Desert Southwest Customer Service Region-Rate Order No. WAPA-127, 36332-36343 [E6-10000]

Agencies

• DEPARTMENT OF ENERGY
• Western Area Power Administration

[Federal Register Volume 71, Number 122 (Monday, June 26, 2006)]
[Notices]
[Pages 36332-36343]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-10000]


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DEPARTMENT OF ENERGY

Western Area Power Administration


Desert Southwest Customer Service Region-Rate Order No. WAPA-127

AGENCY: Western Area Power Administration, DOE.

ACTION: Notice of Order Concerning Network Integration Transmission and 
Ancillary Services Rates.

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SUMMARY: The Deputy Secretary of Energy confirmed and approved Rate 
Order No. WAPA-127 and Rate Schedules PD-NTS2 and INT-NTS2, placing 
rates for Network Integration Transmission Service (Network Service) 
for the Parker-Davis Project (PDP) and the Pacific Northwest-Pacific 
Southwest Intertie Project (Intertie) of the Western Area Power 
Administration (Western) into effect on an interim basis. The Deputy 
Secretary of Energy also confirmed Rate Schedules DSW-SD2, DSW-RS2, 
DSW-FR2, DSW-EI2, DSW-SPR2, and DSW-SUR2, placing ancillary services 
rates from the PDP, Boulder Canyon Project (BCP), Central Arizona 
Project (CAP), and that part of the Colorado River Storage Project 
(CRSP) located in the Western Area Lower Colorado (WALC) Balancing 
Authority and Transmission Operations Area (BATO) into effect on an 
interim basis. The provisional rates will be in effect until the 
Federal Energy Regulatory Commission (Commission) confirms, approves, 
and places them into effect on a final basis or until they are replaced 
by other rates. The provisional rates will provide sufficient revenue 
to pay all annual costs, including interest expense, and repay power 
investment and irrigation aid, within the allowable periods.

DATES: Rate Schedules DSW-SD2, DSW-RS2, DSW-FR2, DSW-EI2, DSW-SPR2, 
DSW-SUR2, PD-NTS2, and INT-NTS2 will be placed into effect on an 
interim basis on the first day of the first full billing period 
beginning on or after July 1, 2006, and will be in effect until the 
Commission confirms, approves, and places the rate schedules in effect 
on a final basis through June 30, 2011, or until the rate schedules are 
superseded.

FOR FURTHER INFORMATION CONTACT: Mr. Jack Murray, Rates Team Lead, 
Desert Southwest Customer Service Region, Western Area Power 
Administration, P.O. Box 6457, Phoenix, AZ 85005-6457; (602) 605-2442, 
e-mail jmurray@wapa.gov.

SUPPLEMENTARY INFORMATION: The Secretary of Energy approved Rate 
Schedules DSW-SD1, DSW-RS1, DSW-FR1, DSW-EI1, DSW-SPR1, DSW-SUR1, PD-
NTS1, and INT-NTS1 for the Desert Southwest Region (DSWR) network 
service for PDP and Intertie, and ancillary services for the WALC BATO 
on May 3, 1999 (Rate Order No. WAPA-84, 64 FR 25323, May 11, 1999). The 
Commission confirmed and approved the rate schedules on January 20, 
2000, in FERC Docket No. EF99-5041-000, (90 FERC 62,032). Approval for 
Rate Schedules DSW-SD1, DSW-RS1, DSW-FR1, DSW-EI1, DSW-SPR1, DSW-SUR1, 
PD-NTS1, and INT-NTS1 covered 5 years beginning on April 1, 1999, and 
ending on March 31, 2004. These rate schedules were extended by a 
series of Rate Orders through September 30, 2006, with the most recent 
Rate Order being Rate Order No. WAPA-129 (71 FR 16572, April 3, 2006). 
The rate schedules were extended to accommodate the Desert Southwest 
Region (DSWR) Multi-System Transmission Rate (MSTR) process. An MSTR 
has not been approved. However, Western plans to seek approval of an 
MSTR for short-term and non-firm transactions in the future.
    The provisional formula for Network Service in Rate Schedules PD-
NTS2 and INT-NTS2 will be the same as the existing formula rates for 
Network Service under Rate Schedules PD-NTS1 and INT-NTS1.
    The existing transmission rates include costs for Scheduling, 
System Control, and Dispatch Services. The transmission provisional 
formula rates include the costs of these services.
    Rate Schedules DSW-SD2, DSW-RS2, DSW-FR2, DSW-EI2, DSW-SPR2, and 
DSW-SUR2 supersede Rate Schedules DSW-SD1, DSW-RS1, DSW-FR1, DSW-EI1, 
DSW-SPR1, and DSW-SUR1, respectively. Spinning Reserve and Supplemental 
Reserve ancillary services are being updated slightly to reflect minor 
changes.
    Under Schedule DSW-SD2, Scheduling, System Control, and Dispatch 
Service (Scheduling Service), the rate is applied on a per tag basis. 
The rate is calculated in two major steps. First, the yearly costs 
associated with capital improvements are determined and divided by the 
number of tags issued during the previous year. Second, the average 
labor cost per tag is determined and added to the capital cost per tag. 
This methodology differs from the previous methodology in that it is 
based on tags rather than schedules and a single rate is applied to all 
transactions. These changes were made because the tag was not used as a 
billing unit when the rates under Rate Order No. WAPA-84 were 
developed.
    Under Schedule DSW-RS2, Reactive Supply and Voltage Control Service 
from Generation Sources (Voltage Support Service), the rate is 
determined by dividing the revenue requirement for the service by the 
reservations for the service. The revenue requirement for the service 
is one minus the power factor (1-PF) times the combined generation

