Loveland Area Projects-Western Area Colorado Missouri Balancing Authority-Rate Order No. WAPA-118, 28684-28692 [E6-7494]

Agencies

• DEPARTMENT OF ENERGY
• Western Area Power Administration

[Federal Register Volume 71, Number 95 (Wednesday, May 17, 2006)]
[Notices]
[Pages 28684-28692]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-7494]



[[Page 28684]]

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DEPARTMENT OF ENERGY

Western Area Power Administration


Loveland Area Projects--Western Area Colorado Missouri Balancing 
Authority-Rate Order No. WAPA-118

AGENCY: Western Area Power Administration, DOE.

ACTION: Notice of rate order.

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

SUMMARY: The Deputy Secretary of Energy confirmed and approved Rate 
Order No. WAPA-118 and Rate Schedule L-AS3, placing the rate for 
Regulation and Frequency Response Service (Regulation Service) for the 
Loveland Area Projects (LAP)--Western Area Colorado Missouri Balancing 
Authority (Balancing Authority) of the Western Area Power 
Administration (Western) into effect on an interim basis. This 
provisional rate will be in effect until the Federal Energy Regulatory 
Commission (Commission) confirms, approves, and places it into effect 
on a final basis or until it is replaced by another rate. The 
provisional rate will provide sufficient revenue to pay all annual 
costs, including interest expense, and repay power investment, within 
the allowable periods.

DATES: Rate Schedule L-AS3 will be placed into effect on an interim 
basis on the first day of the first full billing period beginning on or 
after June 1, 2006, and will be in effect until the Commission 
confirms, approves, and places the rate schedule in effect on a final 
basis through May 31, 2011, or until the rate schedule is superseded.

FOR FURTHER INFORMATION CONTACT: Mr. Edward F. Hulls, Operations 
Manager, Rocky Mountain Customer Service Region, Western Area Power 
Administration, P.O. Box 3700, Loveland, CO 80539-3003, (970) 461-7566, 
e-mail hulls@wapa.gov, or Mr. Daniel Payton, Rates Manager, Rocky 
Mountain Customer Service Region, Western Area Power Administration, 
P.O. Box 3700, Loveland, CO 80539-3003, (970) 461-7442, e-mail 
dpayton@wapa.gov.

SUPPLEMENTARY INFORMATION: The Deputy Secretary of Energy approved 
existing Rate Schedule L-AS3 for Regulation Service, as part of Rate 
Order No. WAPA-106 (69 FR 1723) on December 30, 2003, placing those 
formula rates into effect on an interim basis effective March 1, 2004. 
The Commission confirmed and approved the rate schedules on January 31, 
2005, under FERC Docket No. EF04-5182-000 (110 FERC 62,084) for service 
through February 28, 2009.
    This provisional rate is to supersede the current Rate Schedule L-
AS3 only. Under the existing Rate Schedule L-AS3, the cost for 
Regulation Service is only applied against entities' auxiliary loads.
    The revised rate remains unchanged for the most part; however, 
provisions have been made for the application of the load-based rate to 
all intermittent resources within the Balancing Authority. Intermittent 
generators serving load outside the Balancing Authority will also pay a 
pass-through cost for Regulating Reserves. Additionally, Western has 
further defined the measurement for self-provision of Regulation 
Service. Although self-provision was permitted under the previously 
approved rate schedule, the terms and conditions have now been 
specifically defined.
    Since June 2003 Western representatives have attended and 
participated in various technical conferences and workshops with 
parties interested in the development of this revised rate for 
Regulation Service, including the Utility Wind Interest Group, Oak 
Ridge National Laboratory, the National Wind Coordinating Committee, 
the National Renewable Energy Laboratory, Public Service Company of New 
Mexico, the Rocky Mountain Electrical League, and the Commission.
    By Delegation Order No. 00-037.00, effective December 6, 2001, the 
Secretary of Energy delegated: (1) The authority to develop power and 
transmission rates to Western's Administrator, (2) the authority to 
confirm, approve, and place such rates into effect on an interim basis 
to the Deputy Secretary of Energy, and (3) the authority to confirm, 
approve, and place into effect on a final basis, to remand or to 
disapprove such rates to the Commission. Existing DOE procedures for 
public participation in power rate adjustments (10 CFR part 903) were 
published on September 18, 1985.
    Under Delegation Order Nos. 00-037.00 and 00-001.00B, and pursuant 
to 10 CFR part 903 and 18 CFR part 300, I hereby confirm, approve, and 
place Rate Order No. WAPA-118, the proposed Regulation and Frequency 
Response Service rate, into effect on an interim basis. The new Rate 
Schedule L-AS3 will be promptly submitted to the Commission for 
confirmation and approval on a final basis.

    Dated: May 9, 2006.
Clay Sell,
Deputy Secretary.
Deputy Secretary; Order Confirming, Approving, and Placing the Loveland 
Area Projects--Western Area Colorado Missouri Balancing Authority 
Regulation and Frequency Response Service Rate Into Effect on an 
Interim Basis
    This rate was established in accordance with section 302 of the 
Department of Energy (DOE) Organization Act (42 U.S.C. 7152). This Act 
transferred to and vested in the Secretary of Energy the power 
marketing functions of the Secretary of the Department of the Interior 
and the Bureau of Reclamation under the Reclamation Act of 1902 (ch. 
1093, 32 Stat. 388), as amended and supplemented by subsequent laws, 
particularly section 9(c) of the Reclamation Project Act of 1939 (43 
U.S.C. 485h(c)), and other Acts that specifically apply to the project 
involved.
    By Delegation Order No. 00-037.00, effective December 6, 2001, the 
Secretary of Energy delegated: (1) The authority to develop power and 
transmission rates to Western's Administrator, (2) the authority to 
confirm, approve, and place such rates into effect on an interim basis 
to the Deputy Secretary of Energy, and (3) the authority to confirm, 
approve, and place into effect on a final basis, to remand or to 
disapprove such rates to the Commission. Existing DOE procedures for 
public participation in power rate adjustments (10 CFR part 903) were 
published on September 18, 1985.

