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Notice

Parker-Davis Project, Pacific Northwest-Pacific Southwest Intertie Project, and the Central Arizona Project-Rate Order No. WAPA-114

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AGENCY:

Western Area Power Administration, DOE.

ACTION:

Notice of extension of multi-system transmission rate process.

SUMMARY:

The Western Area Power Administration (Western) initiated a rate adjustment process for a multi-system transmission rate (MSTR) which would have applied to the Parker-Davis Project (P-DP), the Pacific Northwest-Pacific Southwest Intertie Project (Intertie), and the Central Arizona Project (CAP). Western is extending the rate process to allow sufficient time to propose a methodology for the MSTR allowing customers to choose between a single system transmission service and a multi-system transmission service (customer choice model). Western will hold an additional Public Information Forum and Public Comment Forum.

DATES:

The consultation and comment period begins today and will end June 1, 2005. A Public Information Forum will be held on March 29, 2005 beginning at 10 a.m. MST, in Phoenix, AZ. A Public Comment Forum will be held April 6, 2005 beginning at 1 p.m. MST in Phoenix, AZ. Western will accept written comments any time during the consultation and comment period.

ADDRESSES:

Send written comments to J. Tyler Carlson, Regional Manager, Desert Southwest Customer Service Region, Western Area Power Administration, P.O. Box 6457, Phoenix, AZ 85005-6457, e-mail carlson@wapa.gov. Western will post information about the rate process on its Web site at http://www.wapa.gov/​dsw/​pwrmkt/​MSTRP/​MSTRP.htm. Western must receive written comments by the end of the consultation and comment period to ensure they are considered in Western's decision process. The Public Information Forum and Public Comment Forum will be held at: Desert Southwest Customer Service Regional Office, located at 615 South 43rd Avenue, Phoenix, Arizona.

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FOR FURTHER INFORMATION CONTACT:

Mr. J. Tyler Carlson, Regional Manager, Desert Southwest Customer Service Region, Western Area Power Administration, P.O. Box 6457, Phoenix, AZ 85005-6457, telephone (602) 605-2453, e-mail address carlson@wapa.gov, or Mr. Jack Murray, Rates Team Lead, Desert Southwest Customer Service Region, Western Area Power Administration, P.O. Box 6457, Phoenix, AZ 85005-6457, telephone (602) 605-2442, e-mail jmurray@wapa.gov.

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SUPPLEMENTARY INFORMATION:

During the consultation and comment period which this notice extends, Western received comments voicing strong opposition to the proposed methodology and also comments voicing support for the proposed methodology. Western also received requests to change the proposed methodology. The alternative proposal, instead of a mandatory phase-in model for all customers, will be a customer choice model which will allow existing customers to choose either a single system transmission service or a multi-system transmission service.

The initial consultation and comment period ended September 20, 2004. All formally submitted comments, both written and oral, were considered in preparing this notice.

Comments:

Written comments were received from the following organizations: Arizona Start Printed Page 10399Electric Power Cooperative, Arizona Power Authority, Arizona Public Service, Calpine Power Company, Cortaro Water Users' Association, K. R. Saline & Associates, Mohave Electric Cooperative, Navopache Electric Cooperative, Robert S. Lynch and Associates, Salt River Project, Southwest Transmission Cooperative, Welton-Mohawk Irrigation and Drainage District.

Representatives of the following organizations made oral comments: Calpine Power Company, Irrigation & Electrical Districts Association of Arizona, R.W. Beck, Salt River Project.

Western responded to oral comments received during the Public Information and Comment Forums in a letter dated September 2, 2004. Responses in this notice focus primarily on written comments pertinent to a revised customer choice model and Western's authority to develop a MSTR.

Comment: Several comments indicated a preference for the ability to choose whether to remain on a single system rate or elect to have broader system access and pay the MSTR.

Response: Western is extending the public process to allow for consideration and development of a customer choice model for the MSTR.

Comment: Several comments indicated that under the mandatory convergence model Western proposed, they would experience increased costs and would not receive any benefit, while others submitted comments in favor of the proposal because it would have decreased their costs due the elimination of pancaked rates.

Response: Western acknowledges all comments and is extending the public process to develop a customer choice model for firm and non-firm transmission service. A customer choice model will allow those customers who recognize no benefit to remain on a single system rate while those wanting broader transmission system access without pancaked rates can opt for the MSTR.

Comment: Several comments stated that the proposed MSTR constituted a cross-subsidization of one power system to another, and that Western did not have the authority to require that one project be subsidized by another.

Response: The MSTR model referred to in this comment is the Convergence Model which would have applied the MSTR in the fifth year (Fifth Year Convergence). Under this model, each power system would have remained financially independent for accounting and repayment purposes. Each power system would have maintained a separate Power Repayment Study (PRS) and financial reports. The Fifth Year Convergence model would have combined the revenue requirements of three power systems to calculate a firm transmission rate. The total MSTR revenue collected would have been allocated to each power system based on the individual power system's percentage of the total MSTR revenue requirement. It is true that an increase (or decrease) in revenues or expenses on one power system would have an impact on the overall MSTR revenue requirement and therefore a transfer of repayment responsibility under the MSTR would exist.