[[Page 36333]]

revenue requirement of the PDP, BCP, and CRSP. The previous methodology 
used the factor (1-PF\2\) to determine the Voltage Support revenue 
requirement for BCP and PDP.
    Under Schedule DSW-FR2, Regulation and Frequency Response Service 
(Regulation Service), the rate for standard loads is determined using 
the revenue requirement for the service divided by the load in the WALC 
BATO requiring the service. The revenue requirement for the service is 
the product of the generation capacity that is used for regulation 
times the capacity rate of the Project, plus any regulation purchases 
the transmission provider must make. This total is multiplied by a use 
factor, which takes into consideration the customer load in the WALC 
BATO. The denominator in the equation and the load in the BATO 
requiring the service include a portion of the CRSP load and the DSWR 
load.
    Long-term Regulation Service is not available from DSWR resources. 
However, if necessary, DSWR will purchase long-term regulation service 
on a pass-through cost basis on the open market for a charge that 
covers the cost of procuring and supplying the service. Short-term 
Regulation Service will be supplied from DSWR resources if such 
resources are available. Under Rate Schedule DSW-FR1, Western offered 
this service for short-term sales, but set the charge equal to the 
capacity rate of the Project supplying the service rather than basing 
the charge on a formula. The provisional methodology is being used 
because existing technology gives Western the ability to measure 
Regulation Service more accurately than when the previous rate was 
developed.
    Non-conforming loads are volatile loads (such as those associated 
with certain smelters and arc furnaces) that can require a BATO to 
acquire significant amounts of generation capacity for regulation. Such 
non-conforming loads require separate metering of their moment-to-
moment load values to accurately calculate their effects on the system 
and will not be covered under the provisional Regulation Service rate.
    DSWR defines a non-conforming load as either a single plant or site 
with a regulation capacity requirement of 5 megawatts (MW) or greater 
on a recurring basis and a capacity requirement that is equal to 10 
percent or greater of its average load. Regulation Service for non-
conforming loads, as determined by Western, must be delineated in a 
service agreement and charged an amount that includes the cost to 
procure the service and the additional cost required to monitor and 
supply this service.
    Rate Schedule DSW-EI2, Energy Imbalance Service, establishes a 
bandwidth to differentiate the settlement percentage required for 
deviations between scheduled and actual load. That portion of the 
customer's energy imbalance that is within the bandwidth will be 
settled with a one to one return of energy. In lieu of an energy 
settlement, Western, at its discretion, can use a financial settlement 
equal to a weighted index price (described below) times the energy.
    The bandwidth for on-peak is plus or minus 1.5 percent of the 
customer's load with a minimum of 5 MW for either over-delivery or 
under-delivery. The off-peak bandwidth is plus 1.5 percent to negative 
3 percent of a customer's load with a minimum of 2 MW for over-delivery 
and 5 MW for under-delivery.
    For that portion of the customer's energy imbalance that is outside 
the bandwidth during on-peak hours, the settlement is 110 percent of 
the energy imbalance for under-deliveries and 90 percent of the energy 
imbalance for over-deliveries. In lieu of an energy settlement, 
Western, at its discretion, can use a financial settlement equal to 110 
percent of a weighted index price for under-deliveries and 90 percent 
of a weighted index price for over-deliveries.
    For that portion of the customer's energy imbalance that is outside 
the bandwidth during the off-peak hours, the settlement is 110 percent 
of the energy imbalance for under-deliveries. However, for over-
deliveries in the off-peak hours, the settlement is 60 percent of the 
energy imbalance. In lieu of an energy settlement, Western, at its 
discretion, can use a financial settlement equal to 110 percent of a 
weighted index price for under-deliveries, and for over-deliveries, 60 
percent of either a weighted index price or a WALC weighted sales 
price, whichever is the lesser. In the event that Western accepts a 
financial settlement, the index used to calculate the settlement will 
be posted on the Open Access Same-Time Information System (OASIS) at 
the beginning of each fiscal year. The index will be the Dow Jones Palo 
Verde average monthly index or an index identified on the OASIS at the 
beginning of each fiscal year. Settlement for the hourly deviations 
will occur on a monthly basis.
    The provisional rate methodology differs from the previous 
methodology in that previously, DSWR used the Commission pro-forma 
methodology to define the service. Under the provisional rate, the 
bandwidth was increased to equitably treat customers that do not have 
generation capabilities. The settlement for over-deliveries during the 
off-peak hours is set at 60 percent of the energy imbalance to 
discourage over-deliveries at a time when WALC has the least amount of 
load in the BATO. The 100 mills per kilowatthour penalty established in 
the pro-forma methodology was replaced with the percent of an index in 
the provisional methodology to reflect the volatility of the energy 
market.
    Under Schedule DSW-SPR2, Operating Reserves-Spinning Reserve 
Service (Spinning Service) is not available from DSWR resources on a 
long-term firm basis. If a customer cannot self-supply or purchase this 
service from another provider, Western may obtain the Spinning Service 
on the open market on a pass-through cost basis for a charge that 
covers the cost of procuring the service. The transmission customer 
will be responsible for the transmission service to get this Spinning 
Service to the destination.
    Under Schedule DSW-SUR2, Operating Reserves-Supplemental Reserve 
Service (Supplemental Service) is not available from DSWR resources on 
a long-term firm basis. If a customer cannot self-supply or purchase 
this service from another provider, Western may obtain Supplemental 
Service on the open market on a pass-through cost basis for a charge 
that covers the cost of procuring the service. The transmission 
customer will be responsible for the transmission service to get this 
Supplemental Service to the destination.
    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, 10 CFR part 
903, and 18 CFR part 300, I hereby confirm, approve, and place Rate 
Order No. WAPA-127, the provisional network service for the PDP and 
Intertie systems, and for ancillary services from the PDP, BCP, and 
that part of the CRSP located in the WALC BATO into effect on an 
interim basis. The new Rate Schedules DSW-SD2, DSW-RS2, DSW-

[[Page 36334]]

FR2, DSW-EI2, DSW-SPR2, DSW-SUR2, PD-NTS2, and INT-NTS2, will be 
submitted promptly to the Commission for confirmation and approval on a 
final basis.

    Dated: June 13, 2006.
Clay Sell,
Deputy Secretary.

