HE,EA,HE+(FE*(FA/
FX))), but not less
than HE.
WLP....................... Waiver Level WL/EA*100.
Percentage of Full
SHP.
CRCE...................... CRC Energy (GWh)..... EA-WL.
CRCEP..................... CRC Energy Percentage CRCE/EA*100.
of Full SHP.
CRC....................... Cost Recovery Charge FARR/(EA*1,000).
(mills/kWh).
------------------------------------------------------------------------
\1\ Some formulas in this table are based on standard Excel spreadsheet
formatting.
[[Page 47835]]
Narrative of CRC Calculations
Step One: Determine the net balance available in the Basin Fund.
BFBB--Western will forecast the Basin Fund Beginning Balance for
the next FY.
BFTB--Determine the Basin Fund Target Balance for the next FY. The
BFTB will not be less than $20 million. The target balance is 15
percent of projected annual expenses for the coming FY.
BFTB = 0.15 * PAE
PAR--Projected Annual Revenue is Western's estimate of revenue for
the next FY.
PAE--Projected Annual Expense is Western's estimate of expenses for
the next FY. The PAE includes all expenses plus non-reimbursable
expenses, which are capped at $25 million per year plus an inflation
factor. This limitation is for CRC formula calculation purposes only,
and is not a cap on actual non-reimbursable expenses.
NR--Net Revenue equals revenues minus expenses.
NR = PAR-PAE
NB--Net Balance is the Basin Fund Beginning Balance plus net
revenue.
NB = BFBB + NR
Step Two: Determine the forecasted energy purchase expenses.
EA--The Sustainable Hydropower Energy Allocation. This does not
include Project Use Customers.
HE--Western's forecast of Hydro Energy available during the next FY
developed from Reclamation's April 24-month study.
FE--Forecasted Energy purchases are the difference between the
sustainable hydropower allocation and the forecasted hydro energy
available for the next FY, or the anticipated firming purchases for the
next year.
FE = EA-HE
FFC--The forecasted energy price for the next FY per MWh.
FX--Forecasted energy purchase power expenses based on the current
year April 24-month study, representing an estimate of the total cost
of firming purchases for the coming FY.
FX = FE * FFC
Step Three: Determine the amount of Funds Available to spend on firming
energy purchases, and then determine additional revenue to be
recovered. The following two formulas will be used to determine FA, the
lesser of the two will be used. Funds available shall not be less than
zero.
A. Basin Fund Balance Factor (FA1)
The first formula ensures that the Net Balance will not go below 15
percent of the total expenses for that FY. If the Net Balance is
greater than the Basin Fund Target Balance, then use the value for
forecasted energy purchase power expenses. If the net balance is less
than the Basin Fund Target Balance, then reduce the value of the
Forecasted Energy Purchase Power Expenses by the difference between the
Basin Fund Target Balance and the Net Balance.
FA1 = If (NB > BFTB, FX, FX--(BFTB-NB))
If the Net Balance is greater than the Basin Fund Target Balance,
then
FA1 = FX
If the Net Balance is less than the Basin Fund Target Balance, then
FA1 = FX--(BFTB-NB)
B. Basin Fund Revenue Factor (FA2)
The second factor ensures that net revenue does not result in a
loss that exceeds 25 percent of the Basin Fund Beginning Balance. If
the Net Revenue is greater than minus 25 percent of the Basin Fund
Beginning Balance, then use the value for forecasted energy purchase
power expenses. If the Net Revenue is less than a minus 25 percent of
the Basin Fund Beginning Balance, then add the Net Revenue and 25
percent of the Basin Fund Beginning Balance to the forecasted energy
purchase power expenses.
FA2 = If (NR >--0.25 * BFBB, FX, FX + NR + 0.25 * BFBB)
If the Net Revenue does not result in a loss that exceeds 25
percent of the Basin Fund Beginning Balance, then
FA2 = FX
If the Net Revenue results in a loss that exceeds 25 percent of the
Basin Fund Beginning Balance, then
FA2 = FX + NR + 0.25 * BFBB
FA--Determine the funds available for purchasing firming energy by
using the lesser of FA1 and FA2.
FARR--Calculate the additional revenue to be recovered by
subtracting the Funds Available from the forecasted energy purchase
power expenses.
FARR = FX-FA
Step Four: Once the additional revenue to be recovered has been
determined, the Cost Recovery Charge (CRC) can be calculated, and the
Waiver Level (WL) can be determined.
A. Cost Recovery Charge (CRC)
The CRC will be a charge to recover the additional revenue required
as calculated in Step 3. The CRC will apply to all Customers who choose
not to request a waiver of the CRC, as discussed below. The CRC equals
the additional revenue to be recovered divided by the total energy
allocation to all Customers for the FY.
CRC = FARR / (EA*1,000)
B. Waiver Level (WL)
The WL provides Customers the ability for Western to reduce
purchase power expenses by scheduling less energy than their
contractual amounts. Therefore, Western will establish an energy WL.
For those Customers who voluntarily schedule no more energy than their
proportionate share of the WL, Western will waive the CRC for that
year.