While Western is revising the MSTR to a customer choice model, it is not prohibited from implementing such a blended rate by either DOE Order RA 6120.2 or project-specific legislation. Western has combined the revenue requirements of multiple projects for rate-setting purposes in its other regional offices.

Comment: Some comments specifically alleged there is a subsidy from the Intertie 230/345-kilovolt system to the Intertie 500-kV system.

Response: From a legislative, power system repayment, and accounting standpoint, both the 230/345-kV and 500-kV components of Intertie are considered one power system. There is one PRS that includes the investments, revenues, and expenses of both components. Western's financial accounting system does not break costs down by a 230/345-kV or 500-kV component class of service and Western does not record costs to one component over the other. However, Western established two rates for the two components in the 1995 Rate Adjustment in response to customer comments.

Comment: A commenter indicated that granting single system credits to the Firm Electric Service (FES) customers discriminated against the other customers because the credits are part of the revenue requirement for the MSTR.

Response: FES customers receive a bundled firm electric service product. This product is firm energy delivered to the customer's point of delivery on the Parker-Davis System including all necessary ancillary services. Although transmission is bundled in the FES contracts, in Rate Order No. WAPA-75, Western defined a generation component and a transmission component equal to the P-DP Firm Transmission rate. This was done in an effort to voluntarily comply with the intent of Federal Energy Regulatory Commission (Commission) Order No. 888, by giving comparable access to other generation. However, the nature of the P-DP FES product was unchanged and Western's customers agreed that FES remains a bundled product, including both the generation and transmission components. Therefore the FES customers that chose to continue to take limited service delivery solely on the P-DP system would receive a credit for the difference between the MSTR and the transmission component of the P-DP bundled Power rate.

The P-DP PRS does not separate the generation and transmission to calculate a P-DP revenue requirement. A second study, the Cost Apportionment Study, was developed in 1995 to calculate this separation with an allocation of costs between the power and transmission customers. The Commission recognizes the existence of bundled power contracts and the special nature of Western's power marketing mission. The MSTR, as proposed in the June 2004 Public Information Forum, would have been put in place strictly for firm transmission service, which represents an entirely different class of service than firm electric service. Western is following generally accepted industry practices to use different pricing methodologies for different classes of service.

Comment: A commenter indicated that granting credits to UNS Electric (UNS) and Central Arizona Water Conservation District (CAWCD) discriminated against the other customers because the credits are part of the revenue requirement for the MSTR.

Response: Western was not proposing to provide credits to either entity. UNS has a contract which identifies a specific rate through 2008. This contract was executed prior to Western establishing a rate for the CAP. The UNS contract does, however, allow for modification to the rate. All other transmission contracts specify that the contractor will pay the rates and charges set forth in the applicable rate schedule. Since UNS does not pay the firm transmission rate as published in the CAP rate schedule, the revenue collected from that contract is classified as “other revenue” when calculating the CAP revenue requirement. Other revenue is subtracted from or “credited” against the gross revenue requirement to determine the revenue requirement that must be collected from other firm transmission customers.

CAWCD does not receive credit for any part of its transmission use on the CAP system. The CAP transmission system was built to supply power to CAP pumping loads. CAWCD is the project use beneficiary of the CAP and has the financial obligation to repay the entire CAP system. The Desert Start Printed Page 10400Southwest Region (DSW) does not bill CAWCD for transmission service for project use loads on the CAP. In order to include the CAP transmission service revenue paid by others in the MSTR, Western determined a revenue requirement based on the percentage of use on the CAP by CAWCD and subtracted that from the total CAP revenue requirement.

Comment: A commenter indicated there was a discrepancy caused by granting credits to the P-DP FES customers and not to the Salt Lake City Area Integrated Projects (SLCA/IP) FES customers.

Response: DSW approached Western's Colorado River Storage Project (CRSP) Management Center and Rocky Mountain Region (RMR) with several plans to incorporate the SLCA/IP FES into the MSTR. SLCA/IP FES is a bundled product and no acceptable method for breaking out the transmission component could be determined. SLCA/IP FES contracts include Western's obligation to deliver to points on the CRSP system. Deliveries off the CRSP system to the P-DP system require payment at the applicable rate for P-DP Transmission Service. Any methods devised by DSW to include SLCA/IP FES customers resulted in inequities between the SLCA/IP Customers on P-DP and the other SLCA/IP Southern and Northern Division Customers. The CRSP, RMR, and DSW offices agreed that it is not feasible to consider eliminating pancaking among the Regions unless we could combine the transmission service rates of all three Regions.

Comment: A commenter stated that the MSTR does not follow RA 6120.2 and cites paragraphs 7.g., 10.a., and 10.h.