Department of Energy, Deputy Secretary

In the Matter of: Western Area Power Administration Rate Adjustment for 
the Desert Southwest Customer Service Region

[Rate Order No. WAPA-127]

Order Confirming, Approving, and Placing the Desert Southwest Customer 
Service Region Network Integration Transmission and Ancillary Services 
Rates 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:

12-CP: 12-month coincident peak average.
Administrator: The Administrator of the Western Area Power 
Administration.
Ancillary Services: Those services necessary to support the transfer of 
electricity while maintaining reliable operation of the transmission 
system in accordance with standard utility practice.
BATO: Balancing Authority and Transmission Operations area. Formerly 
referred to as a Control Area.
BCP: Boulder Canyon Project.
CAP: Central Arizona Project.
Capacity: The electric capability of a generator, transformer, 
transmission circuit, or other equipment. It is expressed in kilowatts.
Capacity Rate: The rate which sets forth the charges for capacity. It 
is expressed in $ per kilowattmonth.
Commission: Federal Energy Regulatory Commission.
CROD: Contract rate of delivery. The maximum amount of capacity made 
available to a preference customer for a period specified under a 
contract.
CRSP: Colorado River Storage Project.
CRSP MC: The CRSP Management Center of Western.
Customer: An entity with a contract that is receiving service from 
Western's DSWR or CRSP MC.
DOE: United States Department of Energy.
DOE Order RA 6120.2: An order outlining power marketing administration 
financial reporting and ratemaking procedures.
DSWR: The Desert Southwest Region of Western.
Energy: Measured in terms of the work it is capable of doing over a 
period of time. It is expressed in kilowatthours.
FERC: The Commission (to be used when referencing Commission Orders).
Firm: A type of product and/or service available at the time requested 
by the customer.
FRN: Federal Register notice.
FY: Fiscal year; October 1 to September 30.
Integrated Projects: The resources and revenue requirements of the 
Collbran, Dolores, Rio Grande, and Seedskadee projects blended together 
with the CRSP to create the SLCA/IP resources and rate.
Intertie: Pacific Northwest-Pacific Southwest Intertie Project.
kW: Kilowatt--the electrical unit of capacity that equals 1,000 watts.
kWh: Kilowatthour--the electrical unit of energy that equals 1,000 
watts in 1 hour.
kWmonth: Kilowattmonth--the electrical unit of the monthly amount of 
capacity.
Load: The amount of electric power or energy delivered or required at 
any specified point(s) on a system.
Merchant Function: A power marketing function within the CRSP MC and 
DSWR that balances loads and resources for the CRSP MC, DSWR, other 
regions within Western, and customers, and purchases and sells energy 
on the open market.
mill: A monetary denomination of the United States that equals one 
tenth of a cent or one thousandth of a dollar.
mills/kWh: Mills per kilowatthour--the unit of charge for energy.
MW: Megawatt--the electrical unit of capacity that equals 1 million 
watts or 1,000 kilowatts.
Non-firm: A type of product and/or service not always available at the 
time requested by the customer.
O&M: Operation and Maintenance.
OASIS: Open Access Same-Time Information System--provides access to 
information on transmission pricing and availability for potential 
transmission customers.
OATT: Open Access Transmission Tariff.
PDP: Parker-Davis Project.
Power: Capacity and energy.
Project Use Power: Capacity and energy reserved for Federal Reclamation 
project use and irrigation pumping for PDP, CAP, and SLCA/IP under 
Reclamation Law.
Provisional Rate: A rate that has been confirmed, approved, and placed 
into effect on an interim basis by the Deputy Secretary.
PRS: Power Repayment Study.
Rate Brochure: A document explaining the rationale and background for 
the rate proposal contained in this Rate Order.
Reclamation: United States Department of the Interior, Bureau of 
Reclamation.
Reclamation Law: A series of Federal laws. Viewed as a whole, these 
laws create the originating framework under which Western markets 
power.
Revenue Requirement: The revenue required to recover annual expenses 
(such as O&M, purchase power, transmission service expenses, interest, 
and deferred expenses) and repay Federal investments, and other 
assigned costs.
SCADA: Supervisory Control and Data Acquisition.
SLCA/IP: Salt Lake City Area Integrated Projects--The resources and 
revenue requirements of the Collbran, Dolores, Rio Grande, and 
Seedskadee projects blended together with the CRSP to create the SLCA/
IP resources and rate.
Supporting Documentation: A compilation of data and documents

[[Page 36335]]

that support the Rate Brochure and the rate proposal.
WALC: Western Area Lower Colorado BATO, operated by DSWR.
Western: United States Department of Energy, Western Area Power 
Administration.

Effective Date

    The new interim rates will take effect on the first day of the 
first full billing period beginning on or after July 1, 2006, and will 
remain in effect until June 30, 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. The steps Western took to involve interested 
parties in the rate process were:
    1. The rate adjustment process began June 14, 2005, when Western 
mailed a notice announcing informal customer meetings to all DSWR 
customers and interested parties.
    2. Western held an informal meeting on June 27, 2005, in Phoenix, 
Arizona. At this informal meeting, Western explained the rationale for 
the rate adjustment, presented rate designs and methodologies, and 
answered questions.
    3. A Federal Register notice, published on October 12, 2005 (70 FR 
59335), announced the proposed rates for DSWR, began a public 
consultation and comment period, and announced the public information 
and public comment forums.
    4. On October 21, 2005, Western mailed letters to all DSWR 
customers and interested parties transmitting the Federal Register 
notice and announcing the posting of the Brochure for Proposed Rates on 
the DSWR Web site.
    5. On November 2, 2005, beginning at 1 p.m., Western held a public 
information forum at the DSWR office in Phoenix, Arizona. Western 
provided detailed explanations of the proposed rates and answered 
questions. Western provided documentation and informational handouts.
    6. On November 29, 2005, beginning at 1 p.m., Western held a public 
comment forum at the DSWR Office in Phoenix, Arizona to give the public 
an opportunity to comment for the record. One individual spoke at this 
meeting.
    7. On December 12, 2005, Western sent letters to all DSWR customers 
and interested parties clarifying answers to several questions from 
customers attending the public information forum and an informational 
request from a customer at the public comment forum.
    8. Western received one comment letter during the consultation and 
comment period, which ended January 10, 2006. All formally submitted 
comments have been considered in preparing this Rate Order.

Comments

    Written comments were received from the Navajo Agricultural 
Products Industry, New Mexico.
    Representatives of Utility Strategies Consulting Group, Arizona, 
and Salt River Project, Arizona, made oral comments at either the 
public information forum or the public comment forum.

