Application of the Energy Planning and Management Program Power Marketing Initiative to the Salt Lake City Area Integrated Projects

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

the Energy Planning and Management Program (EPAMP) Power Marketing

Initiative (PMI) to the Salt Lake City Area Integrated Projects (SLCA/

IP), as modified and discussed herein. For most of the current

customers, Western will extend 93 percent of the customer's pro rata

share of the SLCA/IP power resource available on October 1, 2004.

Effective on that same date, Western will make allocations of SLCA/IP

power to eligible new customers. Application procedures for new

customers will be set forth in a separate Federal Register notice in

the near future.

FOR FURTHER INFORMATION CONTACT: Mr. Dave Sabo, CRSP Manager, Western

Area Power Administration, PO Box 11606, Salt Lake City, UT 84147-0606,

telephone (801) 524-6372, email [email protected].

DATES: Western's decision to apply the PMI, as modified herein, to the

SLCA/IP will become effective on July 26, 1999.

SUPPLEMENTARY INFORMATION:

Authorities

This decision about the future marketing of the SLCA/IP power

resources was made pursuant to the Department of Energy (DOE)

Organization Act (42 U.S.C. 7101-7352); and the Reclamation Act of 1902

(ch. 1093, 32 Stat. 388), 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 other acts specifically applicable to the

projects involved.

Background

Western published its proposal to apply the EPAMP PMI to the SLCA/

IP on February 26, 1997 (62 FR 8709-8710). Western proposed to extend

96 percent of the SLCA/IP firm Federal resources available on October

1, 2004, to its current firm-power customers for 20 years. The

remaining 4 percent of resources was proposed to be made available for

new customers. Further resource reductions of 1-percent each were

proposed to be made available to new customers on October 1, 2009, and

October 1, 2014.

In its February 26, 1997, notice, Western requested comments on its

proposal. Interested parties were given until May 27, 1997, to comment

in writing. In addition, public information and comment meetings were

held in Sandy, Utah; Golden, Colorado; Albuquerque, New Mexico; and

Phoenix, Arizona. Comments were received from firm-power customers,

Native American tribes, environmental organizations, and members of

Congress.

In a separate public process that started on December 1, 1998, at

63 FR 66166, Western published a Notice of Inquiry to explore the

impact of electric utility industry restructuring on Western's power

allocation policies. A forum was held in Denver, Colorado, on January

6, 1999, to receive public comment on this matter, and written comments

were accepted from the public until the end of a 45-day consultation

and comment period. The comments received during this process are being

addressed in a separate Federal Register notice published concurrently

with this notice.

Several of the comments Western received on the Notice of Inquiry

concerned the size of the proposed new customer power pool,

particularly the adequacy of the pool to meet the needs of Native

American tribes. Consequently, on January 29, 1999, at 64 FR 4646,

Western published a notice of an additional opportunity to comment on

the appropriate size of the new customer power pool and to consider the

needs of eligible Native American tribes. Western accepted comments on

this topic until March 1, 1999. Informational meetings were held on the

SLCA/IP resources in Phoenix, Arizona, and Albuquerque, New Mexico, to

better explain to potential new customers the opportunities available

to them under the proposal. Several comments were received from Native

American tribes, Native American organizations, and current Western

customers.

Availability of Information

All documents made or kept by Western for the purpose of developing

this decision are available for public review, inspection, and copying

at the CRSP Customer Service Center, at 257 East 200 South, Suite 475,

Salt Lake City, Utah.

Regulatory Flexibility Analysis

The Regulatory Flexibility Act of 1980 (5 U.S.C. 601, et seq.)

requires Federal agencies to perform a regulatory flexibility analysis

if a rule is likely to have a significant economic impact on a

substantial number of small entities and there is a legal requirement

to issue a general notice of proposed rulemaking. Western has

determined that this action does not require a regulatory flexibility

analysis since it is a rulemaking of particular applicability involving

rates or services applicable to public property.

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.

