Notice of Interim Approval of Rate Schedules for Cumberland System of Projects

<NOTICE> DEPARTMENT OF ENERGY <SUBAGY>Southeastern Power Administration</SUBAGY> <SUBJECT>Notice of Interim Approval of Rate Schedules for Cumberland System of Projects</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Southeastern Power Administration, DOE. <HD SOURCE="HED">ACTION:</HD> Notice of interim approval. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The Administrator for the Southeastern Power Administration (Southeastern) has confirmed and approved, on an interim basis, rate schedules CBR-1-K, CSI-1-K, CEK-1-K, CM-1-K, CC-1-L, CK-1-K, CTV-1-K, CTVI-1-D, and Replacement-3. These rate schedules are applicable to Southeastern power sold to existing preference customers in Alabama, Georgia, Illinois, Kentucky, Mississippi, North Carolina, Tennessee, and Virginia. The rate schedules are approved on an interim basis through September 30, 2030, and are subject to confirmation and approval by the Federal Energy Regulatory Commission (FERC) on a final basis. </SUM> <DATES> <HD SOURCE="HED">DATES:</HD> Approval of rates on an interim basis is effective on October 1, 2025. </DATES> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Carter B. Edge, Assistant Administrator for Finance and Marketing, Southeastern Power Administration, Department of Energy, 1166 Athens Tech Road, Elberton, Georgia 30635-6711, (706) 213-3800; Email: <E T="03">Carter.Edge@sepa.doe.gov.</E> </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> FERC, by Order issued November 5, 2020, in Docket No. EF20-6-000 (Accession No.: 20201105-3018), confirmed and approved Wholesale Power Rate Schedules CBR-1-J, CSI-1-J, CEK-1-J, CM-1-J, CC-1-K, CK-1-J, CTV-1-J, CTVI-1-C and Replacement-3 for the period October 1, 2020, through September 30, 2025. This order replaces these rate schedules on an interim basis, subject to final approval by FERC. <HD SOURCE="HD1">Department of Energy</HD> <HD SOURCE="HD1">Administrator, Southeastern Power Administration</HD> <FP SOURCE="FP-1"> <E T="03">In the Matter of:</E> Southeastern Power Administration, Cumberland System Power Rates, Rate Order No. SEPA-68 </FP> <HD SOURCE="HD1">Order Confirming and Approving Power Rates on an Interim Basis</HD> Rate Order No. SEPA-68 and associated rate schedules are applicable to Southeastern Power Administration (Southeastern) power sold to existing preference customers in Alabama, Georgia, Illinois, Kentucky, Mississippi, North Carolina, Tennessee, and Virginia. The rate schedules are approved on an interim basis, effective October 1, 2025, through September 30, 2030, and are subject to confirmation and approval by the Federal Energy Regulatory Commission (FERC) on a final basis. <HD SOURCE="HD1">Background</HD> Power from the Cumberland System is presently sold under Wholesale Power Rate Schedules CBR-1-J, CSI-1-J, CEK-1-J, CM-1-J, CC-1-K, CK-1-J, CTV-1-J, CTVI-1-C and Replacement-3. These rate schedules were approved by the FERC in docket number EF20-6-000 on November 5, 2020, for a period ending September 30, 2025 (Accession No.: 20201105-3018). <HD SOURCE="HD1">Public Notice and Comment</HD> Notice of a proposed rate adjustment was published in the <E T="04">Federal Register</E> May 15, 2025 (90 FR 20668). Southeastern proposed an increase to existing rate schedules and continuation of the annual true-up adjustment for the sale of power from the Cumberland System effective October 1, 2025, through September 30, 2030. The notice advised interested parties of a public information and comment forum to be held in Elberton, Georgia, and also virtually by Microsoft Teams, on June 17, 2025. Written comments were accepted through August 13, 2025. The rate schedules recover cost from capacity, energy, and additional energy. The revenue requirement proposed at the forum was $81,750,000 per year. The rates proposed were as follows: <EXTRACT> <HD SOURCE="HD1">Cumberland System Rates </HD> <HD SOURCE="HD2">Original Marketing Policy</HD> <HD SOURCE="HD3">Inside TVA Preference Customers</HD> <E T="03">Capacity and Base Energy:</E> $4.484 per kW/Month. <E T="03">Additional Energy:</E> 17.088 mills per kWh. <E T="03">Transmission:</E> Pass-through. <HD SOURCE="HD3">Outside TVA Preference Customers (Excluding Customers Served Through Duke Energy Progress or East Kentucky Power Cooperative)</HD> <E T="03">Capacity and Base Energy:</E> $4.484 per kW/Month. <E T="03">Additional Energy:</E> 17.088 mills per kWh. <E T="03">Transmission:</E> Monthly TVA Transmission Charge divided by 545,000. <HD SOURCE="HD3">Customers Served Through Duke Energy Progress</HD> <E T="03">Capacity and Base Energy:</E> $5.076 per kW/Month. <E T="03">TVA Transmission:</E> TVA rate at border as computed above, adjusted for DEP delivery. <HD SOURCE="HD3">East Kentucky Power Cooperative</HD> <E T="03">Capacity:</E> $2.348 per kW/Month. <E T="03">Energy:</E> 17.088 mills per kWh. <E T="03">Transmission:</E> Monthly TVA Transmission