Loveland Area Projects-Rate Order No. WAPA-179, 57734-57742 [2017-26375]

Agencies

• DEPARTMENT OF ENERGY
• Western Area Power Administration

[Federal Register Volume 82, Number 234 (Thursday, December 7, 2017)]
[Notices]
[Pages 57734-57742]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-26375]


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DEPARTMENT OF ENERGY

Western Area Power Administration


Loveland Area Projects--Rate Order No. WAPA-179

AGENCY: Western Area Power Administration, DOE.

ACTION: Notice of order concerning firm electric service and sale of 
surplus products formula rates.

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SUMMARY: The Deputy Secretary of Energy confirmed and approved Rate 
Order No. WAPA-179 and Rate Schedules L-F11 and L-M2, placing firm 
electric service and sale of surplus products formula rates for the 
Western Area Power Administration (WAPA) Loveland Area Projects (LAP) 
into effect on an interim basis (Provisional Formula Rates).

DATES: The Provisional Formula Rate Schedules L-F11 and L-M2 are 
effective on the first day of the first full billing period beginning 
on or after January 1, 2018, and will remain in effect through December 
31, 2022, pending confirmation and approval by Federal Energy 
Regulatory Commission (FERC) on a final basis or until superseded.

FOR FURTHER INFORMATION CONTACT: Mr. Michael D. McElhany, Regional 
Manager, Rocky Mountain 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 Region, 
Western Area Power Administration, 5555 East Crossroads Boulevard, 
Loveland, CO 80538-8986, telephone (970) 461-7211, email 
scook@wapa.gov.

SUPPLEMENTARY INFORMATION: 

Firm Electric Service

    On December 2, 2014, the Deputy Secretary of Energy approved, on an 
interim basis, Rate Schedule L-F10 under Rate Order No. WAPA-167 for a 
5-year period beginning January 1, 2015, and ending December 31, 2019 
(79 FR 72663-72670 (Dec. 8, 2014)).\1\ This rate

[[Page 57735]]

schedule is formula-based, providing for adjustments to the Drought 
Adder component.\2\ On January 1, 2017, the Drought Adder component of 
the LAP effective rate schedule was adjusted downward, recognizing 
repayment of drought costs included in the Drought Adder component of 
the approved formula rates. Under Rate Schedule L-F10 with adjusted 
Drought Adder component as of January 1, 2017, the composite rate is 
36.56 mills per kilowatt-hour (mills/kWh) (a Base component of 29.90 
mills/kWh and a Drought Adder component of 6.66 mills/kWh), the firm 
energy rate is 18.28 mills/kWh, and the firm capacity rate is $4.79 per 
kilowatt-month (kWmonth).
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    \1\ FERC confirmed and approved Rate Order WAPA-167 on a final 
basis on June 25, 2015, in Docket No. EF15-4-000. See United States 
Department of Energy, Western Area Power Administration (Loveland 
Area Projects), 151 FERC ] 62,222.
    \2\ The Drought Adder component is 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. See 72 FR 64061 (November 14, 
2007). The Drought Adder was added as a component to the energy and 
capacity rates in Rate Order No. WAPA-134, which was approved by the 
Deputy Secretary on an interim basis on November 14, 2007, (72 FR 
64061). FERC confirmed and approved Rate Order WAPA-134 on a final 
basis on May 16, 2008, in Docket No. EF08-5181. See United States 
Department of Energy, Western Area Power Administration (Loveland 
Area Projects), 123 FERC ] 62,137. WAPA reviews the Drought Adder 
component each September to determine if drought costs differ from 
those projected in the Power Repayment Study and whether an 
adjustment to the Drought Adder component is necessary. See 72 FR 
64065. The Drought Adder component may be adjusted downward using 
the approved annual Drought Adder adjustment process, whereas an 
incremental upward adjustment to the Drought Adder component greater 
than the equivalent of 2 mills/kWh requires a public rate process. 
See 72 FR 64065.
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    Effective January 1, 2018, WAPA is adjusting the overall composite 
rate, which is reflected in adjustments to the formula-based charge 
components. The Drought Adder component will go down to zero and the 
Base component will be adjusted upward to reflect present costs 
attributed to both charge components. Rate Schedule L-F10 is being 
superseded by Rate Schedule L-F11. Under Rate Schedule L-F11, the 
Provisional Formula Rates for firm electric service will result in a 
composite rate of 31.44 mills/kWh (a Base component of 31.44 mills/kWh 
and a Drought Adder component of 0 mills/kWh), the firm energy rate 
will be 15.72 mills/kWh, and the firm capacity rate will be $4.12/
kWmonth. This is a 14 percent decrease when compared to the LAP firm 
electric rates under Rate Schedule L-F10.