Acronyms and Definitions

    As used in this Rate Order, the following acronyms and definitions 
apply:
    ACE: Area Control Error. The instantaneous difference between a 
Balancing Authority's net actual and scheduled interchange, taking into 
account the effects of Frequency Bias and correction for meter error 
and automatic time-error correction.
    AGC: Automatic Generator Control. Equipment that automatically 
adjusts generation in a Balancing Authority from a central location, to 
maintain the Balancing Authority's interchange schedule plus Frequency 
Bias. AGC may also accommodate automatic inadvertent payback and time-
error correction.
    Auxiliary Load: An entity's metered load, less its Federal 
allocation.
    Balancing Authority: The responsible entity that integrates 
resource plans

[[Page 28685]]

ahead of time, maintains load-interchange-generation balance within a 
Balancing Authority area, and supports interconnection frequency in 
real time.
    Capacity: The electric capability of a generator, transformer, 
transmission circuit or other equipment. It is expressed in kW.
    Capacity Rate: The rate which sets forth the charges for capacity. 
It is expressed in dollars per kilowatt-month.
    Commission: Federal Energy Regulatory Commission.
    CPS2: NERC's Control Performance Standard 2 which requires that the 
average ACE for at least 90 percent of clock 10-minute periods (6 non-
overlapping periods per hour) during a calendar month must be within a 
specific limit, referred to as L10 or ``L sub 10''.
    CRSP: Colorado River Storage Project.
    FERC: The Commission (to be used when referencing Federal Energy 
Regulatory Commission Orders).
    FERC Order No. 888: FERC's order promoting open access 
transmission.
    Frequency Bias: A value, usually expressed in megawatts per 0.1 
Hertz (MW/0.1 Hz) associated with a Balancing Authority that 
approximates the Balancing Authority's response to interconnection 
frequency error.
    Fry-Ark: Fryingpan-Arkansas Project.
    Intermittent Resource: For purposes of this rate order, an electric 
generator that is not dispatchable and cannot store its fuel source and 
therefore, cannot respond to changes in system demand or respond to 
transmission security constraints.
    kW: Kilowatt; a unit of power equal to 1,000 watts.
    LAP: Loveland Area Projects.
    MW: Megawatt; a unit of power equal to 1,000 kilowatts.
    NERC: North American Electric Reliability Council.
    P-SMBP: Pick-Sloan Missouri Basin Program.
    Provisional Rate: A rate which has been confirmed, approved and 
placed into effect on an interim basis by the Deputy Secretary.
    Reclamation Law: A series of Federal laws. Viewed as a whole, these 
laws create the originating framework under which Western markets 
power.
    Regulating Reserve: An amount of reserve responsive to automatic 
generation control, which is sufficient to provide normal regulating 
margin.
    Regulating Reserve Charge: Component of the provisional rate that 
would charge for the consumption of Regulating Reserves.
    Regulation Service: Regulation and Frequency Response Service--An 
ancillary service necessary to provide for the continuous balancing of 
resources, generation, and interchange, with load to maintain scheduled 
interconnection frequency at 60 cycles per second (60 Hz). 
Regulation Service is accomplished by committing on-line generation 
through the use of automatic generating control equipment to follow 
moment-by-moment changes in load.
    SBA: Sub-Balancing Authority--An entity serving load inside the 
Balancing Authority, with sufficient metering and AGC to accommodate 
minute-to-minute changes between its metered load and generation.
    Tariff: Western's Open Access Transmission Tariff.
    WACM: Western Area Colorado Missouri Balancing Authority, formerly 
known as the Western Area Colorado Missouri Control Area.
    WALC: Western Area Lower Colorado Balancing Authority.
    WECC: Western Electricity Coordinating Council.
    Western: United States Department of Energy, Western Area Power 
Administration.

Effective Date

    The provisional rate will take effect on the first day of the first 
full billing period beginning on or after June 1, 2006, and will remain 
in effect until May 31, 2011, pending approval by the Commission on a 
final basis.

Public Notice and Comment

    Western followed the Procedures for Public Participation in Power 
and Transmission Rate Adjustments and Extensions, 10 CFR part 903, in 
developing these rates. Western involved interested parties in the rate 
process in the following manner:
    1. Western proposed a rate adjustment for Regulation Service under 
Rate Order No. WAPA-106, dated June 13, 2003, and subsequently withdrew 
it on January 12, 2004, to allow more time for public input on 
intermittent resources and the self-provision of Regulation Service.
    2. On March 18, 2004, Western hosted a Technical Information 
Meeting on Regulation Service in Denver, Colorado. At this meeting, 
Western presented its findings regarding the withdrawal of the proposed 
rate. Interested parties gave detailed presentations from their 
respective viewpoints about Regulation Service.
    3. Between May 2004 and May 2005, Western representatives met with 
officials from Platte River Power Authority, the National Renewable 
Energy Laboratory, Oak Ridge National Laboratory, and the Center for 
Resource Solutions to solicit input on and discuss the impacts of the 
proposed Regulation Service rate.
    4. On September 27, 2004, Western held a second Technical 
Information Meeting on Regulation Service in Denver, Colorado, to 
discuss the results of the technical work completed since the March 18, 
2004, Technical Information Meeting.
    5. On June 20, 2005, Western published a Notice of Proposed Rate 
for Regulation Service in the Federal Register (70 FR 35424). 
Publication of this notice began the formal public process.
    6. On July 27, 2005, Western held public information and public 
comment forums for the proposed Regulation Service rate adjustment in 
Denver, Colorado.
    7. The Consultation and Comment Period for the public process 
closed on September 19, 2005.
    8. Western received two comment letters during the Consultation and 
Comment Period which were considered in preparing this rate order. One 
comment letter received on September 27, 2005, while not specifically 
addressed in this rate order, reiterated the comments of the other two 
commenters, and therefore, was addressed.

Comments

    Written comments were received from the following: Oak Ridge 
National Laboratory, Oak Ridge, Tennessee, and the National Renewable 
Energy Laboratory, Golden, Colorado (submitted jointly) Colorado 
Springs Utilities, Colorado Springs, Colorado.
    Representatives of the following organizations made oral comments: 
Oak Ridge National Laboratory, Oak Ridge, Tennessee Colorado Springs 
Utilities, Colorado Springs, Colorado Platte River Power Authority, 
Fort Collins, Colorado.

