Transmission and Ancillary Services Rates, Loveland Area Projects, Notice of Proposed Rate Adjustments

DEPARTMENT OF ENERGY

Western Area Power Administration

Transmission and Ancillary Services Rates, Loveland Area

Projects, Notice of Proposed Rate Adjustments

AGENCY: Western Area Power Administration, DOE.

ACTION: Notice of proposed rate adjustments.

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SUMMARY: The Western Area Power Administration (Western) is proposing

transmission service and ancillary service rate adjustments (proposed

rates) for the Loveland Area Projects (LAP). This action is necessary

because the existing transmission rate (1993) is no longer sufficient

to recover annual costs (including interest expense) and capital

requirements.

The Proposed Rates are scheduled to go into effect April 1, 1998.

Western requests approval of a rate methodology for each service. Once

approved, the rates will be adjusted on or about October 1 each year by

updating the revenue requirement and load data to the most currently

available. This Federal Register notice initiates the formal process

for the proposed rates.

The current firm transmission rate for LAP expires January 31,

1999, but will be superseded by this rate adjustment for new and

existing transmission service. Heretofore, there have been no rates for

the six ancillary services defined by Federal Energy Regulatory

Commission (FERC) Order 888. Please refer to Table 1 for a summary of

the Proposed Rates and their methodology.

DATES: The consultation and comment period will begin on the date of

publication of this Federal Register notice and will end December 18,

1997. Written comments should be received by Western by the end of the

comment period to be assured consideration. Western will present a

detailed explanation of the proposed rate at the public information

forum which will be held at the following date and time:

1. October 23, 1997--1 p.m. MDT, Denver, CO.

Western will receive written and oral comments at the public

comment forum which will be held at the following date and time:

2. November 18, 1997--1 p.m. MST, Denver, CO.

ADDRESSES: Western's public information forum will be held at the

following place:

1. Fairfield Inn, 6851 Tower Road, Denver, CO 80249, (303) 576-9640

Western's public comment forum will be held at the following place:

2. Fairfield Inn, 6851 Tower Road, Denver, CO 80249, (303) 576-9640

Written comments are to be sent to: Regional Manager, Rocky

Mountain Region (RMR), Western Area Power Administration, P.O. Box

3700, Loveland, Colorado 80539-3003 or faxed to the Regional Manager at

(970) 490-7213.

FOR FURTHER INFORMATION CONTACT: Daniel T. Payton, Rates Manager, RMR,

Western Area Power Administration, P.O. Box 3700, Loveland, CO 80539-

3003, (970) 490-7442, or e-mail ([email protected]).

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Proposed Rates for LAP Transmission

A. Proposed Revenue Requirement for Transmission Service

B. Network Transmission Service

C. Firm Point-to-Point Transmission Service

D. Non-Firm Point-to-Point Transmission Service

II. Proposed Rates for Ancillary Services

A. Proposed Rate for Scheduling, System Control, and Dispatch

Service

B. Proposed Rate for Reactive Supply and Voltage Control from

Generation Sources

C. Proposed Rate for Regulation and Frequency Response Service

D. Proposed Rate for Energy Imbalance Service

E. Proposed Rate for Operating Reserves: Spinning, Supplemental,

and Emergency Use

III. Table 1--Summary of LAP Proposed Service Rates

IV. Authorities

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I. Proposed Rates for LAP Transmission

The RMR will offer network, firm point-to-point, and non-firm

point-to-point transmission service to all Transmission Customers. The

proposed rates will be applicable to existing and future transmission

service. As demonstrated in the rate methodology, Western will be

taking transmission service on the same basis as other Transmission

Customers. The cost of transmission service for serving Western's

Contract Rates of Delivery will continue to be included in the LAP firm

power rate, consistent with existing contracts. These contracts will

expire in the year 2024.