Sale of Surplus Products

    On August 12, 2016, the Deputy Secretary of Energy approved, on an 
interim basis, Rate Schedule L-M1 under Rate Order No. WAPA-174, for a 
5-year period beginning October 1, 2016, and ending September 30, 2021 
(81 FR 56632-56652 (August 22, 2016)).\3\ This Rate Schedule is 
formula-based, providing for LAP Marketing to sell LAP surplus energy 
and capacity products; currently reserves, regulation, and frequency 
response. If LAP surplus products are available, the charge for each 
product will be determined based on market rates plus administrative 
costs. The customer will be responsible for acquiring transmission 
service necessary to deliver the product(s), for which a separate 
charge may be incurred. Rate Schedule L-M1 is being superseded by Rate 
Schedule L-M2. Rate Schedule L-M2 will include ``energy'' as a fourth 
surplus product offered under this rate schedule.
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    \3\ FERC confirmed and approved Rate Order WAPA-174 on a final 
basis on March 9, 2017, in Docket Nos. EF16-5-000 and EF16-5-001. 
See United States Department of Energy, Western Area Power 
Administration (Loveland Area Projects), 158 FERC ] 62,181.
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Legal Authority

    By Delegation Order No. 00-037.00B, effective November 19, 2016, 
the Secretary of Energy delegated: (1) The authority to develop power 
and transmission rates to the Administrator of WAPA; (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. Federal rules (10 CFR part 903) 
govern DOE procedures for public participation in power rate 
adjustments.
    Under Delegation Order Nos. 00-037.00B and 00-001.00F and in 
compliance with 10 CFR part 903 and 18 CFR part 300, I hereby confirm, 
approve, and place Rate Order No. WAPA-179, which provides the formula 
rates for LAP firm electric service and sale of surplus products, into 
effect on an interim basis. The new Rate Schedules L-F11 and L-M2 will 
be submitted to FERC for confirmation and approval on a final basis.

    Dated: November 30, 2017.
Dan Brouillette,
Deputy Secretary of Energy.

DEPARTMENT OF ENERGY

DEPUTY SECRETARY

    In the matter of: Western Area Power Administration Rate 
Adjustment for the Loveland Area Projects

Rate Order No. WAPA-179
ORDER CONFIRMING, APPROVING, AND PLACING THE LOVELAND AREA PROJECTS 
FIRM ELECTRIC SERVICE AND SALE OF SURPLUS PRODUCTS FORMULA RATES INTO 
EFFECT ON AN INTERIM BASIS
    The firm electric service and sale of surplus products rates for 
the Loveland Area Projects (LAP) set forth in this order are 
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 (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 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 projects involved.
    By Delegation Order No. 00-037.00B, effective November 19, 2016, 
the Secretary of Energy delegated: (1) the authority to develop power 
and transmission rates to the Administrator of Western Area Power 
Administration (WAPA); (2) the authority to confirm, approve, and place 
such rates into effect on an interim basis to the Deputy Secretary of 
Energy; and (3) the authority to confirm, approve, and place into 
effect on a final basis, to remand, or to disapprove such rates to the 
Federal Energy Regulatory Commission (FERC). Federal rules (10 CFR part 
903) govern DOE procedures for public participation in power rate 
adjustments.

Acronyms, Terms, and Definitions

    As used in this Rate Order, the following acronyms, terms, and 
definitions apply:
    Base: A fixed revenue requirement that includes O&M expenses, 
investments and replacements, interest on investments and replacements, 
normal timing power purchases (purchases due to operational 
constraints, not associated with drought), and transmission costs.
    Capacity: The electric capability of a generator, transformer, 
transmission circuit, or other equipment. It is expressed in kilowatts.
    Capacity Rate: The rate which sets forth the charges for capacity. 
It is expressed in dollars per kilowatt-month and applied to each 
kilowatt of the Contract Rate of Delivery (CROD).
    Composite Rate: The Power Repayment Study (PRS) rate for commercial 
firm power, which is the

