Federal Register: September 25, 2009 (Volume 74, Number 185)
DOCID: fr25se09-62 FR Doc E9-23233
DEPARTMENT OF ENERGY
Energy Department
NOTICE: NOTICES
DOCID: fr25se09-62
DOCUMENT ACTION: Notice of Rate Order.
SUBJECT CATEGORY:
Notice of Interim Approval
DATES: Approval of rates on an interim basis is effective September 20, 2009.
DOCUMENT SUMMARY:
The Deputy Secretary of the Department of Energy, confirmed and approved, on an interim basis, Rate Schedules JW1I and JW2F. The rates were approved on an interim basis through September 19, 2014, and are subject to confirmation and approval by the Federal Energy Regulatory Commission (Commission) on a final basis.
SUMMARY:
Rate Order; Interim Approval
SUPPLEMENTAL INFORMATION
The Commission, by Order issued April 18,
2005, in Docket No. EF043031000, confirmed and approved Wholesale
Power Rate Schedules JW1H and JW2E. Rate schedules JW1I and JW2 F replace these schedules.
Dated: September 18, 2009.
Daniel B. Poneman,
Deputy Secretary.
Department of Energy, Deputy Secretary; In the Matter of: Southeastern
Power Administration, Jim Woodruff Project Power Rates; Rate Order No.
SEPA51; Order Confirming and Approving Power Rates on an Interim Basis
Pursuant to Sections 302(a) of the Department of Energy Organization Act, Public Law 9591, 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, relating to the Southeastern Power Administration (``Southeastern'' or ``SEPA'') were transferred to and vested in the Secretary of Energy. By Delegation Order No. 00 037.00, effective December 6, 2001, the Secretary of Energy delegated to Southeastern's Administrator the authority to develop power and transmission rates, delegated to the Deputy Secretary of Energy the authority to confirm, approve, and place in effect such rates on an interim basis, and delegated to the Federal Energy Regulatory Commission (``Commission'') the authority to confirm, approve, and place into effect on a final basis or to disapprove rates developed by the Administrator under the delegation. This rate order is issued by the Deputy Secretary pursuant to said delegation.
Background
Power from the Jim Woodruff Project is presently sold under Wholesale Power Rate Schedules JW1H and JW2E. These rate schedules were approved by the Commission on April 18, 2005, for a period ending September 19, 2009 (111 FERC ]61,067).
Public Notice and Comment
Southeastern prepared a Power Repayment Study, dated March 2009, that showed that revenues at current rates were not adequate to meet repayment criteria. A revised study with a revenue increase of $5,575,000 produced rates that are adequate to meet repayment criteria. On March 11, 2009, by Federal Register notice (74 FR 10570), Southeastern proposed a rate adjustment of about 70.6 percent to recover this revenue. The notice also announced a Public Information and Comment Forum to be held April 23, 2009, in Tallahassee, Florida. Nine parties asked questions or made comments at the forum. Responses to the questions are part of the written record of the forum. Written comments were accepted on or before June 26, 2009. Written comments were received from two sources. After review of all comments received Southeastern revised the repayment study. The new revised study with a revenue increase of $5,393,000 produces rates that are adequate to meet repayment criteria. The proposed rate adjustment is an increase of about 67.3 percent.
Staff Review of Comments
The following comments were received during the public comment period. Southeastern's response follows each comment.
Comment 1: The Southeastern Federal Power Customers (``SeFPC'') submitted comments on behalf of certain preference customers of the Jim Woodruff System (``Jim Woodruff Preference Customers''). The Jim Woodruff Preference Customers suggest setting aside the rate for the five year study period and preparing an interim one year rate, or in the alternative, setting a one year interim rate with an express understanding that SEPA will revisit the rate for the five year study period within one year.
Response 1: Contract provisions in the Jim Woodruff System allow rate schedules to be adjusted periodically. One of the main drivers of this rate adjustment is the need to recover capitalized deficits in the rate period. The proposed rates are expected to recover these deficits in the five year period that the rate schedules are proposed to remain in effect. Southeastern interprets DOE Order RA 6120.2 to call for the proposed rates to recover capitalized deficits in the rate period. To recover the capitalized deficits in a oneyear period, the proposed rates would have to be substantially higher than Southeastern is proposing. Southeastern is proposing that the rate schedules be approved for a five year period and will, if the customers make a request to Southeastern, revisit these rates in one year.