Project Description

A. Federal Projects Providing Regulation Service

    LAP is comprised of two power projects that provide Regulation 
Service for the WACM Balancing Authority, the Pick-Sloan Missouri Basin 
Program--Western Division (P-SMBP-WD) and the Fryingpan-Arkansas 
Project (Fry-Ark). The two projects were operationally and financially 
integrated for marketing purposes in 1989.
    WACM also receives supplemental Regulation Service through a 
dynamic signal from CRSP generating resources located within the WALC 
Balancing Authority.
    Within WACM, LAP provides service to customers in a three-state 
area

[[Page 28686]]

(Colorado, Wyoming, and Nebraska) over a transmission system of 
approximately 3,356 miles (5,401 circuit kilometers), and CRSP provides 
service to customers over a transmission system of approximately 1,422 
miles (2,288 circuit kilometers).

Loveland Area Projects

Pick-Sloan Missouri Basin Program--Western Division

    The initial stages of the Missouri River Basin Project, under 
construction since 1944, were authorized by section 9 of the Flood 
Control Act of December 22, 1944 (58 Stat. 877, Public Law 534, 78th 
Congress, 2nd session). It was later renamed the Pick-Sloan Missouri 
Basin Program (P-SMBP) to honor its two principal authors. The P-SMBP 
encompasses a comprehensive program, with the following authorized 
functions: flood control, navigation improvement, irrigation, municipal 
and industrial water development, and hydroelectric production for the 
entire Missouri River Basin. Multipurpose projects have been developed 
on the Missouri River and its tributaries in Colorado, Montana, 
Nebraska, North Dakota, South Dakota, and Wyoming.
    The Colorado-Big Thompson (C-BT), Kendrick, Riverton, and Shoshone 
Projects were administratively combined with P-SMBP in 1954, followed 
by the North Platte Project in 1959. These projects are known as the 
``Integrated Projects'' of the P-SMBP. The Riverton Project was 
reauthorized as a unit of the P-SMBP in 1970.
    The P-SMBP-WD and the Integrated Projects consist of 19 
powerplants: 6 in the C-BT, 6 in the P-SMBP-WD, 2 in the Kendrick 
Project, 4 in the Shoshone Project, and 1 in the North Platte Project.

Fryingpan-Arkansas Project

    Fry-Ark is a transmountain diversion project in central and 
southeastern Colorado authorized by the Act of August 16, 1962 (Pub. L. 
87-590, 76 Stat. 399, as amended by Title XI of the Act of October 27, 
1974, Pub. L. 93-493, 88 Stat. 1487). The Fryingpan and Roaring Fork 
rivers are part of the Colorado River Basin, on the West Slope of the 
Rocky Mountains. Fry-Ark diverts water from the Fryingpan River and 
other tributaries of the Roaring Fork River to the Arkansas River on 
the East Slope of the Rocky Mountains. The water diverted from the West 
Slope, together with regulated Arkansas River water, provides 
supplemental irrigation, municipal and industrial water supplies, and 
hydroelectric power production. Flood control, fish and wildlife 
enhancement, and recreation are other important purposes of Fry-Ark.
    Fry-Ark features five dams and reservoirs, one located on the West 
Slope of the Rocky Mountains, and four located on the East Slope of the 
Rocky Mountains.
    Fry-Ark's electrical features consist of the Mount Elbert 206-MW 
Pumped-Storage Power Plant, the Mount Elbert Switchyard, and the Mount 
Elbert-Malta 230-kV Transmission Line.

Colorado River Storage Project

    CRSP was authorized by the Act of April 11, 1956. It consists of 
four major storage units: Glen Canyon on the Colorado River in Arizona 
near the Utah border, Flaming Gorge on the Green River in Utah near the 
Wyoming border, Navajo on the San Juan River in northwestern New Mexico 
near the Colorado border, and the Wayne N. Aspinall unit (formerly 
known as Curecanti) on the Gunnison River in west-central Colorado.
    Six Federal powerplants with 16 units are associated with the 
project. The operating capacity of CRSP's 16 generating units was 
approximately 1,727,000 kW in fiscal year (FY) 2005. CRSP operates its 
transmission system within two balancing authorities, WACM and WALC.

B. Balancing Authority Characteristics

    WACM is operated by Western and has Federal hydroelectric resources 
from the P-SMBP--WD and Fry-Ark Project. Large non-Federal thermal 
generators also operate within WACM, but are not under the direct 
control of Western; e.g., Laramie River Station operated by Basin 
Electric Power Cooperative, Inc., and Craig Power Plant operated by 
Tri-State Generation and Transmission Association, Inc.
    The thermal generation within WACM represents the larger portion of 
the Balancing Authority's resource portfolio. However, thermal 
resources are much slower to respond to Regulation Service 
requirements, are generally operated near or at maximum generating 
capacity, and are typically not part of the AGC configuration. 
Generally, the thermal generation within WACM, as configured, is not 
considered capable of providing significant Regulation Service.
    In FY 2005, the peak load within WACM was measured at about 3,300 
MW with approximately 5,300 MW of generation installed. Federal 
generation capacity is 830 MW or about 15 percent of the total 
available resource.

Balancing Authority Regulating Constraints

    The only units within WACM capable of providing Regulation Service 
are those with the ability to adjust their output on a moment-to-moment 
basis. These units are located at Yellowtail, Seminoe, Kortes, Fremont 
Canyon, Alcova, Estes, Flatiron, and Mount Elbert powerplants. The 
amount of Regulating Reserve available from LAP powerplants is limited 
by how many units are available and the prescheduled loading of the 
units at a given time. Factors influencing unit regulating availability 
include water schedules, individual generator rough zone constraints, 
and various environmental constraints. These limitations exist at most 
LAP powerplants including Yellowtail and Mount Elbert, the two primary 
powerplants providing Regulation Service.
    The relatively small size of some forebays and afterbays also 
limits the amount of Regulating Reserve available to the system. 
Additionally, water delivery has priority over generation needs, 
further restricting the amount of water that can be moved through the 
generators to provide Regulation Service.