[[Page 57736]]

total annual revenue requirement for capacity and energy divided by the 
total annual energy sales. It is expressed in mills per kilowatt-hour 
and used only for comparison purposes.
    Customer: An entity with a contract that is receiving firm electric 
service from WAPA.
    Deficits: Deferred or unrecovered annual and/or interest expenses.
    DOE Order RA 6120.2: An order outlining power marketing 
administration financial reporting and rate-making procedures.
    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.
    Energy: Measured in terms of the work it is capable of doing over a 
period of time. Electric energy is expressed in kilowatt-hours.
    Energy Charge: The charge under the rate schedule for energy. It is 
expressed in mills per kilowatt-hour and applied to each kilowatt-hour 
delivered to each Customer.
    Firm: A type of product and/or service always available at the time 
requested by a Customer.
    FY: Fiscal year; October 1 to September 30.
    kW: Kilowatt--the electrical unit of capacity that equals 1,000 
watts.
    kWh: Kilowatt-hour--the electrical unit of energy that equals 1,000 
watts in 1 hour.
    kWmonth: Kilowatt-month--the electrical unit of the monthly amount 
of capacity.
    mills/kWh: Mills per kilowatt-hour--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.
    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.
    Preference: The provisions of Reclamation Law that require WAPA to 
first make Federal Power available to certain entities. For example, 
section 9(c) of the Reclamation Project Act of 1939 (43 U.S.C. 485h(c)) 
states 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.
    Provisional Formula Rate: A formula rate confirmed, approved, and 
placed into effect on an interim basis by the Deputy Secretary of 
Energy.
    Ratesetting PRS: The Power Repayment Study used for the rate 
adjustment period.
    Regions: WAPA's Rocky Mountain Region (RMR) and Upper Great Plains 
Region (UGP).
    Revenue Requirement: The revenue required by the PRS 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.

Effective Date

    The Provisional Formula Rate Schedules L-F11 and L-M2 will take 
effect on the first day of the first full billing period beginning on 
or after January 1, 2018, and will remain in effect through December 
31, 2022, pending approval by FERC on a final basis or until 
superseded.

Public Notice and Comment

    WAPA followed the Procedures for Public Participation in Power and 
Transmission Rate Adjustments and Extensions, 10 CFR part 903, in 
developing these rates and schedules. The steps WAPA took to involve 
interested parties in the rate process were:
    1. A Federal Register notice, published on July 3, 2017 (82 FR 
30856) (Proposal FRN), announced the proposed rates for LAP and began 
the 90-day public consultation and comment period.
    2. On July 5, 2017, WAPA emailed letters to LAP Preference 
Customers and interested parties transmitting a copy of the Proposal 
FRN.
    3. On August 22, 2017, at 9 a.m. (MDT), WAPA held a public 
information forum at the Denver Embassy Suites, 7000 Yampa Street, 
Denver, Colorado. WAPA provided updates to the proposed firm electric 
service and sale of surplus products formula rates for both LAP and P-
SMBP--ED. WAPA also answered questions and gave notice that more 
information was available in the customer rate brochure.
    4. On August 22, 2017, at 11 a.m. (MDT), following the public 
information forum, at the same location, WAPA held a public comment 
forum to provide an opportunity for customers and other interested 
parties to comment for the record. No oral or written comments were 
received at this forum.
    5. On August 23, 2017, at 9 a.m. (CDT), WAPA held a public 
information forum at the Holiday Inn, 100 West 8th Street, Sioux Falls, 
South Dakota. WAPA provided updates to the proposed firm electric 
service and sale of surplus product formula rates for both the P-SMBP--
ED and LAP. WAPA also answered questions and gave notice that more 
information was available in the customer rate brochure.
    6. On August 23, 2017, at 11 a.m. (CDT), following the public 
information forum, at the same location, a public comment forum was 
held. The comment forum gave the public an opportunity to comment for 
the record. Two oral comments were received at this forum.
    7. WAPA provided a website that contains all dates, customer 
letters, presentations, FRNs, customer brochure, and other information 
about this rate process. The website is located at https://www.wapa.gov/regions/RM/rates/Pages/2018-Rate-Adjustment-Firm-Power.aspx.
    8. During the 90-day consultation and comment period, which ended 
on October 2, 2017, WAPA received two oral comments (from the August 23 
public comment forum). The comments and WAPA's responses are addressed 
below. All comments have been considered in the preparation of this 
Rate Order.
    Two representatives of the following organizations made oral 
comments:
Mid-West Electric Consumers Association, Colorado
Missouri River Energy Services, South Dakota

Project Descriptions

Loveland Area Projects

    The Post-1989 General Power Marketing and Allocation Criteria 
(Criteria), published in the Federal Register on January 31, 1986 (51 
FR 4012), integrated the resources of the P-SMBP--WD and the Fryingpan-
Arkansas Project (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. WAPA markets LAP power in northeastern Colorado, east 
of the

