Loveland Area Projects-Rate Order No. WAPA-134, 64061-64067 [E7-22191]

Agencies

• DEPARTMENT OF ENERGY
• Western Area Power Administration

[Federal Register Volume 72, Number 219 (Wednesday, November 14, 2007)]
[Notices]
[Pages 64061-64067]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-22191]



[[Page 64061]]

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DEPARTMENT OF ENERGY

Western Area Power Administration


Loveland Area Projects--Rate Order No. WAPA-134

AGENCY: Western Area Power Administration, DOE.

ACTION: Notice of Order Concerning Power Rates.

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SUMMARY: The Deputy Secretary of Energy confirmed and approved Rate 
Order No. WAPA-134 and Rate Schedule L-F7, placing firm electric 
service rates from the Loveland Area Projects (LAP) of the Western Area 
Power Administration (Western) into effect on an interim basis. The 
provisional rates will be in effect until the Federal Energy Regulatory 
Commission (FERC) 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 expenses, and repay power investment and irrigation 
aid within the allowable periods.

DATES: Rate Schedule L-F7 will be placed into effect on an interim 
basis on the first day of the first full billing period beginning on or 
after January 1, 2008, and will be in effect until FERC confirms, 
approves, and places the provisional rates into effect on a final basis 
ending December 31, 2012, or until the rate schedule is superseded.

FOR FURTHER INFORMATION CONTACT: Mr. James D. Keselburg, Regional 
Manager, Rocky Mountain Customer Service Region, Western Area Power 
Administration, 5555 East Crossroads Boulevard, Loveland, CO, 80538-
8986, telephone (970) 461-7201, or Mrs. Sheila D. Cook, Rates Manager, 
Rocky Mountain Customer Service Region, Western Area Power 
Administration, 5555 East Crossroads Boulevard, Loveland, CO, 80538-
8986, telephone (970) 461-7211, e-mail scook@wapa.gov.

SUPPLEMENTARY INFORMATION: The Deputy Secretary of Energy approved 
existing Rate Schedule L-F6 for LAP firm electric service on an interim 
basis on November 9, 2005 \1\. The existing rate schedule is effective 
from January 1, 2006, through December 31, 2010.
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    \1\ Rate Order No. WAPA-125, November 9, 2005 (70 FR 71273). It 
was confirmed and approved by FERC on a final basis on June 14, 
2006, in Docket No. EF06-5181-000 (115 FERC ] 62276).
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    The LAP firm power rates must be increased due to the economic 
impact of the drought, increased operation and maintenance and other 
annual expenses, increased investments, and increased interest expense 
associated with drought induced deficits. Additionally, under Rate 
Schedule L-F7, Western will identify its firm electric revenue 
requirement using a Base component (Base) and a Drought Adder component 
(Drought Adder).
    The existing firm electric service Rate Schedule L-F6 is being 
superseded by Rate Schedule L-F7. Under the current Rate Schedule L-F6, 
a two-step method was approved. The composite rate for the second step 
of Rate Schedule L-F6, effective on January 1, 2007, is 27.36 mills per 
kilowatthour (mills/kWh), the firm energy rate is 13.68 mills/kWh and 
the firm capacity rate is $3.59 per kilowattmonth (kWmonth). Under Rate 
Schedule L-F7, the provisional rates for LAP firm electric services 
will result in a combined composite rate of 32.42 mills/kWh. The energy 
rate will be 16.21 mills/kWh (a Base component of 11.92 mills/kWh and a 
Drought Adder component of 4.29 mills/kWh) and the capacity rate will 
be $4.25/kWmonth (a Base component of $3.13/kWmonth and a Drought Adder 
component of $1.12/kWmonth). This will result in an increase of 18.5 
percent when compared with the existing LAP firm power rate under Rate 
Schedule L-F6.
    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 FERC. 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 00-001.00C, 10 CFR part 
903, and 18 CFR part 300, I hereby confirm, approve, and place Rate 
Order No. WAPA-134 and the proposed LAP firm electric service rates 
into effect on an interim basis. The new Rate Schedule L-F7 will be 
promptly submitted to FERC for confirmation and approval on a final 
basis.

