Pick-Sloan Missouri Basin Program-Eastern Division-Rate Order No. WAPA-135, 64067-64075 [E7-22192]

Agencies

• DEPARTMENT OF ENERGY
• Western Area Power Administration

[Federal Register Volume 72, Number 219 (Wednesday, November 14, 2007)]
[Notices]
[Pages 64067-64075]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-22192]


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DEPARTMENT OF ENERGY

Western Area Power Administration


Pick-Sloan Missouri Basin Program--Eastern Division--Rate Order 
No. WAPA-135

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-135 and Rate Schedules P-SED-F9 and P-SED-FP9, placing 
firm power and firm peaking power rates from the Pick-Sloan Missouri 
Basin Program--Eastern Division (P-SMBP--ED) 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 expense, and repay power investment and irrigation 
aid within the allowable periods.

DATES: Rate Schedules P-SED-F9 and P-SED-FP9 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 rate schedules in effect on a final 
basis ending December 31, 2012, or until the rate schedules are 
superseded.

FOR FURTHER INFORMATION CONTACT: Mr. Robert J. Harris, Regional 
Manager, Upper Great Plains Region, Western Area Power Administration, 
2900 4th Avenue North, Billings, MT 59101-1266, telephone (406) 247-
7405, e-mail rharris@wapa.gov, or Mr. Jon R. Horst, Rates Manager, 
Upper Great Plains Region, Western Area Power Administration, 2900 4th 
Avenue North, Billings, MT 59101-1266, telephone (406) 247-7444, e-mail 
horst@wapa.gov.

SUPPLEMENTARY INFORMATION: The Deputy Secretary of Energy approved 
existing Rate Schedules P-SED-F8 and P-SED-FP8 for firm and firm 
peaking electric service on an interim basis on November 9, 2005.\1\ 
The existing rate schedules are effective from January 1, 2006, through 
December 31, 2010.
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    \1\ Rate Order No. WAPA-125, November 9, 2005 (70 FR 71280). 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 P-SMBP--ED firm power and firm peaking 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 Schedules P-SED-F9 and P-
SED-FP9, Western will identify its firm electric and firm peaking 
service revenue requirements using a Base component (Base) and a 
Drought Adder component (Drought Adder). Under Rate Schedule P-SED-F9, 
Western will also eliminate the tiered rate in P-SMBP--ED.
    The existing firm electric service Rate Schedules P-SED-F8 and P-
SED-FP8 are being superseded by Rate Schedules P-SED-F9 and P-SED-FP9. 
Under current Rate Schedules P-SED-F8 and P-SED-FP8, a two-step method 
was approved. The composite rate for the second step of Rate Schedules 
P-SED-F8 and P-SED-FP8, effective on January 1, 2007, is 19.54 mills 
per kilowatt hour (mills/kWh), the firm energy rate is 11.29 mills/kWh, 
the firm capacity rate is $4.45 per kilowatt month (kWmonth) and the 
firm peaking capacity rate is $4.45 per kWmonth. Under Rate Schedule P-
SED-F9, the provisional rates for firm electric services will result in 
a combined composite rate of 24.49 mills/kWh. The energy rate will be 
13.99 mills/kWh (a Base component of 8.93 mills/kWh and a Drought Adder 
component of 5.06 mills/kWh) and the capacity rate will be $5.65 
kWmonth (a Base component of $3.65/kWmonth and a Drought Adder 
component of $2.00/kWmonth). This will result in an increase of 25.3 
percent when compared with the existing firm power rate under Rate 
Schedule P-SED-F8. Under Rate Schedule P-SED-FP9 the provisional

[[Page 64068]]

rates for firm peaking power consist of a capacity charge of $5.10 per 
kWmonth and an energy charge of 13.99 mills/kWh, effective on January 
1, 2008. This will result in an increase of 14.6 percent when compared 
with the existing firm peaking power rate under Rate Schedule P-SED-
FP8.
    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-135, the proposed P-SMBP--ED firm power and firm peaking 
power rates, into effect on an interim basis. The new Rate Schedules P-
SED-F9 and P-SED-FP9 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

 [Rate Order No. WAPA-135]

In the matter of: Western Area Power Administration Rate Adjustment for 
the Pick-Sloan Missouri Basin Program--Eastern Division

