Application of the Energy Planning and Management Program Power Marketing Initiative to the Boulder Canyon Project, 23583-23586 [2011-10081]

Agencies

• DEPARTMENT OF ENERGY
• Western Area Power Administration

[Federal Register Volume 76, Number 81 (Wednesday, April 27, 2011)]
[Notices]
[Pages 23583-23586]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-10081]


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DEPARTMENT OF ENERGY

Western Area Power Administration


Application of the Energy Planning and Management Program Power 
Marketing Initiative to the Boulder Canyon Project

AGENCY: Western Area Power Administration, Department of Energy.

ACTION: Notice of Decision and Notice of Proposal.

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SUMMARY: The Western Area Power Administration (Western), a Federal 
power marketing agency of the Department of Energy (DOE), will apply 
the Energy Planning and Management Program (Program) Power Marketing 
Initiative (PMI), as modified in this notice, to the Boulder Canyon 
Project (BCP), as proposed in a Federal Register notice (FRN) published 
on November 20, 2009. As a result, Western will extend a major 
percentage of the marketable capacity and energy to existing BCP 
customers. The remaining marketable resource shall form a resource pool 
that shall be marketed by Western to eligible customers by means of a 
public process. Western has determined that all BCP electric service 
contracts resulting from this effort shall have a term of thirty (30) 
years commencing October 1, 2017.
    Western is also making new proposals relative to the BCP 
remarketing effort including marketable capacity and energy, a resource 
pool percentage, and excess energy provisions, as described in this 
notice. Western is accepting public comments on these proposals. All 
comments previously submitted in response to Western's November 20, 
2009, notice will be considered in this process and are not required to 
be resubmitted.

DATES: Western's decisions as described in this notice will become 
effective upon May 27, 2011.
    The comment period for these proposals begins today and ends June 
16, 2011. Western will hold a public information forum and a public 
comment forum on the proposals contained in this FRN. The public 
information forum will be held on May 25, 2011, 10 a.m., MST, in 
Phoenix, Arizona. The public comment forum will be held on May 25, 
2011, 1 p.m., MST, in Phoenix, Arizona.
    Western will accept written comments on or before June 16, 2011. 
Western reserves the right to not consider any comments received after 
this date.

ADDRESSES: Comments may be submitted to: Mr. Darrick Moe, Western Area 
Power Administration, Desert Southwest Regional Manager, P.O. Box 6457, 
Phoenix, AZ 85005-6457. Comments may also be faxed to (602) 605-2490 or 
e-mailed to Post2017BCP@wapa.gov. The public information and comment 
forum location will be the Sheraton Crescent Hotel, 2620 West Dunlap 
Avenue, Phoenix, Arizona.

FOR FURTHER INFORMATION CONTACT: Mr. Mike Simonton, Public Utilities 
Specialist, Desert Southwest Region, Western Area Power Administration, 
P.O. Box 6457, Phoenix, AZ 85005, telephone (602) 605-2675, e-mail 
Post2017BCP@wapa.gov. Information regarding Western's BCP Post 2017 
remarketing efforts, the Program, and the Conformed General 
Consolidated Power Marketing Criteria or Regulations for Boulder City 
Area Projects (Conformed Criteria) published in the Federal Register 
(49 FR 50582) on December 28, 1984, are available at https://www.wapa.gov/dsw/pwrmkt.

SUPPLEMENTARY INFORMATION:
    Authorities: Western markets the BCP power resources under the 
Department of Energy Organization Act (42 U.S.C. 7101-7352); and the 
Reclamation Act of 1902 (ch. 1093, 32 Stat. 388), as amended and 
supplemented by later acts; and other acts that apply specifically to 
BCP, particularly section 5 of the Boulder Canyon Project Act of 1928 
(45 Stat. 1057, as amended, 43 U.S.C. 617 et seq.).
    Background: Existing BCP electric service contracts are set to 
expire on September 30, 2017. On November 20, 2009 (74 FR 60256), 
Western published its proposals: (1) To apply the Program's PMI to the 
BCP; (2) to market 2,044 megawatts (MW) of contingent capacity