    Dated: November 1, 2007.
Clay Sell,
Deputy Secretary of Energy.

Department of Energy; Deputy Secretary

In the matter of: Western Area Power Administration Rate Adjustment for 
the Loveland Area Projects: Order Confirming, Approving, and Placing 
the Loveland Area Projects Firm Electric Service Rates Into Effect on 
an Interim Basis

Rate Order No. WAPA-134]
    These rates for Loveland Area Projects firm electric service were 
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 
section 5 of the Flood Control Act of 1944 (16 U.S.C. 825s); 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 FERC. 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:
Administrator: The Administrator of the Western Area Power 
Administration.
Base: Revenue requirement component of the power rate including annual 
operation and maintenance expenses, investment repayment and associated 
interest, normal timing power purchases, and transmission costs.
Capacity: The electric capability of a generator, transformer, 
transmission circuit, or other equipment. It is expressed in kilowatts.

[[Page 64062]]

Capacity charge: The rate which sets forth the charges for capacity. It 
is expressed in dollars per kWmonth.
Composite rate: The rate for commercial firm power which is the total 
annual revenue requirement for capacity and energy divided by the total 
annual firm energy sales under contract. It is expressed in mills per 
kilowatthour and used for comparison purposes.
Criteria: The Post-1989 General Power Marketing and Allocation Criteria 
for the sale of energy with capacity from the Pick-Sloan Missouri Basin 
Program--Western Division and the Fryingpan-Arkansas Project.
Customer: An entity with a contract for and receiving firm electric 
service from Western's Rocky Mountain Region.
Deficits: Deferred or unrecovered annual expenses.
DOE Order RA 6120.2: An order outlining power marketing administration 
financial reporting and rate-making procedures.
Drought Adder: Formula-based revenue requirement component including 
costs associated with the drought.
Energy: Measured in terms of the work it is capable of doing over a 
period of time. It is expressed in kilowatthours.
Energy charge: The rate which sets forth the charges for energy. It is 
expressed in mills per kilowatthour and applied to each kilowatthour 
delivered to each customer.
FERC: Federal Energy Regulatory Commission.
Firm: A type of product and/or service that is available at the time 
requested by the customer.
FRN: Federal Register notice.
Fry-Ark: Fryingpan-Arkansas Project.
FY: Fiscal year; October 1 to September 30.
kW: Kilowatt--the electrical unit of capacity that equals 1,000 watts.
kWmonth: Kilowattmonth--the electrical unit of the monthly amount of 
capacity.
kWh: Kilowatthour--the electrical unit of energy that equals 1,000 
watts in 1 hour.
LAP: Loveland Area Projects.
L-F6: Loveland Area Projects existing firm electric service rate 
schedule (expires December 31, 2010, or until superseded).
L-F7: Loveland Area Projects provisional firm electric service rate 
schedule (effective January 1, 2008).
M&I: Municipal and industrial water development.
MW: Megawatt--the electrical unit of capacity that equals 1 million 
watts or 1,000 kilowatts.
Mills/kWh: Mills per kilowatthour--the unit of charge for energy 
(equals one tenth of a cent or one thousandth of a dollar).
NEPA: National Environmental Policy Act of 1969 (42 U.S.C. 4321, et 
seq.).
Non-timing purchases: Power purchases that are not related to 
operational constraints such as management of endangered species, 
species habitat, water quality, navigation, and control area purposes.
O&M: Operation and Maintenance.
P-SMBP: The Pick-Sloan Missouri Basin Program.
P-SMBP--WD: Pick-Sloan Missouri Basin Program--Western Division.
Power: Capacity and energy.
Preference: The requirements of Reclamation Law which provide that 
preference in the sale of Federal power shall be given to 
municipalities and other public corporations or agencies and also to 
cooperatives and other nonprofit organizations financed in whole or in 
part by loans made under the Rural Electrification Act of 1936 
(Reclamation Project Act of 1939, section 9(c), 43 U.S.C. 485h(c)).
Provisional Rates: Rates which have been confirmed, approved, and 
placed into effect on an interim basis by the Deputy Secretary.
PRS: Power Repayment Study.
Rate brochure: A June 2007 document prepared for public distribution 
explaining the rationale and background of the rate proposal contained 
in this rate order.
Ratesetting PRS: The PRS used for the rate adjustment proposal.
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.
Regions: Western's Rocky Mountain and Upper Great Plains Customer 
Service Regional Offices.
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.
Timing purchases: Power purchases that are due to operational 
constraints (e.g., management of endangered species habitat, water 
quality, navigation, control area purposes, etc.) and are not 
associated with the drought.
Rocky Mountain Region: The Rocky Mountain Customer Service Region of 
Western.
Western: United States Department of Energy, Western Area Power 
Administration.