Response: Paragraph 1 of RA 6120.2, which sets forth the purpose of establishing financial and reporting policies, procedures and methodologies for all DOE Power Marketing Administrations, specifically allows for deviations when “approved by the Secretary, authorized by statute, or identified and explained in a transmittal memorandum or in the footnotes to the reports”.

Paragraph 7.g. defines a power system as “a system comprised of one project or more than one project hydraulically and/or electrically integrated and therefore treated as one unit for the purpose of establishing rates.” While a transmission system is not a defined term in RA 6120.2, the key feature of the DSW system is that it is electrically connected and thus fits the requirement for being treated as one system for establishing rates.

Neither paragraph 10.a. nor paragraph 10.h. addresses combining the transmission portions of the revenue requirement of multiple power systems. Paragraph 10 sets forth the general requirements for PRSs. The revenue requirement for the MSTR is a combination of transmission revenue requirements for each power system that has been determined using practices consistent with RA 6120.2. Western has previously combined revenue requirements of separate power systems for rate-making purposes. Western's RMR and Sierra Nevada Region (SNR), as well as the CRSP Management Center, have combined revenue requirements from multiple power systems to calculate one combined rate. They also have a firm transmission rate which is calculated separately from the PRS. Revenue from this service is applied to the appropriate PRS as “Other Revenue” similar to what was envisioned for revenue from the MSTR in DSW.

Comment: A commenter questioned the information on the number of customers who benefited from the implementation of the MSTR and those who were disadvantaged and requested additional data.

Response: In a letter dated September 2, 2004, Western provided an impact analysis that listed rates for each year and the total impact by customer. Also included in this data was a listing of reservations by customer for the FY 2005-2009 rate evaluation period. The data is also available on Western's Web site at http://www.wapa.gov/​dsw/​pwrmkt/​MSTRP/​MSTRP.htm.

Since Western is revising the MSTR proposal to a customer choice model, each customer will be able to make the choice whether it is most beneficial to them to remain on a single system rate or elect the MSTR.

Legal Authority

Western will hold both a public information forum and a public comment forum on a revised customer choice methodology for the proposed MSTR. After review of public comments, and possible amendments or adjustments, Western will either recommend the Deputy Secretary of Energy approve the revised MSTR proposal on an interim basis, continue the public process, or withdraw the proposal.

Western is establishing the proposed MSTR under the Department of Energy Organization Act (42 U.S.C. 7152); the Reclamation Act of 1902 (ch. 1093, 32 Stat. 388), as amended and supplemented by subsequent laws, particularly section 9(c) of the Reclamation Project Act of 1939 (43 U.S.C. 485h(c)); and other acts that specifically apply to the projects involved.

By Delegation Order No. 00-037.00, effective December 6, 2001, the Secretary of Energy delegated: (1) The authority to develop power and transmission rates to Western's Administrator; (2) the authority to confirm, approve, and place such rates into effect on an interim basis to the Deputy Secretary of Energy; and (3) the authority to confirm, approve, and place into effect on a final basis, to remand, or to disapprove such rates to the Commission. Existing Department of Energy (DOE) procedures for public participation in power rate adjustments (10 CFR part 903) were published on September 18, 1985 (50 FR 37835).

Availability of Information

All brochures, studies, comments, letters, memorandums, or other documents that Western initiates or uses to develop the proposed rates are available for inspection and copying at the Desert Southwest Customer Service Regional Office, Western Area Power Administration, located at 615 South 43rd Avenue, Phoenix, Arizona. Many of these documents and supporting information are also available on Western's Web site at http://www.wapa.gov/​dsw/​pwrmkt/​MSTRP/​MSTRP.htm.

Regulatory Procedure Requirements

Regulatory Flexibility Analysis

The Regulatory Flexibility Act of 1980 (5 U.S.C. 601, et seq.) requires Federal agencies to perform a regulatory flexibility analysis if a final rule is likely to have a significant economic impact on a substantial number of small entities and there is a legal requirement to issue a general notice of proposed rulemaking. This action does not require a regulatory flexibility analysis since it is a rulemaking of particular applicability involving rates or services applicable to public property.

Environmental Compliance

In compliance with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321, et seq.); Council on Environmental Quality Regulations (40 CFR parts 1500-1508); and DOE NEPA Regulations (10 CFR part 1021), Western has determined this action is categorically excluded from preparing an environmental assessment or an environmental impact statement.Start Printed Page 10401

Determination Under Executive Order 12866

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

Small Business Regulatory Enforcement Fairness Act

Western has determined that this rule is exempt from congressional notification requirements under 5 U.S.C. 801 because the action is a rulemaking of particular applicability relating to rates or services and involves matters of procedure.

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Dated: Feburary 14, 2005.

Michael S. Hacskaylo,

Administrator.

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[FR Doc. 05-4118 Filed 3-2-05; 8:45 am]

BILLING CODE 6450-01-P