Integrated System Power Rates

<NOTICE> DEPARTMENT OF ENERGY <SUBAGY>Southwestern Power Administration</SUBAGY> <SUBJECT>Integrated System Power Rates</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Southwestern Power Administration, DOE. <HD SOURCE="HED">ACTION:</HD> Notice of proposed rate. <SUM> <HD SOURCE="HED">SUMMARY:</HD> Southwestern Power Administration (Southwestern) proposes to revise the existing Integrated System rate schedules to meet the identified average annual revenue need of $237,821,129, an increase of $44,230,649 (22.8 percent), effective April 1, 2025, through September 30, 2027. Interested persons may review the proposed rate and supporting studies on Southwestern's website, request to participate in a public forum, and submit comments. Southwestern will evaluate all comments received in this process. </SUM> <DATES> <HD SOURCE="HED">DATES:</HD> A consultation and comment period will begin November 12, 2024 and end February 10, 2025. Written comments are due on or before February 10, 2025. If requested, a public information and comment forum (Forum) will be held on December 18, 2024, at 9:00 a.m. to no later than 12:00 p.m. Central Standard Time (CST). The Forum will be conducted via Microsoft Teams. Persons desiring to attend the Forum should notify Southwestern by December 11, 2024, at 11:59 p.m. CST, so that a list of Forum participants can be prepared. Requests to attend the Forum should be sent via email to <E T="03">swparates@swpa.gov</E> should include the individual's name, address, phone number, entity (if any) they represent, and email address. Persons desiring to speak at the Forum should specify this in their notification to Southwestern; others may speak if time permits. If Southwestern does not receive a request for a Forum, the Forum will not be held. If a Forum is requested, the Microsoft Teams meeting information will be posted to Southwestern's website. </DATES> <HD SOURCE="HED">ADDRESSES:</HD> Written comments should be submitted to: Fritha Ohlson, Senior Vice President, Chief Operating Officer, Office of Corporate Operations, Southwestern Power Administration, U.S. Department of Energy, One West Third Street, Tulsa, Oklahoma 74103 or emailed to <E T="03">swparates@swpa.gov.</E> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Ashley Corker, Director, Division of Resources and Rates, Southwestern Power Administration, U.S. Department of Energy, One West Third Street, Tulsa, Oklahoma 74103, (918) 595-6682, <E T="03">ashley.corker@swpa.gov.</E> </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> Southwestern markets power from 24 multi-purpose reservoir projects with hydroelectric power facilities constructed and operated by the Corps. These projects are located in Arkansas, Missouri, Oklahoma, and Texas. Southwestern's marketing area includes these states plus Kansas and Louisiana. The costs associated with 22 of these 24 hydropower projects are repaid with revenues received under the Integrated System rates. These rates also cover the costs of Southwestern's transmission facilities that consist of 1,381 miles of high-voltage transmission lines, 27 substations, and 46 microwave and VHF radio sites. On September 30, 2013, the Deputy Secretary of Energy, via Rate Order No. SWPA-66, placed Southwestern's Integrated System rate schedules (P-13, NFTS-13, and EE-13) into effect until September 30, 2017. Subsequently, rate schedule NFTS-13 was renamed to NFTS-13A and rate schedule P-13 was renamed to P-13A and then later to P-13B, in each case with no revenue adjustment. <SU>1</SU> <FTREF/> Additionally, all three rate schedules have been extended with no revenue adjustment. <SU>2</SU> <FTREF/> Most recently, the Southwestern Administrator extended rate schedules P-13B, NFTS-13A, and EE-13, via Rate Order No. SWPA-85, through September 30, 2025. <FTNT> <SU>1</SU>  Rate Order Nos. SWPA-71 (January 1, 2017), SWPA-73 (July 15, 2017), SWPA-80 (July 15, 2023) </FTNT> <FTNT> <SU>2</SU>  Rate Order Nos. SWPA-72 (September 13, 2017), SWPA-74 (September 22, 2019), SWPA-77 (August 30, 2021), SWPA-81 (September 20, 2023). </FTNT> The guidelines for preparation of power repayment studies are included in DOE Order No. RA 6120.2, “Power Marketing Administration Financial Reporting.” In simple terms, the rate process works as follows. First, Southwestern conducts a Power Repayment Study to determine whether its current revenues are sufficient for Southwestern to meet its repayment obligations. If a revenue shortfall (or surplus) is indicated, Southwestern conducts a revised Power Repayment Study to determine the level of revenue needed. If the revenue change needed to meet Southwestern's repayment obligations is within a small margin of Agency discretion, Southwestern will finalize the Power Repayment Studies for that year and Southwestern's rates will not be adjusted. This is what occurred annually for Southwestern's Integrated System Rates