Provo River Project Notice of Rate Order No. WAPA-65

DEPARTMENT OF ENERGY

Western Area Power Administration

Provo River Project Notice of Rate Order No. WAPA-65

AGENCY: Western Area Power Administration, DOE.

ACTION: Notice of Rate Order--Provo River Project.

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SUMMARY: Notice is given of the confirmation and approval by the Deputy

Secretary of the Department of Energy (DOE) of Rate Order No. WAPA-65

placing into effect a formula for determining annual, power-related

payments for the Provo River Project (PRP) of the Western Area Power

Administration (Western) on an interim basis. The formula will remain

in effect on an interim basis until the Federal Energy Regulatory

Commission (FERC) confirms, approves, and makes it effective on a final

basis or until it is replaced by another method.

Statement of Revenue and Related Expenses

The power-related revenue requirements for the Provo River Project

(PRP) will be based upon projections contained in the annual power

repayment study (PRS). Differences between estimated and actual costs

will be adjusted when final financial data becomes available. The

following table is based on the fiscal year (FY) 1994 preliminary PRS

and provides a [[Page 11668]] summary of estimated revenue and cost

data through the proposed 5-year approval period.

Provo River Project--Total 5-Year Projections, Revenues and Costs

[$1,000]

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

Total FY

1995-99

projections

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

Total Revenues....................................... 1,341

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

Costs:

O&M...................................................... 959

Transmission............................................. 155

Interest................................................. 136

Investment Repayment..................................... 91

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

Total Costs.......................................... 1,341

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

DATES: The formula will be effective on an interim basis beginning

April 1, 1995, and remain in effect until FERC confirms, approves, and

places it into effect on a final basis for a 5-year period, or until it

is superseded.

FOR FURTHER INFORMATION CONTACT:

Mr. Kenneth G. Maxey, Area Manager, Salt Lake City Area Office,

Western Area Power Administration, P.O. Box 11606, Salt Lake City, UT

84147-0606, (801) 524-5493 or

Mr. Edmond Chang, Assistant Area Manager, for Power Marketing, Salt

Lake City Area Office, Western Area Power Administration, P.O. Box

11606, Salt Lake City, UT 84147-0606, (801) 524-5493 or

Ms. Deborah M. Linke, Chief, Rates and Statistics Branch, Western

Area Power Administration, P.O. Box 3402, Golden, CO 80401-0098, (303)

275-1618 or

Mr. Joel 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: By Amendment No. 3 to Delegation Order No.

0204-108, published November 10, 1993 (58 FR 58716), the Secretary of

Energy 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).

This action 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) were transferred

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

Rate Order No. WAPA-65, confirming, approving, and placing the

proposed formula for determining annual, power-related payments for the

Provo River Project into effect on an interim basis, is issued and will

be submitted promptly to FERC for confirmation and approval on a final

basis.

Issued in Washington, DC, February 16, 1995.

Bill White,

Deputy Secretary.

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DEPARTMENT OF ENERGY

Deputy Secretary

Order Confirming, Approving, and Placing into Effect on an Interim

Basis, a Formula for Determining Annual, Power-Related Payments for

the Provo River Project

February 16, 1995.

In the matter of: Western Area Power Administration Provo River

Project Power Rate, Rate Order No. WAPA-65.

The formula 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) were transferred

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

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 of DOE; 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 an definitions

apply:

Contractors: ICPA and UMPA.

CRSP: Colorado River Storage Project.

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.

FERC: Federal Energy Regulatory Commission.

FRN: Federal Register notice.

FY: Fiscal year, beginning October 1.

ICPA: Intermountain Consumer Power Association.

Interior: U.S. Department of the Interior.

kW: Kilowatt.

kW/month: The greater of (1) the highest 30-minute demand measured

during the month, not to exceed the contract obligation, or (2) the

contract rate of delivery.

kWh: Kilowatthour.

M&I: Municipal and industrial.

mills/kWh: Mills per kilowatthour.

MWh: Megawatthour.

NEPA: National Environmental Policy Act of 1969.

OM&R: Operation, maintenance, and replacement.

PMA: Power marketing administration.

PRP: Provo River Project.

PRP-MP: Provo River Project--Marketing Plan.