Effective Date

    The new provisional rates will take effect on the first day of the 
first full billing period beginning on or after January 1, 2008, and 
will be in effect until December 31, 2012, pending approval by FERC 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 proposed rate adjustment was initiated on March 19, 2007, 
when Western's Rocky Mountain Region mailed a notice announcing an 
informal customer meeting to discuss the proposed firm electric service 
rate adjustment to all LAP preference customers and interested parties. 
The informal meeting was held on April 9, 2007, in Denver, Colorado. At 
this informal meeting, Western explained the rationale for the rate 
adjustment, presented rate designs and methodologies, and answered 
questions.
    2. A FRN was published on May 31, 2007 (72 FR 30370), officially 
announcing the proposed LAP rates, initiating the public consultation 
and comment period, and announcing the public information and public 
comment forums.
    3. On May 31, 2007, Western's Rocky Mountain Region mailed letters 
to all LAP preference customers and interested parties transmitting a 
copy of the FRN published on May 31, 2007.
    4. The public information forum was held on June 18, 2007, 
beginning at 10 a.m. MDT, in Denver, Colorado. Western provided 
detailed explanations of the proposed LAP rates, provided a list of 
issues that could change the proposed rates, and answered questions. A 
rate brochure detailing the proposed rates was provided at the forum.
    5. The public comment forum was held on July 23, 2007, beginning at 
10 a.m. MDT, in Denver, Colorado. Western gave the public an 
opportunity to comment for the record. No oral comments were made and 
no written comments were received during the comment forum.
    6. Western's Rocky Mountain Region provided a Web site with all of 
the letters, time frames, dates and locations of forums, documents 
discussed at the information meetings, FRNs, rate brochure, and all 
other information about this rate process for customer access. The Web 
site is located at https://www.wapa.gov/rm/ratesRM/2008RatesAdjustment_
FirmPower.htm

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    7. Western received 7 comment letters during the consultation and 
comment period, which ended August 29, 2007. All formally submitted 
comments have been considered in preparing this Rate Order.

Comments

    Written comments were received from the following organizations:
    Lower Yellowstone Rural Electric Association, Inc., Montana
    Municipal Energy Agency of Nebraska, Nebraska
    Mid-West Electric Consumers Association, Colorado
    Woodbury County Rural Electric Cooperative, Iowa
    Nebraska Public Power District, Nebraska
    Town of Julesburg, Colorado
    City of Gering, Nebraska

Project Descriptions

Loveland Area Projects

    The Post-1989 General Power Marketing and Allocation Criteria, 
published in the Federal Register on January 31, 1986 (51 FR 4012), 
integrated the resources of the P-SMBP--WD and Fry-Ark. This 
operational and contractual integration, known as LAP, allowed an 
increase in marketable resource, simplified contract administration, 
and established a blended rate for LAP power sales.
    The P-SMBP--WD and Fry-Ark retain separate financial status. For 
this reason, separate PRSs are prepared annually for each project. 
These PRSs are used to determine the sufficiency of the power rate to 
generate adequate revenue to repay project investment and costs during 
each project's prescribed repayment period. The revenue requirement of 
the Fry-Ark PRS is combined with the P-SMBP--WD revenue requirement 
derived from the P-SMBP PRS, to develop one rate for LAP firm electric 
sales.