The RMR proposes to implement the LAP transmission rates in three

steps:

Step 1--April 1, 1998

The first step will be: the existing rate ($1.88/kW-Month) plus

one-third of the difference between the existing transmission rate

($1.88/kW-Mo) and the proposed rate. The revenue requirement for the

first step is based on FY 1996 financial data; the load is based on

1995 data.

Step 2--October 1, 1998

The second step will be: the existing rate ($1.88/kW-Month) plus

two-thirds of the difference between the existing rate and the

recalculated rate based on financial and load data for FY 1997 (October

1, 1996, to September 30, 1997).

Step 3--October 1, 1999

The third step will be: the recalculated rate based on financial

and load data for FY 1998 (October 1, 1997, to September 30, 1998).

The transmission rates will be recalculated and revised every year

effective October 1, based on the methodologies presented in the

following sections. Western will provide notice of changes in rates no

later than July 1 of each year.

I.A. Proposed Revenue Requirement for Transmission Service

An annual fixed charge methodology was used to determine the

revenue requirement to be recovered from network, firm, and non-firm

transmission service. The annual transmission costs included are

operation and maintenance expenses, administrative and general

expenses, interest expense, and depreciation expense.

I.B. Network Transmission Service

The monthly charge for network transmission service is the product

of the Transmission Customer's load-ratio share times one-twelfth of

the annual transmission revenue requirement. The current revenue

requirement is $43,554,579.

The customer's load-ratio share is the ratio of a network

customer's network load to Western's LAP transmission system total

load, calculated on a rolling 12-month basis (12 coincident peak (12-

cp)). The network customer's monthly network load is its hourly load

coincident with Western's LAP transmission system monthly transmission

system peak. The LAP transmission system total load is the monthly

system peak minus the coincidental peak usage of all firm point-to-

point transmission service customers, plus the reserved capacity for

all firm point-to-point transmission service customers. The 12-cp for

the LAP transmission system is 1,118,245 kW, based on 1995 data.

I.C. Firm Point-to-Point Transmission Service

The rate for firm point-to-point transmission service is the annual

revenue requirement for transmission divided by the 12-cp monthly peak

of the LAP transmission system. The current estimate is $3.25/kW-Month

($43,554,579 / 1,118,245 kW / 12 months). Western may discount these

rates to promote short-term firm sales.

I.D. Non-Firm Point-to-Point Transmission Service

Non-firm transmission service is available for periods ranging from

1 hour to 1 month. The rate for non-firm transmission service may be

discounted based upon market conditions, but never higher than the firm

point-to-point rate, converted to energy equivalent at 100% load

factor. The current maximum rate is 4.45 mills/kWh ($3.25/kW-Month/730

hours).

II. Proposed Rates for Ancillary Services

Western will provide ancillary services, subject to availability,

as described in Table 1 of this notice. The proposed rates are designed

to recover only the costs incurred for the service(s). The ancillary

services, as defined by FERC, are control area-based rates.

It is anticipated that in June 1998, the Western Area Lower

Missouri (WALM) control area will be merged with a portion of the

existing Western Area Upper Colorado (WAUC) control area operated by

Western's Colorado River Storage Project Customer Service Center, to

form the Western Area Colorado Missouri (WACM) control area which will

be operated by Western's RMR. The following ancillary service rate

calculations are for the WACM control area, effective June 1998.

An annual fixed charge methodology was used to determine the

revenue requirement to be recovered by each ancillary service. The

annual generation costs included are operation and maintenance

expenses, administrative and general expenses, interest expense, and

depreciation expense.

II.A. Proposed Rate for Scheduling, System Control, and Dispatch

Service

Scheduling, system control, and dispatch costs are calculated as an

annual cost of all personnel and other related costs involved in

providing the service for RMR customers. That cost is divided by the

number of schedules per year to derive a rate per schedule per day.

The rate for the WACM control area is $25.71 per schedule per day

and will be in effect in June 1998.