Environmental Compliance

In compliance with the National Environmental Policy Act of 1969

(NEPA) (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), considerable environmental documentation has been prepared

addressing EPAMP, and the marketing of SLCA/IP power. Western completed

an environmental impact statement (EIS) on EPAMP. The Record of

Decision was published in the Federal Register (60 FR 53181, October

12, 1995). Western also completed the SLCA/IP Electric Power Marketing

EIS, and the Record of Decision was published in the Federal Register

(61 FR 56534, November 1, 1996). In the Marketing EIS, Western stated

that when EPAMP was applied to the SLCA/IP that if further

environmental review was required it would be completed at that time.

Since then, Western has determined that this action is categorically

excluded from preparation of an additional environmental assessment or

EIS. Accordingly, no further environmental review will be conducted.

Major Comments and Western's Responses

Western has considered the comments presented by all parties on the

proposal. The major comments received and Western's responses to those

comments are summarized below.

1. The Extension of Existing Commitments to Current Customers

Existing firm-power customers and Native American tribes were

generally supportive of Western's proposal. Many customers pointed out

that EPAMP had two components: a requirement that Western's firm-power

customers must

[[Page 34415]]

prepare integrated resource plans (IRP), and that Western extend a

major percentage of the existing Federal resources to Western's

existing firm-power customers through the PMI, with the exact amount to

be determined on a project-specific basis. The customers stated they

have complied with the IRP requirement and believe that Western is now

obliged to extend resource commitments. The customers further argued

that in order to prepare meaningful IRPs, they reasonably had to assume

that a stable Federal resource would continue to be available to them

since an uncertain Federal resource would make it very difficult to

determine future resource needs.

Several customers also suggested that Federal power has become more

expensive in recent years; and, if the trend continued, Federal power

would soon become a noncompetitive resource. They commented that

revenues from the sale of power also repay up to 90 percent of the

Federal Government's investment in the irrigation features of the SLCA/

IP water development projects. These customers argued that Western

should offer contract extensions while customers are willing to enter

into longer term arrangements, thus assuring the Federal Government of

a stable revenue stream to repay its investment in power and irrigation

facilities. Further argument was made that the electric industry is

undergoing many changes and that an extension of resources would help

stabilize volatile resource markets.

Other arguments were made that this is not an appropriate time to

extend resource commitments. According to these other commentors,

changes in the electrical industry create uncertainties about who

should be Western's future customers and that Western should wait until

it has better knowledge of the marketplace. Concern was also expressed

that the extension would impede the progress of legislation to

privatize power marketing administration assets.

Western's Response

After consideration of the comments received and in light of the

broad discretion Congress has provided Western to implement policy

changes when warranted, Western has decided to modify its proposal. For

most of the current customers, Western will extend 93 percent of the

customer's pro rata share of the SLCA/IP power resource available on

October 1, 2004. No further reductions will be made in subsequent years

to meet the needs of new customers. Western will amend current

contracts to extend the term for 20 years effective October 1, 2004.

Western has decided it is appropriate to proceed now with

application of the PMI to the SLCA/IP. Western's determination about

whether to apply the PMI to the SLCA/IP was delayed until the EIS on

the Post 1989 SLCA/IP Power Marketing Plan was completed and the

associated marketing criteria were finalized and implemented. That EIS

was completed in October 1996, and the associated post-1989 marketing

criteria were finalized and implemented April 1, 1997. Customers have

already completed IRPs in compliance with the requirements of EPAMP and

should be able to rely on Western's resources. Western also believes

that it is in the best interest of the United States to help ensure

that the Federal Government's investment in the Federal power projects

be repaid. All of the investment in power facilities, as well as up to

90 percent of the irrigation investment and substantial new

environmental expenses, is being repaid by revenues received from the

sale of electricity. Extending resource commitments provides relative

assurance to the United States of a continued revenue stream to repay

these expenses and obligations.

Western also believes that although the electric industry is

undergoing many changes, it is important to extend resource commitments

now. These changes are affecting not only the competitiveness of

Western's customers, but also the diversity of energy providers in the

marketplace. Western must be able to operate in the new utility

environment in order to fulfill its mission of marketing Federal power.

Western's mission under current statutes is ongoing.

For many of Western's customers, Federal power is an essential

component of their resource mix, and a resource extension is critical

to planning strategies for dealing with the utility restructuring.