Project Description

Parker-Davis Project

    The PDP was formed by consolidating two projects, Davis Dam and 
Parker Dam, under terms of the Act of May 28, 1954. Parker Dam and 
Powerplant, which created Lake Havasu 155 miles below Hoover Dam on the 
Colorado River, was authorized by the Rivers and Harbors Act of August 
30, 1935. Reclamation constructed the project partly with funds 
advanced by the Metropolitan Water District (MWD) of Southern 
California, which now diverts nearly 1.2 million acre-feet of water 
each year by pumping it from Lake Havasu. The cooperative contract for 
construction and operation of Parker Dam was executed in 1933, under 
which MWD receives half of the capacity and energy from four generating 
units. The Federal share of the Parker Powerplant capacity, as 
determined by Reclamation, is 54,000 kW.
    Power generated from the PDP is marketed to customers in Nevada, 
Arizona, and California. Excluding project use, the marketing criteria 
provide for marketing 185,530 kW of capacity in the winter season and 
242,515 kW of capacity in the summer season. Customers receive 1,703 
kWh per kW in the winter season and 3,441 kWh per kW in the summer 
season. Excluding project use, total marketable energy is 316 million 
kWh in the winter season and 835 million kWh in the summer season.
    A portion of the resource marketed is reserved for United States 
use, but is not presently needed. This portion (9,460 kW of capacity 
and associated energy in the winter season and 16,030 kW of capacity 
and associated energy in the summer season) is withdrawable from 
existing customers upon two years' written notice. Existing PDP firm 
power contracts have been extended to September 30, 2028. About 72 
percent of PDP firm energy sales are made to 5 of the 46 customers, 
with about 50 percent of the energy marketed to customers in Arizona.

Pacific Northwest-Pacific Southwest Intertie Project

    The Intertie was authorized by section 8 of the Pacific Northwest 
Power Marketing Act of August 31, 1964. Originally, the Intertie was to 
be a combined alternating current (AC) and direct current (DC) system, 
which was to connect the Pacific Northwest with the Desert Southwest. 
As authorized, the overall project was to be a cooperative construction 
venture between Federal and non-Federal entities.
    Due to delays in construction funding, the estimated in-service 
date of the Intertie was revised to the point that interest by 
potential users waned. These events resulted in the indefinite 
postponement of DC line construction. Consequently, the facilities 
constructed provide only AC transmission service.
    Western's portion of the Intertie consists of two parts--a northern 
portion and a southern portion. The northern portion is administered by 
Western's Sierra Nevada Region and is incorporated, for repayment and 
operation, with the Central Valley Project. The northern portion 
consists of a 94-mile, 500-kV transmission line from Malin Substation 
in Oregon to Round Mountain to Cottonwood Substation in California.
    The southern portion of the Intertie is administered by Western's 
Desert Southwest Region and is treated as a separate stand-alone 
project for repayment and operational purposes. It consists of a 238-
mile, 345-kV transmission line from Mead Substation in Nevada to 
Liberty Substation in Arizona; a 19-mile, 230-kV transmission line from 
Liberty to Westwing Substation in Arizona; a 22-mile, 230-kV 
transmission line from Westwing to Pinnacle Peak Substation in Arizona; 
and two segments that came on-line in April 1996: the 256-mile Mead-
Phoenix 500-kV AC Transmission Line between Marketplace Substation in 
Nevada and Perkins Substation in Arizona and the 202-mile Mead-Adelanto 
500-kV AC Transmission Line between Marketplace in Nevada and the 
existing Adelanto Switching Substation in southern California.

Boulder Canyon Project

    Hoover Dam, the highest and third largest concrete dam in the 
United States, sits on the Colorado River along the Arizona/Nevada 
border. Lake Mead, the reservoir formed behind Hoover

[[Page 36336]]

Dam, is the nation's largest man-made reservoir. It can hold a 2-year 
supply of the average flow from the Colorado River with its storage 
capacity of 27.38 million acre-feet.
    Power from the BCP is marketed as long-term contingent capacity 
with associated energy. The contingent capacity and associated energy 
are available as long as, among other restrictions, sufficient water in 
the reservoir allows for release of water to meet water delivery 
obligations. If sufficient power to support the customer capacity 
entitlements is not available, each customer's capacity entitlement is 
temporarily reduced. Customers are entitled to receive 4.527 billion 
kWh of energy (associated with contingent capacity) each year. If 
generation at Hoover Powerplant is insufficient, Western can purchase 
energy to make up the shortfall at the individual customer's request on 
a pass-through cost basis.
    Project power is sold in three states: Arizona, California, and 
Nevada. About 56 percent of BCP energy sales revenue comes from 
California customers. Of the Boulder Canyon Project's 15 customers, 11 
are municipalities. These municipalities provide only 28 percent of the 
revenue. Four customers account for 82 percent of the power revenue 
from the project: the MWD of Southern California, Colorado River 
Commission of Nevada, Arizona Power Authority, and the Los Angeles 
Department of Water and Power. Existing power contracts for the BCP 
expire on September 30, 2017.

Central Arizona Project

    The CAP is one of three related water development projects that 
make up the Colorado River Basin Project; the others are the Dixie and 
the Upper Basin Projects. The CAP was developed for Arizona and western 
New Mexico; the Dixie Project for southeastern Utah; and the Upper 
Basin Project for Colorado and New Mexico.
    Congress authorized the project in 1968 to improve water resources 
in the Colorado River Basin. Segments of the 1968 authorization allowed 
Federal participation in the Navajo Generating Station, which has three 
coal-fired steam electric generating units for a combined capacity of 
2,250 MW. The rate methodology for Network Integration Transmission 
Service over CAP 115-kV and 230-kV transmission lines went into effect 
on January 1, 2001, and has been revised effective January 1, 2006 
through December 31, 2010, Rate Order WAPA-124 (71 FR 1533, January 10, 
2006).

Salt Lake City Area/Integrated Projects

    The SLCA/IP consists of the CRSP, Rio Grande, and Collbran 
Projects. The CRSP includes two participating projects that have power 
facilities: the Dolores and Seedskadee Projects. Western integrated the 
Rio Grande and Collbran Projects with CRSP for marketing and ratemaking 
purposes on October 1, 1987. The goals of integration were to increase 
marketable resources and to simplify contract and rate development and 
project administration by creating one rate and assuring repayment of 
the Projects' costs. All Integrated Projects maintain their individual 
identities for financial accounting and repayment purposes, but their 
revenue requirements are integrated into one SLCA/IP PRS for 
ratemaking.

