Boulder Canyon ProjectNotice of Rate Order

DEPARTMENT OF ENERGY

Western Area Power Administration

Boulder Canyon Project--Notice of Rate Order

AGENCY: Western Area Power Administration, DOE.

ACTION: Notice of rate order.

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SUMMARY: This notice announces the confirmation and approval by the

Deputy Secretary of the Department of Energy (DOE) of Rate Order No.

WAPA-70 and Rate Schedule BCP-F5 placing into effect the rate

methodology for determining the Annual Revenue Requirement, Base

Charge, Forecast Capacity Rate and Forecast Energy Rate, and Calculated

Energy Rate for the Boulder Canyon Project (BCP) of the Western Area

Power Administration (Western) on an interim basis. The rate

methodology and the charges/rates will remain in effect on an interim

basis until the Federal Energy Regulatory Commission (FERC) confirms,

approves, and places them into effect on a final basis or until

superseded.

DATES: Rate Schedule BCP-F5 will be placed into effect on an interim

basis on the first day of the first full billing period beginning on or

after November 1, 1995, and will be in effect until FERC confirms,

approves, and places the rate schedule in effect on a final basis for a

5-year period, or until superseded.

FOR FURTHER INFORMATION CONTACT:

Mr. J. Tyler Carlson, Area Manager, Phoenix Area Office, Western Area

Power Administration, P.O. Box 6457, Phoenix, AZ 85005-6457 and (602)

352-2453 and

Mr. Joel K. Bladow, Assistant Administrator for Washington Liaison,

Western Area Power Administration, Room 8G-027, Forrestal Building,

1000 Independence Avenue, SW., Washington, DC 20585-0001, (202) 586-

5581.

SUPPLEMENTARY INFORMATION: The proposed rate methodology is the result

of Western, the Bureau of Reclamation (Reclamation), and the BCP

Contractors\1\ successfully concluding negotiations on the BCP

Implementation Agreement which became effective February 17, 1995. The

BCP Implementation Agreement resolved eleven issues (1) Replacements;

(2) Visitor Facilities; (3) Amendment to Regulations; (4) Multi-Project

Benefits and Costs; (5) Engineering & Operation Committee (E&OC) and

Coordinating Committee; (6) Billing and Payment; (7) Operation Amount

and Working Capital; (8) Audits; (9) Principal Payments; (10) Annual

Rate Adjustments; and (11) Uprating Credits.

\1\The BCP Contractors include the Arizona Power Authority;

Colorado River Commission of Nevada; City of Boulder City, Nevada;

Department of Water and Power of the City of Los Angeles; The

Metropolitan Water District of Southern California; Southern

California Edison Company; and the Cities of Anaheim, Azusa,

Banning, Burbank, Colton, Glendale, Pasadena, Riverside, and Vernon,

California.

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Four major changes are affecting the power rates for the BCP. The

first change concerns the ratesetting methodology. Under the

Implementation Agreement of February 17, 1995, the new rate methodology

provides that the BCP Contractors will pay each year for the Annual

Revenue Requirement. From the Annual Revenue Requirement, a Base Charge

for both capacity and energy is calculated. The Base Charge is

calculated by dividing the Annual Revenue Requirement equally between

energy (Energy Dollar) and capacity (Capacity Dollar), with an

adjustment (Capacity Credit) to resolve the historic revenue imbalance

between energy and capacity. The Contractor's energy Base Charge each

month will be the Rate Year's Energy Dollar multiplied by the

Contractor's Firm Energy percentage multiplied by the Contractor's

Monthly Energy Ratio. The Contractor's capacity Base Charge each month

will be the Rate Year's Capacity Dollar divided by 12 multiplied by the

Contractor's Contingent Capacity percentage.

For each Rate Year, Western will calculate a Forecast Capacity Rate

and a Forecast Energy Rate. These rates will be applied to services

such as: excess energy, unauthorized overruns, and water pump energy.

Within 90 days after, the end of the Rate Year, a Calculated Energy

Rate shall be calculated.

The second change concerns reducing the Annual Uprating Payments.

The Uprating payments are payments due the BCP Schedule B Contractors

for advancing funds to upgrade the BCP system. The Colorado River

Commission

[[Page 57860]]

of Nevada requested and obtained approval from the BCP Engineering &

Maintenance Committee to reduce their Uprating Credit Carryforward

balance.

The third change concerns the projection of a large carryover

balance in the Colorado River Dam Fund, which is proposed to be applied

against FY 1996 expenses, reducing the need for FY 1996 revenue. In

previous rate studies, no carryover balance was assumed available in

the ratesetting year. However, implementing a provision of the BCP

Implementation Agreement requires projecting actual FY 1996. This rate

order assumes the full amount of the carryover is applied against FY

1996 expenses, offsetting the need for an equal amount of power revenue

in FY 1996.

The fourth change affecting the BCP power rate is the assumed

completion of the Hoover Dam Visitor Facilities in FY 1996. This

increases the annual interest payment due in FY 1996 and subsequent

years by nearly $10 million annually. Partially offsetting this

increased expenses is an increase in revenue from visitors' fees

assumed to begin in FY 1996. The ``Other revenue'' category is assumed

to increase from $2.4 million in FY 1995 to $6.0 million in FY 1996.

The net effect of all these changes is to decrease the revenues

that need to be collected through power bills in FY 1996 from $49.3

million to $45.2 million on an 8.4 percent decrease.

The existing rate, proposed Base Charge, Forecast Energy Rate, and

Forecast Capacity Rate for the 5-year period are as follows:

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Proposed\2\

Existing rates charges/rates

(FY 1995) (FY 1996)

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Rate Schedule.............................. BCP-F4/2 ................................... BCP-F5

Base Charge\3\ ($1,000):

Energy Dollar................... $23,460

Capacity Dollar................. $21,737

Firm Energy Rate (mills per kilowatthour). 6.31 Forecast Energy Rate (mills per 6.12

kilowatthour).