Western recognizes the need for flexibility to respond to the changing

utility industry and to changing dam operations. Recently, Western and

its SLCA/IP customers entered into an amendment to power sales

contracts which provides great flexibility for dealing with changing

hydropower situations.

Western recognizes that the Bureau of Reclamation is under a

continuing obligation to ensure that the operation of the hydroelectric

facilities comply with Federal environmental laws. Western may revise

the amount of power marketed by the SLCA/IP as required to respond to

changes in hydrology and river operations, upon 5 years' notice to

customers. Any such changes will be applied on a pro rata basis among

all customers.

2. Allocations to Native American Tribes

Native American tribes commented that they should be entitled to an

allocation of Federal power to help compensate them for the impacts to

their lands and lifestyles caused by the construction of the Federal

dams and power facilities. The tribes argued that the proposed power

pool of 4 percent of the SLCA/IP marketable resources was inadequate to

meet their current or future needs. Several comments were received that

the pool should be increased to 10-30 percent and if the tribes did not

use the total amount it could be returned to the current customers

after the reallocation process. The tribes were also concerned that the

30-day comment period was not adequate for them to determine their

loads and to make a reasonable recommendation of pool size.

Some commentors suggested that Western should provide enough power

to supply 100 percent of tribal loads as well as meet future needs.

Others commented that it is not appropriate or even possible for

Western to do this.

Western's current customers commented that the proposed power pool

was adequate to give tribes and other new customers a fair share of the

resource. They suggested that Western consider advancing the 2009 and

2014 resource pools to enhance the initial pool in 2004, with no

further changes in allocations for the term of the contracts, to allow

Native American tribes to make appropriate resource decisions. Both

tribes and customers commented that Western should work out

arrangements for tribes to receive the benefits of Federal power

through bill crediting or other beneficial arrangements.

A comment was also made that Western should commission a study to

determine tribal loads within the SLCA/IP marketing area.

Western's Response

Effective October 1, 2004, Western will make allocations of SLCA/IP

power to eligible new customers which apply for SLCA/IP power. The

source of electricity for allocations to the new customers will be a

resource pool of SLCA/IP power not extended to existing customers and

available beginning October 1, 2004. Western has determined that a

resource pool size of 7 percent of resources available on October 1,

2004, combined with an additional reduction to Tri-State Generation and

Transmission

[[Page 34416]]

Association's (Tri-State) SLCA/IP resource commitment, will enable

Western to supply up to 12.5 percent of the current load of new utility

applicants and 65 percent of the load of Native American entities that

apply.

Western believes that it would be in the best interests of both

current customers and potential customers including Native Americans to

establish one resource pool of a definite size at this time. Western

performed a study of tribal loads within the SLCA/IP marketing area.

Western received information on loads from tribes and serving utilities

for many potential customers. Others were estimated using data about

the size of the tribe and use of electricity in the local area. Western

determined that a power pool that would provide Native American tribes

enough power to serve 65 percent of their current loads would be

equitable to the tribes and to current customers. Serving tribal load

at this level would be consistent with DOE policy and the trust

responsibility that exists between Native Americans and the Federal

Government. Western's study indicates that a resource pool of the size

described in this Federal Register notice would be sufficient to meet a

fair share of Native American loads as well as those of other potential

new customers.

In an exemption to the general policy, the four existing firm-power

customers of the SLCA/IP that are Native American entities--the Navajo

Tribal Utility Authority, the Ak Chin Indian Community, the Bureau of

Indian Affairs' Colorado River Agency, and the San Carlos Irrigation

Project--will be extended 100 percent of their pro rata share of the

SLCA/IP resource available on October 1, 2004. In addition, Western

will, if necessary, allocate additional SLCA/IP resources from a

resource pool to these or other Native American organizations such that

a minimum of 65 percent of the current load of each is served by

Federal power resources.

For Native American tribes which currently receive power from

utilities that have allocations of Federal power, Western will take

into account the benefit received through the existing supplier when

determining the power allocation to the tribe.