[[Page 23584]]

with an associated 4,116,000 megawatt-hours (MWh) of annual firm energy 
from the BCP; (3) to extend 100 percent of the existing contractors' 
contingent capacity allocations, totaling 1,951 MW, and 95 percent of 
the proposed marketable firm energy, totaling 3,910,200 MWh annually to 
the existing contractors based proportionally upon their existing 
allocations of marketed annual firm energy and to create a single, one-
time resource pool consisting of 93 MW of contingent capacity with an 
associated 205,800 MWh of annual firm energy; and, (4) that electric 
service contracts resulting from this effort will have a term of 30 
years commencing on October 1, 2017.
    Public information and comment forums were held in Las Vegas, 
Nevada; Phoenix, Arizona; and Ontario, California. Western received 
comments from existing power contractors, Native American tribes, 
electric cooperatives, municipals, and other potential contractors. 
Transcripts of the public information and comment forums, as well as 
all the comments received, may be viewed on Western's website at https://www.wapa.gov/dsw/pwrmkt.
    In an April 16, 2010, Federal Register Notice (75 FR 19966), 
Western extended the comment period of the November 20, 2009, FRN from 
January 29, 2010, to September 30, 2010. This extension provided 
Western additional time to examine the issues raised in the comments it 
received, and allowed interested parties additional opportunity to 
consult with Western and comment on the proposals.
    Decision: Based on comments received and a review of available 
resources, Western will: (1) Apply the PMI, as modified in this notice, 
to the Boulder Canyon Project remarketing effort including the 
establishment of a resource pool and, (2) establish a term of 30 years 
for all BCP electric service contracts beginning October 1, 2017. 
Western presents further proposals in the Proposals section of this 
FRN.

Comments and Discussion

    Western received a significant number of comments on Western's 
proposals during the comment period. Western reviewed and considered 
all comments received. This section summarizes and responds to the 
comments received on the applicability of the PMI to BCP, the length of 
the contract term, and the other topics appropriate to the proposals. 
All written comments and transcripts from the public comment forums are 
available on Western's website at https://www.wapa.gov/dsw/pwrmkt.
    Comment: Several comments were received requesting Western to 
suspend or delay the administrative remarketing process in order to 
either ensure all tribes in the BCP service area have sufficient time 
to become familiar with the effort or to provide pending legislation an 
opportunity to be enacted by Congress in the 111th congressional 
session.
    Response: Based upon comments received, Western extended the 
comment period of the November 20, 2009, FRN from January 29, 2010, to 
September 30, 2010. In that time, Western identified 59 Federally 
recognized Native American tribes in the BCP marketing area and sent 
letters to each tribe notifying them of the BCP remarketing effort and 
extending an opportunity to consult with Western regarding the tribes' 
potential interests and participation in the public process.
    To date, the legislative efforts to amend the Hoover Power Plant 
Act of 1984 (Hoover Act) (43 U.S.C. 619a) to make specific allocations 
of BCP power after September 30, 2017, have not come to fruition. 
Western acknowledges future legislation is possible, but also notes 
that Western has a statutory obligation to market BCP power pursuant to 
section 5 of the Boulder Canyon Project Act (Project Act) (43 U.S.C. 
617d) in conjunction with section 302 of the Department of Energy 
Organization Act of 1977 (42 U.S.C. 7152). Therefore, Western will 
proceed to fulfill its marketing responsibilities related to BCP power 
through a public administrative process under current statutory 
authority.
    Comment: Current legal authority does not preclude the application 
of the PMI to the BCP and Western has applied this protocol to other 
Federal power projects since its implementation in 1995. Western should 
continue with its proposal to apply the PMI to the BCP for this 
remarketing effort.
    Response: Western agrees with this comment. The PMI was developed 
by Western through a public process and has been applied to other 
Federal projects as an appropriate means of balancing existing 
contractors' resource stability while also encouraging the widespread 
public use of the Federal generation. Western believes it is 
appropriate to apply the PMI, as modified herein, to the BCP at this 
time.
    Comment: Comments were received questioning Western's authority 
under current law to apply the PMI to the BCP. Unlike other projects 
where Western has applied its PMI, the allocation of Hoover power has 
been the sole province of Congress. Western should explain its legal 
theories that may support the application of the PMI.
    Response: Hoover power was originally allocated by the Secretary of 
Interior by regulation and administrative action and was not directly 
determined through legislation until the Hoover Act. To date 
legislative proposals to extend the specific allocations in the Hoover 
Act have not been enacted. Moreover, section 5 of the Project Act and 
the Department of Energy Organization Act of 1977 authorizes Western to 
establish and apply regulations governing BCP allocations, including 
the application of the PMI and the creation of a resource pool. 
Application of the PMI to the BCP expressly protects and reserves a 
major portion of the existing contractors' allocations while also 
providing potential contractors an opportunity to acquire an 
allocation. Western believes that application of the PMI has 
historically provided for a balancing of the needs of the existing 
contractors with those of prospective contractors. Therefore, it is 
consistent with the Hoover Act and appropriate for Western to apply the 
PMI to the BCP.
    Comment: 43 U.S.C. section 617d(b) provides that holders of Hoover 
contracts shall be entitled to a renewal upon such terms and conditions 
as may be authorized or required under the then existing laws and 
regulations. This language provides Western express authority to apply 
its current regulations to the marketing of the BCP.
    Response: Western agrees and is herein deciding on the application 
of the PMI in conformance with its existing regulations.
    Comment: Section 18 of the Reclamation Project Act of 1939 
(Reclamation Act) provided that ``nothing in this Act shall be 
construed to amend the Boulder Canyon Project Act of 1928 (45 Stat. 
1057), as amended.'' 43 U.S.C. 485j footnote. Reclamation law, 
including the preference provisions contained in 43 U.S.C. 485h, is not 
applicable to the BCP allocation process.
    Response: Western's decision to apply the PMI means the majority of 
the resources will continue to be allocated to existing BCP customers. 
The criteria under which the resources in the resource pool will be 
allocated shall be determined in a subsequent public process. Western 
will comply with all applicable laws during that process.
    Comment: Section 5 of the Project Act governs allocation of power 
from Hoover Dam. The first priority to that power goes in equal 
opportunity to the states of Arizona, California, and Nevada. 
Subsequently, the power may