Pick-Sloan Missouri Basin Program--Western Division

    The initial stages of the Missouri River Basin Project were 
authorized by Congress in section 9 of the Flood Control Act of 
December 22, 1944, commonly referred to as the 1944 Flood Control Act 
(Pub. L. 78-534, 58 Stat. 877, 891). The Missouri River Basin Project, 
later renamed the Pick-Sloan Missouri Basin Program to honor its two 
principal authors, has been under construction since 1944. The P-SMBP 
encompasses a comprehensive program of flood control, navigation 
improvement, irrigation, M&I 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, 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 include 19 powerplants. 
There are six powerplants in the P-SMBP--WD: Glendo, Kortes, and 
Fremont Canyon powerplants on the North Platte River; Boysen and Pilot 
Butte on the Wind River; and Yellowtail powerplant on the Big Horn 
River.
    In the Colorado-Big Thompson Project, there are also six 
powerplants. Green Mountain powerplant on the Blue River is on the West 
Slope of the Rocky Mountains. Marys Lake, Estes, Pole Hill, Flatiron, 
and Big Thompson powerplants are on the East Slope.
    The Kendrick Project has two power production facilities: Alcova 
and Seminoe powerplants. Power production facilities in the Shoshone 
Project are Shoshone, Buffalo Bill, Heart Mountain, and Spirit Mountain 
powerplants. The only production facility in the North Platte Project 
is the Guernsey powerplant.

Fryingpan-Arkansas Project

    The Fry-Ark is a transmountain diversion development in 
southeastern Colorado authorized by the Act of Congress on August 16, 
1962 (Pub. L. 87-590, 76 Stat. 389, as amended by Title XI of the Act 
of Congress on October 27, 1974 (Pub. L. 93-493, 88 Stat. 1486, 1497)). 
The Fry-Ark diverts water from the Fryingpan River and other 
tributaries of the Roaring Fork River in the Colorado River Basin on 
the West Slope of the Rocky Mountains to the Arkansas River on the East 
Slope. The water diverted from the West Slope, together with regulated 
Arkansas River water, provides supplemental irrigation, M&I water 
supplies, and produces hydroelectric power. Flood control, fish and 
wildlife enhancement, and recreation are other important purposes of 
Fry-Ark. The only generating facility in Fry-Ark is the Mt. Elbert 
Pumped-Storage powerplant on the East Slope.

Power Repayment Studies--Firm Electric Service Rate

    Western prepares a PRS each FY to determine if revenues will be 
sufficient to repay, within the required time, all costs assigned to 
the LAP revenues. Repayment criteria are based on law, policies, 
including DOE Order RA 6120.2, and authorizing legislation. To meet 
cost recovery criteria outlined in DOE Order RA 6120.2, revised studies 
and rate adjustments have been developed to demonstrate that sufficient 
revenues will be collected to meet future obligations.
    Under this adjustment, payments toward irrigation assistance and 
capital debt are necessary before deficits are completely repaid. 
Traditionally, prepayment of irrigation assistance or capital is only 
done in the absence of deficits. However, if all revenue were applied 
toward deficits prior to making any payments for irrigation and other 
capital requirements, an extraordinarily large rate increase to meet 
single-year repayment obligations would be required. Once these single-
year repayment obligations were satisfied, another rate adjustment 
would be necessary to decrease the rates. While repayment of capital 
debt and irrigation assistance prior to complete repayment of deficits 
is not typical, the approach approved within this Rate Order is well 
within the bounds of the discretion allowed under DOE Order RA 6120.2.
    Under this adjustment, Rate Schedule L-F7, Western will repay 
deficits and also make previously planned payments for irrigation 
assistance and other investments that are due within the required 
repayment period. Prepaying irrigation and capital investments has been 
part of the P-SMBP repayment plans and approved rate adjustments for 
the past 20 years. Prepayment is an integral part of the long-term plan 
for the project and has provided rate stability for consumers while 
meeting Federal repayment obligations. Modest irrigation and investment 
payments for a brief period of 2 to 3 years will reduce the single-year 
revenue requirement for irrigation assistance and hold increases to the 
``lowest possible rates to consumers consistent with sound business 
principles,'' as outlined in section 5 of the Flood Control Act of 
1944.