During the process of allocating the resource pool to customers,

which will begin after conclusion of this process, further information

on actual loads will be collected and used to determine the final

allocations from the resource pool. Western, to the extent it is able,

will provide technical assistance to tribes requesting assistance in

preparation of their applications and load data. After applications are

received and power allocated, unallocated power remaining in the pool

may be returned to current customers. If a tribe receives an allocation

but is unable to accept power on October 1, 2004, the power allocated

to the tribe will be provided to existing customers until such time as

the tribe is able to use the power.

Western has also decided that the interest shown by tribes and

other potential new customers indicates that the resource pool should

be used to serve these loads rather than, as proposed in February 1997,

for encouragement of new technologies, conservation, or renewable

resources, or held in reserve by Western for contingencies. Other

eligibility criteria for allocations of SLCA/IP resources will be

addressed in subsequent Federal Register notices and mailings to

interested parties about the availability of SLCA/IP resources to new

customers. Western will initiate a separate public process soon to

accept applications from Native American tribes and potential new

customers for firm electric service of SLCA/IP power from October 1,

2004, through September 30, 2024.

Finally, Western has agreed to work out arrangements for tribes to

receive the benefits of Federal power through bill crediting or other

beneficial arrangements.

3. Other Comments

A comment was received that the prices charged by Western for its

power sales are too low and that the price should be raised to finance

development of alternative forms of energy. Although comments about the

pricing of Western power are outside the scope of Western's proposal,

Western has a long record of encouraging its customers to conserve

energy and develop renewable resources without the need to introduce

changes in how its rates are set. Additionally, Western prohibits its

customers from profiteering by reselling their Federal power to

entities other than their end users. Comments on Western's rates may be

addressed when Western issues notices of proposed rate changes.

Comments on actions Western might take to further encourage its

customers to conserve energy and to develop renewable resources may be

addressed later this year when Western begins a formal public process

to reconsider its regulations concerning its customers' IRPs.

Another comment suggested that Western should provide an official

public comment forum or official public record. Western has provided

adequate opportunity for formal comment. Four information and comment

forums were held in 1997, and an additional public comment forum was

held in Denver, Colorado, on January 6, 1999. Interested parties also

were encouraged during each of the three informational meetings, held

in early February of 1999, to comment in writing. Letters submitted in

response to the January 29, 1999, Federal Register notice on resource

pool size are part of Western's formal and official record. Western has

considered the comments presented by all parties on the proposed 2004

marketing plan. Western has also responded in detail to the comments

received as a result of the Notice of Inquiry in a separate document

published separately in the Federal Register. Those additional comments

are incorporated herein by reference.

Several comment letters were received regarding the impact of a

pending merger between Tri-State and Plains Electric Generation and

Transmission Cooperative (Plains). One member of Plains, Navopache

Electric Cooperative (Navopache), is choosing not to participate in the

merger and cannot receive a portion of the SLCA/IP power allocated to

Plains under the terms of the currently effective power sales contract

between Western and Plains. Navopache has asked to receive an

independent allocation of power in 2004 to remediate the

``overallocation'' to Tri-State.

In another exception to the general policy concerning the

allocation to Tri-State, Western has decided to allocate to Tri-State 7

megawatts less than 93 percent of Tri-State's pro rata share of the

SLCA/IP resource available on October 1, 2004. The 7 mega-watts will be

part of the resource pool to be made available to new customers. This

additional reduction to Tri-State's allocation is being taken in

recognition of the fact that Tri-State would otherwise receive a post-

2004 resource commitment based on all of the SLCA/IP power allocation

of Plains, even though Navopache has chosen not to use Tri-State as its

power supplier. Navopache is welcome to apply for power from the

resource pool as a new customer.

In order to provide additional flexibility in addressing changing

conditions, the new contracts will have language that gives the

Administrator the discretion to adjust a customer's power allocation in

the event the customer merges with another organizational entity,

acquires or ``spins off'' another utility, joins or withdraws from a

membership-based organization, or adds members from a membership

organization.

[[Page 34417]]

Dated: June 10, 1999.

Michael S. Hacskaylo,

Administrator.

[FR Doc. 99-16017 Filed 6-24-99; 8:45 am]

BILLING CODE 6450-01-P