II.B. Proposed Rate for Reactive Supply and Voltage Control From

Generation Sources

RMR's Reactive Supply and Voltage Response Service costs are

calculated as an annual cost of Bureau of Reclamation generation plant

investment for both LAP and Salt Lake City Area-Integrated Projects

(SLCA-IP), and applying to that cost the percentage of the generation

resource required to provide reactive support in the control area to

yield an annual cost. That annual cost is then divided by the 12-cp

average of the total load that requires VAR support in the control

area, yielding a rate for the combined WACM control area effective June

1998 of $0.12/kW-Month (or .27 mills/kWh for non-firm service, based on

a 60 percent annual load factor).

II.C. Proposed Rate for Regulation and Frequency Response Service

Western's Regulation and Frequency Response Service rate is

determined by considering the annual revenue requirement of Bureau of

Reclamation regulating plants for both LAP and SLCA-IP, and dividing

that by the load requiring regulation in the WACM control area

(exclusive of those known loads that provide their own automatic

generation control). The resulting rate for the WACM control area

effective June 1998 is $0.15/kW-Month (or .34 mills/kWh for non-firm

service, based on 60 percent annual load factor).

II.D. Proposed Rate for Energy Imbalance Service

The Energy Imbalance Service rate will be applied against

deviations outside a 3 percent bandwidth ( 1.5

[[Page 49220]]

percent deviations), with a 2 MW deviation minimum.

Negative excursions (under deliveries) greater than 1.5 percent and

occurring more than five times per month will be assessed a penalty

charge of 100 mills/kWh; e.g., the sixth time an under delivery occurs

within a month, the 100 mills/kWh charge will be applied.

Any positive excursion (over delivery) will be credited to the

customer for 50 percent of the market value of the over delivery within

30 days.

II.E. Proposed Rate for Operating Reserves: Spinning, Supplemental, and

Emergency Use

It is unlikely that reserves will be available from WACM resources

on a long-term basis.

If Western has Spinning or Supplemental Reserves available for

short-term sale from WACM resources, Western will charge the LAP or the

SLCA-IP firm power capacity rate in effect at the time of the sale. The

current LAP firm power capacity rate is $2.85/kW-Month. The proposed

SLCA-IP firm power capacity rate is $3.48/kW-Month.

If Spinning or Supplemental Reserves are unavailable from WACM

resources, Western may obtain the reserves on the open market for the

customer and pass through the cost of those reserves, plus a cost for

administration.

When reserves are called on for Emergency Use, Western will assess

a charge for energy used, at the greater of 30 mills/kWh or the

prevailing market energy rate in the Region.

The Transmission Customer will be responsible for the transmission

service to get these reserves to their destination.

III. Table 1--Summary of LAP Proposed Service Rates

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Service Rate calculation or basis Proposed rate

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Network Transmission............... Customer's Load Ratio Share *\1/12\* Annual Based upon customer load

Transmission Revenue Requirement ($43,554,579). share.

Firm Point-to-Point Transmission... Total Annual Revenue Requirement/12 CP/12 $3.25/kW-month.

months ($43,554,579/1,118,245 kW/12).

Non Firm Point-to-Point Firm point-to-point rate/730 hours per month Maximum of 4.45 mills/kWh.

Transmission. ($3.25/kW-Month/730).

Scheduling, System Control, and Annual cost of personnel and related costs/

Dispatch. number of schedules per year.

Before consolidation into WACM: $1,098,873/ Before: $32.51/schedule/

33,800 schedules. day.

After consolidation into WACM: $1,223,140/ After: $25.71/schedule/

47,580 schedules. day.

Reactive Supply and Voltage Control Total Annual Revenue Requirement for Generation

from Generation Sources. *Percentage of Resource Capacity Used for

Reactive Power = Annual Revenue Requirement

for Reactive Power/Load in Control Area

Requiring Reactive Power/12 months.

Before consolidation into WACM: $51,456,799 Before: $0.09/kW-Month.

*2.82%=$1,448,509; then, $1,448,509/1,383,432

kW/12.