Firm Capacity Rate ($ per kilowatt-month).. 1.07 Forecast Capacity Rate ($ per $0.93

kilowatt-month).

Composite Rate (mills per kilowatthour).... 12.62 Composite Rate (mills per 11.79

kilowatthour).

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2New rates will be determined each year, based upon the proposed new rate setting methodology. These charges and

rates represent FY 1996 only.

3The monthly charge for each Contractor is calculated as follows: (1) Energy Base Charge=Rate Year Energy Dollar

multiplied by the Contractor's Firm Energy percentage multiplied by its Monthly Energy Ratio and (2) Capacity

Base Charge=Rate Year Capacity Dollar divided by 12 multiplied by the Contractor's contingent Capacity

percentage. For FY 1996, upon the determination of the actual October 1995 energy and capacity charges, the

monthly Energy Charge and Capacity Charge for the remaining months will be adjusted so the BCP Contractors

will not pay more than the FY 1996 Annual Revenue Requirement.

Upon completion of the written procedures for the Uprating Credit

Program and receipt of revised Uprating Credit Schedules, the FY 1996

Energy Dollar and Capacity Dollar will be adjusted by the difference

over the remaining months of FY 1996 so the BCP Contractors will not

pay more than the FY 1996 Annual Revenue Requirement.

Statement of Annual Base Charge

The annual Base Charge for both capacity and energy for the BCP

will be based upon the estimated Annual Revenue Requirement contained

in the annual power repayment spreadsheet study (PRSS). The Base Charge

is comprised of the Energy Dollar (50-percent of the Annual Revenue

Requirement plus the Capacity Credit) and Capacity Dollar (50-percent

of the Annual Revenue Requirement minus the Capacity Credit).

Differences between the estimated and the actual Annual Revenue

Requirement for the Rate Year will be calculated at the end of each FY

when final financial data becomes available and will be used in

adjusting the next years' Annual Revenue Requirement.

By Amendment No. 3 to Delegation Order No. 0204-108, published

November 10, 1993 (58 FR 59716), the Secretary of Energy (Secretary)

delegated (1) the authority to develop long-term power and transmission

rates on a nonexclusive basis to the Administrator of Western; (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 FERC. Existing DOE procedures for public

participation in power rate adjustments (10 CFR Part 903) became

effective on September 18, 1985 (50 FR 37835).

These power rates are established pursuant to section 302(a) of the

DOE Organization Act, 42 U.S.C. Sec. 7152(a), through which the power

marketing functions of the Secretary of the Interior and Reclamation

under the Reclamation Act of 1902, 43 U.S.C. Sec. 371 et seq., as

amended and supplemented by subsequent enactments, particularly section

9(c) of the Reclamation Project Act of 1939, 43 U.S.C. Sec. 485h(c),

and other acts specifically applicable to the project system involved,

were transferred to and vested in the Secretary.

During the 109-day comment period, Western received eight written

comments. In addition, five speakers commented during the July 13,

1995, public comment forum. All comments and responses are addressed in

the rate order.

Rate Order No. WAPA-70, confirming, approving, and placing the

proposed rate methodology for determining the Annual Revenue

Requirement, Base Charge, Forecast Capacity Rate, Forecast Energy Rate,

and Calculated Energy Rate for the BCP into effect on an interim basis,

is issued, and the Rate Schedule BCP-F5 will be submitted promptly to

FERC for confirmation and approval on a final basis.

Issued in Washington, DC, October 31, 1995.

Charles B. Curtis,

Deputy Secretary.

Department of Energy, Deputy Secretary

Order Confirming, Approving, and Placing the Boulder Canyon Project

Firm Power Service Rate Into Effect on an Interim Basis

In the matter of: Western Area Power Administration Rate

Adjustment for Boulder Canyon Project

[Rate Order No. WAPA-70]

November 1, 1995.

The rate methodology is established pursuant to section 302(a) of

the Department of Energy (DOE) Organization Act, 42 U.S.C.

Sec. 7152(a), through which the power marketing functions of the

Secretary of the Interior and the Bureau of Reclamation (Reclamation)

under the Reclamation

[[Page 57861]]

Act of 1902, 43 U.S.C. Sec. 371 et seq., as amended and supplemented by

subsequent enactments, particularly section 9(c) of the Reclamation

Project Act of 1939, 43 U.S.C. Sec. 485h(c), and other acts

specifically applicable to the project system involved were transferred

to and vested in the Secretary of Energy (Secretary).

By Amendment No. 3 to Delegation Order No. 0204-108, published

November 10, 1993 (58 FR 59716), the Secretary delegated (1) the

authority to develop long-term power and transmission rates on a

nonexclusive basis to the Administrator of the Western Area Power

Administration (Western); (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

Federal Energy Regulatory Commission. Existing DOE procedures for

public participation in power rate adjustments (10 CFR Part 903) became

effective on September 18, 1985 (50 FR 37835).

Acronyms and Definitions

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

apply:

1941 General Regulations: General regulations for generation and

sale of power in accordance with the Boulder Canyon Project Adjustment

Act.

1984 Act: Hoover Power Plant Act of 1984, August 17, 1984 (43

U.S.C. 619 et seq.).

Adjustment Act: Boulder Canyon Project Adjustment Act, July 19,

1940 (43 U.S.C. 618 et seq.).

Annual Capacity Credit: The dollar amount used to adjust the Energy

Dollar and Capacity Dollar in order to resolve the historic revenue

imbalance between energy and capacity.

Annual Rate: A rate revision recommended to and approved by the

Deputy Secretary of Energy for approval on an annual basis for the

interim years of the 5-year period.