Power Repayment Studies

    Western prepares a separate PRS for PDP, Intertie, BCP, and SLCA/IP 
and a transmission rate study for CAP each FY to determine if revenues 
will be sufficient to repay, within the required time, all costs 
assigned to the respective projects. Repayment criteria are based on 
law, policies, including DOE Order RA 6120.2, and authorizing 
legislation.
    The PRS for PDP and Intertie yield revenue requirements that are 
used to calculate firm transmission rates in DSWR. The PRS for PDP, 
BCP, and SLCA/IP are used to determine part of the revenue requirements 
for the ancillary services.

Network Integration Transmission Service

    Under Rate Schedules PD-NTS2 and INT-NTS2, the methodology for 
calculating the customer's monthly charge is the product of the 
transmission customer's load-ratio share times one-twelfth (1/12) of 
the annual transmission revenue requirement. The load-ratio share will 
be based on the network customers' hourly load coincident with 
appropriate power or system monthly transmission system peak, which 
will be calculated on a rolling 12-CP basis. The transmission system 
peak includes the sum of capacity reserved for point-to-point 
transmission and the average 12-CP monthly system peak for network 
transmission service.
    The monthly hour of the system peak is determined as the hour that 
the sum of the network customers' metered loads is the greatest. The 
firm point-to-point transmission reservations include the OATT firm 
point-to-point reservations, the PDP Firm Electric Service (FES) 
contract rates of delivery, the pre-OATT Firm Transmission Service, and 
the SLCA/IP FES with delivery points on the PDP.

Ancillary Services

    Six ancillary services will be offered by DSWR, two of which 
(Scheduling, System Control, and Dispatch Service; and Reactive Supply 
and Voltage Control Service) are required to be purchased from the WALC 
BATO. The remaining four ancillary services are Regulation and 
Frequency Response Service, Energy Imbalance Service, Spinning Reserve 
Service, and Supplemental Reserve Service. These four services will be 
offered either from the BATO, or the DSWR or CRSP Merchant Function, 
and may be taken from WALC, self-provided, or provided by another party 
acceptable to Western. Sales of Regulation and Frequency Response, 
Energy Imbalance, Spinning Reserve, and Supplemental Reserve Services 
from WALC power resources are limited since Western has allocated all 
of its power resources to preference entities under long-term 
commitments. Western will determine the availability and type of 
Ancillary Services based on excess resources available when the service 
is requested.
    The provisional rates for Ancillary Services are designed to 
recover only the costs associated with providing the service(s). The 
costs for providing Scheduling, System Control, and Dispatch Service 
are included in the appropriate existing and provisional transmission 
services rates.

Existing and Provisional Rates

    Various levels of difference exist between the existing and 
provisional Ancillary Service rates due to changes in the provisional 
rate methodologies. The provisional Scheduling, System Control, and 
Dispatch Ancillary Service methodology differs from the existing 
methodology in its assessment of charges by tags instead of by 
schedules, and the elimination of multiple rates distinguished by 
inter-bus transfers and new versus existing schedules. The difference 
in the rates is shown in Table 1.

[[Page 36337]]



                           Table 1.--Scheduling, System Control, and Dispatch Service
----------------------------------------------------------------------------------------------------------------
                           Existing                                                Provisional
----------------------------------------------------------------------------------------------------------------
             Description                        Rates                 Description                 Rates
----------------------------------------------------------------------------------------------------------------
DSW-SD1..............................  Per Schedule per Day...  DSW-SD2................  Per Tag.
Existing No SCADA programming or       $54.99.................  All applicable           $18.55.
 Intra-bus Transfer.                                             transactions.
Existing No SCADA programming          $73.05.................
 requires Intra-bus Transfer.
New Schedule w/SCADA no Inter-bus      $51.10.................
 Transfer.
New Schedule w/SCADA and Intra-bus     $75.26.................
 Transfer.
----------------------------------------------------------------------------------------------------------------

    The Reactive Supply and Voltage Control Service uses a slightly 
different multiplier (1-PF versus 1-PF\2\) and removes the entities 
with generation agreements to supply Voltage Support to WALC from the 
denominator. The effect of these changes on the provisional rate is 
shown in Table 2.

                              Table 2.--Reactive Supply and Voltage Control Service
----------------------------------------------------------------------------------------------------------------
                           Existing                                                Provisional
----------------------------------------------------------------------------------------------------------------
             Description                        Rates                 Description                 Rates
----------------------------------------------------------------------------------------------------------------
DSW-RS1..............................  $/kWmonth..............  DSW-RS2................  $/kWmonth.
All applicable transactions..........  $0.05..................  All applicable           $0.043.
                                                                 transactions.
If resources are not available.......  Market Rates + 10%.....  Non-conforming Loads...  Cost to procure and
                                                                                          monitor.
----------------------------------------------------------------------------------------------------------------

    The Regulation and Frequency Response Service is similar to the 
existing methodology in that it highlights the lack of DSWR resources 
available to supply this service on a long-term basis but instead of 
using the capacity rate of the project for short-term sales, as with 
the existing methodology, it specifies a rate based on the revenue 
requirement for the service divided by the load requiring the service. 
The rate schedule for the provisional rates defines non-conforming 
loads and spells out the requirement that services for these loads will 
be charged an amount that includes regulation purchased on the open 
market plus the cost to procure and monitor the service. The comparison 
of the existing rate to the provisional rate is shown in Table 3.

                               Table 3.--Regulation and Frequency Response Service
----------------------------------------------------------------------------------------------------------------
                           Existing                                                Provisional
----------------------------------------------------------------------------------------------------------------
             Description                        Rates                 Description                 Rates
----------------------------------------------------------------------------------------------------------------
DSW-FR1..............................  mills/kWh..............  DSW-FR2................  mills/kWh.
If available from DSWR Resources.....  Capacity charge of       If available for short   0.2049.
                                        supplying project.       term sales.
                                                                Non-conforming loads...  Cost to procure and
                                                                                          monitor.
----------------------------------------------------------------------------------------------------------------

    The methodology for the Energy Imbalance Service for the 
provisional rate differs from the existing rate in several key ways: 
The bandwidth differs for on and off peak, the minimum load differs for 
over- and under-deliveries, and the settlement is based on a market 
index rather than a penalty. The index will be the Dow Jones Palo Verde 
Index unless modified as posted on the OASIS. Table 4 shows these 
differences specifically.

