81 FR 64147 - Boulder Canyon Project

DEPARTMENT OF ENERGY
Western Area Power Administration

Federal Register Volume 81, Issue 181 (September 19, 2016)

In this notice, the Western Area Power Administration (WAPA) establishes the Fiscal Year (FY) 2017 base charge and rates for Boulder Canyon Project (BCP) electric service, as approved by the Deputy Secretary of Energy (Deputy Secretary). The base charge will provide sufficient revenue to cover all annual costs, including interest expense, and to repay investments within the allowable period.

[Federal Register Volume 81, Number 181 (Monday, September 19, 2016)]
[Notices]
[Pages 64147-64149]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-22465]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF ENERGY

Western Area Power Administration


Boulder Canyon Project

AGENCY: Western Area Power Administration, DOE.

ACTION: Notice of approval for Fiscal Year 2017 base charge and rates.

-----------------------------------------------------------------------

SUMMARY: In this notice, the Western Area Power Administration (WAPA) 
establishes the Fiscal Year (FY) 2017 base charge and rates for Boulder 
Canyon Project (BCP) electric service, as approved by the Deputy 
Secretary of Energy (Deputy Secretary). The base charge will provide 
sufficient revenue to cover all annual costs, including interest 
expense, and to repay investments within the allowable period.

DATES: The base charge and rates will be effective the first day of the 
first full billing period beginning on or after October 1, 2016, and 
will remain in effect through September 30, 2017, or until superseded.

FOR FURTHER INFORMATION CONTACT: Mr. Ronald E. Moulton, Regional 
Manager, Desert Southwest Region, Western Area Power Administration, 
P.O. Box 6457, Phoenix, AZ 85005-6457, (602) 605-2453, email 
[email protected], or Mr. Scott Lund, Rates Manager, Desert Southwest 
Region, Western Area Power Administration, P.O. Box 6457, Phoenix, AZ 
85005-6457, (602) 605-2442, email [email protected].

SUPPLEMENTARY INFORMATION: Hoover Dam, authorized by the Boulder Canyon 
Project Act (45 Stat. 1057, December 21, 1928), sits on the Colorado 
River along the Arizona and Nevada border. The Hoover Dam power plant 
has 19 generating units (two for plant use) and an installed capacity 
of 2,078,800 kilowatts (kW) (4,800 kW for plant use). High-voltage 
transmission lines and substations connect BCP power to consumers in 
southern Nevada, Arizona, and southern California. Electric service 
rates are adjusted annually using an existing rate formula established 
on April 19, 1996. The rate formula requires BCP power customers to pay 
a base charge (expressed in dollars), rather than a rate, for their 
power. The base charge is calculated to generate sufficient revenue to 
cover all annual costs, including interest expense, and to repay 
investments within allowable time periods. The base charge is allocated 
to each BCP power customer in proportion to its allocation of Hoover 
power. The composite power rate, expressed in mills per kilowatt-hour 
(mills/kWh), is calculated by dividing the base charge by energy sales 
in a year. However, it is the base charge and not the power rate that 
is used to calculate BCP customers' bills.
    Rate Schedule BCP-F9 under Rate Order No. WAPA-171 was approved on 
an interim basis by the Deputy Secretary for a five-year period 
beginning October 1, 2015, and ending September 30, 2020.\1\ This rate 
schedule, which was approved by the Federal Energy Regulatory 
Commission (FERC) on a final basis on December 11, 2015, requires the 
base charge be calculated annually based on current financial and 
hydrological data.\2\ This notice sets forth the calculation for the FY 
2017 BCP base charge.
---------------------------------------------------------------------------

    \1\ 80 FR 44098 (July 24, 2015).
    \2\ Docket No. EF15-7-000 (153 FERC ] 62,189).
---------------------------------------------------------------------------