Existing and Provisional Rates

    A comparison of the existing and provisional rates for LAP firm 
electric service follows:

[[Page 64064]]



                     Comparison of Existing and Provisional Rates LAP Firm Electric Service
----------------------------------------------------------------------------------------------------------------
                                           Existing rate (January 1,   Provisional rate (January
          Firm electric service                   2007) L-F6                 1, 2008) L-F7        Percent change
----------------------------------------------------------------------------------------------------------------
LAP revenue requirement.................  $55.8 million.............  $66.1 million.............            18.5
LAP composite rate......................  27.36 mills/kWh...........  32.42 mills/kWh...........            18.5
Firm energy.............................  13.68 mills/kWh...........  16.21 mills/kWh...........            18.5
Firm capacity...........................  $3.59/kWmonth.............  $4.25/kWmonth.............            18.4
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    The adjustment to the P-SMBP revenue requirement is a separate 
formal rate process which is documented in Rate Order No. WAPA-135. 
Rate Order No. WAPA-135 is also scheduled to go into effect on the 
first day of the first full billing period beginning on or after 
January 1, 2008.

Certification of Rates

    Western's Administrator certified that the provisional rates for 
LAP firm electric service under Rate Schedule L-F7 are the lowest 
possible rates consistent with sound business principles. The 
provisional rates were developed following administrative policies and 
applicable laws.

LAP Firm Electric Service Rate Discussion

    According to Reclamation Law, Western must establish power rates 
sufficient to recover operation, maintenance, purchase power and 
interest expenses, and repay power investment and irrigation aid.
    The Criteria, published in the Federal Register on January 31, 1986 
(51 FR 4012), operationally and contractually integrated the resources 
of the P-SMBP--WD and Fry-Ark (thereafter referred to as LAP). A 
blended rate was established for the sale of LAP power. The P-SMBP--WD 
portion of the revenue requirement for the LAP firm electric service 
rates was developed from the revenue requirement calculated in the P-
SMBP Ratesetting PRS. The P-SMBP--WD revenue requirement increased 
approximately 23 percent from the previous revenue requirement due to 
the economic impact of the drought, increased O&M and other annual 
expenses, increased investments, and increased interest expenses 
associated with the deficits. The revenue requirements for P-SMBP--WD 
are as follows:

            Summary of P-SMBP--WD Revenue Requirements ($000)
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Present Revenue Requirement (Jan 07) (21.09 mills/kWh x          $41,927
 1,988,000,000 kWh).....................................
Provisional Increase (Jan 08) (4.95 mills/kWh x                    9,840
 1,988,000,000 kWh).....................................
Provisional Revenue Requirement (21.09 + 4.95 = 26.04             51,767
 mills/kWh x 1,988,000,000 kWh).........................
------------------------------------------------------------------------

    The Fry-Ark piece of the revenue requirement for the LAP firm 
electric service rates was developed from the revenue requirement 
calculated in the Fry-Ark Ratesetting PRS, which has been updated to 
reflect the most current information. The Fry-Ark revenue requirement 
increased approximately 3 percent due to increased O&M expenses and the 
economic impact of the drought. The revenue requirements for Fry-Ark 
are as follows:

             Summary of Fry-Ark Revenue Requirements ($000)
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Present Revenue Requirement (Jan 07)....................         $13,901
Provisional Increase (Jan 08)...........................            $464
Provisional Revenue Requirement.........................         $14,365
------------------------------------------------------------------------

    This table compares the LAP existing revenue requirements to the 
proposed revenue requirements:

               Summary of LAP Revenue Requirements ($000)
------------------------------------------------------------------------
                                             Existing       Provisional
                                          (January 2007)  (January 2008)
------------------------------------------------------------------------
P-SMBP--WD..............................         $41,927         $51,767
Fry-Ark.................................         $13,901         $14,365
Total LAP...............................         $55,828         $66,132
------------------------------------------------------------------------

    Western will identify its firm electric service revenue requirement 
using Base and Drought Adder components. The Base is a revenue 
requirement for each Project that includes annual O&M expenses, 
investment repayment and associated interest, normal timing power 
purchases, and transmission costs. Normal timing power purchases are 
purchases due to operational constraints (e.g., management of 
endangered species habitat, water quality, navigation, control area 
purposes, etc.) and are not associated with the current drought in the 
Regions. The Base revenue requirement may not be adjusted without 
Western going through a public process to do so.
    The Drought Adder revenue requirement for each Project is a 
formula-based revenue requirement that includes costs attributable to 
the present drought conditions within the Regions. The Drought Adder 
includes costs associated with future non-timing purchases of 
additional power to firm obligations not covered with available system 
generation due to the drought, previously incurred deficits due to 
purchased power debt that resulted from non-timing power purchases made 
during this drought, and the interest associated with the previously 
incurred and future drought debt. The Drought Adder is designed to 
repay the drought debt within 10 years from the time the debt was 
incurred. Adjustments to the Drought Adder of less than or equal to the 
equivalent of 2 mills/kWh to the LAP composite rate will be made by 
customer notification of a revised rate schedule with a January 
implementation date.
    The annual revenue requirement calculation can be summarized by the

[[Page 64065]]

following formula: Annual Revenue Requirement = Base Revenue 
Requirement + Drought Adder Revenue Requirement. Under this provisional 
rate, the LAP annual revenue requirement equals $66.1 million and is 
comprised of a Base revenue requirement of $48.6 million plus a Drought 
Adder revenue requirement of $17.5 million.
    Below is a table identifying the rates for the revenue requirement 
components:

                        Summary of LAP Components
------------------------------------------------------------------------
                                      Firm energy        Firm capacity
------------------------------------------------------------------------
Base............................  11.92 mills/kWh...  $3.13/kWmonth.
Drought Adder...................  4.29 mills/kWh....  1.12/kWmonth.
Total LAP.......................  16.21 mills/kWh...  4.25/kWmonth.
------------------------------------------------------------------------

    Western reviews its firm electric service rates annually. Western 
will review the Base after the annual PRS is completed, generally in 
the first quarter of the calendar year. If an adjustment to the Base is 
necessary, Western will initiate a public process pursuant to 10 CFR 
part 903 prior to making an adjustment.
    Western will review the Drought Adder each September to determine 
if drought costs differ from those projected in the PRS and whether an 
adjustment to the Drought Adder is necessary. Western will use recent 
Corps of Engineers and Bureau of Reclamation hydrological estimates and 
historical data to determine the estimated amounts for future purchase 
power costs. For any adjustments attributed to drought costs of less 
than or equal to the equivalent of 2 mills/kWh to the LAP composite 
rate, Western will notify customers by letter in October of the planned 
adjustment and implement the adjustment in the following January 
billing cycle. For the portion of any planned incremental adjustment 
greater than the equivalent of 2 mills/kWh to the LAP composite rate, 
Western will engage in a public process pursuant to 10 CFR part 903 
prior to implementing that portion of the adjustment. Although 
decremental adjustments to the Drought Adder will occur, the adjustment 
cannot result in the Drought Adder being a negative number. Western 
will conduct a preliminary review of the Drought Adder in early summer 
and advise customers by letter of any estimated change to the Drought 
Adder for the following January. Customers will also be notified by 
letter in October of the final Drought Adder adjustment to be effective 
with the following January billing period.

