WSP03951

• File Number: 8407.500
• Description: River Basin General Publications - Missouri River General Publications
• Date: 6/1/1973
• Title: Information Report on Proposed Power Rate Adjustment Eastern and Western Divisions
• Water Supply Pro - Doc Type: Publication

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Major power costs to be paid from power revenues are operation, maintenance,
and replacement coets. Next, interest charges on the unpaid balance of the
investment in power facilities are paid. The amount of revenue remaining
each year is available for principal payments on the investment. Revenues
considered include all projected revenue from the sale of all classes of
energy available in an average water year. Reasonable charges were used
for all classes of surplus energy. Peaking power was set at $6.60 per
season, and a computer program was used to determine the average annual
return needed from the sale of firm power.

The results of the study showed that an increase in average annual revenues
of approximately $3.8 million is needed to maintain the financial integrity
of the project and meet the repayment criteria. The major cause is increased
operations and maintenance costs. The division of the needed increase in
revenues to the Eastern and Western Divisions is covered in Section V. i.
of the report.

The average revenue to the Eastern Division from the sale of firm power
is expected to be about 4.387 mills per kilowatt-hour in the near future
under the existing MRB-F5 rate schedule. The proposed new firm power rate
schedule is expected to yield average revenues from the sale of firm power
of 4.78 mills per kwh to the Eastern Division, an increase of 0.393 mill
per kilowatt-hour, or approximately 9 percent. The average return to the
Western Division from the sale of firm power was approximately 6.15 mills
per kilowatt-hour in fY 1972. The proposed new Western Division rate
schedule is expected to yield average revenues of 6.4 mills per kilowatt-
hour, an increase of 0.25 mill per kilowatt-hour, or about 4 percent. The
larger increase assigned to the Eastern Division represents a first step
in more nearly equalizing the rates of the two divisions.

The new proposed Eastern Division rate schedules were presented in our
letter of May 29. They are also covered in Section V. C. of the report.
Several possible rate schedules were examined. The proposed schedules
were selected as those that will best give the project financial stability
and treat all customers equitably. The reason for the increase in the
monthly energy charge for energy in excess of a 60-percent monthly load
factor is primarily to correct the steady reduction in the average revenue
per kilowatt-hour caused by the steadily increasing load factors of our
customers. Increased average load factors are a significant cause of a
need for Eastern Division rate adjustments.

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In addition to the new rate structures set forth in the report, it is
also proposed that a penalty rate be established for unauthorized overruns
of the Bureau's commitment to serve power and energy. Bureau power systems
have finite generating resources, and firm commitments have been made to
wholesale power customers up to the limit of these resources. Unauthorized
overruns of these commitments would cause the Bureau to be short of generation

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