Order Confirming, Approving, and Placing the Pick-Sloan Missouri Basin 
Program--Eastern Division Firm Power and Firm Peaking Power Service 
Rates Into Effect on an Interim Basis

    These rates for the Pick-Sloan Missouri Basin Program--Eastern 
Division 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.
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 energy sales. It is expressed in mills per kilowatthour and used 
for comparison purposes.
Corps: United States Army Corps of Engineers.
CROD: Contract rate of delivery. The maximum amount of capacity made 
available to a preference customer for a period specified under a 
contract.
Customer: An entity with a contract that is receiving service from 
Western's Upper Great Plains Region.
Deficits: Deferred or unrecovered annual expenses.
DOE: United States Department of Energy.
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 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.
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.
LAP: Loveland Area Projects.
Load Factor: The ratio of average load in kW supplied during a 
designated period to the peak or maximum load in kW occurring in that 
period.
mills/kWh: Mills per kilowatthour--the unit of charge for energy (equal 
to one tenth of a cent or one thousandth of a dollar.)
MW: Megawatt--the electrical unit of capacity that equals 1 million 
watts or 1,000 kilowatts.
NEPA: National Environmental Policy Act of 1969 (42 U.S.C. 4321, et 
seq.).
Non-timing Power Purchases: Power purchases that are not related to 
operational constraints such as management of endangered species, 
species habitat, water quality, navigation, control area purposes, etc.
O&M: Operation and Maintenance.
P-SMBP: The Pick-Sloan Missouri Basin Program.
P-SMBP--ED: Pick-Sloan Missouri Basin Program--Eastern Division.
P-SMBP--WD: Pick-Sloan Missouri Basin Program--Western Division.
Power: Capacity and energy.
Power Factor: The ratio of real to apparent power at any given point 
and time in an electrical circuit. Generally it is expressed as a 
percentage ratio.
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 Rate: A rate which has been confirmed, approved and placed 
into

[[Page 64069]]

effect on an interim basis by the Deputy Secretary.
PRS: Power Repayment Study.
Rate Brochure: A June 2007 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.
RMR: The Rocky Mountain Customer Service Region of Western.
Timing Power Purchases: Power purchases that are due to operational 
constraints (e.g. management of endangered species, species habitat, 
water quality, navigation, control area purposes, etc.) and not 
associated with the drought.
UGPR: The Upper Great Plains 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 remain 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 process began March 15, 2007, when 
Western's UGPR mailed a notice announcing informal customer meetings to 
all P-SMBP--ED preference customers and interested parties. The 
informal meetings were held on April 9, 2007, in Denver, Colorado, and 
on April 10, 2007, in Sioux Falls, South Dakota. At these informal 
meetings, Western explained the rationale for the rate adjustment, 
presented rate designs and methodologies, and answered questions.
    2. An FRN was published on May 31, 2007 (72 FR 30372), that 
announced the proposed rates for P-SMBP--ED, began a public 
consultation and comment period, and announced the public information 
and public comment forums.
    3. On June 1, 2007, Western's UGPR mailed letters to all P-SMBP--ED 
preference customers and interested parties transmitting the FRN 
published on May 31, 2007.
    4. On June 18, 2007, beginning at 10 a.m. (MDT), Western held a 
public information forum at the Radisson Stapleton Plaza in Denver, 
Colorado. On June 19, 2007, beginning at 9 a.m. (CDT), a second public 
information forum was held at the Holiday Inn in Sioux Falls, South 
Dakota. Western provided detailed explanations of the proposed rates 
for P-SMBP--ED, and a list of issues that could change the proposed 
rates. Western also answered questions and gave notice that more 
information was available in the rate brochure.
    5. On July 23, 2007, beginning at 10 a.m. (MDT), Western held a 
public comment forum at the Radisson Stapleton Plaza in Denver, 
Colorado, to give the public an opportunity to comment for the record. 
No oral or written comments were received at this forum. On July 24, 
2007, beginning at 9 a.m. (CDT), a second public comment forum was held 
at the Holiday Inn in Sioux Falls, South Dakota, to give the public an 
opportunity to comment for the record. No oral or written comments were 
received at this forum.
    6. Western's UGPR 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 easy customer access. The Web site is 
located at https://www.wapa.gov/ugp/rates/2008FirmRateAdjust.
    7. Western received 25 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:

City of Gering, Nebraska.
City of Wisner, Nebraska.
Central Power Electric Cooperative, Inc., North Dakota.
Corn Belt Power Cooperative, Iowa.
East River Electric Power Cooperative, South Dakota.
Federated Rural Electric, Minnesota.
Heartland Consumers Power District, South Dakota.
Lincoln Electric System, Nebraska.
Lower Yellowstone Rural Electric Cooperative, Montana.
Lyon-Lincoln Electric Cooperative, Minnesota.
Marshall Municipal Utilities, Minnesota.
Mid-West Electric Consumers Association, Colorado.
Minnkota Power Cooperative, Inc., North Dakota.
Montana Electric Cooperatives' Association, Montana.
Municipal Energy Agency of Nebraska, Nebraska.
Nebraska Public Power District, Nebraska.
Northwest Iowa Power Cooperative, Iowa.
Renville Sibley Cooperative Power Association, Minnesota.
Rosebud Electric Cooperative, South Dakota.
Sioux Valley Energy, South Dakota.
Sisseton-Wahpeton Oyate, Lake Traverse Reservation, South Dakota.
South Dakota Rural Electric Association, South Dakota.
Town of Julesburg, Colorado.
Verendrye Electric Cooperative, North Dakota.
Woodbury Rural Electric Cooperative, Iowa.

Project Description

    The P-SMBP was authorized by Congress in section 9 of the Flood 
Control Act of December 22, 1944, commonly referred to as the 1944 
Flood Control Act. This multipurpose program provides flood control, 
irrigation, navigation, recreation, preservation and enhancement of 
fish and wildlife, and power generation. Multipurpose projects have 
been developed on the Missouri River and its tributaries in Colorado, 
Montana, Nebraska, North Dakota, South Dakota and Wyoming.
    In addition to the multipurpose water projects authorized by 
section 9 of the Flood Control Act of 1944, certain other existing 
projects have been integrated with the P-SMBP for power marketing, 
operation and repayment purposes. The Colorado-Big Thompson, Kendrick, 
and Shoshone Projects were combined with the P-SMBP in 1954, followed 
by the North Platte Project in 1959. These projects are referred to as 
the ``Integrated Projects'' of the P-SMBP.
    The Flood Control Act of 1944 also authorized the inclusion of the 
Fort Peck Project with the P-SMBP for operation and repayment purposes. 
The Riverton Project was integrated with the P-SMBP in 1954, and in 
1970 was reauthorized as a unit of P-SMBP.
    The P-SMBP is administered by two regions. The UGPR with a regional 
office in Billings, Montana, markets power from the Eastern Division of 
P-SMBP, and the RMR with a regional

[[Page 64070]]

office in Loveland, Colorado, markets the Western Division power of P-
SMBP. The UGPR markets power in western Iowa, western Minnesota, 
Montana east of the Continental Divide, North Dakota, South Dakota, and 
the eastern two-thirds of Nebraska. The RMR markets P-SMBP--WD power, 
which in combination with Fry-Ark power is known as LAP power, in 
northeastern Colorado, east of the Continental Divide in Wyoming, west 
of the 101st meridian in Nebraska, and most of Kansas. The P-SMBP power 
is marketed to approximately 300 firm power customers by the UGPR and 
approximately 40 firm power customers by the RMR.

Power Repayment Study--Firm Power 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 P-SMBP. 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, a revised study and rate 
adjustment has been developed to demonstrate that sufficient revenues 
will be collected under proposed rates 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 the adjustment in power rate schedules P-SED-F9 and P-SED-
FP9, 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 firm power and firm 
peaking power rates follow:

Comparison of Existing and Provisional Rates

                               Pick-Sloan Missouri Basin Program--Eastern Division
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                                          Existing rates effective       Provisional rates
         Firm electric service                 January 1, 2007       effective January 1, 2008   Percent change
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P-SMBP--ED Revenue Requirement.........  $189.9 million............  $235.9 million...........              24.2
P-SMBP--ED Composite Rate..............  19.54 mills/kWh...........  24.49 mills/kWh..........              25.3
Firm Capacity..........................  $4.45/kWmonth.............  $5.65/kWmonth............              27.0
Firm Energy............................  11.29 mills/kWh...........  13.99 mills/kWh..........              23.9
Tiered > 60 Percent Load Factor........  5.21 mills/kWh............  Eliminated...............               N/A
Firm Peaking Capacity..................  $4.45/kWmonth.............  $5.10/kWmonth............              14.6
Firm Peaking Energy \1\................  11.29 mills/kWh...........  13.99 mills/kWh..........              23.9
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\1\Firm Peaking Energy is normally returned. This rate will be assessed in the event Firm Peaking Energy is not
  returned.