[[Page 23585]]

be further allocated within the marketing area primarily pursuant to 
priorities developed by the Solicitor of the U.S. Department of the 
Interior in the 1930's.
    Response: Section 5 of the Project Act (43 U.S.C. 617d(c)) provides 
that ``the States of Arizona, California, and Nevada shall be given 
equal opportunity as * * * applicants'' for BCP power. It does not 
require equal distribution of BCP power among the three states, as 
evidenced by the Hoover Act which did not reallocate BCP power in equal 
portions to Arizona, California, and Nevada.
    Comment: Under section 5 (c) of the Project Act, Western lacks the 
statutory authority to withhold capacity and associated energy in order 
to create a resource pool.
    Response: Section 5 specifically grants the Secretary broad 
discretion to allocate power in accordance with the public interest and 
this authority provides for the necessary administrative flexibility to 
reserve capacity and energy for the creation of a resource pool.
    Comment: Consistent with current U.S. Department of Energy Native 
American policy, Western must maintain a government-to-government 
relationship with Federally-recognized Native American governments. 
Native American tribes should have the option to seek an allocation 
directly from Western.
    Response: Western agrees with this comment and intends to accept 
applications from Federally-recognized tribes for consideration of a 
BCP allocation after an official call for applications has been made in 
the Federal Register.
    Comment: Western should allocate all of the 2,074 MW of nameplate 
capacity of the BCP. The maximum dependable operating capacity should 
be marketed to the contractors who are paying for the continued 
operations and maintenance of the dam. If the lake conditions ever 
return to optimal, then the full capacity should be made available to 
those who have been paying for the full contract amounts but have not 
received it.
    Response: Western has historically marketed the BCP capacity as 
contingent capacity. BCP contractors have always been delivered the 
capacity they have contracted for when the supporting generating units 
are available. Western has and will continue to deliver contracted 
contingent capacity to the extent it is available. As proposed, Western 
would market 2,044 MW of contingent capacity from the BCP. The 
remaining 30 MW would be used for project integration and reliability 
purposes. The BCP contractors would not be responsible for the expenses 
associated with the 30 MW as determined by Western. Western will 
determine the final marketable contingent capacity after considering 
the public comments it receives resulting from this notice.
    Comment: Many comments requested Western to allocate the existing 
contractual amount of 4,527,001 MWh of annual firm energy while another 
comment supported the proposed 4,116,000 MWh.
    Response: Western typically seeks to market an amount of energy 
that is commensurate with that which Western deems to be reasonably 
attainable as projected in hydrologic studies. Western and the Bureau 
of Reclamation (Reclamation) reviewed recent hydrologic studies 
provided by Reclamation. Several analyses were performed on the 
projected output of the BCP over the proposed term. The study results 
yielded an estimated average generation of approximately 3,650,000 MWh 
annually. Western proposed 4,116,000 MWh after considering factors such 
as average energy projections, resource stability, and frequency of 
excess energy. Comments received were predominantly in favor of 
maintaining the existing 4,527,001 MWh of annual firm energy 
irrespective of projected generation or an alternate logic. Western 
anticipates that just as it is today, all energy generated will be 
delivered to the BCP contractors based on their respective allocations 
regardless of the specific amount of energy marketed. It is noted that 
in the case of the BCP, the level of marketable energy has an impact on 
the amount of excess energy that is achieved. Due to this excess energy 
impact, Western believes that the best course of action is to propose 
marketable energy, excess energy provisions, and a resource pool 
percentage in a coordinated fashion with all impacting variables 
simultaneously considered. Western will determine the final marketable 
energy after considering the public comments it receives resulting from 
this notice.
    Comment: Some comments suggested a 30-year term for contract offers 
taking effect after September 30, 2017, while several others requested 
50 years.
    Response: Western considered 20-, 30-, 40-, and 50-year contract 
terms. While the PMI calls for 20 years, based upon comments received, 
a longer term would be preferred by existing and potential new 
customers. With the dynamic nature of the electric industry in the last 
few decades, Western believes that a remarketing effort will be in 
order for less than 50 years to ensure that the most widespread use of 
the Federal generation is maintained. Therefore, Western will extend 
contract offers to existing and new contractors with the term of 30 
years commencing October 1, 2017. Western anticipates that a 30-year 
term will allow sufficient resource planning horizons and added 
stability compared to a term less than 30 years, yet will also provide 
an allocation opportunity for future entities at an appropriate time.
    Comment: Several comments requested that Western maintain the 
existing excess energy provisions consisting of Schedules A, B, and C 
as described in the Hoover Act and the Conformed Criteria. Contrary 
comments requested that all contractors should share in the allocation 
of excess energy in proportion to their respective energy allocation 
percentage. Another comment stated that Native American tribes and 
other new preference applicants should receive a first right of refusal 
to excess energy.
    Response: Western considered all of these potential methods in 
creating the proposed excess energy provisions. Several impacting 
factors were identified and contemplated to derive what Western 
believes to be fair and equitable excess energy provisions. Western 
will determine the final excess energy provisions after considering the 
public comments it receives resulting from this notice.
    Comment: The PMI should state specifically that contractors will be 
permitted to transact Hoover power, including ancillary services, with 
an Independent System Operator, including the California Independent 
System Operator (CAISO).
    Response: Western is committed to working with the contractors and 
related entities to ensure BCP power, including the associated 
ancillary services, are able to be utilized in a suitable fashion.
    Comment: Western should clarify in this initiative that contractors 
will obtain the same ancillary services such as ramping, regulation, 
and reserves that are presently provided for under the existing 
contracts.
    Response: In Western's November 20, 2009, FRN, Western stated that 
``If by means of a public process, Western applies the PMI to the BCP, 
the current long-term contractors of the project would receive an 
extension of a major portion of the resources available to them at the 
time their contracts expire.'' While the capability to dynamically 
receive the BCP resource and these associated ancillary services is not