C. Regulation Service Rate Discussion

    In April 1998 Western implemented a load-based rate for Regulation 
Service. This rate has been applied to auxiliary loads within the 
Balancing Authority since that time. The existing formula rate for 
Regulation Service is based on an analysis that shows WACM requires 75 
MW of Regulating Reserve. As LAP has limited hydroelectric generation 
available for Regulation Service, it must rely on purchases from others 
to supplement its own resources. This is important as the Balancing 
Authority could be the default provider of Regulation Service for 653.5 
MW of intermittent resources currently in its interconnection queue. 
Recognizing its resource limitations, in this rate adjustment Western 
has included rates designed to properly allocate costs to all users of 
Regulation Service, including intermittent resources.
    The rate for Regulation Service is derived by dividing the revenue 
requirement by the load plus the installed intermittent generation, if 
any, within the WACM Balancing Authority requiring Regulation Service. 
The revenue requirement for Regulation Service consists of: (1) The 
annualized cost of LAP powerplants providing Regulation Service within 
the WACM Balancing Authority, (2) the revenue requirement for CRSP 
powerplants

[[Page 28687]]

providing supplemental Regulation Service to the WACM Balancing 
Authority, and (3) the cost of purchases to support Regulation Service. 
The load taking Regulation Service within WACM is derived by 
measurement of the load coincident with the LAP transmission system 
peak on a rolling 12-month average, plus the nameplate capacity of the 
intermittent resources located within the Balancing Authority.
    The provisional Regulation Service rate was developed based on the 
analysis of data relevant to the WACM Balancing Authority, and an 
extensive record was compiled during the process. Each Balancing 
Authority has unique operating characteristics and constraints when 
providing ancillary services. This rate is specifically designed for 
WACM's unique operating characteristics.

Basis for Rate Development

    The existing rate for Regulation Service in Rate Schedule L-AS3 
expires on February 28, 2009.
    The provisional rate will provide sufficient revenue to pay all 
annual costs, including interest expense and repayment of power 
investment, and will ensure that revenues are collected from the 
appropriate entities. The provisional rate will take effect on June 1, 
2006, and will remain in effect through May 31, 2011.

D. Rate Adjustment Background/Rates History

Background

    Western published a Notice of Proposed Rate for Regulation Service 
in the Federal Register on June 13, 2003 (68 FR 35398). One component 
of that proposed rate specifically addressed Regulation Service needs 
for intermittent resources. However, that component was withdrawn from 
the Final Notice of Rate Order published in the Federal Register on 
January 12, 2004 (69 FR 1723), to allow further study and input from 
interested parties. This provisional rate for Regulation Service is the 
culmination of that continued study and input from various interested 
parties.

Existing, Proposed, and Provisional Rates

    Western received comments during the Consultation and Comment 
Period that ended September 19, 2005. Based on comments received and 
further analysis, Western has revised its June 20, 2005, proposed rate 
to reflect the final provisional rate outlined in this rate order.

Description of Existing Rate

    Western's existing rate for Regulation Service is a load-based rate 
which is applied to entities' auxiliary loads within WACM. The existing 
rate provides for entities to be credited when providing WACM with 
Regulation Service, and waives charges if the load/resource is 
dynamically metered out of WACM. Western's existing rate contains no 
provision for application of pass-through costs. Following is a 
description of the changes made from the proposed rate to the 
provisional rate:

Load-Based Assessment Changes

    The June 2005 proposed rate maintained the existing rate's load-
based rate for application to auxiliary loads, but limited the 
application of that load-based rate for intermittent resources equal to 
or less than 10 percent of an entity's auxiliary load. The proposed 
rate also provided for an assessment to any load or resource deemed to 
be non-conforming.
    The provisional rate eliminates the 10-percent limit, and applies 
the load-based rate to both the auxiliary loads and the total installed 
intermittent resources within the Balancing Authority.

Changes in the Pass-Through Assessment

    The June 2005 proposed rate included provisions for periodic 
evaluations of all generators' performance within the Balancing 
Authority, and for those identified as non-conforming, provided for a 
pass-through cost. In the proposed rate, pass-through costs would also 
be applied to entities' intermittent resources exceeding 10 percent of 
their auxiliary load.
    The provisional rate eliminates the generator performance 
evaluation, as well as the 10-percent measurement and the non-
conforming load/resource analysis. In the provisional rate, only 
intermittent resources that are exported are charged a pass-through 
cost for Regulating Reserves.

Changes in Self-Provision or Cost Waiver Assessment

    The June 2005 proposed rate maintained the cost waiver if a load or 
resource was dynamically metered out of the Balancing Authority. If an 
entity claimed to be self-providing Regulation Service, the proposed 
rate gave the option of fully or partially self-providing (no different 
than the existing rate). The measurement of partial self-provision 
would be accomplished by measuring the first derivative of the average 
1-minute change in the entity's ACE. An entity claiming to fully self-
provide Regulation Service would have a choice of responding to WACM's 
dynamic ACE proportional to the entity's load, allowing WACM direct 
access to pulse the entity's regulating units, or some other mutually 
agreed-to process.
    The provisional rate no longer provides the option for an entity to 
respond to a proportional share of WACM's ACE. The provisional rate 
retains the option for an entity to allow WACM to directly pulse the 
entity's regulating units. It has also been adjusted slightly to 
measure partial self-provision by offering the customer the option of 
measuring either the entity's first derivative of the average 1-minute 
change in its ACE, or its averaged 1-minute ACE.

Summary of the Provisional Rate Effective June 1, 2006

    The provisional rate maintains the load-based assessment for 
auxiliary loads and the allowance for self-provision of the service, 
but allows the following choices for measuring that self-provision: (1) 
The first derivative of the averaged 1-minute change in the entity's 
ACE, or (2) the entity's average 1-minute ACE.
    The provisional rate eliminates the 10-percent limitation for 
intermittent resources to receive the load-based rate and instead 
applies the load-based rate to the total installed capacity of the 
intermittent resource.
    The provisional rate also eliminates the conforming versus non-
conforming load/resource analysis. However, any intermittent resource 
exporting from WACM via a schedule would still be charged a pass-
through cost based on the average hourly mismatch between forecast and 
actual generation.