                                       Table 4.--Energy Imbalance Service
----------------------------------------------------------------------------------------------------------------
                                                                                Provisional
            Description                    Existing       ------------------------------------------------------
                                                                   On/off peak
----------------------------------------------------------------------------------------------------------------
Bandwidth.........................  +/-1.5%                            On              +/-1.5%.
Minimum...........................  3 MW                                               5 MW.
----------------------------------------------------------------------------------------------------------------
Bandwidth.........................  +/-1.5%                            Off             +1.5% to -3%.
Minimum...........................  3 MW                                               2 MW (Over Delivery).
                                                                                       5 MW (Under Delivery).
----------------------------------------------------------------------------------------------------------------
Energy Within Bandwidth...........  No Penalty (Return                 On              100% of Weighted Index
                                     100% of Energy).                                   Price.

[[Page 36338]]

 
                                                                       Off             100% of Weighted Index
                                                                                        Price (Under Delivery).
----------------------------------------------------------------------------------------------------------------
Energy Outside Bandwidth..........  100 mills/kWh +                    On              110% of Weighted Index
                                     Return of Energy.                                  Price (Under Delivery).
                                                                                        90% of Weighted Index
                                                                                        Price (Over Delivery).
                                                                       Off             110% of Weighted Index
                                                                                        Price (Under Delivery).
                                                                                       The lesser of 60% of
                                                                                        Weighted Index Price or
                                                                                        WALC Weighted Sales
                                                                                        Price (Over Delivery).
----------------------------------------------------------------------------------------------------------------

    The Spinning and Supplemental Reserve Services under the 
provisional rate methodology does not differ from the previous rate 
methodology, except that the charge associated with procuring and 
supplying the service is the capacity rate of the Project supplying the 
service under the existing methodology and cost to procure the service 
on the open market under the provisional rate methodology.

Ancillary Services Discussion

    Ancillary services are necessary to provide basic transmission 
service and to capture the costs associated with undertaking a 
transmission transaction within a BATO. To this end, DSWR will provide 
ancillary services, subject to provisions in Western's OATT. The 
provisional rates for these services are designed to recover all costs 
incurred for each service.
    The annual generation costs included in the development of the 
revenue requirement consist of operation and maintenance expenses, 
administrative and general expenses, and interest and principal capital 
payments. The annual PRS is the primary tool utilized to derive the 
revenue requirement to be recovered from the ancillary services. 
Additional tools include meter and SCADA data, and power flow studies.
    Currently, DSWR is offering the following ancillary services: (1) 
Scheduling, System Control, and Dispatch Service; (2) Reactive Supply 
and Voltage Control Service; (3) Regulation and Frequency Response 
Service; (4) Energy Imbalance Service; (5) Spinning Reserve Service; 
and 6) Supplemental Reserve Service. The existing rates will expire 
September 30, 2006.
    The provisional rates and descriptions for the six ancillary 
services are:

                  Provisional Ancillary Services Rates
------------------------------------------------------------------------
                                Ancillary service
   Ancillary service type          description        Provisional rate
------------------------------------------------------------------------
Scheduling, System Control,   Required to schedule  Included in
 and Dispatch.                 the movement of       appropriate
                               power through, out    transmission rates.
                               of, within, or into
                               a control area.
Reactive Supply and Voltage   Reactive power        $0.043/kWmonth.
 Control.                      support provided
                               from generation
                               facilities that is
                               necessary to
                               maintain
                               transmission
                               voltages within
                               acceptable limits
                               of the system.
Regulation and Frequency      Generation provided   0.2049 mills/kWh1.
 Response.                     to match resources
                               and loads on a real-
                               time continuous
                               basis.
Regulation for Non-           Volatile loads-       Cost to procure and
 conforming loads.             regulation capacity   monitor the load.
                               >5 MW on a regular
                               basis and
                               regulation capacity
                               requirement > 10
                               percent of average
                               load.
Energy Imbalance............  Provided when a       Bandwidth = +or-1.5%
                               difference occurs     of load for On-peak
                               between the           and +1.5% and -3%
                               scheduled and         for Off-peak.
                               actual delivery of   Within bandwidth
                               energy to a load      100% of energy.\2\
                               located in the WALC
                               BATO.
                                                    Outside of
                                                     bandwidth, On-peak
                                                     110% of energy
                                                     (Under del) 90% of
                                                     energy (Over
                                                     del).\3\
                                                    Outside of
                                                     bandwidth, Off-peak
                                                     110% of energy
                                                     (Under del) 60% of
                                                     energy (Over
                                                     del).\4\
Spinning Reserve............  Needed to serve load  Not available for
                               immediately in the    long term sales.
                               event of a system     \5\
                               contingency.
Supplemental Reserve........  Needed to serve load  Not available for
                               in the event of a     long term sales.
                               system contingency;   \6\
                               however, it is not
                               available
                               immediately to
                               serve load, but
                               rather within a
                               short period of
                               time.
------------------------------------------------------------------------
\1\ Not available for long term. DSWR will provide from available
  resources short term for rate shown.
\2\ Western, at its discretion, can accept a financial payment equal to
  a weighted index price of the imbalance energy. Index will be Dow
  Jones Palo Verde index or as modified by posting on the OASIS.
\3\ 110% of weighted index or 90% of weighted index.
\4\ 110% of index price or the lesser of the index price or WALC
  weighted sales times 60%.
\5\ DSWR will purchase on the open market on a pass-through cost basis
  plus cost associated with purchase as appropriate or provide from
  available resources short term for market price of service.
\6\ DSWR will purchase on the open market on a pass-through cost basis
  plus cost associated with purchase as appropriate or provide from
  available resources short term for market price of service.


[[Page 36339]]

Comments

    Comments and responses regarding ancillary service rates, 
paraphrased for brevity when not affecting the meaning of the 
statements, are discussed below. Direct quotes from comment letters are 
used for clarification where necessary. Responses to the two oral 
comments were included in the December 12, 2005, customer letter and 
are not in this document.
    Comment: A customer stated that their organization was ``in the 
early stages of developing and coordinating an energy demand schedule'' 
and requested that Western not impose the ``imbalance penalty 
charges.''
    Response: DSWR included the penalties in the energy imbalance 
service to encourage customers to accurately estimate their loads when 
requesting schedules. The penalties are also designed to reduce the 
opportunity for an entity to reduce its energy costs by using DSWR's 
resources. This practice will help Western provide BATO services at the 
lowest possible cost.