Charge divided by 545,000. </EXTRACT> The proposed rate schedules continue adjustments annually on April 1 of each year, based on transfers of specific power investment to plant-in-service for the preceding fiscal year, to the base demand charge and base additional energy charge. The annual adjustment will be, for each increase of $1,000,000 to specific power plant-in-service, an increase of $0.003 per kilowatt per month added to the base capacity rate and an increase of 0.013 mills per kilowatt-hour added to the base additional energy rate. Southeastern will give written notice to the customers of the amount of the true-up by February 1 of each year. <HD SOURCE="HD1">Public Comments</HD> Southeastern received oral comments from one participant as part of the public information and comment forum on June 17, 2025. Southeastern received written comments mirroring the oral comments provided in the public information and comment forum from the same representing organization as the forum participant. The comments are summarized below. Southeastern's responses are provided. <E T="03">Comment 1:</E> In our review of the supplemental rate materials that SEPA has provided, and as discussed below, we believe the Administrator has exercised his authority under the Flood Control Act of 1944 to keep rates as low as possible consistent with sound business principles, but further action should be taken. Notably, we observe that in certain instances, hydropower customers are being asked to assume cost responsibility for flood control expenses which should be assigned fully to flood control for reimbursement. <E T="03">Response to Comment 1:</E> Southeastern's Administrator agrees that protecting hydropower customers from bearing costs unrelated to hydropower is a priority, and other such costs should be properly attributed to the relevant purposes of the projects. Southeastern realizes there are flood control or flood risk management costs applied to the hydropower portion of the joint share. Southeastern's Administrator has the responsibility to determine which costs are appropriate and is obligated to prudently follow sound business principles in recovering costs associated with generating hydropower, including the amortization of capital Federal investment and appropriate joint costs allocated to power. Southeastern is continuing to monitor the Corps' charging practices and coordination efforts to ensure charging practices result in appropriate cost allocation. <E T="03">Comment 2:</E> The revised repayment materials provided by SEPA indicate that power customers of the Cumberland System of Projects will be paying for accumulated deficits over the course of the next five years, which raises concerns about the prior rate and whether SEPA waited too long to publish a revised rate. . .. While the SeFPC recognizes that the proposed rate must recover all accumulated deficits, the Customers have concerns that SEPA did not propose the rate increase in the prior fiscal year. Specifically, the SeFPC believes that SEPA should have recognized the significant increase in incremental investment in the prior fiscal year and proposed a rate increase in 2024. This action would have avoided the accumulated deficit and associated interest charge which must be recovered in the proposed rate. <E T="03">Response to Comment 2:</E> Annual power repayment studies are conducted to ensure current rates are adequate. Annual studies use the Corps' and Southeastern's Fiscal Year end combined financial statements. Yearly, the unamortized investment was below the allowable investment indicating the cost recovery criteria was being met. In the Fiscal Year 2023 annual repayment study no capitalized deficits were incurred, and a cumulative surplus was observed. In the Fiscal Year 2024 annual repayment study, upon entering data from the Corps' and Southeastern's Fiscal Year 2024 combined financials, the study revealed the Fiscal Year 2024 operating expenses and interest exceeded revenues, resulting in a $9M capitalized deficit. The increase in incremental investment for Fiscal Year 2024 was from actuals reported in the Corps' Fiscal Year 2024 financial statements. Southeastern received the Corps' Fiscal Year 2025 five-year projections and used them in the annual repayment study's cost recovery period to test the adequacy of current rates. The current rates were determined to be inadequate to recover projected annual costs, interest, and repayment of capitalized Federal investment prompting the need for revised rates. <E T="03">Comment 3:</E> The SeFPC believes that the costs of all spillway repairs should be eliminated from the rate. In supplemental materials provided to the organization after the forum convened on June 17th, we have observed that certain spillway capital costs have been included in the proposed rate while others have been exclude ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 57k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━