PRS: Power repayment study.

PRWUA: Provo River Water Users Association.

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

SLCA: Salt Lake City Area.

SLCAO: Salt Lake City Area Office.

Treasury: U.S. Department of the Treasury.

UMPA: Utah Municipal Power Agency.

UP&L: Utah Power & Light Company.

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

Effective Date

The revenue recovery formula will become effective on an interim

basis [[Page 11669]] beginning April 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 annual power-related

payments.

The following summarizes the steps Western took to ensure

involvement of interested parties in determining annual power-related

payments:

1. A Federal Register notice was published on July 12, 1994 (59 FR

35513), officially announcing the proposed formula, initiating the

public consultation and comment period, and presenting procedures for

public participation.

2. On July 15, 1994, a letter was mailed from Western's SLCAO to

customers and other interested parties announcing the publication of

the Federal Register notice of July 12, 1994.

3. The consultation and comment period ended August 11, 1994.

Project History

The PRP is located on the Provo River in central Utah. Deer Creek

Reservoir is backed-up behind Deer Creek Dam. Construction of the PRP

began in May 1938, with the powerplant completed in 1958. It has a

present generating capacity of 5 megawatts. The PRP initially was

designed to supply M&I and irrigation water to users in the Salt Lake

and Utah valleys. It does this by capturing the flow of the Provo River

and also by storing water diverted from the Duschesne and Weber Rivers.

UP&L has a powerplant on the Weber which has its production reduced

with the diversion of water to the Deer Creek Reservoir. As

compensation, the PRP furnishes UP&L energy to replace that which it is

estimated it would have generated absent the construction of the PRP.

This arrangement was formalized in contract No. Ilr-1082, dated

December 20, 1938.

The irrigation water consumers for the PRP are organized into the

PRWUA, a corporation of stockholders owning prorated Provo River water

entitlements. They executed contract No. Ilr-874 in 1936 with the

Federal Government to construct and repay irrigation-related project

facilities.

Only Deer Creek energy in excess of that obligated to UP&L has been

available for Federal marketing. Since 1963, CRSP has purchased the

available PRP energy at rates designed to recover the PRP's power-

related OM&R and investment costs. Since 1986, the PRP rate has also

included a commitment to supply $1.623 million toward the PRWUA's

repayment obligation for costs allocated to irrigation. The PRP's

original power-related investment was repaid in FY 1986.

Power Repayment Studies

PRSs are typically prepared each FY to determine if power revenues

will be sufficient to pay, within the prescribed time periods, all

costs assigned to be repaid by 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) 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, (3) each dollar of

assisted irrigation investment within the period established for the

irrigation water users to repay their share of construction costs.

The PRP PRSs have been used to determine the annual PRP rate, which

includes OM&R, wheeling and interest expenses. The contractors' annual

irrigation assistance payments to the PRWUA will not be included in the

PRS but will instead be paid under a separate agreement among

Reclamation, Western, PRWUA, and the contractors.

Certification of Rate

Western's Administrator has certified that the PRP formula for

determining annual, power-related payments placed into effect on an

interim basis herein will result in the lowest possible cost to

consumers, consistent with sound business principles. The formula has

been developed in accordance with administrative policies and

applicable laws.

Discussion

Each year, the contractors will pay the PRP's total estimated

annual power-related costs in return for the total marketable energy

produced at the PRP. The energy produced at the PRP has been allocated

to the contractors proportional to their PRP entitlement. Western will

prepare an annual PRS which will identify the anticipated power-related

costs for the next FY. Budgeted minor replacements and additions will

be included in the annual expenses. If replacements or additions

exceeding $5,000.00, but no greater than $25,000.00 are needed, the

contractors will be given the option of financing their share of the

cost, proportional to their PRP entitlement, in advance, or of having

the cost capitalized at DOE's current interest rate (the year in which

funds are first expended) and amortized over the estimated, average

life of the replacement, or 50 years, whichever is less. Additions will

be amortized over 50 years. Each contractor will pay its share of the

annual costs identified in the PRS in 12 equal monthly installments.

This method of determining annual power-related revenue

requirements will satisfy the cost-recovery criteria set forth in DOE

Order RA 6120.2.