Availability of Information

    Information about this rate adjustment, including PRSs, comments, 
letters, memorandums, and other supporting material made or kept by 
Western and used to develop the provisional rates, is available for 
public review in the Desert Southwest Regional Office, Western Area 
Power Administration, 615 South 43rd Avenue, Phoenix, Arizona.

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 for implementing NEPA (40 CFR parts 1500-1508); and DOE 
NEPA Implementing Procedures and Guidelines (10 CFR part 1021), Western 
has determined that this action is categorically excluded from 
preparing 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 interim 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 July 1, 2006, Rate 
Schedules PD-NTS2, and INT-NTS2 for the Parker-Davis Project (PDP) and 
the Pacific Northwest-Pacific Southwest Intertie Project, and Rate 
Schedules DSW-SD2, DSW-RS2, DSW-FR2, DSW-EI2, DSW-SPR2, and DSW-SUR2, 
for the PDP, the Boulder Canyon Project (BCP), the Central Arizona 
Project (CAP), and that part of the Colorado River Storage Project 
located in the WALC Balancing Authority and Transmission Operations 
Area of the Western Area Power Administration. The rate schedules shall 
remain in effect on an interim basis pending the Commission's 
confirmation and approval of them or substitute rates on a final basis 
through June 30, 2011.

    Dated: June 13, 2006.

Clay Sell,
Deputy Secretary.

Rate Schedule PD-NTS2; Attachment H-1 to Tariff (Supersedes Rate 
Schedule PD-NTS1)

United States Department of Energy, Western Area Power Administration

Network Integration Transmission Service on the Parker-Davis Project

Effective

    The first day of the first full billing period beginning on or 
after July 1, 2006, through June 30, 2011.

Available

    In the area served by the Parker-Davis Project (PDP) transmission 
facilities.

Applicable

    To Network Integration Transmission Service (Network Service) 
customers where capacity and energy are supplied to the PDP 
transmission system from designated resources, transmitted subject to 
the availability of the transmission capacity, and delivered, less 
losses, to designated points of delivery on the PDP system specified in 
the network service agreement.

Character and Conditions of Service

    Alternating current at 60 hertz, three-phase, delivered and metered 
at the voltages and points of delivery established by the network 
service agreement.

Monthly Rate

    Network Service Charge: Each Contractor shall be billed an amount 
based on the contractor's load ratio share times one-twelfth of the PDP 
annual revenue requirement. The load ratio share will be determined by 
the contractor's coincidental peak load averaged with the coincidental 
peak loads of the previous 11 months divided by the average PDP system 
peak for the same time period.

Revenue Requirement

    The projected annual revenue requirement allocated to transmission 
for FY 2006 for the PDP is $32,826,345. Based on updated financial and 
load data, a recalculated revenue requirement will go into effect on 
October 1 of each year during the effective rate schedule period.

Adjustment for Ancillary Services

    Network Service is offered under Western's Open Access Transmission 
Tariff and contractors are responsible for all ancillary services set 
forth in the applicable rate schedules specified in the customer's 
network service agreement.

[[Page 36340]]

Adjustment for Losses

    Capacity and energy losses incurred in connection with the 
transmission and delivery of power and energy under this rate schedule 
shall be supplied by the customer in accordance with the network 
service agreement.

Modifications

    The Desert Southwest Customer Service Region may modify the charges 
for Network Service upon written notice to the transmission customer. 
Any change to the charges to the transmission customer for Network 
Service shall be as set forth in a revision to this rate schedule 
promulgated under applicable Federal laws, regulations, and policies, 
and made part of the applicable network service agreement.

Rate Schedule INT-NTS2; Schedule H-2 to Tariff (Supersedes Rate 
Schedule INT-NTS1)

United States Department of Energy, Western Area Power Administration, 
Desert Southwest Customer Service Region

Network Integration Transmission Service on the Pacific Northwest-
Pacific Southwest Intertie Project

Effective

    The first day of the first full billing period beginning on or 
after July 1, 2006, through June 30, 2011.

Available

    Within the marketing area serviced by the Pacific Northwest-Pacific 
Southwest Intertie Project (Intertie) transmission facilities.

Applicable

    To Network Integration Transmission Service (Network Service) 
customers where capacity and energy are supplied to the Intertie from 
designated resources, transmitted subject to the availability of the 
transmission capacity, and delivered, less losses, to designated points 
of delivery on the Intertie system specified in the network service 
agreement.

Character and Conditions of Service

    Alternating current at 60 hertz, three-phase, delivered and metered 
at the voltages and points of delivery established by the network 
service agreement.

Monthly Rate

    Network Service Charge: Each contractor shall be billed an amount 
based on the contractor's load ratio share times one-twelfth of the 
Intertie annual revenue requirement. The load ratio share will be 
determined by the contractor's coincidental peak load averaged with the 
coincidental peak loads of the previous 11 months divided by the 
average Intertie system peak for the same time period.

Revenue Requirement

    The projected annual revenue requirement allocated to transmission 
for FY 2006 for the Intertie is $22,742,569. Based on updated financial 
and load data, a recalculated revenue requirement will go into effect 
on October 1 of each year during the effective rate schedule period.

Adjustments for Ancillary Services

    Network Service is offered under the Open Access Transmission 
Tariff and contractors are responsible for all ancillary services set 
forth in the applicable rate schedules specified in the customer's 
network service agreement.

Adjustments for Losses

    Capacity and energy losses incurred in connection with the 
transmission and delivery of power and energy under this rate schedule 
shall be supplied by the customer in accordance with the network 
service agreement.

Modifications

    The Desert Southwest Customer Service Region may modify the charges 
for Network Service upon written notice to the transmission customer. 
Any change to the charges to the transmission customer for Network 
Service shall be as set forth in a revision to this rate schedule 
promulgated under applicable Federal laws, regulations, and policies 
and made part of the applicable network service agreement.

Rate Schedule DSW-SD2; Schedule 1 to Tariff (Supersedes Rate Schedule 
DSW-SD1)

United States Department of Energy, Western Area Power Administration, 
Desert Southwest Customer Service Region

Scheduling, System Control, and Dispatch Service

Effective

    The first day of the first full billing period beginning on or 
after July 1, 2006, through June 30, 2011.