Western Division

    The LAP rate is designed to recover the P-SMBP--WD revenue 
requirement for the P-SMBP and the revenue requirement for Fry-Ark. The 
adjustment to the LAP rate is a separate formal rate process which is 
documented in Rate Order No. WAPA-134. Rate Order No. WAPA-134 is also 
scheduled to go into effect on the first day of the first full billing 
period beginning on January 1, 2008.

Certification of Rates

    Western's Administrator certified that the provisional rates for P-
SMBP--ED firm power and firm peaking power rates are the lowest 
possible rates consistent with sound business principles. The 
provisional rates were developed following administrative policies and 
applicable laws.

P-SMBP--ED Firm Power Rate Discussion

    According to Reclamation Law, Western must establish power rates 
sufficient to recover operation, maintenance, purchased power and 
interest expenses, and repay power investment and irrigation aid.
    The P-SMBP--ED firm power and firm peaking power rates must be 
increased due to the economic impact of the drought, increased O&M and 
other annual expenses, increased investments, and increased interest 
expense associated with deficits.
    The existing rates for P-SMBP--ED firm power and firm peaking power 
under Rate Schedules P-SED-F8 and P-SED-FP8 expire December 31, 2010. 
Effective January 1, 2008, Rate Schedules P-SED-F8 and P-SED-FP8 will 
be superseded by the new rates in Rate Schedule P-SED-F9 and Rate 
Schedule P-SED-FP9. The provisional rates under P-SED-F9 for firm power 
consist of a capacity charge of $5.65/kWmonth, and an energy charge of 
13.99 mills/kWh. The provisional rates under P-SED-FP9 for firm peaking 
power consist of a capacity of $5.10/kWmonth, and an energy charge of 
13.99 mills/kWh. These rates are comprised of Base and Drought Adder 
components.
    Additionally, under Rate Schedules P-SED-F9 and P-SED-FP9, Western 
will identify its firm and firm peaking electric service revenue 
requirements using Base and Drought Adder components. The Base is a 
revenue requirement 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

[[Page 64071]]

quality, navigation, control area purposes, etc.) and are not 
associated with the current drought in the region. The Base revenue 
requirement may not be adjusted without Western going through a public 
process to do so.
    The Drought Adder revenue requirement is a formula-based revenue 
requirement that includes costs attributable to the present drought 
conditions within the P-SMBP. The Drought Adder includes costs 
associated with future non-timing power 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 
incurred from non-timing power purchases made during this drought, and 
the interest associated with previously incurred and future drought 
debt. The Drought Adder is designed to repay drought debt within 10 
years of the year the debt was incurred. Adjustments to the Drought 
Adder of less than or equal to the equivalent of 2 mills/kWh to the PRS 
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 
following formula: Annual Revenue Requirement = Base Revenue 
Requirement + Drought Adder Revenue Requirement. Under this provisional 
rate, the P-SMBP--ED annual revenue requirement equals $245.2 million 
and is comprised of a Base revenue requirement of $157.2 million plus a 
Drought Adder revenue requirement of $88.0 million. Both the Base and 
the Drought Adder recover portions of the firm power revenue 
requirement, which when combined with the firm peaking power revenue 
requirement equals the P-SMBP--ED annual revenue requirement.
    Below is a table identifying the rates for the revenue requirement 
components:

------------------------------------------------------------------------
                                                     Drought
                Service                     Base      adder      Rates
                                         component  component
------------------------------------------------------------------------
Firm Capacity ($/kWmonth)..............      $3.65      $2.00      $5.65
Firm Energy (mills/kWh)................       8.93       5.06      13.99
Firm Peaking Capacity ($/kWmonth)......      $3.25      $1.85      $5.10
Firm Peaking Energy (mills/kWh) \1\....       8.93       5.06      13.99
------------------------------------------------------------------------
\1\ Firm Peaking Energy is normally returned. This rate will be assessed
  in the event Firm Peaking Energy is not returned.