Existing and Provisional Rates

    A comparison of the existing, proposed, and provisional rates is as 
follows:

------------------------------------------------------------------------
Existing Rate Schedule L-AS3      Proposed Rate       Provisional Rate
   Effective March 1, 2004       Schedule L-AS3        Schedule L-AS3
-----------------------------   Proposed June 20,     Effective June 1,
                                      2005                  2006
       Load-Based Rate       -------------------------------------------
                                 Load-Based Rate       Load-Based Rate
------------------------------------------------------------------------
Applied to:                   Applied to:           Applied to:

[[Page 28688]]

 
(1) Entity's auxiliary loads  (1) Entity's          (1) Entity's
                               auxiliary loads;.     auxiliary loads;
                                                     and
                              (2) Entities'         (2) Entities' total
                               intermittent          installed
                               resources <= 10% of   inermittent
                               their auxiliary       resources' capacity
                               load within WACM,     within WACM, with
                               after 180 MW limit    no installation
                               for intermittent      limit.
                               resource
                               installation
                               reached; and
                              (3) Non-conforming    (3) Eliminated.
                               type load (charged
                               an adjusted load-
                               based rate).


------------------------------------------------------------------------
 Pass-Through Cost:  Market-   Pass-Through Cost:    Pass-Through Cost:
            Based                 Market-Based          Market-Based
------------------------------------------------------------------------
N/A.........................  Applied to:.........  Applies to:
                              (1) all generators    (1) See No. (2), in
                               without designated    Cost Waiver section
                               load in WACM; and.    below.
                              (2) entities with     (2) No limit on
                               installed             installed
                               intermittent          intermittent
                               generation 10% of     generation, which
                               their auxiliary       will be charged as
                               load within WACM,     outlined in a. and
                               after 180 MW limit    b., below:
                               for intermittent
                               resource
                               installation
                               reached, will be
                               charged as follows:
                              (a) Regulation        (a) Regulation
                               Charge for minute-    Charge (load-based)
                               to-minute             will be charged to
                               fluctuations.         total installed
                                                     intermittent
                                                     resources (see Load-
                                                     Based Rate, No.
                                                     (2).
                              (b) Regulating        (b) intermittent
                               Reserve Charge for    resources exporting
                               hourly mismatch of    from WACM via
                               capacity.             schedule will be
                                                     charged for a
                                                     Regulating Reserve
                                                     Charge based on the
                                                     hourly mismatch of
                                                     forecast versus
                                                     actual generation.


------------------------------------------------------------------------
        Cost Waiver:              Cost Waiver:          Cost Waiver:
------------------------------------------------------------------------
Cost for service partially    Cost for service      Cost for service
 or fully waived if:.          partially or fully    partially or fully
                               waived if:.           waived if:
(1) generator or load         (1) generator or      (1) generator or
 dynamically metered out of    load dynamically      load dynamically
 WACM; or                      metered out of        metered out of
                               WACM; or.             WACM; or
(2) an entity provides its    (2) entities with     (2) entities
 own service (partially or     manual AGC that are   partially self-
 fully) and claim is           partially self-       providing (charged
 accepted by WACM              providing (charged    the load-based
                               load-based rate),     rate) will be
                               will be measured by   measured by either:
                               the first            (a) first derivative
                               derivative of the     of the averaged 1-
                               averaged 1-minute     minute change in
                               change in the         the entity's ACE;
                               entity's error        or
                               signal; or           (b) the entity's
                                                     average 1-minute
                                                     ACE; or
                              (3) entities with     (3) entitites
                               automatic AGC, that   wishing to fully
                               want to fully         provide service
                               provide service (no   must:
                               charge) must:
                              (a) be willing/able   (a) no longer
                               to respond to         applicable;
                               WACM's dynamic
                               signal,
                               proportional to
                               entity's load;
                              (b) allow WACM        (b) allow WACM
                               direct access to      direct access to
                               pulse entity's        pulse entity's
                               regulating units;     regulating units;
                              (c) mutually agree    (c) mutually agree
                               to any other proven   to any other proven
                               methodology or        methodology or
                               process; or           process; or
                              (d) if entity does    (d) if entity doe
                               not comply with       not comply with b.
                               (a), (b), or (c),     or c., it will be
                               it will be subject    subject to
                               to measurement        measurement
                               outlined in manual    outlined in this
                               AGC description in    section, Nos.
                               No. (2), in this      (2)(a) or (2)(b).
                               section.
------------------------------------------------------------------------

Customer Accommodation

    As referenced in Western's existing rate schedule for Regulation 
Service, entities requiring service ``* * * must either purchase this 
service from WACM or make alternative comparable arrangements to 
satisfy their Regulation obligations.'' (69 FR 1734) Western expects 
that entities requiring Regulation Service will take service from the 
WACM Balancing Authority.
    However, for entities unwilling to take Regulation Service from the 
WACM Balancing Authority, self-provide it, or acquire it from a third 
party, Western has an established record of assisting and will continue 
to assist entities in the dynamic metering of their loads or resources 
out of the Balancing Authority. Until such time as meter 
reconfiguration is accomplished, an entity will be responsible for 
Regulation Service charges assessed by the WACM Balancing Authority 
under the rate then in effect.

Certification of Rates

    Western's Administrator certified that the provisional rate for 
Regulation Service is the lowest possible rate consistent with sound 
business principles. The provisional rate was developed following 
administrative policies and applicable laws.

Comments

    The comments and responses regarding the Regulation Service rate, 
paraphrased for brevity when not affecting the meaning of the 
statement(s), are discussed below. Direct quotes from comment letters 
are used for clarification where necessary.
    The issues discussed have been organized into three sections: (1) 
Rate Design, (2) Implementation, and (3) Miscellaneous.