[[Page 57737]]

Continental Divide in Wyoming, west of the 101st meridian in Nebraska, 
and most of Kansas.
    The P-SMBP--WD and Fry[dash]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 firm electric 
service rate to generate adequate revenue to repay project investment 
and costs during each project's prescribed repayment period. The 
revenue requirement of the Fry[dash]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 P-SMBP, originally the Missouri River Basin Project, was 
authorized by Congress in section 9 of the Flood Control Act of 
December 22, 1944 (Pub. L. 534, 58 Stat. 887, 891). 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, 
Riverton, 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 reauthorized as a unit of P-SMBP in 1970. 
Together the P-SMBP--WD and the Integrated Projects have 19 power 
plants.
    The P-SMBP is marketed by two Regions. The RMR, with a regional 
office in Loveland, Colorado, markets the Western Division power of P-
SMBP through LAP to approximately 75 customers. The UGP Region, with a 
regional office in Billings, Montana, markets power from the Eastern 
Division of P-SMBP to approximately 340 customers.
    The adjustment to the P-SMBP--ED rate is in a separate formal rate 
process, which is documented in Rate Order No. WAPA-180. Rate Order No. 
WAPA-180 is also scheduled to go into effect on the first day of the 
first full billing period on or after January 1, 2018.

Fryingpan[dash]Arkansas Project

    Fry-Ark is a trans-mountain 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[dash]Ark diverts water from the Fryingpan River and other 
tributaries of the Roaring Fork River in the Colorado River Basin on 
the Western Slope of the Rocky Mountains to the Arkansas River on the 
Eastern Slope of the Rocky Mountains. The water diverted from the 
Western Slope, together with regulated Arkansas River water, provides 
supplemental irrigation and M&I water supplies, and produces 
hydroelectric power. Flood control, fish and wildlife enhancement, and 
recreation are other important purposes of Fry[dash]Ark. The only 
generating facility in Fry-Ark is the Mt. Elbert Pumped[dash]Storage 
powerplant on the Eastern Slope.

Power Repayment Study--Firm Electric Service Rate

    WAPA prepares PRSs each FY to determine if revenues will be 
sufficient to repay, within the required time, all costs assigned to 
the LAP. Repayment criteria are based on WAPA's applicable laws and 
legislation, as well as policies including DOE Order RA 6120.2. To meet 
the Cost Recovery Criteria outlined in DOE Order RA 6120.2, revised 
PRSs and rate adjustments have been developed to demonstrate sufficient 
revenues will be collected under the Provisional Formula Rates to meet 
future obligations. The revenue requirement and composite rate for LAP 
firm electric service are being reduced, as indicated in Table 1:

                         Table 1--Comparison of Revenue Requirements and Composite Rates
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                                                              Existing         Provisional
                 Firm Electric Service                      requirements       requirements      Percent Change
                                                         (January 1, 2017)  (January 1, 2018)
----------------------------------------------------------------------------------------------------------------
LAP Revenue Requirement (million $)....................              $74.5              $64.1               -14%
LAP Composite Rate (mills/kWh).........................              36.56              31.44               -14%
----------------------------------------------------------------------------------------------------------------

    Under the existing rate methodology, rates for LAP firm electric 
service are designed to recover an annual revenue requirement that 
includes power investment repayment, aid to irrigation repayment, 
interest, purchase power, O&M, and other expenses within the allowable 
period. The annual revenue requirement continues to be allocated 
equally between capacity and energy.

Existing and Provisional Formula Rates

    The existing Rate Schedule L-F10 and provisional Rate Schedule L-
F11 continue to be formula-based, with Base and Drought Adder 
components, and provide for an annual incremental upward adjustment to 
the Drought Adder up to 2 mills/kWh. An incremental increase to the 
Drought Adder component greater than 2 mills/kWh, requires a public 
process. The Drought Adder may be adjusted downward pursuant to the 
formula, by using the approved annual Drought Adder adjustment process. 
A comparison of the existing and Provisional Formula Rates for LAP firm 
electric service is listed in Table 2:

[[Page 57738]]



                          Table 2--Comparison of Existing and Provisional Formula Rates
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                                                          Existing Charges
                                                             Under Rate        Provisional
                                                           Schedule L-F10     Charges Under
                 Firm Electric Service                     With Modified    Rate Schedule  L-    Percent Change
                                                          Drought Adder As  F11 As of January
                                                           of January 1,         1, 2018
                                                                2017
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Firm Energy Rate (mills/kWh)...........................              18.28              15.72               -14%
Firm Capacity Rate ($/kWmonth).........................              $4.79              $4.12               -14%
----------------------------------------------------------------------------------------------------------------

    Under Rate Schedule L-M2, the Provisional Formula Rate will consist 
of a charge for products listed in the rate schedule that will be 
determined at the time of the sale based on market rates, plus 
administrative costs.