    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 PRS 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 PRS 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 may 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.
    Western has also redesigned its revenue recovery methodology for 
firm peaking service. Under Rate Schedule P-SED-FP9, the firm peaking 
demand charge is calculated by dividing one-half of the P-SMBP--ED 
revenue requirement by the sum of the total allocated seasonal CRODs 
modeled as monthly billing units for both firm electric and firm 
peaking service.

Statement of Revenue and Related Expenses

    The following table provides a summary of projected revenue and 
expense data for the total P-SMBP, including both the Eastern and 
Western Divisions, firm electric service revenue requirement through 
the 5-year rate approval period. The firm power rates for both 
divisions have been developed with the following revenues and expenses 
for the P-SMBP:

                     Total P-SMBP Firm Power Comparison of 5-Year Rate Period (FY 2008-2012)
----------------------------------------------------------------------------------------------------------------
                                                                                                    Difference
                                                                   Existing rate   Proposed rate   ($000)  Total
                                                                      ($000)          ($000)       revenues and
                                                                                                     expenses
----------------------------------------------------------------------------------------------------------------
Total Revenues..................................................      $1,723,061      $2,127,445        $404,384
                      Revenue Distribution
Expenses:
    O&M.........................................................         829,319         910,948          81,629
    Purchased Power and Wheeling................................          84,040         290,654         206,614
    Integrated Projects Requirements............................               0               0               0
    Interest....................................................         499,116         530,912          31,796
    Transmission................................................          58,956          60,856           1,900
                                                                 -----------------------------------------------

[[Page 64072]]

 
        Total Expenses..........................................       1,471,431       1,793,370         321,939
                                                                 ===============================================
Principal Payments:
    Capitalized Expenses........................................         218,819         127,958        (90,861)
    Original Project and Additions..............................          26,392         188,898         162,506
    Replacements................................................           2,019           2,219             200
    Irrigation..................................................           4,400          15,000          10,600
                                                                 -----------------------------------------------
        Total Principal Payments................................         251,630         334,075          82,445
                                                                 ===============================================
        Total Revenue Distribution..............................       1,723,061       2,127,445         404,384
----------------------------------------------------------------------------------------------------------------

Basis for Rate Development

    The existing rates for P-SMBP--ED firm power in Rate Schedule P-
SED-F8, which expire December 31, 2010, no longer provide sufficient 
revenues to pay all annual costs, including interest expense, and repay 
investment and irrigation aid within the allowable period. The adjusted 
rates reflect increases due to the economic impact of the drought, 
increased O&M and other annual expenses, increased investments, and 
increased interest expense associated with drought 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 P-SMBP--ED provisional firm power rate under rate schedule P-
SED-F9 is designed to recover 50 percent of the revenue requirement 
from the capacity rate and 50 percent from the energy rate. The firm 
capacity rate of $5.65 per kWmonth is calculated by dividing 50 percent 
of the total annual revenue by the total firm power billing units 
(kWmonths) in a year. The firm energy rate of 13.99 mills/kWh is 
calculated by dividing 50 percent of the total annual revenue 
requirement by the annual energy sales.
    Historically, the P-SMBP--ED firm peaking rate has been equal to 
the demand charge for the firm power rate. The customer pays the demand 
rate on their total firm peaking CROD each month rather than firm 
energy peaking delivered each month. Contract terms vary among firm 
peaking customers with respect to return of peaking energy. One 
customer may return all peaking energy, while another peaking customer 
may pay for 20 to 40 percent of the peaking energy they use and return 
the rest to Western. When a peaking customer does not return peaking 
energy, they are billed at the firm energy rate.
    Previously, Western used the sum of the metered billing units for 
firm electric service and the seasonal CROD modeled as monthly billing 
units for firm peaking service. Western is changing the methodology for 
the firm peaking rate design to use the sum of the total allocated 
seasonal CRODs for both firm electric demand and firm peaking demand 
modeled as billing units. Changing the methodology is consistent with 
the principle that Western's rate design for firm electric demand and 
firm peaking demand should be representative of the different products. 
The firm peaking rate under P-SED-FP9 is $5.10/kWmonth. The revenue 
requirement for firm peaking demand is calculated by multiplying the 
firm peaking power billing units per year (4,272,000 kWmonth/year) by 
the firm peaking demand rate yielding a firm peaking revenue 
requirement of $21.8 million.
    With this rate adjustment, the P-SMBP--ED is also eliminating the 
tiered rate. The tiered rate charge was implemented in the mid-1970s 
for loads in excess of 60 percent monthly load factor. Continuing the 
tiered rate charge discourages load management. Moreover, eliminating 
the tiered rate from the P-SMBP--ED firm electric service schedule is 
consistent with the administration of firm electric service rates in 
the P-SMBP--WD, as well as all other Western regions, which do not 
assess a tiered rate charge.

