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91 FERC 62,160
UNITED STATES OF AMERICA
FEDERAL ENERGY REGULATORY COMMISSION

United States Department of Energy
June 02, 2000

Docket No.
EFOO-5071-OOO

Western Area Power Administration
Provo River Project

ORDER CONFIRMING AND APPROVING RATE SCHEDULE
ON A FINAL BASIS

Summary:

On February 14, 2000, the Deputy Secretary of Energy (Deputy Secretary) requested final confirmation and approval of the Western Area Power Administration's (Western) formula rate applicable to the Provo River Project (Provo River)1. The Deputy Secretary placed the rate into effect on an interim basis effective April 1, 20002, and requests final confirmation and approval of the rate for the period April 1, 2000, through March 31, 2005. Under the proposed formula rate, annual revenues will be based upon cost projections contained in an annual power repayment study made the prior year. Differences between estimated and actual costs will be calculated annually and recovered the subsequent year. Charges are assessed regardless of the output of the facility.

Notice of the application was published in the Federal Register with comments, protests, or motions to intervene due on or before March 17, 2000.3 No responses were received.

Standard of Review:

The Department of Energy Organization Act, Pub. L. 95-91, 91 Stat. 565 (1977), grants the Secretary of Energy (Secretary) authority to approve Western's rates on both an interim and final basis.4 The Secretary, in turn, delegated the authority to confirm and approve Western's rates on a final basis to the Commission.5 The delegation establishes the standard and scope for Commission review of Western's rates. The scope of Commission review is limited to:

whether the rates are the lowest possible to customers consistent with sound business principles;

whether the revenue levels generated by the rates are sufficient to recover the costs of producing and transmitting the electric energy including the repayment, within the period of cost recovery permitted by law, of the capital investment allocated to power and costs assigned by Acts of Congress to power for repayment; and

the assumptions and projections used in developing the6 rate components that are subject to Commission review.

The Commission is prohibited from reviewing policy judgments and interpretations of laws and regulations made by the power generating agencies.7 The Commission may reject the rate determinations of Western's Administrator only if it finds them to be arbitrary, capricious, or in violation of the law, if they violate Department of Energy regulations (e.g., Order No. RA 6120.2 which prescribes Western's financial reporting policies, procedures, and methodologies), or if they violate agreements between the Administrator and the applicable power generating agency. The Commission considers its role as that of an appellate body which reviews the record developed by the Administrator. In other words, the Commission does not develop a record on its own. Consequently, the Commission only affirms or remands the rates submitted to it for final review.8

Discussion:

By statute,9 Western must repay the Federal investment in Provo River from power revenues within a reasonable period of time, which as a general practice is 50 years. While the statute only requires that the Federal investment be repaid sometime within the repayment period, some reasonable intermediate level of repayment should exist to ensure that repayment will occur by the end of the fiftieth year. Therefore, the Commission compared the actual investment repayment to date with a benchmark level of repayment based upon a compound interest (home mortgage type) amortization schedule. Western's Federal investment as of September 30, 1999, was $1,762,326. Western had repaid $1,414,896 (80.3 percent) of the Federal investment. Under a compound interest amortization schedule, the repayment through a comparable date should be $632,000 (40.2 percent) . This indicates that Western's past rates have been sufficient to recover a reasonable portion of the Federal investment. Consequently, the remaining power investment to be repaid from future rates is not unreasonable when compared to the remaining repayment period.

The Commission's review of Western's power repayment study (PRS) for Provo River indicates that the future revenues collected under the proposed rate will be sufficient to recover Western's costs of producing and transmitting the power and energy, including the recovery of the remaining Federal investment, with interest, over the remaining repayment period. The Commission's review also indicates that the PRS was prepared in a manner consistent with Order No. RA 6120.2 which requires that Western's system financial statements be prepared in accordance with generally accepted accounting principles, as appropriate, and that its PRS be prepared using sound forecasting techniques designed to approximate as closely as possible actual results. Finally, since the revenues generated by the proposed rate recover no more than Western's annual costs and the remaining Federal investment, the rate is the lowest possible to customers.

Since Western's rate is consistent with the standards of review delegated to the Commission by the Secretary, it merits final confirmation and approval.

The Director:

Confirms and approves on a final basis Western's proposed formula rate for Provo River for the period April 1, 2000, through March 31, 2005.

Authorities:

Authority to act on this matter is delegated to the Director, Division of Tariffs and Rates - West, under 18 C.F.R. 375.308 of the Commission's regulations.

This order constitutes final agency action. Requests for rehearing by the Commission may be filed within 30 days of the date of issuance of this order, pursuant to 18 C.F.R. 385.713.



Michael A. Coleman, Director
Division of Tariffs and Rates - West



1 Provo River is a multipurpose hydroelectric project. Since 1994, the project's power output has been marketed to Utah Municipal Power Agency and Utah Associated Municipal Power Systems, located in the Provo River drainage area.

2 Rate Order No. WAPA-87 was issued on February 18, 2000, under authority granted in Section 2 of Department of Energy Delegation Order No. 0204-108 (Delegation Order), as amended November 10, 1993 (58 Fed. Reg. 59,716).

3 65 Fed. Reg. 11,297 (2000)

4 42 U.S.C. 7152.

5 Section 3 of the Delegation Order.

6 Id.

7 The power generating agencies include the Bureau of Reclamation, the Army Corps of Engineers, and the International Boundary and Water Commission. These agencies build and operate various projects. The Power Marketing Administrations market the output of the projects.

8 See, e.g., U.S. Department of Energy- Western Area Power Administration (Boulder Canyon Project), 61 FERC 61,229 at 61,844 (1992); U.S. Department of Energy - Western Area Power Administration (Salt Lake City Area Integrated Projects), 59 FERC 61,058 at 61,240-41 & ma. 17, 20, reh'g denied, 60 FERC 61,002 (1992); U.S. Secretary of Energy, Bonneville Power Administration, 13 FERC 61,157 at 61,338 (1980)

9 Section 9(c) of the Reclamation Project Act of 1939, 43 U.S.C. 485h(c) arid Section 5 of the Flood Control Act of 1944, 16 U.S.C. 825s.

This order has been reformatted as an HTML document.

 

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