After consolidation into WACM: $73,299,264 After: $0.12/kW-Month.

*2.82%=$2,063,374; then $2,063,374/1,407,918

kW/12.

Regulation and Frequency Response.. Total Annual Revenue Requirement for Regulation/

Load in Control Area Requiring Regulation/12/

Months.

Before consolidation into WACM: $1,746,658/ Before: $0.11/kW-Month.

1,353,712 kW/12.

After consolidation into WACM: $2,531,065/ After: $0.15/kW-Month.

1,407,918 kW/12.

Energy Imbalance................... Charge for Energy Imbalance will be applied to As described.

deviations outside a 3 percent bandwidth.

Negative deviations above 1.5 percent,

occurring more than five times per month, will

be assessed 100 mills/kWh, with a 2 MW minimum

deviation.

Any Positive deviations above 1.5 percent will

be credited to customer at 50 percent of

average monthly non-firm market price in WACM

control area.

Spinning/Supplemental/Emergency Use Anticipate no long-term surplus reserves Spinning/Supplemental

Reserves. available for sale. Reserves will be charged

the Current Firm Power

Capacity Rates:

If available from a WACM resource on short-term LAP: $2.85kW Month.

basis, Spinning/Supplemental reserves would be

assessed the LAP or SLCA-IP firm power

capacity rate in effect at the time the

request is made.

Spinning/Supplemental reserves are unavailable SLCA-IP: $3.48/kW-Month

from a WACM resource, Western would offer to (Proposed).

purchase and pass-through cost of the

reserves, plus a cost for administration.

Emergency Use reserves will be charged the Emergency Use will be

greater of 30 mills/kWh or the prevailing charged > of 30 mills/kWh

market energy rate in the Region. or prevailing market.

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IV. Authorities

Transmission and ancillary services rates for the LAP are being

established pursuant to the Department of Energy (DOE) Organization Act

(42 U.S.C. 7101 et seq.) and the Reclamation Act of 1902 (43 U.S.C. 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. 485h(c)) and section 5 of the Flood Control Act of 1944 (16

U.S.C. 825s) and other acts specifically applicable to the projects

involved.

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

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

[[Page 49221]]

confirm, approve, and place into effect on a final basis, to remand, or

to disapprove such rates to the FERC. Existing DOE procedures for

public participation in power rate adjustments are found at 10 CFR part

903.

Regulatory Flexibility Analysis

Pursuant to the Regulatory Flexibility Act of 1980 (5 U.S.C. 601,

et seq.), each agency, when required to publish a proposed rule, is

further required to prepare and make available for public comment an

initial regulatory flexibility analysis to describe the impact of the

proposed rule on small entities. In this instance the initiation of the

LAP transmission rate and ancillary service rate adjustments are

related to non-regulatory services provided by Western at particular

rates. Under 5 U.S.C. 601(2), rules of particular applicability

relating to rates or services are not considered rules within the

meaning of the act. Since the LAP transmission rates and ancillary

services are of limited applicability, no flexibility analysis is

required.

Environmental Compliance

Western will conduct an environmental evaluation of the proposed

rates and develop the appropriate level of environmental documentation

pursuant to the National Environmental Policy Act (NEPA) of 1969 (42

U.S.C. 4321 et seq.); the Council on Environmental Quality Regulations

for implementing NEPA (40 CFR parts 1500 through 1508); and the DOE

NEPA Implementing Procedures and Guidelines (10 CFR part 1021).

Determination Under 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 Office of Management and Budget is required.

Availability of Information

All brochures, studies, comments, letters, memoranda, or other

documents made or kept by Western for developing the proposed rates,

will be made available for inspection and copying at the RMR Office,

located at 5555 East Crossroads Boulevard, Loveland, Colorado, 80537,

during normal business hours.

Dated: Sepember 11, 1997.

Michael S. Hacskaylo,

Acting Administrator.

[FR Doc. 97-24950 Filed 9-18-97; 8:45 am]

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