Comments

    The comments and responses below regarding the firm power and firm 
peaking power rates are paraphrased for brevity when not affecting the 
meaning of the statement(s). Direct quotes from comment letters are 
used for clarification when necessary.
    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 brought about by drought related costs. 
Comments expressed support for elimination of the tiered rate because 
it has penalized customers for making efficient use of renewable energy 
resources that do not contribute to global warming. Comments also 
supported the redesign of the peaking rate as it better reflects the 
value and limitations of the peaking product.
    Response: Western appreciates customer support received for the 
rate adjustment proposal, including separation of the annual revenue 
requirement into a Base component and Drought Adder component, 
elimination of the tiered rate and redesign of the peaking rate.
    B. Comment: Western received one comment opposed to the elimination 
of the tiered rate. ``It appears to me to be a push put on by those 
systems with load management systems. They manage their peaks & thus 
buy more power in the over 60% load factor range. The systems that do 
not use load control helped pay for the load control systems of those 
that do & now they are asking us to pay again.''
    Response: P-SMBP--ED customers that have load management systems in 
place have paid for those systems themselves. Western has not recovered 
costs for load management systems of others nor has Western passed 
those costs on to customers that do not have load management systems. 
Western

[[Page 64073]]

does not charge a tiered rate in the P-SMBP--WD nor in any other 
projects marketed by Western. Western endeavors to treat customers 
fairly and we believe penalizing customers for efficient management is 
unjust. Furthermore, penalizing customers for managing the load on 
their power system is unreasonable in an era when use of renewable 
energy is at the forefront of efficient energy management.
    C. Comment: Western received one comment opposed to the proposed 
firm peaking capacity rate and the proposed peaking energy charge. The 
percentage increase for the firm peaking capacity is only 14.6% 
compared to the 25.3% increase in firm power. The peaking energy charge 
of 13.99 mills/kWh seems low.
    Response: Those customers who have peaking capacity pay for the 
service each month of the season for which they have a CROD whether 
they are allowed to use the capacity under the contract terms or not. 
Typically, peaking capacity is used one to four times annually by the 
peaking customers, thus paying monthly for a product they are not 
allowed to use. Western's new peaking rate is reflective of the peaking 
customer's historical usage and their impact on drought costs. Western 
believes we have treated both the firm and firm peaking customers 
equitably by separating the rate designs of the two products. This 
separation is demonstrated in the new peaking product rate design which 
better reflects the value and restrictions of the peaking product.
    D. Comment: Western received numerous 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 has identified both 
the Base component and Drought Adder component in energy and capacity 
rates in the firm and firm peaking rate schedules.
    E. 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.
    F. Comment: Many comments supported the increase in rates, 
recognizing Western's need to generate added revenue in order to meet 
its operations and repayment obligations due to pressure from the long-
term drought affecting the Missouri River Basin.
    Response: Western appreciates the customer support it has received 
for the rate adjustment proposal.
    G. Comment: Western received one comment that the 25% rate increase 
for the area utilities should not decrease the Tribal benefits, rather 
the opposite should happen and Tribal benefits should increase due to 
the increased value of the hydro resource.
    Response: Western does provide bill crediting of the Tribal 
benefits according to the composite rate for the P-SMBP--ED as provided 
in the Tribal contracts. Native American contractual arrangements do 
allow for the composite rate to be modified. Under this rate 
adjustment, the composite rate for P-SMBP--ED is increasing from 19.54 
mills per kWh to 24.49 mills per kWh. Benefits to a Tribe are 
determined from the difference between the composite rate for Western 
and the composite rate of the power supplier the Tribe has designated. 
As Western's composite rate increases, it is likely that the composite 
rates for the Tribes designated power suppliers will increase as well, 