Statement of Revenue and Related Expenses

The revenue requirements for the PRP are based upon PRS estimates

of future annual costs. Each FY's annual estimated costs will be

adjusted when historical financial data becomes available. The

following table provides a summary of estimated revenue and cost data

through the proposed 5-year approval period.

Provo River Project Total--5-Year Projections Revenues and Costs

[$1,000]

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

Total FY

1995-99

projections

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

Total Revenues....................................... 1,341

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

Costs:

O&M...................................................... 959

Transmission............................................. 155

Interest................................................. 136

Investment Repayment..................................... 91

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

Total Costs.......................................... 1,341

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

Basis for Rate Methodology--Provo River Project

The contractors will be billed each FY, payable in 12 equal monthly

payments. The monthly payments will be due and payable regardless of

the amount of power the contractors receive from the PRP. During the

first year this procedure is in effect, the annual sum due for FY 1995

will be divided by the months remaining in FY 1995. The contractors

will be billed in equal monthly installments for the remaining months

in FY 1995. Beginning in FY 1996, the proposed 12 equal monthly

installments will take effect. Each FY, Western will project PRP

expenses by [[Page 11670]] preparing a PRS which will include budgeted

OM&R and repayment costs for the PRP. The revenue requirement shown in

this PRS will not be dependent upon the power and energy made available

for sale, or the rate of generation each year. The amount of each

monthly payment for the following FY shall be established in advance by

Western and submitted to each contractor on or before August 31 of the

year preceding the appropriate FY.

The preparation of each FYs PRS shall include adjustment to the

figures used in the previous year's PRS to incorporate final financial

and operational data for the prior FY. Any adjustments required,

whether resulting in an increase or decrease of the annual sum due,

will be added to the FY then being calculated, and divided over 12

equal monthly installments.

Minor replacements and additions will be included in annual OM&R

expenses. If replacements and/or additions exceeding $5,000.00, but no

greater than $25,000.00, in cost are needed, the contractors will be

given the option of financing the cost through their own non-Federal

sources or having the cost financed by the Federal Government and

amortized and paid over the lesser of the average life of the

replacement or 50 years, whichever is less. Additions will be amortized

over 50 years. If financed with Federal funds, the cost will be

capitalized at the then-current interest rate prescribed by DOE,

pursuant to RA 6120.2 11B, ``Basic Policy for Rate Adjustments;

Interest Rate Formula,'' in the FY in which funds are first expended

for the replacement or addition.

If replacements over $25,000.00 are needed, the contractors will

consult with Reclamation, the PRWUA, and Western about financing the

replacement.

The proposed formula constitutes a minor rate adjustment as defined

by the procedures for public participation in general rate adjustments

covered in 10 CFR 903.2(f). The PRP's annual sales are less than 100

million kWh and installed capacity is less than 20,000 kW.

Comments

During the 30-day comment period, Western received no written

comments either requesting information or commenting on the formula.

Comments were received in response to the revised, PRP-MP Federal

Register notice dated July 11, 1994 (59 FR 35334). Comments were

accepted on Western's revised PRP-MP proposal until August 10, 1994.

These comments were addressed in the PRP-MP Federal Register notice

dated November 21, 1994 (59 FR 60007).

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 the Office of Management and Budget is required.

Availability of Information

Information regarding this rate order, including PRSs, comments,

letters, memorandums, and other supporting material made or kept by

Western for the purpose of developing the revenue-recovery methodology,

is available for public review at the following offices:

Western Area Power Administration, Salt Lake City Area Office, Office

of the Assistant Area Manager for Power Marketing, 257 East 200 South,

Suite 475, Salt Lake City, UT 84111

Western Area Power Administration, Division of Marketing and Rates,

1627 Cole Boulevard, Golden, CO 80401

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 formula for determining annual, power-related payments 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 April 1, 1995, the method of cost recovery for the

Provo River Project. The procedure shall remain in effect on an interim

basis, pending Federal Energy Regulatory Commission confirmation and

approval of it or a substitute process on a final basis, through March

31, 2000.

Issued in Washington, DC, February 16, 1995.

Bill White,

Deputy Secretary.

[FR Doc. 95-4880 Filed 3-1-95; 8:45 am]

BILLING CODE 6450-01-P