Comment 2: The Jim Woodruff Preference Customers suggest evaluating the implementation of the contract with Progress Energy Florida that supplies replacement power in the event that the Jim Woodruff Project is unavailable.
Response 2: Southeastern cannot change the existing agreement or
the interpretation of the existing agreement with Progress Energy
Florida unilaterally. Any change to the implementation of the existing
agreement or modification of the existing agreement will require the
consent of Progress Energy Florida. The existing agreement is a bundled [[Page 48943]]
arrangement that includes transmission, firming energy, support
capacity, and sales of energy surplus of the customers' needs to
Progress Energy Florida. The agreement precedes FERC's open access
rules. Southeastern will pursue changes to the existing agreement with
Progress Energy Florida if a preponderance of the Jim Woodruff preference customers make a request.
Comment 3: The Jim Woodruff Preference Customers suggest removing the marginal cost of the additional 9 MW of nameplate capacity from the existing rate schedule in light of the unavailability of that capacity at the Jim Woodruff Project.
Response 3: The total nameplate capacity at the Jim Woodruff Project is 43.35 MW. DOE Order RA 6120.2 requires Southeastern to recover all costs placed in service and allocated to the power function. Southeastern has no information on the incremental costs associated with the increased capacity associated with the rehabilitation of the Jim Woodruff Project. The capacity increase was considered incidental and the marginal cost is thought to be minimal. Southeastern will request information from the U.S. Army Corps of Engineers (``Corps'') on the incremental cost associated with the additional 9 MW. A request for approval of a rate adjustment that does not include these costs would require a departure from the requirements of DOE Order RA 6120.2.
Comment 4: The Jim Woodruff Preference Customers suggest developing communications protocols that will allow the Jim Woodruff Preference Customers to understand on a real time basis the operations of the Jim Woodruff Project including the availability or lack thereof of capacity and energy.
Response 4: Southeastern will consider any communications protocols the Jim Woodruff Preference Customers request. To the extent that there are material costs associated with the requested communications protocols, these costs would be charged to the Jim Woodruff System and recovered from Jim Woodruff customers.
Comment 5: The Jim Woodruff Preference Customers suggest providing a vigorous review of operations and maintenance (``O&M'') expenses incurred by the Corps and charged to the Jim Woodruff Project.
Response 5: The Corps provides detailed annual reports of O&M costs charged to the Jim Woodruff Project to the O&M Committee of the Southeastern Federal Power Customers (SeFPC). This provides opportunity for vigorous review of these costs.
Comment 6: The Jim Woodruff Preference Customers suggest developing a rate that provides transparency as to the repayment of expenses, particularly accumulated deficits.
Response 6: DOE Order RA6120.2 requires power marketing administrations to update and monitor the status of repayment for all power marketing systems annually. The status of repayment is reported annually in the annual report for the Southeastern Federal Power Program. Southeastern will provide reports on the status of repayment that the customers request.
Comment 7: SEPA admits that the estimates for purchased power
expenses are nothing more than a simple two year average of the last
two years of purchased power expenses in support of the Jim Woodruff
Project. This historical two year average reflects a period of atypical
and extremely limited water flows due to drought conditions in the
region. This approach is overly simplistic and fails to take into
account multiple factors that SEPA should have considered in
determining a suitable level for purchased power expenses in the study period. Specifically, SEPA should have considered:
(1) Anticipated more normal flows;
(2) Availability of the units at the Jim Woodruff Project; (3) Scheduled outages;
(4) Progress Energy's expected average system cost including the
fuel adjustment clause in the existing contract with Progress Energy; and
(5) Any particular load factors for the individual customers of the Jim Woodruff Project.
Taken together, these factors would provide a sound basis for SEPA to set a level of purchased power expense for the next year.