Available

    In the area served by the Western Area Lower Colorado (WALC) 
Balancing Authority and Transmission Operations area (BATO).

Applicable

    To transactions with entities not taking transmission service in 
WALC. For entities taking transmission service from Western in the WALC 
BATO, the Scheduling, System Control, and Dispatch Service (Scheduling 
Service) charge is included in the transmission rate.

Character of Service

    Scheduling Service is required to schedule the movement of power 
through, out of, within, or into the WALC BATO.

Formula Rate

    The charges for Scheduling Service are to be based on the following 
formula rate where the Rate per Tag equals: Annual Capital Cost per Tag 
+ Hourly Labor Rate X Average Time to Execute Tag

Rate

    The rate charged for the Scheduling Service is $18.55 per tag. This 
rate is based on FY 2004 financial and load data, and will be in effect 
July 1, 2006, through September 30, 2006. Based on updated financial 
and load data, a recalculated rate will go into effect on October 1 of 
each year during the effective rate period.
    The Desert Southwest Customer Service Region's charge for 
Scheduling Service may be modified upon written notice to the customer 
and any change to the charges for the service shall be as set forth in 
a revision to this rate schedule promulgated under applicable Federal 
laws, regulations, and policies and made part of the applicable service 
agreement.

Rate Schedule DSW-RS2; Schedule 2 to Tariff (Supersedes Rate Schedule 
DSW-RS1)

United States Department of Energy, Western Area Power Administration, 
Desert Southwest Customer Service Region

Reactive Supply and Voltage Control From Generation Sources Service

Effective

    The first day of the first full billing period beginning on or 
after July 1, 2006, through June 30, 2011.

Available

    In the area served by the Western Area Lower Colorado (WALC) 
Balancing Authority and Transmission Operations Area (BATO).

Applicable

    To all customers in the WALC BATO taking transmission service under 
the

[[Page 36341]]

Open Access Transmission Tariff. The customer must purchase this 
service from WALC, unless the entity has a separate generation 
agreement to supply Reactive Supply and Voltage Control from Generation 
Sources Service (Voltage Support Service) to WALC.

Character of Service

    Voltage Support Service is needed to maintain transmission voltages 
on all transmission facilities within acceptable limits. To accomplish 
this, generation facilities under the control of the WALC BATO are 
operated to produce or absorb reactive power.

Formula Rate

    The charges for Voltage Support Service are based on the following 
formula rate.
[GRAPHIC] [TIFF OMITTED] TN26JN06.000

    The revenue requirement for the service is the sum of the service 
for each generation project in WALC determined by multiplying the 
generation revenue requirement by one minus the power factor for the 
supplying plants.
    WALC Transmission Reservations are the total firm point-to-point 
reservations minus reservations by entities with generation agreements 
to supply Voltage Support Service to WALC.

Rate:

    The rate to be in effect July 1, 2006, through September 30, 2006, 
is:

Monthly: $0.043/kWmonth.
Weekly: 9.92 mills/kWweek.
Daily: 1.42 mills/kWday.
Hourly: 0.059 mills/kWh.

    This rate is based on the above formula and on FY 2004 financial 
and calendar year 2004 load data, and will be in effect July 1, 2006, 
through September 30, 2006. Based on updated financial and load data, a 
recalculated rate will go into effect on October 1 of each year during 
the effective rate period.
    The Desert Southwest Customer Service Region (DSWR) charges for 
Voltage Support Service may be modified upon written notice to the 
customer. Any change to the charges for Voltage Support Service shall 
be as set forth in a revision to this rate schedule promulgated under 
applicable Federal laws, regulations, and policies and made part of the 
applicable service agreement. DSWR shall charge the customer in 
accordance with the rate then in effect.

Rate Schedule DSW-FR2; Schedule 3 to Tariff (Supersedes Rate Schedule 
DSW-FR1)

United States Department of Energy, Western Area Power Administration, 
Desert Southwest Customer Service Region

Regulation and Frequency Response Service

Effective

    The first day of the first full billing period beginning on or 
after July 1, 2006, through June 30, 2011.

Available

    In the area served by the Western Area Lower Colorado (WALC) 
Balancing Authority and Transmission Operations Area (BATO).

Applicable

    To all customers with standard loads in the WALC BATO taking this 
service under the Open Access Transmission Tariff. Customers with non-
conforming loads will be charged differently as stated below. A non-
conforming load is defined as a single plant or site with a regulation 
capacity requirement of 5 megawatts (MW) or greater on a recurring 
basis and whose capacity requirement is equal to 10 percent or greater 
of its average load.

Character of Service

    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 on-line 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 transmission provider. 
The transmission customer must either purchase this service from the 
WALC BATO, or make alternative comparable arrangements satisfactory to 
Western to meet its Regulation Service requirements.

Formula Rate

    The charges for Regulation Service are based on the following 
formula rate.
[GRAPHIC] [TIFF OMITTED] TN26JN06.001

Where:

    Revenue requirement for the service is the product of the 
generation capacity for the regulation times the capacity rate of 
supplying projects, plus any regulation purchases the transmission 
provider must make, multiplied by a use factor; and Load requiring the 
service is the sum of the loads in the WALC BATO.

Rate

    The rate to be in effect July 1, 2006, through September 30, 2006, 
is:

0.2049 mills/kWh.

    Regulation Service for non-conforming loads, as determined by 
Western, must be delineated in a service agreement and charged an 
amount which includes the cost to procure the service and the 
additional amount required to monitor and supply this service.
    This rate is based on the above formula and on FY 2004 financial 
and load data, and will be in effect July 1, 2006, through September 
30, 2006. Based on updated financial and load data, a recalculated rate 
will go into effect on October 1 of each year during the effective rate 
period.
    The DSWR charges for Regulation Service may be modified upon 
written

[[Page 36342]]

notice to the customer. Any change to the charges for regulation shall 
be as set forth in a revision to this rate schedule promulgated under 
applicable Federal laws, regulations, and policies and made part of the 
applicable service agreement. The DSWR shall charge the customer in 
accordance with the rate then in effect.

Rate Schedule DSW-EI2; Schedule 4 to Tariff (Supersedes Rate Schedule 
DSW-EI1)

United States Department of Energy, Western Area Power Administration, 
Desert Southwest Customer Service Region

Energy Imbalance Service

Effective

    The first day of the first full billing period b