Certification of Rates

    WAPA's Administrator certified that the Provisional Formula Rates 
for LAP firm electric service under Rate Schedule L-F11 and sale of 
surplus products under Rate Schedule L-M2 are the lowest possible rates 
consistent with sound business principles. The Provisional Formula 
Rates were developed following administrative policies and applicable 
laws.

LAP Firm Electric Service Rate Discussion

    According to Reclamation Law, WAPA is required to establish power 
rates sufficient to recover O&M, purchased 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[dash]Ark (thereafter referred to as LAP). A 
blended rate was established for the sale of LAP firm electric service.

P-SMBP--WD

    The P[dash]SMBP--WD portion of the revenue requirement was 
developed from the revenue requirement calculated in the P[dash]SMBP 
Ratesetting PRS. The P[dash]SMBP--WD revenue requirement decreased 
approximately 14 percent from the previous revenue requirement 
primarily as a result of the Drought Adder component being reduced to 
zero, as the P-SMBP drought-related debts are projected to be fully 
repaid in 2018. The Base component costs for the P-SMBP--WD have 
increased primarily due to inflationary annual and capital cost 
increases associated with incorporating three new out-year projections 
into the 5-year cost evaluation period into the P-SMBP Ratesetting PRS. 
The revenue requirements for P-SMBP--WD are as follows:

       Table 3--Summary of P-SMBP--WD Revenue Requirements ($000)
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Current Revenue Requirement (Jan 2017):
    (29.80 mills/kWh x 1,988,000,000 kWh)...............         $59,242
Provisional Decrease:
 Base: 2.41 mills/kWh x 1,988,000,000 kWh...............           5,129
 Drought Adder: -6.66 mills/kWh x 1,988,000,000 kWh.....         -13,578
                                                                  -8,449
Provisional Revenue Requirement (29.80 - 4.25 = 25.55             50,793
 mills/kWh x 1,988,000,000 kWh).........................
------------------------------------------------------------------------

Fry-Ark

    The Fry[dash]Ark portion of the revenue requirement was developed 
from the revenue requirement calculated in the Fry-Ark Ratesetting PRS. 
The Fry[dash]Ark revenue requirement decreased approximately 13 percent 
due to the Base component costs decreasing, even though the three new 
out-year projections for annual expenses and capital costs within the 
5-year cost evaluation period include inflation. This decrease is 
caused by the annual expense projections in the current Fry-Ark 
Ratesetting PRS being an average of $0.3 million per year lower than 
the annual expense projections in the previous Fry-Ark Ratesetting PRS. 
In addition to lower annual expenses, ancillary service revenue 
projections have increased an average of $1.1 million per year over the 
previous projections; resulting in a net revenue increase of 
approximately $1.4 million per year. This net revenue helps offset the 
revenue requirement for firm electric service. The revenue requirements 
for Fry[dash]Ark are as follows:

         Table 4--Summary of Fry-Ark Revenue Requirements ($000)
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Current Revenue Requirement (Jan 2017)..................         $15,328
Provisional Decrease:
    Base................................................          -1,978
    Drought Adder.......................................               0
                                                                  -1,978
                                                         ---------------
Provisional Revenue Requirement.........................          13,350
------------------------------------------------------------------------

    The net effect of the P-SMBP--WD and Fry-Ark adjustments to the 
Drought Adder and Base components results in an overall decrease to the 
LAP revenue requirement. The following Table 5 compares LAP existing 
revenue

[[Page 57739]]

requirements to the proposed revenue requirements:

           Table 5--Summary of LAP Revenue Requirements ($000)
------------------------------------------------------------------------
                                             Existing       Provisional
                                          (January 2017)  (January 2018)
------------------------------------------------------------------------
P-SMBP--WD..............................         $59,242         $50,793
Fry-Ark.................................          15,328          13,350
                                         -------------------------------
    Total LAP...........................          74,571          64,144
------------------------------------------------------------------------