    The FY 2017 base charge for BCP electric service is $69,662,289, a 
9.3 percent increase from the FY 2016 base charge of $63,735,856. The 
primary factors contributing to the change in the base charge are prior 
year carryover and total expenses. Prior year carryover, the difference 
between the previous year's base charge and expense, has decreased by 
$9 million, or 62.7 percent. Prior year carryover offset current year 
expenses, thereby reducing the base charge. In FY 2014, carryover 
increased significantly when customers repaid certain capitalized 
investments. Since that time carryover has steadily decreased, 
contributing to the increase in the FY 2017 base charge. Total 
expenses, which include operation, maintenance and replacement costs, 
increased by $6 million, or 9.2 percent, while other expenses such as 
the uprating credit program and Hoover Dam Visitor Center costs 
decreased by $10 million, or 37 percent. Despite the overall expense 
decrease of $4 million, the FY 2017 base charge is increasing due to 
the reduction of prior year carryover.
    The FY 2017 composite rate of 19.63 mills/kWh increased 7.11 
percent compared to the FY 2016 composite rate of 18.33 mills/kWh. The 
FY 2017 energy rate of 9.82 mills/kWh increased 7.11 percent compared 
to the FY 2016 energy rate of 9.17 mills/kWh. The FY 2017 capacity rate 
of $1.89/kW-month increased 9.8 percent compared to the FY 2016 
capacity rate of $1.72/kW-month. Energy sales are forecast to increase 
2 percent from FY 2016 while FY 2017 capacity sales are expected to 
decrease 0.5 percent due to poor hydrological conditions. The increase 
in the FY 2017 base charge is the primary driver behind the increases 
in the composite, energy and capacity rates. The base charge and rates 
were calculated using WAPA's FY 2016 Final Master Schedule which 
provides FY 2017 energy and capacity sales projections.
    The following summarizes the steps taken by WAPA to ensure 
involvement of all interested parties in determining the base charge 
and rates:
    1. A Federal Register notice was published on April 4, 2016 (81 FR 
19169), announcing the proposed rate adjustment process, initiating a 
public consultation and comment period, announcing public information 
and public comment forums, and presenting procedures for public 
participation.
    2. Discussion of the proposal occurred at two informal BCP 
Contractor meetings held April 5, 2016, in Phoenix, Arizona and April 
12, 2016, via web conference. Representatives from WAPA and the Bureau 
of Reclamation (Reclamation) explained the basis for the estimates used 
to calculate the base charge and rates and held a question and answer 
session.
    3. At the public information forum held on April 27, 2016, in 
Phoenix, Arizona, WAPA and Reclamation representatives explained the 
proposed base charge and rates for FY 2017 and held a question and 
answer session at these informal meetings.

[[Page 64148]]

    4. A public comment forum held on May 25, 2016, in Phoenix, 
Arizona, provided the public with an opportunity to comment for the 
record.
    5. WAPA received several comments during the 90-day consultation 
and comment period ending July 5, 2016. Comments and responses, 
paraphrased for brevity when not affecting the meaning of the 
statement, are presented below.
    Comment: Commenters objected to the expense WAPA incurred to 
negotiate electric service contracts for the Post-2017 marketing 
period.
    Response: Department of Energy Order RA 6120.2 requires the 
recovery of all costs of operating and maintaining a power system. It 
was necessary and appropriate to incur costs associated with 
negotiating the Post-2017 electric service contracts and implementation 
agreement. During the negotiations, WAPA remained mindful of costs 
incurred and was prudent in managing travel and related expenses.
    Comment: A commenter questioned why the FY 2017 base charge has 
cost increases for power marketing when the negotiations for the Post-
2017 electric service contracts have concluded.
    Response: The commenter is correct in pointing out that 
negotiations on the Post-2017 electric service contracts concluded in 
2016. The increase in power marketing costs in the FY 2017 base charge 
is necessary to implement and support the 31 additional electric 
service contracts that will be in effect during the Post-2017 marketing 
period.
    Comment: A commenter expressed concern regarding changes to WAPA's 
General Western Allocation, which is a component of the Facility 
Expenses cost category.
    Response: WAPA provided a detailed explanation of cost allocation 
changes that affect the General Western Allocation during a customer 
meeting held on August 23, 2016. WAPA will continue to provide 
customers with detailed explanations of changes in BCP costs.
    Comment: A commenter encouraged Reclamation and WAPA to separately 
account for Post-Retirement Benefit (PRB) expenses collected during 
each marketing period in the event a refund is given for those 
expenses.
    Response: Reclamation and WAPA are able to identify the PRB 
expenses collected in each marketing period, inclusive of any refunds.
    Comment: A commenter asked for an update on a customer audit of the 
BCP and whether the audit will impact the FY 2017 base charge.
    Response: The BCP contractors designated an audit selection 
committee to oversee the selection process of a new audit firm. 
Southern California Public Power Authority plans to administer the 
contract. This audit will not affect the FY 2017 base charge and rates 
as any findings will not be identified until after the FY 2017 base 
charge and rates are in effect.
    Comment: A commenter requested that detailed presentations be made 
when the FY 2018 base charge is proposed so new contractors can better 
understand the proposal.
    Response: WAPA will increase the level of detail presented in 
future presentations and supporting documentation and work with new 
contractors to assist them in understanding the proposed base charge.
    Comment: A commenter requested the current Ten Year Operating Plan 
and supporting documentation for the FY 2017 base charge.
    Response: Reclamation has sent new and existing contractors the 
latest Ten Year Operating Plan. Supporting documentation for the base 
charge is available on WAPA's Web site at https://www.wapa.gov/regions/DSW/Rates/Pages/boulder-canyon-rates.aspx.