Annual Revenue Requirement: An amount used to calculate the

Capacity Dollar and Energy Dollar equal to the estimated actual

expenses for the Rate Year less the sum of (1) multi-project benefits;

(2) carryover of funds from the prior FY; (3) estimated BCP water

revenue; (4) estimated User Fees; and (5) funds from other sources,

except revenue from the sale of capacity and energy.

Base Charge: The total charge paid by a Contractor for capacity and

energy based on the Annual Revenue Requirement, pursuant to Section 13

of the BCP Implementation Agreement effective February 17, 1995. The

Base Charge shall be composed of a capacity component and an energy

component.

BCP: Boulder Canyon Project.

BCP Contractors: The BCP Contractors include the Arizona Power

Authority; Colorado River Commission of Nevada; City of Boulder City,

Nevada; Department of Water and Power of the City of Los Angeles,

California; the Metropolitan Water District of Southern California;

Southern California Edison Company; and the Cities of Anaheim, Azusa,

Banning, Burbank, Colton, Glendale, Pasadena, Riverside, and Vernon,

California.

BCP Implementation Agreement: An agreement which became effective

February 17, 1995. The agreement resolved eleven issues (1)

Replacements; (2) Visitor Facilities; (3) Amendment to Regulations; (4)

Multi-Project Benefits and Costs; (5) Engineering & Operating Committee

(E&OC) and Coordinating Committee; (6) Billing and Payment; (7)

Operating Amount and Working Capital; (8) Audits; (9) Principal

Payments; (10) Annual Rate Adjustments; and (11) Uprating Credits.

Calculated Energy Rate: This rate equals fifty percent (50%) of the

Annual Revenue Requirement for each FY divided by the Energy Deemed

Delivered in such FY.

Capacity Dollar: The amount of revenue to be billed for Project

capacity sales for each Fiscal Year. Such amount shall be fifty percent

(50%) of the Annual Revenue Requirement, adjusted for the Annual

Capacity Credit in accordance with Section 13.9 of the BCP

Implementation Agreement.

Colorado River Basin Project Act: The Colorado River Basin Project

Act, September 30, 1968 (43 U.S.C. 1501 et seq.).

Contribution Charge: LCRBDF surcharge is part of the rate schedule

and is expressed in mills per kWh; required by law to be included in

the BCP rates.

Conformed Criteria: Conformed general consolidated power marketing

criteria or regulations for Boulder City Area Projects (49 FR 50582,

December 28, 1984) beginning on June 1, 1987.

CRDF: Colorado River Dam Fund. A fund established by Section 2 of

the Project Act which is to be used only for the purposes specified in

the Adjustment Act, Colorado River Basin Project Act of 1968, and the

1984 Act.

DOE: Department of Energy.

DOE Order RA 6120.2: An order related to power marketing

administration financial reporting.

$/kW-month: Dollars per kilowatt-month.

E&OC: Engineering and Operating Committee, consisting of members

from BCP Contractors, Western, and Reclamation. Its function is to

establish a regular review process of Western's and Reclamation's

planned O&M, additions, and replacements.

Energy Deemed Delivered: The amount of energy scheduled, delivered,

metered and calculated to be delivered to each Contractor, including

ML and SL.

Energy Dollar: The amount of revenue to be billed for BCP energy

sales for each FY. Such amount shall be fifty percent (50%) of the

Annual Revenue Requirement, adjusted for the Annual Capacity Credit in

accordance with Section 13.9 of the BCP Implementation Agreement.

FERC: Federal Energy Regulatory Commission.

Forecast Capacity Rate: This rate equals the Capacity Dollar

divided by 1,951,000 kW.

Forecast Energy Rate: This rate equals the Energy Dollar divided by

the lesser of the Total Master Schedule or 4,501.001 MWh.

FY: Fiscal Year.

Hoover Dam: The dam on the Colorado River which forms Lake Mead.

kW: Kilowatt.

kWh: Kilowatthour.

LCRBDF: Lower Colorado River Basin Development Fund--a fund

established by the Colorado River Basin Project Act of 1968.

Ml and Sl: Motoring losses and system losses.

Master Schedule: This is an 18-month schedule of projected BCP

hydrology.

mills/kWh: Mills per kWh.

Monthly Energy Ratio: The estimated amount of energy each

Contractor is to receive each month in accordance with the final Master

Schedule divided by the total energy that Contractor is to receive in

that FY under the final Master Schedule.

NEPA: National Environmental Policy Act of 1969.

OMB: Office of Management and Budget.

O&M: Operation and maintenance.

Project Act: The Boulder Canyon Project Act authorizing the

construction of Boulder Canyon Project dated December 21, 1928 (43

U.S.C. 617 et seq.).

PRSS: Power Repayment Spreadsheet Study.

Rate Year: The FY in which the Base Charge, Forecast Capacity Rate,

and Forecast Energy Rate are determined and effective.

Reclamation: Bureau of Reclamation, U.S. Department of the

Interior.

Replacements: A unit of property constructed or acquired as a

substitute

[[Page 57862]]

for a existing unit of property for the purpose of maintaining the

power features of a project or the joint features properly allocated to

power.

Schedule B Contractors: The BCP Contractors that advanced funds to

upgrade the BCP System.

Secretary: Secretary of Energy.

Treasury: Secretary of the Department of the Treasury.

Uprating Program: A program nonfederally financed by eleven (11) of

the BCP Contractors. The purpose was to increase the capacity of the

existing generating and associated electrical equipment at the BCP.

Western: Western Area Power Administration, U.S. Department of

Energy.

Western's 1986 General Regulations: General Regulations for the

Regulations: Charges for the Sale of Power from the Boulder Canyon

Project, 10 CFR Part 904.