    As a part of the current and provisional rate schedules, WAPA 
provides for a formula-based adjustment of the Drought Adder component 
of up to 2 mills/kWh. The 2 mills/kWh cap places a limit on the amount 
the Drought Adder component can be adjusted relative to associated 
drought costs to recover costs attributable to the Drought Adder 
formula rate for any one-year cycle. Continuing to identify the firm 
electric service revenue requirement using Base and Drought Adder 
components will assist WAPA in the presentation of future impacts of 
droughts, demonstrate repayment of drought[dash]related costs in the 
PRSs, and allow WAPA to be more responsive to changes caused by 
drought[dash]related expenses. WAPA will continue to charge and bill 
its Preference Customers firm electric service rates for energy and 
capacity, which are the sum of the Base and Drought Adder components.
    Under Rate Schedule L-F11, WAPA will continue to identify its firm 
electric service revenue requirement using Base and Drought Adder 
components. The Base component is a fixed 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 drought. WAPA cannot adjust the Base component without 
a public process.
    The Drought Adder component is a formula-based revenue requirement 
that includes costs attributable to the drought conditions in the 
Regions. The Drought Adder component includes costs associated with 
future Non-timing Power Purchases to meet firm electric service 
contractual obligations not covered with available system generation 
due to a drought, previously incurred deficits due to purchased power 
debt that resulted from Non-timing Power Purchases made during a 
drought, and the interest associated with drought debt. The Drought 
Adder component is designed to repay the drought debt within 10 years 
from the time the debt was incurred, using balloon-payment methodology. 
For example, the drought debt incurred in FY 2009 will be repaid by FY 
2019.
    The annual revenue requirement calculation will continue to be 
summarized by the following formula: Annual Revenue Requirement = Base 
Revenue Requirement + Drought Adder Revenue Requirement. Under this 
Provisional Rate, the LAP annual revenue requirement equals $64.1 
million and is comprised of a Base revenue requirement of $64.1 million 
plus a Drought Adder revenue requirement of $0. A comparison of the 
existing and provisional charge components is listed in Table 6:

                                                        Table 6--Summary of LAP Charge Components
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                            Existing Charges Under Rate Schedule L-F10     Provisional Charges Under Rate Schedule L-F11
                                           with Modified Drought Adder As of January 1,                As of January 1, 2018
                                         ----------------------2017---------------------------------------------------------------------- Percent Change
                                                           Drought Adder                                   Drought Adder
                                          Base Component     Component     Total Charge   Base Component     Component     Total Charge
--------------------------------------------------------------------------------------------------------------------------------------------------------
Firm Capacity                                      $3.92           $0.87           $4.79           $4.12              $0           $4.12             -14
 (/kWmonth).............................
Firm Energy (mills/kWh).................           14.95            3.33           18.28           15.72               0           15.72             -14
--------------------------------------------------------------------------------------------------------------------------------------------------------

    WAPA reviews its firm electric service rates annually. WAPA will 
review the Base and Drought Adder components after the annual PRSs are 
complete, generally in the first quarter of the calendar year. If an 
adjustment to the Base component is necessary, or if an incremental 
upward adjustment to the Drought Adder component greater than the 
equivalent of 2 mills/kWh to the PRS Composite Rate is necessary, WAPA 
will initiate a public process pursuant to 10 CFR part 903 prior to 
making an adjustment.
    In accordance with the approved annual Drought Adder adjustment 
process, WAPA will review the Drought Adder component annually in early 
summer to determine if drought costs differ from those projected in the 
PRSs. In October, WAPA will determine if a change to the Drought Adder 
component is necessary, either incremental or decremental. Any 
adjustments to the Drought Adder component, up to 2 mills/kWh, will be 
implemented in the following January billing cycle. Although 
decremental adjustments to the Drought Adder component will occur as 
drought costs are repaid, the adjustments cannot result in a negative 
Drought Adder component. Implementing the Drought Adder component 
adjustment on January 1 of each year will help keep the drought 
deficits from escalating as quickly, will lower the interest expense 
due to drought deficits, will demonstrate responsible deficit 
management, and will provide prompt drought deficit repayments.