[[Page 28689]]

1. Rate Design
    A. Comment: Several comments expressed concern about the difference 
between Western's interpretation and their own regarding the true 
nature of Regulation Service. The commenters stated that Western's 
methodology for Regulation Service increases the cost of the service as 
expensive regulating units also support load-following and ramping.
    Response: The Commission requires balancing authorities to offer 
transmission customers Regulation and Frequency Response Service. 
However, there is no standard definition for load-following in any 
Commission document, NERC's glossary of terms, or WECC's reliability 
criteria. Within WACM, there is no distinction between Regulation 
Service and load-following during the hour on a real-time basis.
    WACM's Regulation Service, ramping, and load-following are 
performed simultaneously by the same units. As typical loads require 
all three services, it serves no purpose to operationally separate the 
functions.
    Out of the 16 customers taking Regulation Service from Western, the 
7 balancing authorities adjacent to Western, or the 34 balancing 
authorities within the Western Interconnection, none have made requests 
or submitted comments to Western regarding the separation of these 
services.
    B. Comment: A comment suggested Western develop a mechanism to tap 
into the ramping capability of non-Federal thermal generation within 
WACM, so that the cost of Regulation Service and load-following could 
be reduced for all customers.
    Response: This comment is out of the scope of this rate action. 
However, the ramping capability identified in the comment is not owned 
by Western. Such resources are fully committed or used for the 
respective owners' deliveries to load. Any use of available ramping 
capability would have to be purchased from the thermal generation's 
owner and replaced to accommodate previous operational commitments.
    C. Comment: A comment states that the proposed rate methodology 
adds unneeded complexity to the rate.
    Response: Western believes that the methodology adopted in the 
provisional rate reflects a more accurate assignment of costs and is a 
reasonable modification of the existing approved rate for Regulation 
Service. The methodology is no more complex than necessary to assign 
costs fairly and provide adequate customer choice.
    D. Comment: The rate adjustment fails to assess the actual physical 
Regulation Service burden placed on the system by each separate 
customer and improperly recovers costs from each customer in proportion 
only to the Regulation Service burden placed on the system by each 
customer group.
    Response: This methodology is unchanged from the previous 
Commission-approved rate and is consistent with regional and Western 
Interconnection practices. A separate rate or system burden is not 
identified for each customer, and proportional, cost-based assessments 
will continue to be made for each customer's load share of the system's 
Regulation Service requirements.
    E. Comment: A commenter believes that the Regulation Service rate 
should be based on the Regulation Service allocation method described 
in the January 2000 report, ``Customer-Specific Metrics for the 
Regulation and Load Following Ancillary Services,'' authored by Brendan 
Kirby and Eric Hirst of Oak Ridge National Laboratory.
    Response: Based upon Western's research, the methodology outlined 
in the January 2000 report referenced by the comment has not been 
adopted and put into practice by any entity or Balancing Authority in 
the electric utility industry.
    Western's load-based rate is approved by the Commission and has 
been in effect for approximately 8 years. Western believes that minor 
adjustments to the approved rate, based on operating experience and 
Balancing Authority needs, are a reasonable modification.
    The provisional rate methodology, specifically tailored for WACM's 
unique mix of resources, results in the lowest cost consistent with 
sound business principles and therefore, is most appropriate for 
determining Regulation Service. A complete change in methodology is 
unnecessary.
    F. Comment: Western received several comments related to the 
analysis of wind resources, their operating characteristics, and 
impacts on Balancing Authority performance. Specifically, comments 
addressed Western's simulation studies to determine wind impacts on the 
Balancing Authority, the true amount of wind capacity that could be 
absorbed by WACM, and the cost of service for intermittent resources.
    Response: In its simulation studies on Balancing Authority 
performance, Western projected or scaled the output of existing WACM 
wind resources to study the impacts of additional wind resources.
    While linear scaling of a large magnitude in the range of 10 to 20 
times might render questionable results, Western has demonstrated that 
linear scaling of 2 to 3 times is accurate for the purpose of this 
analysis.
    As a benchmark of reasonability, Western worked with a neighboring 
Balancing Authority with similar characteristics and a 204-MW wind 
farm. Analyses revealed that this wind farm had significant intra-hour 
fluctuations, often up to the installed capacity of the units. During 
these times, the neighboring Balancing Authority saw a significant 
degradation in its operating performance.
    Despite the fluctuations in output from wind or other intermittent 
resources, Western has determined by reviewing additional information 
and public comments that at present, there is no need to establish a 
limit for the amount of wind that may be installed for use by loads 
residing within the Balancing Authority.
    For resources exported out of the Balancing Authority, Western will 
charge the load-based rate against the nameplate of the resource plus a 
Regulating Reserve Charge, measured by the average hourly mismatch of 
the forecast versus the actual generation, and using pass-through 
pricing.
    G. Comment: Western has effectively double-charged customers for 
energy associated with Regulation Service, by charging them once in 
their Energy Imbalance Service rate schedule and by charging them again 
within the Regulation Service rate as a Regulating Reserve Charge.
    Response: In the interest of clarification, Western notes that its 
Energy Imbalance Service credits customers who over-deliver their 
resources and charges customers who under-deliver their resources.
    Western will not double-collect by charging for both Energy 
Imbalance Service and Regulating Reserve charges. The proposed 
Regulating Reserve Charge is a separate and distinct charge and can be 
viewed in the same light as a ``unit commitment'' charge; i.e., what 
Western needs to keep on-line when an intermittent resource's actual 
output differs from its scheduled output.
    Western notes that the Regulating Reserve Charge would only apply 
to entities exporting their intermittent generation out of WACM.
    H. Comment: A comment states that Western's metric does not work 
above the 10-percent penetration rate (as defined by Western). For wind 
capacity in excess of this limit, there is no indication of what metric 
will be used to calculate the impact of wind on the system regulation 
requirements.