Working Capital Fund: Reserve of funds contributed by the

Contractors to be used when the Colorado River Dam Fund has no money

available.

Effective Date

The proposed rate methodology for determining the Annual Revenue

Requirement, Base Charge, Forecast Capacity Rate, Forecast Energy Rate,

and Calculated Energy Rate, will become effective on an interim basis

beginning November 1, 1995, and remain in effect pending FERC's

approval on a final basis for a 5-year period, or until superseded.

Public Notice and Comment

The Procedures for Public Participation in Power and Transmission

Rate Adjustments and Extensions, 10 CFR Part 903, have been followed by

Western in developing the method of determining the Annual Revenue

Requirement, Base Charge, Forecast Capacity Rate, Forecast Energy Rate,

and the Calculated Energy Rate.

The following summarizes the steps Western took to ensure

involvement of interested parties in the rate process:

1. Discussion of the proposed rate methodology was initiated at an

informal BCP Contractor meeting held on April 13, 1995, in Phoenix,

Arizona. At this informal meeting, Western and Reclamation

representatives explained the need for a change in the Annual Revenue

Requirements, Forecast Capacity Rate, Forecast Energy Rate, and

answered questions from those persons attending.

2. A Federal Register notice was published on May 8, 1995 (60 FR

22575), officially announcing the proposed firm power rate adjustment

process, initiating the public consultation and comment period,

announcing the public information and public comment forums, and

presenting procedures for public participation.

3. On May 18, 1995 a letter was mailed from Western's Phoenix Area

Office to all Boulder Canyon Project customers and other interested

parties providing a copy of the Boulder Canyon Project Rate Brochure,

dated May 1995, which included a copy of the Federal Register notice of

May 8, 1995.

4. At the public information forum held on June 15, 1995, Western

and Reclamation representatives explained the proposed rate

methodology, a change in the proposed billing procedure, and outlined

the reasoning for the overall decrease in the Annual Revenue

Requirement for Rate Year 1996 in greater detail and answered

questions.

5. On August 4, 1995, a letter was mailed from Western's Phoenix

Area Office to all Boulder Canyon Project customers and other

interested parties announcing the extension of the consultation and

comment period through August 25, 1995.

6. A public comment forum was held on July 13, 1995, to give the

public an opportunity to comment for the record. Five persons

representing customers and customer groups made oral comments.

7. A Federal Register notice was published on August 21, 1995,

announcing the extension of the consultation and comment period through

August 25, 1995.

8. Eight comment letters were received during the 109-day

consultation and comment period. The consultation and comment period

ended August 25, 1995. All formally submitted comments have been

considered in the preparation of this rate order.

Project History

The BCP was authorized for construction by the Project Act. The

Project Act provided for a dam to be built in the Black Canyon located

on the Colorado River adjacent to the Arizona- Nevada border. The dam

was built for the expressed purposes of (1) controlling the flooding in

the lower regions of the Colorado River drainage system; (2) improving

navigation of the Colorado River and its tributaries; (3) regulating

the Colorado River, while providing storage and delivery of the stored

water for the reclamation of public lands; and (4) generating

electrical energy as a means of making the BCP a self-supporting and

financially solvent undertaking. Congress authorized the Treasury to

advance up to $165 million to the Secretary of the Interior to provide

for the construction of the dam, powerplant, and related features; $25

million of the $165 million was allocated to flood control.

Construction of the Hoover Dam, formerly known as Boulder Dam,

began in 1930, and the first generating unit of the powerplant went

into service in 1937. Upon completion of the project facilities, power

sales commenced, in accordance with the provisions of the Project Act,

to contractors in the states of Arizona, California, and Nevada.

The Project Act was modified in 1940 by the Adjustment Act. The

Adjustment Act, among other things, authorized the Secretary of the

Interior to promulgate and to put into effect power rates based upon a

repayment period from June 1, 1937, to May 31, 1987; to reduce the

interest rate from 4 percent to 3 percent per annum on unpaid Treasury

advances; to require annual payments to the states of Arizona and

Nevada in lieu of taxes levied; and to defer without interest until

June 1, 1987, the repayment of the $25 million allocated to flood

control.

Subsequent and pursuant to the Adjustment Act, the Secretary of the

Interior published and implemented the 1941 General Regulations for the

period ending May 31, 1987.

As the end of the 50-year term of the original contracts

approached, controversy developed among the BCP contractors over

renewal rights to the BCP power, and litigation resulted. Compromises

were reached and embodied in the 1984 Act.

The 1984 Act authorized an increase in the capacity of the existing

generating and associated electrical equipment at the BCP. The work to

accomplish this increase, referred to as the Uprating Program, was

funded initially by advances from certain BCP Contractors to

Reclamation. Funds advanced would be returned to these contractors

through credits on their monthly power bills. The 1984 Act provided for

advances from the Treasury for the improvement of visitor facilities at

the BCP. The 1984 Act also required that an additional charge of 4.5

mills/kWh be assessed on energy sales to Arizona and an additional

charge of 2.5 mills/kWh be assessed on energy sales to California and

Nevada; all revenue resulting from the Contribution Charge is to be

transferred to the LCRBDF.

Under the 1984 Act, the BCP's power was sold to 15 contractors

located in the states of Arizona, California, and

[[Page 57863]]

Nevada, in accordance with the Conformed Criteria.

Due to the numerous requirements set out in the 1984 Act and the

earlier separation of the Federal responsibilities relating to Hoover

Dam between Reclamation and Western, both agencies published new

regulations governing their respective responsibilities at the BCP

after June 1, 1987. These regulations are cited herein as Reclamation's

1986 General Regulations and Western's 1986 General Regulations, and

they supersede the 1941 General Regulations, which terminated on May

31, 1987.

