Provo River Project Rate Order No. WAPA-116

AGENCY:

Western Area Power Administration, DOE.

ACTION:

Notice of rate order concerning a power rate formula.

SUMMARY:

The Deputy Secretary of Energy confirmed and approved Rate Order No. WAPA-116, placing a rate formula for the Provo River Project (Project) of Western Area Power Administration (Western) into effect on an interim basis. The provisional power rate formula will remain in effect on an interim basis until the Federal Energy Regulatory Commission (Commission) confirms, approves, and places it into effect on a final basis, or until the power rate formula is replaced by another power rate formula.

DATES:

The provisional rate formula extension will be placed into effect on an interim basis on April 1, 2005, and will be in effect until the Commission confirms, approves, and places the provisional rate formula extension in effect on a final basis for 5 years ending March 31, 2010, or until superseded.

FOR FURTHER INFORMATION CONTACT:

Mr. Bradley S. Warren, CRSP Manager, CRSP Management Center, Western Area Power Administration, PO Box 11606, Salt Lake City, UT 84147-0606, (801) 524-5493, or Ms. Carol Loftin, Rates Manager, CRSP Management Center, Western Area Power Administration, PO Box 11606, Salt Lake City, UT 84147-0606, (801) 524-6380, e-mail loftinc@wapa.gov.

SUPPLEMENTARY INFORMATION:

The Project was authorized in 1935. Construction on the Project, which includes Deer Creek Dam and Powerplant on the Provo River in Utah, began in 1938 but, because of World War II, was not completed until 1951. The powerplant, authorized on August 20, 1951, was completed and generation began in 1958. Its maximum operating capacity is 5,300 kilowatts.

Provo River Project power is now marketed independently from the Salt Lake City Area Integrated Projects subsequent to a marketing plan that was approved and published in the Federal Register on November 21, 1994. This marketing plan allows Western to market the output of the Project to customers of the Utah Municipal Power Agency and the Utah Associated Municipal Power Systems (Customers) in the Provo River drainage area.

Contract Nos. 94-SLC-0253 and 94-SLC-0254 between the United States and its Customers require that the amount of each annual installment be established in advance by Western and submitted to the Customers on or before August 31 of the year preceding the appropriate fiscal year. Each fiscal year, Western will estimate the Deer Creek Powerplant (DCP) expenses by preparing a power repayment study, which will include estimates of operation, maintenance, and replacement costs for the DCP.

Each annual installment pays the annual amortized portion of the United States investment in the Deer Creek Dam and Reservoir hydroelectric facilities with interest and the associated operation, maintenance, and replacement costs. This repayment schedule does not depend upon the power and energy made available for sale or the rate of generation each year, but is included in the contract in which the Customers pay all operating, maintenance, and replacement expenses of the Project and, in return, receive all of the energy produced by the Project. Western will continue to provide the Customers a revised annual installment by August 31 of each year using the same methodology.

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 (50 FR 37835).

Under Delegation Order Nos. 00-037.00 and 00-001.00A, 10 CFR 903, and 18 CFR 300, I hereby confirm, approve, and place Rate Order No. WAPA-116 into effect on an interim basis. The extension of the rate formula will be promptly submitted to the Commission for confirmation and approval on a final basis.

In the matter of: Western Area Power Administration Power Rate Formula Extension for the Provo River Project; Order Confirming, Approving, and Placing a Rate Formula Extension for the Provo River Project 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 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 Provo River Project (PRP).

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, 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 903) were published on September 18, 1985 (50 FR 37835).

Acronyms and Definitions

As used in this rate order, the following acronyms and definitions apply:

CRSP: Colorado River Storage Project.

Commission: Federal Energy Regulatory Commission.

Contracts: Contract No. 94-SLC-0254 with UMPA effective December 22, 1994, and Contract No. 94-SLC-0253 with UAMPS effective January 19, 1995, which were extended to September 30, 2024.

Customers: UMPA and UAMPS.

DCP: Deer Creek Powerplant.

DOE: Department of Energy.

DOE Order RA 6120.2: A Department of Energy order dealing with power marketing administration financial reporting and ratemaking procedures.

FY: Fiscal year; October 1 to September 30.

Interior: United States Department of the Interior.

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

MW: Megawatt—the electrical unit of capacity that equals 1 million watts or 1,000 kilowatts.

NEPA: National Environmental Policy Act of 1969 (42 U.S.C. 4321, et seq.).

OM&R: Operation, Maintenance, and Replacement.

PRP: Provo River Project.

PRS: Power repayment study.

PRWUA: Provo River Water Users Association.

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

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 resources and rate.

UAMPS: Utah Associated Municipal Power Systems.

UMPA: Utah Municipal Power Agency.

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

Effective Date

This power rate formula will become effective on an interim basis beginning April 1, 2005, and will be in effect pending the Commission's approval of this or a substitute rate formula on a final basis for 5 years ending March 31, 2010, or until superseded.

Public Notice and Comment

Paragraph 903.23(a) of 10 CFR 903 for rate extensions does not require either a consultation and comment period, or public information or comment forums. This request is for approval of an extension of the present methodology used for calculating the annual installment. On April 14, 2004, Western met with the Customers and notified them of Western's intent to extend the present rate formula. Western also discussed the FY 2005 budget and capital expenditures. The Customers expressed their desire to continue using the rate formula methodology through notifications dated July 20, 2004, and August 26, 2004.