[[Page 28690]]

    Response: Western has eliminated the limit for intermittent 
generation of 180 MW or 10 percent of the Balancing Authority's 
auxiliary load, primarily due to the dynamic circumstances surrounding 
the impacts of additional intermittent resource installation. It is 
highly likely that WACM would experience degradation in its CPS2 should 
a single 200-MW intermittent resource be added to the Balancing 
Authority's resource mix. Historically, however, WACM has seen a very 
gradual addition of wind generators and has been able to adapt its 
system to operate around the volatility of these generators. Therefore, 
Western has eliminated the limit in the provisional rate.
2. Rate Implementation
    A. Comment: Western has incorrectly identified non-conforming loads 
and did not adequately define how they would be measured.
    Response: Western's proposed metric for identifying conforming 
versus non-conforming load was accurate, and properly distinguished 
between these two types of loads. However, the WACM Balancing Authority 
does not presently have any non-conforming load within its boundaries, 
and is not anticipating such load in the foreseeable future. This led 
to a decision to eliminate the non-conforming load assessment from the 
provisional rate.
    B. Comment: An SBA with AGC must respond to an error signal from 
WACM ``proportional to the SBA's load within the Balancing Authority,'' 
which would be inequitable, as allocation of regulating burden cannot 
be assessed on load. Regulating Service charges are more properly based 
on the volatility of the load, not on average demand.
    Response: The option of responding to a proportional share of 
WACM's dynamic signal was one of several options available to 
customers. However, this option was eliminated from the provisional 
rate. Other remaining alternatives include paying the same load-based 
Regulation Service rate as others or being treated as an SBA without 
AGC, both of which would resolve the comment's concern that it only 
respond to the ``volatility'' of its own load (see Response to Comment 
2.C. below).
    Regarding the comment that a proportional response of a customer's 
AGC to an error signal from the Balancing Authority is inequitable, 
Western believes that this arrangement is equitable and necessary to 
prevent WACM from being the first to respond to a dynamic signal when 
an SBA cannot. It ensures that the SBA absorbs, on a proportional 
basis, responsibility for Regulation Service within the Balancing 
Authority.
    C. Comment: Under the self-provision assessment methodology, the 
limits of 0.5 percent and 1.5 percent to determine whether there are 
full, partial or no charges for a period are completely arbitrary.
    Response: The bandwidths of 0.5 percent and 1.5 percent are not 
arbitrary and follow calculations used by NERC for computing allowable 
excursions for each Balancing Authority. This calculation is based on 
the proportional share of generation response within a Balancing 
Authority's boundaries, contrasted to total generation response in the 
Interconnection.
    D. Comment: A commenter maintains that it is providing its own 
Regulation Service, and, therefore, is not subject to WACM's ancillary 
service rate for Regulation Service.
    Response: Western's position is that all entities operating within 
the Balancing Authority that are not NERC-recognized balancing 
authorities must take Regulation Service from the host Balancing 
Authority, unless they can demonstrate that they are actually providing 
their own service or are not using the resources of the host Balancing 
Authority.
    An entity's claim of full self-provision of Regulation Service must 
be demonstrated through joint study between the entity and the 
Balancing Authority, and approved by WACM. Until such time as full 
self-provision is demonstrated and approved, the entity will be charged 
for Regulation Service based on the entity's choice of: (1) The first 
derivative of the averaged 1-minute change in the entity's ACE; (2) the 
entity's average 1-minute ACE, as outlined in Rate Schedule L-AS3, 
Section 3.1; or (3) the load-based rate applied against the entity's 
load.
    E. Comment: The rate methodology does not credit the SBA for 
providing frequency response service which could motivate the SBA to 
set its Frequency Bias to zero, resulting in governor response being 
withdrawn by the AGC system during a system disturbance.
    Response: For those entities operating generation in a tie-line 
bias mode, Western will offset the calculated Regulation Service 
requirement by mutual agreement with the SBA.
    Western will not provide credit for the governor response, as it is 
an involuntary action by the generating units across the Western 
Interconnection to arrest frequency from further degradation in the 
aftermath of a large contingency.
3. Miscellaneous
    A. Comment: Several comments applauded Western for its efforts to 
develop a rate for Regulation Service that recognizes the costs 
associated with providing the service and attempts to allocate those 
costs to the transmission customers responsible for incurring those 
costs.
    Response: Western notes the comments.
    B. Comment: A comment recommends WACM abandon the present proposal 
and develop a Regulation Service rate that uses technically defensible 
metrics to measure consumption of the service.
    Response: Western acknowledges the recommendation, but believes 
that its methodology is technically defensible, and it would not be 
reasonable to abandon efforts to manage and accurately account for the 
cost of providing Regulation Service. Western provided appropriate time 
and opportunity for consultation and comment on the proposed action in 
accordance with the Procedures for Public Participation in Power and 
Transmission Rate Adjustments and Extensions, set out in 10 CFR part 
903.
    C. Comment: A comment renewed an offer to help Western develop an 
appropriate
    Regulation Service tariff and help analyze the impact of wind 
generation.
    Response: Western appreciates the offers of assistance it received 
during the course of this rate process, however, Western cannot give 
favored status to any group or groups in the design and implementation 
of proposed actions.
    Western did accept information and input from all concerned 
parties, both formally and informally, worked closely with technical 
staff from other agencies, and hosted panel discussions regarding the 
proposed rate at many wind-related conferences and meetings.
    Western also believes that it is in the best position to design its 
Regulation Service rate, based on the unique characteristics of WACM, 
the regional Federal hydroelectric powerplants, and Western's mission.

Availability of Information

    Information about this rate adjustment, including comments, 
letters, memorandums and other supporting materials Western used to 
develop the provisional rates, is available for public review in the 
Rocky Mountain Customer Service Region, Western Area Power 
Administration, 5555 East Crossroads Boulevard, Loveland, Colorado.

[[Page 28691]]

Regulatory Procedure Requirements

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 final 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.

Environmental Compliance

    In compliance with the National Environmental Policy Act (NEPA) of 
1969 (42 U.S.C. 4321, et seq.); Council on Environmental Quality 
Regulations (40 CFR parts 1500-1508); and DOE NEPA Regulations (10 CFR 
part 1021), Western has determined that this action is categorically 
excluded from preparation of an environmental assessment or an 
environmental impact statement.

Determination Under Executive Order 12866

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

Small Business Regulatory Enforcement Fairness Act

    Western has determined that this rule is exempt from congressional 
notification requirements under 5 U.S.C. 801 because the action is a 
rulemaking of particular applicability relating to rates or services 
and involves matters of procedure.