Power Repayment Spreadsheet Studies

A PRSS is prepared each FY to determine the power revenues required

to pay, within the prescribed time periods, all costs assigned to the

power function. Repayment criteria are based on law, policies, and

authorizing legislation. DOE Order RA 6120.2, section 12b, requires

that:

In addition to the recovery of the above costs (operation and

maintenance and interest expenses) on a year-by-year basis, the

expected revenues are at least sufficient to recover (1) each dollar

of power investment at Federal hydroelectric generating plants

within 50 years after they become revenue producing, except as

otherwise provided by law; plus, (2) each annual increment of

Federal transmission investment within the average service life of

such transmission facilities or within a maximum of 50 years,

whichever is less; plus, (3) the cost of each replacement of a unit

of property of a Federal power system within its expected service

life up to a maximum of 50 years; plus, (4) each dollar of assisted

irrigation investment within the period established for the

irrigation water users to repay their share of construction costs;

plus, (5) other costs such as payments to basin funds, participating

projects, or States.

The BCP PRSS has been used to determine the Annual Revenue

Requirement, which includes the net of expenses (OM&R, payment to

states, uprating credit payments, interest and principal payments,

working capital) minus other revenue (prior year carryover balance,

water revenue, and other revenue).

Existing and Provisional Rates

A comparison of the existing and provisional charges and rates

follows:

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Existing Proposed\5\

charges/rates charges/rates

(FY 1995) (FY 1996)

----------------------------------------------------------------------------------------------------------------

Rate Schedule.............................. BCP-F4/2 BCP-F5

Base Charge\6\ ($1,000):...........

Energy Dollar................... $23,460

Capacity Dollar................. $21,737

Firm Energy Rate (mills per kilowatthour).. 6.31 Forecast Energy Rate (mills per 6.12

kilowatthour).

Firm Capacity Rate ($ per kilowatt-month).. 1.07 Forecast Capacity Rate ($ per $0.93

kilowatt-month).

Composite Rate (mills per kilowatthour).... 12.62 Composite Rate (mills per 11.79

kilowatthour).

----------------------------------------------------------------------------------------------------------------

\5\New rates will be determined each year, based upon the proposed new rate setting methodology. These charges

and rates represent FY 1996 only.

\6\The monthly charge for each Contractor is calculated as follows: (1) Energy Base Charge = Rate Year Energy

Dollar multiplied by the Contractor's Firm Energy percentage multiplied by its Monthly Energy Ratio and (2)

Capacity Base Charge = Rate Year Capacity Dollar divided by 12 multiplied by the Contractor's contingent

Capacity percentage. For FY 1996, upon the determination of the actual October 1996 energy and capacity

charges, the monthly Energy Charge and Capacity Charge for the remaining months will be adjusted so the BCP

Contractors will not pay more than the FY 1996 Annual Revenue Requirement.

Certification of Rate

Western's Administrator has certified that the rate methodology for

determining the BCP Annual Revenue Requirement, Base Charge, Forecast

Energy Rate, Forecast Capacity Rate, and Calculated Energy Rate placed

into effect on an interim basis herein are the lowest possible,

consistent with sound business principles. The rate methodology has

been developed in accordance with administrative policies and

applicable laws.

Discussion

Western is requesting approval to place into effect a new rate

methodology. Each year the contractors will pay the BCP the total

estimated Annual Revenue Requirement in return for up to 1,951,000 kW

of capacity and 4,501.001 MWh of energy at the BCP. The capacity and

energy, produced up to the above limits at the BCP, have been allocated

to the contractors on a percentage basis. Western will prepare an

annual PRSS which will identify the estimated annual revenue

requirements for the next FY. The annual operation, maintenance, and

replacement budgets will be presented to and approved by the BCP E&OC.

Upon completion of the Uprating Credit Procedures and receipt of

revised Uprating Credit Schedules, the FY 1996 Energy Dollar and

Capacity Dollar will be adjusted by the difference between the

originally projected Annual Uprating Credit Payments and the revised

Annual Uprating Credit Payments and spread over the remaining months of

FY 1996 so the BCP Contractors will not pay more than the revised FY

1996 Annual Revenue Requirement.

Revenue Requirements

The existing and proposed Annual Revenue Requirements for the BCP

are as follows:

------------------------------------------------------------------------

Estimated FY 1996

existing proposed

------------------------------------------------------------------------

Annual Revenue Requirements (rounded to nearest

$1,000)......................................... $57,720 $45,197

------------------------------------------------------------------------

The methodology for determining the Annual Revenue Requirement will

satisfy the cost-recovery criteria set forth in DOE Order RA 6120.2.

Statement of Revenue and Related Expenses

The Annual Revenue Requirement for the BCP is based upon Ratebase

PRSS estimates of the Rate Year's annual costs less other revenues.

Each FY's estimated Annual Revenue Requirement will be adjusted when

actual financial data becomes available. The following table provides a

summary of the revenue and related expenses through the 5-year

provisional rate approval period.

[[Page 57864]]

Boulder Canyon Project Projections of 5-Year Period Revenues and Expenses

[In thousands of dollars]

----------------------------------------------------------------------------------------------------------------

Provisional Existing annual

annual revenue revenue

requirement PRSS requirement PRSS Difference

1996-2000 1996-2000

----------------------------------------------------------------------------------------------------------------

Total Revenues............................................ $276,261 $269,702 $6,559

-----------------------------------------------------

Revenue Distribution:

O&M................................................... 131,051 110,664 20,387

Payment to States..................................... 3,000 3,000 0

Other Expenses........................................ 23,201 18,950 4,251

Annual Uprating Payments.............................. 74,699 76,888 -2,189

Annual Replacements................................... 20,402 10,577 9,825

Working Capital Fund.................................. 653 0 653

Interest.............................................. 62,577 53,996 8,581

Principal Payments.................................... 13,255 12,887 368

CRDF Carry-Over Balance............................... (13,317) 0 -13,317

Water Sales........................................... (2,650) (2,250) -400

Other Revenue......................................... (36,610) (15,010) -21,600

-----------------------------------------------------

Annual Revenue Requirement (rounded to the nearest

$1,000)............................................ 276,261 269,702 6,559

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Note: The difference between the Annual Revenue Requirements for the existing rates and the provisional rates is

because the existing rates are based upon the FY 1993 budget and the provisional rates are based upon the FY

1996 budget.

