Integrated System Power Rate Schedules

AGENCY:

Southwestern Power Administration, DOE

ACTION:

Notice of rate order.

SUMMARY:

The Secretary of Department of Energy has approved and placed into effect on an interim basis Rate Order No. SWPA-44, which provides the Integrated System Rate Schedules P-98D, Wholesale Rates for Hydro Peaking Power and Rate Schedule NFTS-98D, Wholesale Rate for Non-Federal Transmission/Interconnection.

FOR FURTHER INFORMATION CONTACT:

Mr. Forrest E. Reeves, Assistant Administrator, Office of Corporate Operations, Southwestern Power Administration, Department of Energy, P.O. Box 1619, Tulsa, OK 74101, (918) 595-6696, reeves@swpa.gov.

SUPPLEMENTARY INFORMATION:

In May 2000, Southwestern Power Administration (Southwestern) completed its annual review of the adequacy of the current rate schedules for the Integrated System and finalized its FY 2000 Power Repayment (PRS). The FY 2000 Power Repayment for the Integrated System indicates that rates prescribed by Rate Schedules P-98C, Wholesale Rates for Hydro Peaking Power, and NFTS-98C, Wholesale Rates for Non-Federal Transmission Service, are sufficient to meet repayment criteria. However, certain aspects of the terms and conditions set forth in the rate schedules need to be revised. Southwestern proposes to: (1) Revise the Limitations for Energy Imbalance Service provision to better clarify the hours and circumstances in which energy within the authorized bandwidth is to be returned to Southwestern, (2) to change the Power Factor Penalty to charge on an hourly basis to more accurately reflect the actual taking of reactive kilovolt amperes (VARS) from the system of Southwestern, (3) to add a new provision to provide for an Interconnection Facilities Service Charge to recover costs incurred for the use of Southwestern's transmission system, and (4) to make modifications to enhance clarity within the rate schedules. The net results of the 1997 Integrated System Power Repayment Studies, which was the basis for the existing rate schedules, will not be altered. The designations of the aforementioned rate schedules have been changed from P-98C and NFTS-98C to P-98D and NFTS-98D, respectively, to reflect the fact that revisions have been made.

Title 10, Part 903 Subpart A, of the Code of Federal Regulations, “Procedures for Public Participation in Power and Transmission Rate Adjustments and Extensions” (Part 903) have been followed in connection with the proposed revisions to the rate schedules. An opportunity for customers and other interested members of the public to review and comment on the proposed Rate Schedules P-98D and NFTS-98D was announced by notice published in the Federal Register (66 FR 9316), February 7, 2001, with written comments due on or before March 9, 2001. In addition, Southwestern held informal meetings with numerous customers in which proposed changes were discussed. No written comments were received.

Information regarding these rate schedule changes, including revised schedules and other supporting material, is available for public review and comment in the offices of Southwestern Power Administration, Suite 1400, One West Third Street, Tulsa, Oklahoma 74103.

Order

In view of the foregoing and under the authority vested in me as the Secretary of Energy, I hereby confirm and approve Rate Order No. SWPA-44 on an interim basis, through September 30, 2001, or until confirmed and approved on a final basis by the Federal Energy Regulatory Commission.

Department of Energy, Secretary of Energy

In the matter of: Southwestern Power Administration Integrated System Rates; Order Confirming, Approving and Placing Revised Power Rate Schedules In Effect on an Interim Basis