[[Page 57740]]

Statement of Revenue and Related Expenses

    The following Table 7 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:

          Table 7--Fry-Ark Comparison of 5-Year Rate Period (FY 2018-2022) Total Revenues and Expenses
----------------------------------------------------------------------------------------------------------------
                                                                   Existing Rate    Provisional     Difference
                                                                      ($000)        Rate ($000)       ($000)
----------------------------------------------------------------------------------------------------------------
Total Revenues \1\..............................................         $89,012         $84,359         $-4,653
Revenue Distribution:
Expenses:
    O&M.........................................................          32,322          31,334            -988
    Purchase Power..............................................             691             724              33
    Transmission \1\............................................          12,663          12,248            -415
                                                                 -----------------------------------------------
    Interest....................................................          16,080          14,779          -1,301
----------------------------------------------------------------------------------------------------------------
        Total Expenses..........................................          61,756          59,085          -2,671
Principal Payments:
    Capitalized Expenses (deficits).............................               0               0               0
    Original Project and Additions..............................          21,757          14,893          -6,864
                                                                 -----------------------------------------------
    Replacements................................................           5,499          10,381           4,882
----------------------------------------------------------------------------------------------------------------
        Total Principal Payments \2\............................          27,256          25,274          -1,982
        Total Revenue Distribution..............................          89,012          84,359          -4,653
----------------------------------------------------------------------------------------------------------------
\1\ Excludes $7,033M of pass-through transmission revenue and expense projections related to network service
  contract No. 13-RMR-2368 with Public Service Company of Colorado.
\2\ The difference in principal payments is due to changes between the FY15 and FY18 work plans, as well as the
  decrease in revenue being available for repayment during the 5-year period due to the revenue requirement
  decrease.

    The summary of P-SMBP--WD projected 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-180.

Sale of Surplus Products Discussion

    The existing Rate Schedule L-M1 is formula-based, providing for LAP 
Marketing to sell LAP surplus energy and capacity products; currently 
reserves, regulation, and frequency response. If LAP surplus products 
are available, the charge will be determined at the time of the sale 
based on market rates, plus administrative costs. The customer will be 
responsible for acquiring transmission service necessary to deliver the 
product(s), for which a separate charge may be incurred. Rate Schedule 
L-M1 is being superseded by Rate Schedule L-M2. Rate Schedule L-M2 will 
include ``energy'' as a fourth surplus product offered under this rate 
schedule.

Basis for Rate Development

    WAPA is lowering the overall charges for firm electric service by 
14 percent, by reducing the Drought Adder component to zero and 
increasing the Base component to reflect present costs. The Provisional 
Formula Rates under Rate Schedule L-F11 will provide sufficient revenue 
to pay all annual costs, including interest expenses, and repay 
investments and irrigation aid within the allowable periods. In 
addition, WAPA is modifying language in the Sale of Surplus Products 
rate schedule to include ``energy'' as a fourth surplus product offered 
under this rate schedule. This change will be included in a new Rate 
Schedule L-M2.

Comments

    WAPA received two oral comments during the public consultation and 
comment period. The comments expressed have been paraphrased, where 
appropriate, without compromising the meaning of the comments.
    A. Comment: Both customer representatives supported the rate 
adjustment as proposed, and emphasized the need for continued cost 
control regarding the Base component.
    Response: WAPA is committed to keeping the power rates at the 
lowest possible rates while maintaining sound business principles.

Availability of Information

    Information about this rate adjustment, including the customer rate 
brochure, PRSs, comments, letters, memorandums, and other supporting 
materials that were used to develop the Provisional Formula Rates, is 
available for inspection and copying at the Rocky Mountain Regional 
Office, 5555 East Crossroads Boulevard, Loveland, Colorado. Many of 
these documents are also available on WAPA's Web site at https://www.wapa.gov/regions/RM/rates/Pages/2018-Rate-Adjustment-Firm-Power.aspx.

RATEMAKING PROCEDURE REQUIREMENTS

Environmental Compliance

    In compliance with the National Environmental Policy Act (NEPA) of 
1969, 42 U.S.C. 4321-4347; 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), WAPA 
has determined that this action is categorically excluded from the 
preparation of an environmental assessment or an environmental impact 
statement. A copy of the categorical exclusion determination is 
available on WAPA's Web site at https://www.wapa.gov/regions/RM/environment/Pages/CX2017.aspx. Look for file entitled ``LAP WAPA-179 
FES Rate Adjustment.''

Determination Under Executive Order 12866

    WAPA has an exemption from centralized regulatory review under 
Executive Order 12866; accordingly, no

[[Page 57741]]

clearance of this notice by the Office of Management and Budget is 
required.