Basis for Rate Methodology--Boulder Canyon Project

The proposed rate methodology is the result of Western,

Reclamation, and the BCP Contractors successfully concluding

negotiations on the BCP Implementation Agreement which became effective

February 17, 1995.

The FY 1996 Energy Dollar and Capacity Dollar are designed to

maintain a 50/50 split between revenue earned from energy and revenue

earned from capacity. The Capacity Credit revenue adjustment resolves

the historic imbalance between revenues collected from capacity and

energy. The cost to individual BCP Contractor will vary because of the

differences in each BCP Contractor's entitlement.

Each Contractor shall be billed monthly a Base Charge comprised of

(1) an energy charge equal to the Rate Year Energy Dollar multiplied by

the Contractor's Firm Energy percentage multiplied by their Monthly

Energy Ratio and (2) a capacity charge equal to the Rate Year Capacity

Dollar divided by 12 multiplied by the Contractor's Contingent Capacity

percentage. The FY 1996 Rate Year's Energy Dollar and Capacity Dollar

will be adjusted over the remaining 11 months of FY 1996, so that the

BCP Contractors will not pay more than the estimated Annual Revenue

Requirement for FY 1996. The monthly energy and capacity charge will be

due and payable regardless of the amount of power and energy produced

by the BCP.

In addition to the Contractor's monthly base charge, a Forecast

Energy Rate and a Forecast Capacity Rate shall be calculated and will

be applied, for (1) excess energy, (2) unauthorized overruns, and (3)

water pump energy.

Within 90 days after the end of the FY and the Energy Deemed

Delivered has been determined, Western shall determine the Calculated

Energy Rate. If the Energy Deemed Delivered is greater than 4,501.001

MWh, Western shall then apply the Calculated Energy Rate to each

Contractor's Energy Deemed Delivered to determine the Contractor's

actual energy charge. Western shall then establish a credit or debit

for each Contractor based on the difference between the Contractor's

Energy Dollar and the Contractor actual energy charge. Such credit or

debit shall be issued by Western against the Contractor in the month

following the calculation or as soon as possible thereafter.

The preparation of each FY's PRSS shall include adjustments from

estimates to actuals in the previous year's PRSS. Any adjustments

required, whether resulting in an increase or decrease of the annual

revenue requirement, will be carried forward and included in the

estimated revenue requirement for the calculation of the next Rate

Year.

Comments

During the 109-day comment period, Western received eight written

comments either requesting information or commenting on the rate

adjustment. In addition, five persons commented during the July 13,

1995, public comment forum. All comments were reviewed and considered

in the preparation of this rate order.

Written comments were received from the following sources:

Colorado River Commission of Nevada (Nevada)

Irrigation & Electrical Districts Association of Arizona (Arizona)

Mr. Northcutt Ely for Los Angeles, City of, Department of Water and

Power and Southern California Edison Company (California) (2)

Metropolitan Water District of Southern California (California)

Overton Power District No. 5 and Valley Electric Association (Nevada)

R.W. Beck for the Arizona Power Authority (Arizona)

Vernon, City of (California)

Representatives of the following organizations made oral comments:

Arizona Power Authority (Arizona) (3 speakers)

Overton Power District No. 5 and Valley Electric Association (Nevada)

Los Angeles, City of, Department of Water and Power and Southern

California Edison Company (California)

Most of the comments received at the public meetings and in

correspondence dealt with the proposed rates, hydrology, cost

containment, and working capital fund. All comments were considered in

developing the proposed BCP rates.

The comments and responses, paraphrased for brevity, are discussed

below. Direct quotes from comment letters are used for clarification

where necessary.

[[Page 57865]]

Boulder Canyon Comments

Rates

Issue: Some customers are requesting a delay in the BCP rate

process in order to allow the customers, Western, and Reclamation

sufficient time to complete their current efforts; in particular,

efforts of the uprating credits committee.

Response: Western and Reclamation believe a 30-day delay in the

implementation of the proposed rate methodology until November 1, 1995,

would be in the best interest of the BCP Contractors. The 30-day delay

allowed the Colorado River Commission of Nevada (CRC) to obtain the

August 16, 1995, approval by the BCP E&OC of a request concerning CRC's

uprating credit carryforward balance and allow Western to incorporate

the resulting changes from CRC's request into the PRSS. Also, in

addition, the delay is taken in response to public comments for

additional review and comment time and the delay in the enactment of

the BCP Implementation Agreement. Upon completion of the current

efforts on the uprating credit committee, Western believes that further

changes to the uprating credit schedules can be incorporated into the

PRSS and the FY 1996 Rate Year Annual Revenue Requirement can be

adjusted accordingly at that time.

Issue: A customer suggested that if sufficient revenue reductions

are achieved through the efforts of the current committees to

potentially warrant a rate reduction for FY 96, Western should,

instead, consider carrying these revenues over into FY 1997 in order to

mitigate the effect of the Hoover Visitor Facilities on that year's

rates.