Submission to the Federal Energy Regulatory Commission

    The provisional rates herein confirmed, approved, and placed into 
effect, together with supporting documents, will be submitted to the 
Commission for confirmation and final approval.

Order

    In view of the foregoing and under the authority delegated to me, I 
confirm and approve on an interim basis, effective June 1, 2006, Rate 
Schedule L-AS3 for the Loveland Area Projects and the Western Area 
Colorado Missouri Balancing Authority of the Western Area Power 
Administration. The rate schedule shall remain in effect on an interim 
basis, pending the Commission's confirmation and approval of it or a 
substitute rate on a final basis through May 31, 2011.

    Dated: May 9, 2006.
Clay Sell,
Deputy Secretary.

Rate Schedule L-AS3, Schedule 3 to Tariff, June 1, 2006

Rocky Mountain Region; Regulation And Frequency Response Service

Effective

    The first day of the first full billing period beginning on or 
after June 1, 2006, through May 31, 2011.

Applicable

    Regulation and Frequency Response Service (Regulation Service) is 
necessary to provide for the continuous balancing of resources, 
generation and interchange with load, and for maintaining scheduled 
interconnection frequency at sixty cycles per second (60 Hz). 
Regulation Service is accomplished by committing online generation 
whose output is raised or lowered, predominantly through the use of 
automatic generating control equipment, as necessary to follow the 
moment-by-moment changes in load. The obligation to maintain this 
balance between resources and load lies with the Western Area Colorado 
Missouri (WACM) Balancing Authority operator. The Customers (Loveland 
Area Projects (LAP) Transmission Customers and customers on others' 
transmission systems within WACM) must purchase this service from WACM 
or make alternative comparable arrangements to satisfy their Regulation 
Service obligations. The charges for Regulation Service are outlined 
below.
    LAP charges for Regulation Service may be modified upon written 
notice to Customers. Any change to the Regulation Service charges will 
be listed in a revision to this rate schedule issued under applicable 
Federal laws, regulations, and policies and made part of the applicable 
service agreement. Western will charge Customers under the rate then in 
effect.

Types

    There will be three different applications of this rate, none of 
which are exclusive of the other, and all three may be applied to the 
same entity where appropriate. The three applications are:
    1. Load-based Assessment: The Rate is reflected in the Formula Rate 
section and will be applied to entities who serve load within the WACM 
Balancing Authority. This load-based rate will be assessed on an 
entity's auxiliary load (total metered load less Federal entitlements) 
and will also be applied to the installed nameplate capacity of all 
intermittent generators within WACM.
    2. Exporting Intermittent Resource Assessment: This application 
will apply to entities that export the output from intermittent 
resource(s). The entity will continue to pay the load-based charge on 
the nameplate capacity, as described in No. 1 above, but will also pay 
an additional Regulating Reserve charge for mismatched capacity; i.e., 
the hourly average mismatch of the resource's forecast versus actual 
generation, using the regional market rate for capacity/reserves as 
pricing.
    3 Self-Provision Assessment: Western will allow entities with 
automatic or manual generation control to self-provide for all or a 
portion of their loads. Typically, entities with generation control are 
known as Sub-Balancing Authorities (SBA) and should meet all of the 
following criteria:
    a. Have a well-defined boundary, with WACM-approved revenue-quality 
metering, accurate as defined by NERC, to include MW flow data 
availability at 6-second or smaller intervals.
    b. Have AGC capability.
    c. Demonstrate Regulation Service capability.
    d. Execute a contract with the WACM Balancing Authority to:
    i. Provide all requested data to the WACM Balancing Authority.
    ii. Meet SBA Error Criteria as described under section 3.1 below.
    3.1. Self-provision will be measured by use of the entity's 1-
minute average ACE or the entity's 1-minute first derivative of ACE (at 
the customer's choice), to determine the amount of self-provision. The 
assessment will be calculated every hour and the value of ACE or its 
derivative will be used to calculate the Regulation Service charges as 
follows:
    a. If the entity's 1-minute average ACE or entity's 1-minute first 
derivative of ACE is <= than 0.5 percent of the entity's hourly average 
load, no Regulation Service charges will be assessed by WACM.
    b. If the entity's 1-minute average ACE or the entity's 1-minute 
first derivative of ACE is >= 1.5 percent of the entity's hourly 
average load, WACM will assess Regulation Service charges to the 
entity's entire load, using the load-based rate.
    c. If the entity's 1-minute average ACE or the entity's 1-minute 
first derivative of ACE is > 0.5 percent of the entity's hourly average 
load, but < 1.5 percent of the entity's hourly average load, WACM will 
assess Regulation Service

[[Page 28692]]

charges based on linear interpolation of zero charge and full charge.

Customer Accommodation

    For entities unwilling to take Regulation Service, self-provide it 
as described above, or acquire the service from a third party, Western 
will assist the entity in dynamically metering its loads/resources to 
another Balancing Authority. Until such time as that meter 
configuration is accomplished, the entity will be responsible for 
charges assessed by WACM under the rate in effect.

Formula Rate

    Load-Based Rate, applicable to No. 1 and No. 3 as described above 
and outlined in the ``Types'' section of this rate schedule:
[GRAPHIC] [TIFF OMITTED] TN17MY06.000

    Pass-Through Costs (Market), will be applicable only to No. 2 as 
described above and outlined in the ``Types'' section of this rate 
schedule.

Rates

Load-Based Rate

    The rate to be in effect June 1, 2006, through September 30, 2006, 
for Nos. 1, 2, and 3, as described above and outlined in the ``Types'' 
section of this rate schedule is:

Monthly: $0.219/kW-month
Weekly: $0.051/kW-week
Daily: $0.007/kW-day
Hourly: $0.000292/kWh

    This rate is based on the above formula and on fiscal year 2004 
financial and load data, and will be adjusted annually as new data 
become available.

Pass-Through Rate

    The rate to be in effect June 1, 2006, through September 30, 2006, 
for No. 2 as described above and outlined in the ``Types'' section of 
this rate schedule will be the regional market-based cost for capacity/
reserves.

 [FR Doc. E6-7494 Filed 5-16-06; 8:45 am]
BILLING CODE 6450-01-P