although such increase is not within the control of Western. (In 
addition, this comment pertains to contract administration and is 
outside the scope of this rate process.)
    H. Comment: Two comments received expressed appreciation for 
Western's commitment to supply the full firm power allocation during 
this drought cycle. However, there is also concern that adequate long 
term purchase power arrangements have not been pursued by Western, 
leaving UGPR to continually rely on short-term, spot market energy 
purchases to meet its shortfall.
    Response: Although this comment is not directly related to the 
proposed rate action and is outside the scope of this rate process, 
Western is actively addressing these issues as well as other options 
and evaluating them based on cost and benefit to Western's customers.
    I. Comment: Commenters state that by relying on non-firm 
transmission for spot energy purchases, the likelihood of curtailments 
is increased. It is their understanding that a number of short-term 
purchases by Western have been curtailed, causing additional drought-
related expenses as higher cost energy is generated or purchased to 
replace the curtailed purchases in real time.
    Response: This comment is not directly related to the proposed rate 
action and is outside the scope of this rate process. However, Western 
is actively addressing these issues as well as other options and 
evaluating them based on cost and benefit to Western's customers.
    J. Comment: Commenters state that one area of controllable cost 
that causes significant concern is the area of regional transmission. 
The commenters understand that UGPR is considering the logistics of 
participating in the Midwest Independent Transmission System Operator 
(MISO) and its Day Two Markets. Before pursuing such a radical 
departure from past practice, they suggest a thorough review of costs 
and benefits to all Western customers. If Western joins MISO, and other 
area transmission owners that also serve Western customers do not join, 
there could be significant seams issues. If there are benefits to 
participating in the Day Two Market, those benefits should flow to all 
Western customers, not just those that participate in joint dispatching 
arrangements inside the Integrated System.
    Response: This comment is not directly related to the proposed rate 
action and is outside the scope of this rate process. However, Western 
is actively addressing these issues as well as other options and 
evaluating them based on cost and benefit to Western's customers.

Availability of Information

    Information about this rate adjustment, including the PRS, 
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 Upper Great Plains Regional Office, 
Western Area Power Administration, 2900 4th Avenue North, Billings, 
Montana.

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

[[Page 64074]]

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 Schedules P-SED-F9 and P-SED-FP9 for the Pick-Sloan Missouri Basin 
Program--Eastern Division of the Western Area Power Administration. The 
rate schedules 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.
Rate Schedule P-SED-F9
(Supersedes Schedule P-SED-F8)
Effective January 1, 2008

United States Department of Energy, Western Area Power Administration

Pick-Sloan Missouri Basin Program--Eastern Division, Montana, North 
Dakota, South Dakota, Minnesota, Iowa, Nebraska

Schedule of Rates for Firm Power Service (Approved Under Rate Order 
No. WAPA-135)

    Effective: The first day of the first full billing period 
beginning on or after January 1, 2008, through December 31, 2012.
    Available: Within the marketing area served by the Eastern 
Division of the Pick-Sloan Missouri Basin Program.
    Applicable: To the power and energy delivered to customers as 
firm power service.
    Character: Alternating current, 60 hertz, three phase, delivered 
and metered at the voltages and points established by contract.
    Monthly Rates:
    Demand Charge: $5.65 for each kilowatt per month (kWmonth) of 
billing demand.
    Energy Charge: 13.99 mills per kilowatthour (kWh) for all energy 
delivered as firm power service.
    Billing Demand: The billing demand will be as defined by the 
power sales contract.
    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 
$157.2 million.
[GRAPHIC] [TIFF OMITTED] TN14NO07.004

[GRAPHIC] [TIFF OMITTED] TN14NO07.005

    Drought Adder: A formula-based revenue requirement that includes 
future purchase power expense excluding timing purchases, previous 
purchase power drought deficits, and interest on the purchase power 
drought deficits. For the period beginning January 2008, the Drought 
Adder revenue requirement is $88 million.
[GRAPHIC] [TIFF OMITTED] TN14NO07.006