Statement of Revenue and Related Expenses

    The following table provides a summary of projected revenue and 
expense data for the Fry-Ark firm electric service revenue requirement 
through the 5-year provisional rate approval period:

                        Fry-Ark Comparison of 5-Year Rate Approval Period (FY 2008-2012)
                                       [Total Revenue and Expense ($000)]
----------------------------------------------------------------------------------------------------------------
                                                                                    Provisional
                                                                   Existing rate       rate         Difference
----------------------------------------------------------------------------------------------------------------
Total Revenues..................................................         $74,638         $78,683          $4,045
Revenue Distribution:...........................................
Expenses:.......................................................
  O&M...........................................................          23,190          25,236           2,046
  Purchase Power and Transmission...............................          20,435          21,260             825
  Interest......................................................          23,926          22,287          -1,639
    Total Expenses..............................................          67,551          68,783           1,232
Principal Payments:.............................................
  Capitalized Expenses..........................................              $0              $0              $0
  Original Project and Additions................................             940             578            -362
  Replacements..................................................           6,147           9,322           3,175
    Total Principal Payments....................................           7,087           9,900           2,813
    Total Revenue Distribution..................................          74,638          78,683           4,045
----------------------------------------------------------------------------------------------------------------

    The summary of P-SMBP--WD revenues and expenses for the 5-year 
provisional rate approval period is included in the P-SMBP Statement of 
Revenue and Related Expenses that is part of Rate Order No. WAPA-135.

Basis for Rate Development

    The existing rates for LAP firm electric service in Rate Schedule 
L-F6, which expire on December 31, 2010, no longer provide sufficient 
revenues to pay all annual costs, including interest expense, and repay 
power investment and irrigation aid within the allowable period. The 
adjusted rates reflect increases primarily due to the economic impact 
of the drought, increased O&M and other annual expenses, increased 
investments, and increased interest expenses associated with deficits. 
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. The provisional rates will 
take effect on January 1, 2008, to correspond with the start of the 
calendar year, and will remain in effect on an interim basis, pending 
FERC's confirmation and approval of them or substitute rates on a final 
basis, through December 31, 2012.
    The provisional LAP firm electric service rates are designed to 
recover 50 percent of the revenue requirement from the capacity charge 
and 50 percent from the energy charge. The capacity charge is 
calculated by dividing 50 percent of the total annual revenue 
requirement by the number of billing units (kWmonth)

[[Page 64066]]

in a year. The energy charge is calculated by dividing 50 percent of 
the total annual revenue requirement by the annual energy sales under 
contract.

Comments

    The comments and responses applicable to the LAP firm electric 
service rates, paraphrased for brevity when not affecting the meaning 
of the statement(s), are discussed below. Comments that apply to P-SMBP 
or to P-SMBP--Eastern Division only are being answered in Rate Order 
No. WAPA-135.
    A. Comment: Western received numerous comments that strongly 
supported Western's rate adjustment proposal. These comments support 
the establishment of a Drought Adder and Base component as it will 
ensure timely repayment of obligations to the Treasury while insulating 
the Base from inflation by drought related costs.
    Response: Western appreciates the customer support it has received 
for the rate adjustment proposal, including separation of the annual 
revenue requirement into a Base component and a Drought Adder 
component.
    B. Comment: Western received several comments encouraging Western 
to keep preference customers informed throughout the year on the 
progress made in paying down the drought deficits and provide early and 
timely information to customers on any changes to the Drought Adder so 
customers can plan accordingly.
    Response: Western intends to inform customers annually of the 
status of the drought costs and the repayment of those costs. It is 
Western's intention to include the most current hydrological and 
operations cost data into projections in the PRS as soon as they are 
available and will notify customers as soon as practical of any changes 
to the Drought Adder.
    C. Comment: Western received comments encouraging Western to 
include identification of the portion of the total rate which will be 
attributed to the Drought Adder and that such amount be identified in 
terms of both the energy and capacity rates.
    Response: Western agrees with this request to identify the portion 
of the rate attributable to the Drought Adder and have shown both the 
Base component and Drought Adder component in energy and capacity rates 
in the rate schedule.
    D. Comment: Customers would like to work with Western on how the 
Drought Adder would be administered in future droughts.
    Response: Western is committed to working with its customers, now 
and in the future, to determine ways to control costs and repay the 
projects.