Electric Service Rates

    The base charge and the resulting calculated rates for electric 
service are designed to recover expenses including operation and 
maintenance, payments to states, visitor services, the uprating 
program, replacements, investment repayment, and accumulated interest. 
WAPA's power repayment study (PRS) allocates the base charge for 
electric service equally between capacity and energy.

Availability of Information

    Information about this base charge and rate adjustment, including 
the PRS, comments, letters, memorandums, and other supporting material 
developed or maintained by WAPA and used to develop the FY 2017 base 
charge and rates is available for public review at the Desert Southwest 
Region, Western Area Power Administration, 615 South 43rd Avenue, 
Phoenix, AZ 85009. The information is also available on WAPA's Web site 
at https://www.wapa.gov/regions/DSW/Rates/Pages/boulder-canyon-rates.aspx.

Ratemaking Procedure Requirements

    BCP electric service rates are developed under the Department of 
Energy Organization Act (42 U.S.C. 7101-7352), through which the power 
marketing functions of the Secretary of the Interior under the 
Reclamation Act of 1902 (ch. 1093, 32 Stat. 388), as amended and 
supplemented by subsequent enactments, 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 project involved, were transferred to 
and vested in the Secretary of Energy, acting by and through WAPA.
    By Delegation Order No. 00-037.00A, effective October 25, 2013, 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; and (3) the authority to confirm, approve, and 
place into effect on a final basis, to remand or to disapprove such 
rates to the FERC. Existing Department of Energy procedures for public 
participation in power rate adjustments (10 CFR part 903) were 
published on September 18, 1985 (50 FR 37835). Department of Energy 
procedures were followed by WAPA in developing the rate formula 
approved by FERC on December 11, 2015.\3\
---------------------------------------------------------------------------

    \3\ Docket No. EF15-7-000 (153 FERC ] 62,189).
---------------------------------------------------------------------------

    The Boulder Canyon Project Implementation Agreement (BCPIA) 
requires that WAPA determine the annual base charge and rates for the 
next fiscal year before October 1 of each rate year. The rates for the 
first rate year, and each fifth rate year thereafter, become effective 
provisionally upon approval by the Deputy Secretary subject to final 
approval by FERC. For all other rate years, as is the case for FY 2017, 
the rates become effective on a final basis upon approval by the Deputy 
Secretary.
    In accordance with 10 CFR part 904, effective June 1, 1987, and the 
BCPIA, the rates are reviewed annually and adjusted to assure 
sufficient revenues are collected to achieve payment of all costs and 
financial obligations associated with the project. Each fiscal year, 
WAPA prepares a PRS for the BCP to update actual revenues and expenses, 
including interest, estimates of future revenues, operating expenses, 
and capitalized costs.
    Consistent with procedures set forth in 10 CFR parts 903 and 904 
and 18 CFR part 300, WAPA held a consultation and comment period. The 
notice of the proposed FY 2017 base charge and rates for electric 
service was published in the Federal Register on April 4, 2016 (81 FR 
19169).
    Under Delegation Order Nos. 00-037.00A and 00-001.00F and in 
compliance with 10 CFR parts 903 and 904, I hereby approve the FY 2017 
base charge and rates for BCP electric service

[[Page 64149]]

on a final basis under Rate Schedule BCP-F9 through September 30, 2017.

    Dated: September 12, 2016.
Elizabeth Sherwood-Randall,
Deputy Secretary of Energy.
[FR Doc. 2016-22465 Filed 9-16-16; 8:45 am]
 BILLING CODE 6450-01-P