Project Description

Construction of the PRP began in May 1938, and the powerplant was completed in 1958. Presently, it has a generating capacity of 5,300 kW of power. Only energy excess to PRP purposes has been available for Federal marketing. Between 1963 and 1994, SLCA/IP needed additional energy and purchased the available PRP energy at an amount established annually for the PRP to cover its costs, including OM&R and repayment expenses. These expenses included $1.6 million of irrigation assistance to the PRWUA. PRP's original power investment has been repaid.

PRP power is now marketed independently from the SLCA/IP under a marketing plan published in the Federal Register on November 21, 1994. This marketing plan allows Western to market the output of the PRP to customers of UMPA and UAMPS in the Provo River drainage area.

Power Repayment Studies

Each fiscal year, Western will estimate DCP expenses by preparing a PRS that will include estimates of OM&R costs for the DCP for the next fiscal year. The PRS determines if power revenues will be sufficient to pay, within the prescribed time periods, all costs assigned to the PRP power function. Repayment criteria are based on law, policies including DOE Order RA 6120.2, and authorizing legislation.

Western calculates the annual installment based on 2 years of data. The calculation includes the projected costs of the rate installment year (future fiscal year) and an adjustment from the last historic fiscal year. The adjustment is the surplus or deficit that occurs in the last historic year when actual costs and repayment obligations are subtracted from actual revenues. This surplus or deficit is combined with the projected rate installment year costs to arrive at the rate installment. Each annual installment pays the annual amortized portion of the United States investment in the Deer Creek Dam and Reservoir hydroelectric facilities with interest and the associated OM&R. This repayment schedule does not depend upon the power and energy made available for sale or the rate of generation each year.

Certification of Rates

Western's Administrator certified that the interim rates for PRP power are the lowest possible rates consistent with sound business principles. The provisional rates were developed following administrative policies and applicable laws.

Statement of Revenue and Related Expenses

The revenue requirements for the PRP are based on PRS calculations for future requirements, which will be adjusted when FY actuals are known. The following table summarizes revenues and expenses for the current 6-year rate formula and the actual revenues and expenses for the same period.

The following table provides a summary of the projected revenues and expenses during the provisional rate formula period.

Basis for Rate Development

Each Customer is billed for electric service calculated every FY, payable in 12 equal monthly payments. Every FY, Western will estimate PRP expenses by preparing a PRS which will include estimates of OM&R costs for the DCP. The amount of each monthly payment will be established in advance by Western and submitted to the Customers on or before August 31 of the year preceding the appropriate FY.

The calculation of the amount of the annual installment and the monthly payments will include adjustments to the OM&R charges. These adjustments deal with the difference between estimated and actual OM&R expenses. If OM&R charges are underestimated, an amount equal to the difference must be added to the next annual installment. Conversely, if OM&R charges are overestimated, the amount would be deducted from the next installment.

In accordance with the Contracts, minor replacements and additions are included in the annual operation and maintenance expenses of the DCP. If major replacements and additions exceeding $5,000, but not greater than $25,000, are needed, the Customers will be given the option of financing their share of the cost or having the cost capitalized and amortized over the life of the replacement or addition, or over the life of the contract. If the Customers select the latter, the costs will be capitalized at the current interest rate prescribed by DOE, under RA 6120.2, Paragraph 11B, “Basic Policy for Rate Adjustment; Interest Rate Formula,” in the fiscal year in which the replacement or addition is made. Such costs will be based on prudent and businesslike management practices and following established electric industry operation and maintenance practices. If extraordinary replacements exceeding $25,000 are needed, the Customers will consult with Reclamation, PRWUA, and Western on financing the replacement.

The rate does not depend upon the power and energy made available for sale; instead, the Customers will pay the total PRP's annual powerplant expenses in return for the total marketable PRP production. Each Customer will pay its proportional share of the OM&R expenses identified in the PRS in 12 monthly installments.

Availability of Information

Information about this rate formula extension is available for public review at the Colorado River Storage Project Management Center, Western Area Power Administration, 150 East Social Hall Avenue, Suite 300, Salt Lake City, Utah 84111. Documents are also available at http://www.wapa.gov/crsp/rateanal.htm under CRSP rate adjustment documents for the Provo River Project's section.

Regulatory Procedure Requirements

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 1500-1508); and DOE NEPA Regulations (10 CFR 1021), Western has determined that this action is categorically excluded from the preparation of an environmental assessment or an environmental impact statement.

Determination Under Executive Order 12866

Western has an exemption from centralized regulatory review under Executive Order 12866; accordingly, no clearance of this notice by the Office of Management and Budget is required.

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 Federal Energy Regulatory Commission

The interim rate formula extension herein confirmed, approved, and placed into effect on an interim basis, together with supporting documents, will be submitted to the Commission for confirmation and final approval.

Order

In view of the above and under the authority delegated to me as the Deputy Secretary of Energy, I confirm and approve on an interim basis, effective April 1, 2005, an extension of the rate formula for the Provo River Project of the Western Area Power Administration. The rate formula shall remain in effect on an interim basis, pending the Commission's confirmation and approval of it or a substitute rate on a final basis through March 31, 2010.

Dated: November 22, 2004.

Kyle E. McSlarrow,

Deputy Secretary.