After the Funds Available have been determined, the WL will be set
at the sum of the energy that can be provided through hydro generation
and purchased with Funds Available. The WL will not be less than the
forecasted Hydro Energy.
WL = If (EA < HE, EA, HE + (FE * (FA / FX)))
If SHP Energy Allocation is less than forecasted Hydro Energy
available, then
WL = EA
If SHP Energy Allocation is greater than forecasted Hydro Energy
available, then
WL = HE + (FE * (FA / FX))
Prior Year Adjustment: The CRC PYA for subsequent years will be
determined by comparing the prior year's estimated firming-energy cost
to the prior year's actual firming-energy cost for the energy provided
above the WL. The PYA will result in an increase or decrease to a
Customer's firm energy costs over the course of the following year. The
table below is the calculation of a PYA.
[[Page 47836]]
PYA CALCULATION
------------------------------------------------------------------------
Description Formula
------------------------------------------------------------------------
Step One--Determine Actual Expenses and Purchases for Previous Year's
Yirming. This Data Will be Obtained From Western's Financial Statements
at the End of FY
------------------------------------------------------------------------
PFX....................... Prior Year Actual Financial Statements.
Firming Expenses ($).
PFE....................... Prior Year Actual Financial Statements.
Firming Energy (GWh).
---------------------------
Step Two--Determine the Actual Firming Cost for the CRC Portion
------------------------------------------------------------------------
EAC....................... Sum of the energy .....................
allocations of
Customers subject to
the PYA (GWh).
FFC....................... Forecasted Firming From CRC Calculation.
Energy Cost--($/MWh).
AFC....................... Actual Firming Energy PFX/PFE.
Cost--($/MWh).
CRCEP..................... CRC Energy Percentage From CRC Calculation.
CRCE...................... Purchased Energy for EAC*CRCEP.
the CRC (GWh).
---------------------------
Step Three--Determine Revenue Adjustment (RA) and PYA
------------------------------------------------------------------------
RA........................ Revenue Adjustment (AFC-FFC)*CRCE*1,000.
($).
PYA....................... Prior Year Adjustment (RA/EAC)/1,000.
(mills/kWh).
------------------------------------------------------------------------
Narrative PYA Calculation
Step One: Determine Actual Expenses and Purchases for Previous
Year's Firming. This data will be obtained from Western's financial
statements at end of FY.
PFX--Prior year actual firming expense
PFE--Prior year actual firming energy
Step Two: Determine the actual firming cost for the CRC portion.
EAC--Sum of the energy allocations of Customers subject to the PYA
CRCE--The amount of CRC Energy needed
AFC--The Actual Firming Energy Cost are the PFX divided by the PFE
AFC = (PFX / PFE) / 1,000
Step Three: Determine Revenue Adjustment (RA) and Prior Year
Adjustment (PYA).
RA--The Revenue Adjustment is AFC less FFC times CRCE
RA = (AFC--FFC) * CRCE) * 1,000
PYA = The PYA is the RA divided by the EAC for the CRC Customers only.
PYA = (RA / EAC) /1,000
The Customer's PYA will be based on their prior year's energy
multiplied by the resulting mills/kWh to determine the dollar amount
that will be assessed. The Customer will be charged or credited for
this dollar amount equally in the remaining months of the next year's
billing cycle. Western will attempt to complete this calculation by
December of each year. Therefore, if the PYA is calculated in December,
the charge/credit will be spread over the remaining 9 months of the FY
(January through September).
Billing Demand:
The billing demand will be the greater of:
1. The highest 30-minute integrated demand measured during the
month up to, but not more than, the delivery obligation under the power
sales contract, or
2. The Contract Rate of Delivery.
Billing Energy:
The billing energy will be the energy measured during the month up
to, but not more than, the delivery obligation under the power sales
contract.
Adjustment for Waiver:
Customers can choose not to take the full SHP energy supplied as
determined in the attached formulas for CRC, and they will be billed
the Energy and Capacity rates listed above, but not the CRC.
Adjustment for Transformer Losses:
If delivery is made at transmission voltage but metered on the low-
voltage side of the substation, the meter readings will be increased to
compensate for transformer losses as provided in the contract.
Adjustment for Power Factor:
The Customer will be required to maintain a power factor at all
measurement points between 95 percent lagging and 95 percent leading.
Adjustment for Western Replacement Power:
Under the Customer's Firm Electric Service Contract, as amended,
Western will bill the Customer for its proportionate share of the costs
of Western Replacement Power (WRP) within a given time period. Western
will include in the Customer's monthly power bill the WRP cost and the
incremental administrative costs associated with WRP.
Adjustment for Customer Displacement Power Administrative Charges:
Western will include in the Customer's regular monthly power bill
the incremental administrative costs associated with CDP.
Certification of Rates
Colorado River Storage Project Management Center Salt Lake City Area
Integrated Projects
I certify that Rate Schedule SLIP-F8 developed for the Salt Lake
City Area Integrated Projects is consistent with applicable laws and
that the rates are the lowest possible consistent with sound business
principles.
Dated: July 5, 2005.
Michael S. Hacskaylo,
Administrator.
[FR Doc. 05-16044 Filed 8-12-05; 8:45 am]
BILLING CODE 6450-01-P