[[Page 23586]]

explicitly described here, it is currently Western's intent to continue 
to provide these capabilities to the existing and new BCP contractors 
into the next contract term.
    Proposals: Western is making additional proposals and is seeking 
further comments on the amount of marketable contingent capacity and 
firm energy, the amount of marketable contingent capacity and firm 
energy to be extended to existing contractors, the size of the resource 
pool to be created, and excess energy provisions. Western proposes the 
following:

    (1) To market 2,044 MW of contingent capacity with an associated 
4,527,001 MWh of annual firm energy from the BCP; (2) to extend 100 
percent of the existing contractors' contingent capacity 
allocations, totaling 1,951 MW, and 95 percent of the proposed 
marketable firm energy, totaling 4,300,651 MWh annually based 
proportionally upon their existing allocations of marketed annual 
firm energy; (3) to create a single, one-time resource pool 
consisting of 93 MW of contingent capacity with an associated 
226,350 MWh of annual firm energy; and; (4) that excess energy 
provisions contain a first and second priority defined as:
    First Priority: The Arizona Power Authority (APA) shall have a 
first priority right to delivery of excess energy, which is equal in 
each year of operation to 200,000 MWh; provided, however, that in 
the event excess energy in the amount of 200,000 MWh is not 
generated during any year of operation, APA shall accumulate a first 
right to delivery of excess energy subsequently generated in an 
amount not to exceed 600,000 MWh, inclusive of the current year's 
200,000 MWh. The first right of delivery shall accrue at a rate of 
200,000 MWh per year for each year excess energy in the amount of 
200,000 MWh is not generated, less amounts of excess energy 
delivered.
    Second Priority: Any remaining excess energy available after the 
first priority has been satisfied shall be allocated to each BCP 
contractor based on a proportionate share of its annual firm energy 
percentage allocation.

    Western will consider all comments received pertaining to its 
proposals since the initiation of the public process when making its 
final decisions. Western will publish its final decisions and further 
address the comments received on these proposals in a separate Federal 
Register notice.

Regulatory Procedure Requirements

Determination Under Executive Order 12866

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

Environmental Compliance

    In accordance with the DOE National Environmental Policy Act 
Implementing Procedures (10 CFR part 1021), Western has determined that 
these actions fit within class of action B4.1 Contracts/marketing 
plans/policies for excess electric power, in Appendix B to Subpart D to 
Part 1021--Categorical Exclusions Applicable to Specific Agency 
Actions.

    Dated: April 19, 2011.
Timothy J. Meeks,
Administrator.
[FR Doc. 2011-10081 Filed 4-26-11; 8:45 am]
BILLING CODE 6450-01-P