from 2013 until 2023. If, however, Southwestern's annual Power Repayment Studies indicate a revenue shortfall (or surplus) outside of that small margin of Agency discretion, Southwestern must then engage in a Rate Design Study to inform the Administrator as to what the new proposed rates should be in order to generate the needed revenue. This is what occurred in 2023. Unlike previous years, Southwestern's 2023 Power Repayment Studies indicated the need for a revenue increase that was substantial enough to impact Southwestern's ability to meet its repayment obligations. The 2023 Power Repayment Studies indicated the need for an increase of $44,230,649 in average annual revenue. Southwestern then engaged in a Rate Design Study to develop rates necessary to generate this additional revenue. The resulting rates are described in the chart. Part of the total additional revenue identified by the Power Repayment Studies is a need to increase revenues specifically for purchased power and wheeling. The Purchased Power & Wheeling Adder (PPWA) produces revenues which are segregated to cover the cost of power purchased to meet contractual obligations. The PPWA is established to reflect revenues required to meet Southwestern's purchased power and wheeling needs on an average annual basis. The PPWA rate will increase to reflect the increasing average cost of purchasing power over the period as well as the cost of firm transmission to wheel power and energy from two projects, Blakely Mountain and DeGray, from MISO into Southwestern's system. Revenue from the sale of excess energy from Blakely Mountain and DeGray will offset the increase in purchased power and wheeling cost. The Administrator's authority to adjust the PPWA at her or his discretion with the Purchased Power & Wheeling Adder Adjustment (PPWAA) will remain in force. <SU>3</SU> <FTREF/> The PPWAA is limited to two adjustments per year not to exceed a total of ±8.7 mills per kilowatt-hour per year. The PPWA will increase to $0.0087 per kilowatt-hour and the PPWAA will decrease to $0.00 per kilowatt-hour when the proposed rate schedules take effect. <FTNT> <SU>3</SU>  See 138 FERC ¶ 62,199 (2012). </FTNT> Additionally, the Capacity Overrun and Energy Overrun penalties in the proposed Hydro Peaking Power rate schedule have been updated to be formula rates, which are the greater of the penalties as included in P-13B, or the applicable day-ahead locational marginal price. This change is to ensure that penalties are sufficient to cover the financial impact of unauthorized capacity and energy overruns. The Excess Energy rate schedule has also been converted to a formula rate based on the applicable market rates at the time of sale, rather than a set rate as in EE-13. Like EE-13, the proposed Excess Energy rate schedule does not include a transmission component, as transmission service will be the sole responsibility of the entity purchasing excess energy. Below is a comparison of the existing and proposed Integrated System rates: <GPOTABLE COLS="5" OPTS="L2,nj,tp0,i1" CDEF="s75,r30,r30,10,10"> <CHED H="1"> </CHED> <CHED H="1">Existing</CHED> <CHED H="2">P-13B</CHED> <CHED H="1">Proposed</CHED> <CHED H="2">P-23</CHED> <CHED H="1">Change</CHED> <CHED H="2">Dollars</CHED> <CHED H="2">Percent</CHED> <ROW EXPSTB="04" RUL="s"> <ENT I="21"> <E T="02">Hydro Peaking Power</E> </ENT> </ROW> <ROW EXPSTB="00"> <ENT I="22"> <E T="03">Energy:</E> <ENT>$0.0094 /kWh</ENT> <ENT>$0.0128 /kWh</ENT> <ENT>$0.0034</ENT> <ENT>36.2</ENT> </ROW> <ROW> <ENT I="03">Supplemental Peaking Energy</ENT> <ENT>$0.0094 /kWh</ENT> <ENT>$0.0128 /kWh</ENT> <ENT>0.0034</ENT> <ENT>36.2</ENT> </ROW> <ROW> <ENT I="03">Purchased Power & Wheeling</ENT> <ENT>$0.0059 /kWh</ENT> <ENT>$0.0087 /kWh</ENT> <ENT>0.0028</ENT> <ENT>47.5</ENT> </ROW> <ROW> <ENT I="03">Administrator's Discretionary Adder Adjustment—Annual Limit</ENT> <ENT>+/−$0.0059 /kWh</ENT> <ENT>+/−$0.0087 /kWh</ENT> <ENT>0.0028</ENT> <ENT>47.5</ENT> </ROW> <ROW> <ENT I="22"> <E T="03">Capacity:</E> <ENT>$4.50 /kW/Mo</ENT> <ENT>$5.30 /kW/Mo</ENT> <ENT>0.80</ENT> <ENT>17.8</ENT> </ROW> <ROW> <ENT I="03">Regulation & Frequency Response</ENT> <ENT>$0.07 /kW/Mo</ENT> <ENT>$0.0208 /kW/Mo</ENT> <ENT>(0.0492)</ENT> <ENT>−70.3</ENT> </ROW> <ROW> <ENT I="03">Operational Reserves—Spinning</ENT> <ENT>$0.0146 /kW/Mo</ENT> <ENT>$0.0208 /kW/Mo</ENT> <ENT>0.0062</ENT> <ENT>42.5</ENT> </ROW> <ROW> <ENT I="03">Operational Reserves—Supplemental</ENT> <ENT>$0.0146 /kW/Mo</ENT> <ENT>$0.0208 /kW/Mo</ENT> <ENT>0.0062</ENT> <ENT>42.5</ENT> </ROW> <ROW> <ENT I="03">Energy Imbalance</ENT> <ENT>$0.0 /kW/Mo</ENT> <ENT>$0.0 /kW/Mo</ENT> <ENT>0.0</ENT> <ENT>0.0</ENT> </ROW> <ROW> <ENT I="03">Regulation Purchased Adder (load within SWPA BAA)</ENT> <ENT>prorated share of total energy cost</ENT> <ENT>prorated share of total energy c ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 17k characters. 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