Response 7: Purchased power expense for the Jim Woodruff System has been volatile. Over the last five years, the expense has increased from about $495,000 in Fiscal Year 2004 to about $4,371,000 in Fiscal Year 2008. This volatility makes estimating the purchased power expense for rate setting purposes challenging. Marketing arrangements in the Jim Woodruff System require Southeastern to provide energy to preference customers at the same load factor as the customers' other supplier. This means that the preference customers can impose an obligation on Southeastern to purchase more power by allocating capacity to delivery points that have a higher load factor. In the past two years, some Jim Woodruff customers have done this. Southeastern has limited experience with the new delivery points. However, it appears that these new delivery points will require Southeastern to purchase more power from Progress Energy Florida and will reduce the amount of residual energy available for sale to Progress Energy Florida.
Due to Southeastern's limited experience with the new delivery points, Southeastern views modeling based on historic averages to be of limited value. Southeastern has limited inhouse modeling capability. Southeastern is not convinced that more expensive modeling techniques yield more accurate results. Therefore, Southeastern will use the estimated purchased power costs included in the earlier repayment studies.
Regardless of the estimate used for ratesetting purposes, Southeastern is required to recover the cost of purchased power from the sale of power. Any variance of actual costs from the estimates will be recovered in the next rate adjustment.
Comment 8: In documents prepared by the Corps and attached hereto (Attachment B), the Corps has predicted that they would spend roughly $4.8 million per year on Corps O&M activities for the Jim Woodruff Project that are allocated to hydropower for fiscal year 2010 to 2013. Accordingly, the Jim Woodruff Preference Customers suggest that this figure of $4.8 million is an appropriate amount to include for years 2 5 of the study period as a base amount.
Response 8: Southeastern proposed rates in March of 2009. The Corps provides Southeastern with projections of O&M expenses and capital outlays in April. At the time rates were proposed, the April 2008 projections were the most recent projections available. Southeastern will use the April 2009 projections in the rates that are proposed to the Deputy Secretary.
Regardless of the estimate used for ratesetting purposes, Southeastern is required to recover the cost of Corps O&M from the sale of power. Any variance of actual costs from the estimates will be recovered in the next rate adjustment.
Comment 9: The Jim Woodruff Preference Customers believe that SEPA
needs to perform the following analyses under the contract:
(1) Calculate whether Progress Energy's sale of firming energy
leads to sales of energy to Progress Energy that would otherwise be available to the Jim Woodruff Preference Customers;
(2) Evaluate the practices employed by Progress Energy to calculate
the aggregate deficiency energy requirement under the contract; and [[Page 48944]]
(3) Determine whether such practices allow Progress Energy to true
up energy obligations in a manner that increases the overall purchased power obligation for SEPA.
Response 9: See Response 2, above.
Comment 10: SEPA has indicated that the full cost of the hydropower
plant and service at the Jim Woodruff Project is included in the rates.
SEPA considers the full 45 megawatt nameplate capacity to be the plant
in service and subject to cost recovery from the customers under the
rate. However, SEPA's marketing policy only allows for the marketing of
36 megawatts from the Jim Woodruff Project. Indeed it is arbitrary and
capricious for SEPA to set a rate that recovers excess amounts from the
customers that is in clear departure from its marketing policy.
Accordingly, the Jim Woodruff Preference Customers believe that the
marginal cost for the rehabilitation that raised the nameplate capacity
from the previous 36 megawatts to the current 45 megawatts should be excluded from the rate base in the repayment study.
Response 10: See Response 3, above.
Comment 11: The Jim Woodruff Preference Customers encourage SEPA to meet and develop real time communications protocols which would allow the individual Jim Woodruff Preference Customers, to integrate this resource into their own systems on a real time basis and allow them to take full advantage the Jim Woodruff project energy and capacity.
Response 11: See Response 4, above.
Comment 12: At the forum conducted in Tallahassee, SEPA made the assertion that the Jim Woodruff Preference Customers have signed off on the O&M expenses for the Jim Woodruff Project through the O&M Committee of the SeFPC. This is plainly false.
Response 12: Southeastern has reviewed the transcripts of the forum conducted in Tallahassee, Florida, on April 23, 2009. The words ``signed'' or ``off'' do not appear in the transcripts. The quote from the transcript the commenter appears to be referring to is as follows:
FOR FURTHER INFORMATION CONTACT
Leon Jourolmon, Assistant Administrator, Finance & Marketing, Southeastern Power Administration, Department of Energy, 1166 Athens Tech Road, Elberton, Georgia 30635 6711, (706) 2133800.