Pursuant to sections 301(b) and 302(a) of the Department of Energy Organization Act, Public Law 95-91, the functions of the Secretary of the Interior and the Federal Power Commission under section 5 of the Flood Control Act of 1944, 16 U.S.C. 825s, for the Southwestern Power Administration (Southwestern) were transferred to and vested in the Secretary of Energy. By Delegation Order No. 0204-108, effective December 14, 1983, 48 FR 55664, the Secretary of Energy delegated to the Deputy Secretary of Energy on a non-exclusive basis the authority to confirm, approve and place into effect on an interim basis power and transmission rates, and delegated to the Federal Energy Regulatory Commission (FERC) on an exclusive basis the authority to confirm, approve and place in effect on a final basis, or to disapprove power and transmission rates. Amendment No. 1 to Delegation Order No. 0204-108, effective May 30, 1986, 51 FR 19744, revised the delegation of authority to confirm, approve and place into effect on an interim basis power and transmission rates by delegating such authority to the Under Secretary of Energy. This delegation was reassigned to the Deputy Secretary of Energy by Department of Energy (DOE) Notice 1110.29, dated October 27, 1988, and clarified by Secretary of Energy Notice SEN-10-89, dated August 3, 1989, and subsequent revisions. By Amendment No. 2 to Delegation Order No. 0204-108, effective August 23, 1991, 56 FR 41835, the Secretary of the Department of Energy delegated to the Assistant Secretary, Conservation and Renewable Energy, the authority which was previously delegated to the Deputy Secretary in that Delegation Order. By Amendment No. 3 to Delegation Order No. 0204-108, effective November 10, 1993, the Secretary of Energy re-delegated to the Deputy Secretary of Energy, the authority to confirm, approve and place into effect on an interim basis power and transmission rates of the Power Marketing Administrations. By notice, dated April 15, 1999, the Secretary of Energy rescinded the authority of the Deputy Secretary of Energy under Delegation Order No. 0204-108. By Delegation Order No. 0204-172, effective November 11, 1999, the Secretary of Energy again provided interim rate approval authority to the Deputy Secretary of Energy. Because there is no Deputy Secretary at the present time, the Secretary of Energy has exercised his authority to confirm, approve, and place into effect on an interim basis the rates in Southwestern Rate Order No. SWPA-44.

Background

In May 2000, Southwestern Power Administration (Southwestern) completed its annual review of the adequacy of the current rate schedules for the Integrated System and finalized its FY 2000 Power Repayment Studies (PRS). The FY 2000 Power Repayment Studies for the Integrated System indicates that rates prescribed by rate schedules P-98C, Wholesale Rates for Hydro Peaking Power, and NFTS-98C, Wholesale Rates for Non-Federal Transmission Service, are sufficient to meet repayment criteria. However, certain aspects of the terms and conditions set forth in the rate schedules need to be revised. Southwestern proposes to: (1) Revise the Limitations for Energy Imbalance Service provision to better clarify the hours and circumstances in which energy within the authorized bandwidth is to be returned to Southwestern, (2) to change the Power Factor Penalty to charge on an hourly basis to more accurately reflect the actual taking reactive kilovolt amperes (VARs) from the system of Southwestern, (3) to add a new provision to provide for an Interconnection Facilities Service Charge to recover costs incurred for the use of Southwestern's transmission system, and (4) to make modifications to enhance clarity within the rate schedules. The net results of the 1997 Integrated System Power Repayment Studies, which was the basis for the existing rate schedules, will not be altered. The designations of the aforementioned rate schedules have been changed from P-98C and NFTS-98C to P-98D and NFTS-98D, respectively, to reflect the fact that revisions have been made.

Title 10, Part 903 Subpart A, of the Code of Federal Regulations, “Procedures for Public Participation in Power and Transmission Rate Adjustments and Extensions” (Part 903) have been followed in connection with the proposed revisions to the rate schedules. An opportunity for customers and other interested members of the public to review and comment on the proposed Rate Schedules P-98D and NFTS-98D was announced by notice published in the Federal Register (66 FR 9316), February 7, 2001, with written comments due on or before March 9, 2001. In addition, Southwestern held informal meetings with numerous customers in which proposed changes were discussed. No written comments were received.

Discussion

Rate Schedule P-98D applies to wholesale customers purchasing Federal Hydro Peaking Power and Peaking Energy from the Integrated System. Rate Schedule NFTS-98D applies to wholesale customers purchasing Non-Federal Point-to-Point and Network Integration Transmission Service. Provisions in the rate schedules are being revised to reflect minor corrections and modifications for the purpose of clarification and to address specific issues that have arisen relative to industry restructuring since the last rate schedule approval. Southwestern has clarified the Energy Imbalance Service provision to specify the hours and circumstances in which energy within the authorized bandwidth is to be returned to the providing party, and has revised the Power Factor Penalty to charge on an hourly basis to more accurately reflect the actual taking of reactive kilovolt amperes (VARS) from the system of Southwestern. In addition, Southwestern is adding a new provision for an Interconnection Facilities Service Charge. This charge will be applicable to interconnection requests for which Southwestern does not otherwise receive benefits or compensation for the use of Federal facilities. At this time, Southwestern does not anticipate any substantive change in revenues as a result of these changes which would impact revenue requirements. Southwestern does not forecast for penalties and currently has no contractual arrangements to which the Interconnection Facilities Service Charge would be applied.