Response: As under the existing rate methodology, the proposed rate

methodology provides that any revenue over or under the Annual Revenue

Requirement is carried forward into the next year and increases or

decreases that year's Annual Revenue Requirement. The revenue carried

forward in any given year lowers the total Annual Revenue Requirement

for the next year, and does not act as a credit for any one specific

item, such as the visitor facilities. Western cannot deviate from the

methodology as agreed to by all the BCP Contractors in the BCP

Implementation Agreement.

Issue: A customer does not agree that the savings which may come

about as a result of an increase in generation of energy or a reduction

in costs should be carried over into FY 1997.

Response: Western agrees. As indicated previously, any savings in 1

year, which result in excess revenue being collected, is automatically

carried forward to the next year.

Issue: Some customers believe there is no need for a rate increase;

instead, there should be a reduction for FY 1996. It is believed that

Reclamation and Western can safely operate and maintain the BCP for FY

1996 using the rates currently in effect.

Response: Western agrees that a rate increase is not justified for

FY 1996. Under the proposed rate methodology, Base Charge and

forecasted rates will be a reduction to the existing rates. The FY 1995

Ratebase PRSS projects the FY 1996 Rate Year Base Charge to be less

than the total energy and capacity revenues to be collected in FY 1995.

Issue: A customer asks the question whether it is necessary to

calculate or display rates in view of the requirement introduced by the

BCP Implementation Agreement that the amount collected for energy shall

equal one-half of revenue requirements with adjustments to offset past

imbalances irrespective of the quantities of energy produced. It

believes that the calculation and promulgation of rates continues to be

necessary as a consequence of provision of the regulations and

contracts as well as for practical reasons.

Response: Western agrees that the calculation of rates should

continue. The proposed rate methodology requires Western to calculate

the Annual Revenue Requirement, Base Charge, Forecast Energy Rate,

Forecast Capacity Rate, and Calculated Energy Rate. The forecasted or

calculated rates would be applied to services such as unauthorized

overruns, ML and SL, and excess energy.

Issue: Some customers support the proposal to adjust the rate upon

the completion of the Uprating credit discussions.

Response: Western anticipates that the Uprating credits for FY 1996

will decrease upon completion of the Uprating credits discussions. The

reductions are a result of the Uprating Program being declared

complete, which releases excess bond funds and a revision to the

calculation of the weighted average interest rate, used to determine

the non-bonding contractors' Uprating credits. Western believes that

the FY 1996 Base Charge can be adjusted upon completion of the Uprating

credit discussions and receipt of the revised Uprating schedules.

Issue: Some customers request that the proposed rates be

implemented as soon as possible.

Response: Western agrees that the new rate methodology needs to be

implemented as soon as possible. It is Western's intention to proceed

with the rate process and have the proposed rate methodology effective

November 1, 1995, on an interim basis.

Issue: Some customers support the option where the Uprating credit

carryforward balances are paid over a 3-year period.

Response: Western has incorporated this request into the FY 95 Rate

Base PRSS. The process to request the FY 1995 payments has been

initiated. It is to be noted that the payments incorporated in the PRSS

do not address the issue of interest on the Uprating carryforward

balance.

Issue: One customer believes that the proposed charges and rates

should provide for repayment of all overdue Uprating credits payments

with accrued interest.

Response: The Uprating credit procedures have not been completed.

Western believes upon completion of the procedures and receipt of

revised Uprating credit schedules this issue will be resolved.

Issue: One customer has offered to provide Western with expertise

and assistance in the light of Western's reorganization, changes in

budgets, and turnover.

Response: Western appreciates the offer for assistance. Western

recognizes there are opportunities for developing partnerships with our

customers and will be looking for opportunities through the

transformation process.

Issue: A customer comments that existing legal requirements, if

followed strictly, would result in an over collection of revenue as a

result of increased energy generation, requiring a mid-year adjustment.

Response: The BCP Implementation Agreement provides that Western

bill the BCP Contractors a monthly Base Charge, collecting no more than

the Total Annual Revenue Requirement. Under the new methodology,

revenue actually collected is not dependent upon the amount of energy

generated or the rate charged. Western is reviewing the regulations to

determine whether the customer's interpretation of the regulations is

valid. Upon completion of the review, Western will followup with the

Bureau of Reclamation and the BCP Contractors for further discussions

on this issue.

Hydrology

Issue: A customer believes the Master Schedule distributed on June

15, 1995, should be corrected since it has no operative effect until

October 1, 1995, as the power contracts provide in Section 5.58 for the

revision of the Master Schedule.

[[Page 57866]]

Response: The BCP Implementation Agreement provides that Western

will use the final Master Schedule, dated June of each year, to

calculate the Forecast Energy Rate and provide each contractor's

Monthly Energy Ratio used in calculating its monthly energy charge.

Western believes that any deviation from the June final Master Schedule

would have to be agreed to by all BCP Contractors, Western, and

Reclamation. The agreement would require an amendment to the BCP

Implementation Agreement.

Cost Containment

Issue: Reclamation's operation and maintenance, other expenses, and

replacements costs have been steadily increasing. The BCP

Implementation Agreement now ensures complete recovery of these costs.

What is Reclamation doing to reduce these costs and to improve its

efficiency?

Response: Reclamation is committed to improving its efficiency and

minimizing the costs associated with operation and maintenance, other

expenses, and replacements. To achieve this goal Reclamation is working

closely with the Budget Review Subcommittee of the E&OC.

Issue: There are an inordinate number of supervisors and

administrative employees in relation to the number of actual workers.

What is Reclamation doing to reduce these administrative and overhead

costs?

Response: Since the beginning of FY 1994, Reclamation has reduced

layering from as many as five layers in some areas of the organization,

to no more than two layers between any employee and the Regional

Director in the Regional office, and no more than three layers between

any employee and the Regional Director in the Area Offices.