Submission to the Federal Energy Regulatory Commission

    The Provisional Formula Rates herein confirmed, approved, and 
placed into effect on an interim basis, 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 the first full 
billing period on or after January 1, 2018, Rate Schedules L-F11 and L-
M2 for the Loveland Area Projects of the Western Area Power 
Administration. These rate schedules shall remain in effect on an 
interim basis, pending the Federal Energy Regulatory Commission's 
confirmation and approval of them, or substitute rates, on a final 
basis through December 31, 2022, or until superseded.

    Dated: November 30, 2017
Dan Brouillette
Deputy Secretary of Energy

Rate Schedule L-F11

(Supersedes Rate Schedule L-F10)

UNITED STATES DEPARTMENT OF ENERGY

WESTERN AREA POWER ADMINISTRATION

ROCKY MOUNTAIN REGION

Loveland Area Projects

FIRM ELECTRIC SERVICE

(Approved Under Rate Order No. WAPA-179)

Effective

    The first day of the first full billing period beginning on or 
after January 1, 2018, and extending through December 31, 2022, or 
until superseded by another rate schedule, whichever occurs earlier.

Available

    Within the marketing area served by the Loveland Area Projects; 
parts of Colorado, Kansas, Nebraska, and Wyoming.

Applicable

    To the firm electric service delivered at specific point(s) of 
delivery, as established by contract.

Character

    Alternating current, 60 hertz, three phase, delivered and metered 
at the voltages and points established by contract.

Formula Rate and Charge Components

Rate = Base component + Drought Adder component

    Monthly Charge as of January 1, 2018, under the Rate:
    CAPACITY CHARGE:
    $4.12 per kilowatt per month (kWmonth) of billing capacity.
    ENERGY CHARGE:
    15.72 mills per kilowatt-hour (kWh) of monthly entitlement.
    BILLING CAPACITY:
    Unless otherwise specified by contract, the billing capacity will 
be the seasonal contract rate of delivery.
    Base Component: A fixed revenue requirement that includes operation 
and maintenance expense, investments and replacements, interest on 
investments and replacements, normal timing power purchases (purchases 
due to operational constraints, not associated with drought), and 
transmission costs. Any proposed change to the Base component will 
require a public process.
    The Base revenue requirement is $64.1 million and the charges under 
the formulas are:
[GRAPHIC] [TIFF OMITTED] TN07DE17.003

    Drought Adder Component: 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. As of January 1, 2018, the Drought Adder component 
revenue requirement is $0.0 million and the charges under the formulas 
are:
[GRAPHIC] [TIFF OMITTED] TN07DE17.004

    Annual Drought Adder Adjustment Process: The Drought Adder 
component may be adjusted annually using the above formulas 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.
    The annual review process is initiated in early summer when WAPA 
reviews the Drought Adder component and provides notice of any 
estimated change to the Drought Adder component charge under the 
formula. In October, WAPA will make a final determination of any change 
to the Drought Adder component charge, either incremental or 
decremental. If a Drought Adder component change is required, a 
modified Drought Adder revenue requirement and the associated charges 
will become effective the following January 1 and will be identified in 
a Drought Adder modification update. WAPA will inform customers of 
updates by letter and post updates to WAPA's external website.

[[Page 57742]]

Adjustments

    For Transformer Losses: If delivery is made at transmission voltage 
but metered on the low[dash]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[dash]percent 
lagging and 95[dash]percent leading.

Rate Schedule L-M2
(Supersedes Rate Schedule L-M1)

UNITED STATES DEPARTMENT OF ENERGY

WESTERN AREA POWER ADMINISTRATION

ROCKY MOUNTAIN REGION

Loveland Area Projects

SALE OF SURPLUS PRODUCTS

(Approved Under Rate Order No. WAPA-179)

Effective

    The first day of the first full billing period beginning on or 
after January 1, 2018, and extending through December 31, 2022, or 
until superseded by another rate schedule, whichever occurs earlier.

Applicable

    This rate schedule applies to Loveland Area Projects (LAP) 
Marketing and is applicable to the sale of the following LAP surplus 
energy and capacity products: energy, frequency response, regulation, 
and reserves. If any of the above LAP surplus products are available, 
LAP can make the product(s) available for sale, providing entities 
enter into separate agreement(s) with LAP Marketing which will specify 
the terms of sale(s).

Formula Rate

    The charge for each product will be determined at the time of the 
sale based on market rates, plus administrative costs. The customer 
will be responsible for acquiring transmission service necessary to 
deliver the product(s), for which a separate charge may be incurred.

[FR Doc. 2017-26375 Filed 12-6-17; 8:45 am]
 BILLING CODE 6450-01-P