Southwestern has revised language in the NFTS-98D rate schedule under the provision for Limitations for Energy Imbalance Service to clarify the hours and conditions in which the use of energy within the authorized bandwidth is to be returned to Southwestern. Energy within the authorized bandwidth for this service is accounted for as an inadvertent flow. The current language specifies that the energy is to be returned “in like hours and similar circumstances.” The lack of clarification of this language has provided an opportunity for transmission customers to use the bandwidth during high-value on-peak demand periods and to return the energy during low-value off-peak demand times. The hours and circumstances in which energy is returned become very important, particularly during summer peak periods when the value of energy is high and the capability of Southwestern to provide such energy from its during those times is typically low. The revised provision provides for a separate inadvertent monthly accumulation for each hour. Each month, any hourly month-end balance that exceeds 12 MWHs will be subject to a penalty. It is anticipated that this process will allow for the use of the authorized bandwidth and yet provide for a method to return the energy within the bandwidth in like hours and within a reasonable time frame.

Southwestern has revised the Power Factor Penalty provision in both the P-98D and NFTS-98D rate schedules to charge for all Demand Periods (the 60-minute period which begins with the change of hour) of a month which contribute to a power factor of less than 95 percent lagging. Currently, this penalty is based on the customer's peak demand in kilowatts at the point of delivery for the month in which a low power factor was calculated. This change will allow Southwestern to better align the penalty with the reactive kilovolt amperes (VARS) taken from the system of Southwestern. This penalty will provide an incentive for customers to look for the cause of their low power factor and take necessary actions to correct the problem.

Southwestern has added a new provision, Interconnection Facilities Service Charge, to the NFTS-98D to provide compensation to Southwestern for the use of the Federal transmission system for those interconnections that do not provide any other compensating benefit. Historically, Southwestern has secured compensating benefits for the use of its facilities to provide an interconnection on its transmission system. The electric industry's transitioning toward a regionally-operated transmission grid, the uncertainty that surrounds many of the impacts on Southwestern, and the need for a mechanism to recover the cost for the use of the System of Southwestern wherein the Federal government receives no compensating benefit, have contributed to the need to establish a charge for interconnections. Pursuant to the Flood Control Act of 1944, Southwestern must recover its costs for the use of its system.

Comments and Responses

Southwestern has received no formal written comments regarding these Rate Schedule changes.

Other Issues

There were no other issues raised during the informal meetings or during the formal public participation period. However, during the public participation period, Southwestern re-examined the penalty language included in the Power Factor Penalty provision of the Federal Register (26 FR 9316) proposal, dated February 7, 2001, and its applicability based on data that has since become available. Southwestern determined that the formula was too complex and appeared to create a penalty that was unreasonably high. Based on this analysis, Southwestern also determined that the penalty could be simplified by making it similar to the original language, while revising the formula to charge on an hourly Demand basis when the power factor was below 95 percent lagging. This revised formula will still allow Southwestern to better align the penalty with the VARS taken from the System of Southwestern and provide an incentive for customers to look for the cause of their low power factor and take necessary actions to provide an appropriate power factor on their own transmission systems.

Administrator's Certification

The revised rate schedules will repay all costs of the Integrated System including amortization of the power investment consistent with the provisions of Department of Energy Order No. RA 6120.2. In accordance with Section 1 of Delegation Order No. 0204-108, as amended November 10, 1993, 58 FR 59717, and Section 5 of the Flood Control Act of 1944, the Administrator has determined that the proposed Integrated System Rate Schedules are consistent with applicable law and the lowest possible rates consistent with sound business principles.

Environment

No additional evaluation of the environmental impact of the proposed rate schedule changes was conducted since no change has been made to the currently-approved Integrated System rates which were determined to fall within the class of actions that are categorically excluded from the requirements of preparing either an Environmental Impact Statement or an Environmental Assessment pursuant to the procedural provisions of the National Environmental Policy Act, 10 CFR 1021.

Order

In view of the foregoing and under the authority vested in me as the Secretary of Energy, I hereby confirm, approve and place in effect on an interim basis, effective April 1, 2001, the Southwestern Integrated System Rate Schedules P-98D and NFTS-98D, which shall remain in effect on an interim basis through September 30, 2001, or until the FERC confirms and approves the rates on a final basis.