Supervisory-to-employee positions have been reduced from one supervisor

to every 8 employees to one supervisor for every 15 employees. Several

positions and functions have been eliminated. The Lower Colorado Region

has reduced its FTE by 307 as of July 7, 1995, which represents an

overall 22-percent reduction.

Issue: One customer requests that Western and Reclamation agree to

not increase the total Annual Revenue Requirements for FY 1997 and FY

1998 above FY 1996 levels and set the goal to stabilize the charges

over the next 3-years.

Response: The BCP Implementation Agreement provides for a

collaborative budgetary review process through the E&OC. Western and

Reclamation believe that this is the appropriate forum to address

budgetary review by the BCP Contractors. When comparing the Annual

Revenue Requirement for FY 1996 with FY 1997 and FY 1998, note that a

$13 million carryover balance from FY 1995 is figured in the FY 1996

estimate. If the FY 1996 Annual Revenue Requirement (without adjustment

for the carryover balance) was used as the ceiling for FY 1997 and FY

1998, Western and Reclamation would have to postpone replacements that

are critical to operation of the project.

Working Capital

Issue: A customer believes there is no justification to have the

working capital fund and should be eliminated from the PRSS.

Response: The BCP Implementation Agreement provides for the Working

Capital to be adjusted to $3 million for the FY 1996 Rate Year. Under

Section 14.7 of the BCP Implementation Agreement, the Coordinating

Committee shall have the authority, pursuant to Section 11.4.3, to

increase or decrease the Working Capital.

Environmental Evaluation

In compliance with the National Environmental Policy Act 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

the preparation of an environmental assessment or an environmental

impact statement.

Executive Order 12866

DOE has determined that this is not a significant regulatory action

because it does not meet the criteria of Executive Order 12866, 58 FR

51735. Western has an exemption from centralized regulatory review

under Executive Order 12866; accordingly, no clearance of this notice

by OMB is required.

Availability of Information

Information regarding this rate adjustment, including PRSSs,

comments, letters, memorandums, and other supporting material made or

kept by Western for the purpose of developing the power rates, is

available for public review in the Phoenix Area Office, Western Area

Power Administration, Office of the Assistant Area Manager for Power

Marketing, 615 South 43rd Avenue, Phoenix, Arizona 85009-5313; Western

Area Power Administration, Division of Power Marketing, 1627 Cole

Boulevard, Golden, Colorado 80401; and Western Area Power

Administration, Office of the Assistant Administrator for Washington

Liaison, Room 8G-027, Forrestal Building, 1000 Independence Avenue SW.,

Washington, DC 20585.

Submission to Federal Energy Regulatory Commission

The charges and rates herein confirmed, approved, and placed into

effect on an interim basis, together with supporting documents, will be

submitted to FERC for confirmation and approval on a final basis.

Order

In view of the foregoing and pursuant to the authority delegated to

me by the Secretary of Energy, I confirm and approve on an interim

basis, effective November 1, 1995, Rate Schedule BCP-F5 for the Boulder

Canyon Project. The rate schedule shall remain in effect on an interim

basis, pending Federal Energy Regulatory Commission confirmation and

approval of it or a substitute rate on a final basis, through September

30, 2000.

Issued in Washington, DC, October 31, 1995.

Charles B. Curtis,

Deputy Secretary.

Boulder Canyon Project Schedule of Rates for Firm Power Service

Effective: The first day of the first full billing period beginning

on or after November 1, 1995, and remaining in effect through September

30, 2000, or until superseded.

Available: In the marketing area serviced by the Boulder Canyon

Project (BCP).

Applicable: To power customers served by the BCP supplied through

one meter at one point of delivery, unless otherwise provided by

contract.

Character and Condition of Service: Alternating current at 60

hertz, three-phase, delivered and metered at the voltages and points

established by contract.

Base Charge: Energy Charge: Each Contractor shall be billed monthly

an energy charge equal to the Rate Year Energy Dollar multiplied by the

Contractor's Firm Energy percentage multiplied by the Contractor's

Monthly Energy Ratio as provided by contract.

Capacity Charge: Each Contractor shall be billed monthly a capacity

charge equal to the Rate Year Capacity Dollar divided by 12 multiplied

by the Contractor's Contingent Capacity percentage as provided by

contract.

Forecast Rates: Energy: Shall be equal to the Rate Year Energy

Dollar divided by the lesser of the Total Master Schedule Energy or

4,501.001 megawatthours. This rate is to be

[[Page 57867]]

applied for use of excess energy, unauthorized overruns, and water pump

energy.

Capacity: Shall be equal to the Rate Year Capacity Dollar divided

by 1,951,000 kilowatts, to be applied for use of unauthorized overruns.

Calculated Energy Rate: Within 90 days after the end of each Rate

Year, a Calculated Energy Rate shall be calculated. If the Energy

Deemed Delivered is greater than 4,501.001 megawatthours, then the

Calculated Energy Rate shall be applied the each Contractor's Energy

Deemed Delivered. A credit or debit shall be established based on the

difference between the Contractor's Energy Dollar and the Contractor's

Actual Energy Charge, to be applied the following month calculated or

as soon as possible thereafter.

Lower Basin Development Fund Contribution Charge: The Contribution

Charge is 4.5 mills/kWh for each kWh measured or scheduled to an

Arizona purchaser and 2.5 mills/kWh for each kWh measured or scheduled

to a California or Nevada purchaser, except for purchased power.

Billing for Unauthorized Overruns: For each billing period in which

there is a contract violation involving an unauthorized overrun of the

contractual power obligations, such overruns shall be billed at 10

times the Forecast Energy Rate and Forecast Capacity Rate. The

Contribution Charge shall be applied also to each kWh of overrun.

Adjustments: None.

[FR Doc. 95-28534 Filed 11-21-95; 8:45 am]

BILLING CODE 6450-01-P