Availability of Information

    Information about this rate adjustment, including PRSs, comments, 
letters, memorandums, and other supporting material made or kept by 
Western that was used to develop the provisional rates, is available 
for public review in the Rocky Mountain Customer Service Regional 
Office, Western Area Power Administration, 5555 East Crossroads 
Boulevard, Loveland, Colorado.

Ratemaking Procedure Requirements:

Environmental Compliance

    In compliance with the National Environmental Policy Act of 1969 
(NEPA) (42 U.S.C. 4321, et seq.); the Council on Environmental Quality 
Regulations for implementing NEPA (40 CFR parts 1500-1508); and DOE 
NEPA Implementing Procedures and Guidelines (10 CFR part 1021, Subpart 
D, APP. B4.3), 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.

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 FERC 
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 January 1, 2008, 
Rate Schedule L-F7 for the Loveland Area Projects of the Western Area 
Power Administration. The rate schedule shall remain in effect on an 
interim basis, pending FERC's confirmation and approval of them or 
substitute rates on a final basis through December 31, 2012.
    Dated: November 1, 2007.

Clay Sell,
Deputy Secretary of Energy.

United States Department of Energy; Western Area Power Administration

Loveland Area Projects: Colorado, Kansas, Nebraska, Wyoming

Schedule of Rates for Firm Electric Service: (Approved Under Rate Order 
No. WAPA-134)
    Effective: Beginning on the first day of the first full billing 
period on or after January 1, 2008, through December 31, 2012.
    Available: Within the marketing area served by the Loveland Area 
Projects.
    Applicable: To the wholesale power customers for firm power service 
supplied through one meter at one point of delivery, or as otherwise 
established by contract.
    Character: Alternating current, 60 hertz, three phase, delivered 
and metered at the voltages and points established by contract.
    Monthly Rates:
    Capacity Charge: $4.25 per kilowattmonth of billing capacity.
    Energy Charge: 16.21 mills per kilowatthour (kWh) of use.
    Billing Capacity: Unless otherwise specified by contract, the 
billing capacity will be the seasonal contract rate of delivery.
    Charge Components: Base: A fixed revenue requirement that includes 
operation and maintenance expense, investments and replacements, 
interest on investments and replacements, normal timing purchase power 
costs (purchases due to operational constraints, not associated with 
drought), and transmission costs. The Base revenue requirement is $48.6 
million.
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[GRAPHIC] [TIFF OMITTED] TN14NO07.001

    Drought Adder: A formula-based revenue requirement that includes 
future purchase power expenses excluding timing purchases, previous 
purchase power drought deficits, and interest on the purchase power 
drought deficits. For this period, effective January 2008, the Drought 
Adder revenue requirement is $17.5 million.
[GRAPHIC] [TIFF OMITTED] TN14NO07.002

[GRAPHIC] [TIFF OMITTED] TN14NO07.003

    Process: Any proposed change to the Base component will require a 
public process.
    The Drought Adder may be adjusted annually using the above formula 
for any costs attributed to drought of less than or equal to the 
equivalent of 2 mills/kWh to the LAP composite rate. Any planned 
incremental adjustment to the Drought Adder component greater than the 
equivalent of 2 mills/kWh to the LAP composite rate will require a 
public process.
    Adjustments:
    For Drought Adder: Adjustments pursuant to the Drought Adder 
component will be documented in a revision to this rate schedule.
    For Transformer Losses: If delivery is made at transmission voltage 
but metered on the low-voltage side of the substation, the meter 
readings will be increased to compensate for transformer losses as 
provided for in the contract.
    For Power Factor: None. The customer will be required to maintain a 
power factor at all points of measurement between 95-percent lagging 
and 95-percent leading.

 [FR Doc. E7-22191 Filed 11-13-07; 8:45 am]
BILLING CODE 6450-01-P