[GRAPHIC] [TIFF OMITTED] TN14NO07.007

    Process: Any proposed change to the Base component will require 
a public process.
    The Drought Adder component 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 Power Repayment Study 
(PRS) composite rate. Any planned incremental adjustment to the 
Drought Adder component greater than the equivalent of 2 mills/kWh 
to the PRS 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 Character and Conditions of Service: Customers who receive 
deliveries at transmission voltage may in some instances be eligible 
to receive a 5 percent discount on demand and energy charges when 
facilities are provided by the customer that results in a sufficient 
savings to Western to justify the discount. The determination of 
eligibility for receipt of the voltage discount shall be exclusively 
vested in Western.
    For Billing of Unauthorized Overruns: For each billing period in 
which there is a contract violation involving an unauthorized 
overrun of the contractual firm power and/or energy obligations, 
such overrun shall be billed at 10 times the above rate.
    For Power Factor: None. The customer will be required to 
maintain a power factor at the point of delivery between 95 percent 
lagging and 95 percent leading.

Rate Schedule P-SED-FP9
(Supersedes Schedule P-SED-FP8)
Effective January 1, 2008

United States Department of Energy, Western Area Power Administration

Pick-Sloan Missouri Basin Program--Eastern Division, Montana, North 
Dakota, South Dakota, Minnesota, Iowa, Nebraska

Schedule of Rates for Firm Peaking Power Service (Approved Under 
Rate Order No. WAPA-135)

    Effective: The first day of the first full billing period 
beginning on or after January 1, 2008, through December 31, 2012.
    Available: Within the marketing area served by the Eastern 
Division of the Pick-Sloan Missouri Basin Program, to customers

[[Page 64075]]

with generating resources enabling them to use firm peaking power 
service.
    Applicable: To the power sold to customers as firm peaking power 
service.
    Character: Alternating current, 60 hertz, three phase, delivered 
and metered at the voltages and points established by contract.
    Monthly Rates:
    Demand Charge: $5.10 for each kilowatt per month (kWmonth) of 
the effective contract rate of delivery for peaking power or the 
maximum amount scheduled, whichever is greater.
    Energy Charge: 13.99 mills for each kilowatthour (kWh) for all 
energy scheduled for delivery without return.
    Charge Components:
    Base: A fixed revenue requirement that includes operation and 
maintenance expense, investment and replacements, normal timing 
purchase power costs (purchases due to operational constraints, not 
associated with drought), and transmission costs. The Base peaking 
revenue requirement is $13.9 million.
[GRAPHIC] [TIFF OMITTED] TN14NO07.008

Energy \1\: = 8.93 mills/kWh.

    \1\ Firm peaking energy is normally returned. This rate will be 
assessed in the event firm peaking energy is not returned. This rate 
is calculated in accordance with the schedule of rates for firm 
power service, Rate Schedule P-SED-F9 or its successor.
---------------------------------------------------------------------------

    Drought Adder: A formula-based revenue requirement that includes 
future purchase power above timing purchases, previous purchase 
power drought deficits, and interest on the purchase power drought 
deficits. For the period beginning January 2008, the Drought Adder 
peaking revenue requirement is $7.9 million.
[GRAPHIC] [TIFF OMITTED] TN14NO07.009

Energy \1\: = 5.06 mills/kWh.

    Process: Any proposed change to the Base component will require 
a public process.
    The Drought Adder component 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 Power Repayment Study 
(PRS) composite rate. Any planned incremental adjustment to the 
Drought Adder component greater than the equivalent of 2 mills/kWh 
to the PRS composite rate will require a public process.
    Billing Demand: The billing demand will be the greater of: (1) 
The highest 30-minute integrated demand measured during the month up 
to, but not in excess of, the delivery obligation under the power 
sales contract, or (2) the contract rate of delivery.
    Adjustments:
    For Drought Adder: Adjustments pursuant to the Drought Adder 
component will be documented in a revision to this rate schedule.
    Billing for Unauthorized Overruns: For each billing period in 
which there is a contract violation involving an unauthorized 
overrun of the contractual obligation for peaking demand and/or 
energy, such overrun shall be billed at 10 times the above rate.

[FR Doc. E7-22192 Filed 11-13-07; 8:45 am]
BILLING CODE 6450-01-P