[Federal Register Volume 60, Number 203 (Friday, October 20, 1995)]
[Rules and Regulations]
[Pages 54151-54180]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-25829]
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Rules and Regulations
Federal Register
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Federal Register / Vol. 60, No. 203 / Friday, October 20, 1995 /
Rules and Regulations
[[Page 54151]]
DEPARTMENT OF ENERGY
Western Area Power Administration
10 CFR Part 905
Energy Planning and Management Program
AGENCY: Western Area Power Administration, DOE.
ACTION: Final rule.
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SUMMARY: The Western Area Power Administration is publishing this final
rule to adopt an Energy Planning and Management Program. The Program is
being developed in part to implement section 114 of the Energy Policy
Act of 1992. The Program requires the preparation of integrated
resource plans by Western's customers and establishes a framework for
extension of existing firm power resource commitments.
EFFECTIVE DATE: These regulations will become effective November 20,
1995.
FOR FURTHER INFORMATION CONTACT: For additional information, please
contact: Robert C. Fullerton, Western Area Power Administration, P.O.
Box 3402, A3100, Golden, CO 80401-0098, (303) 275-1610.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
II. Discussion of comments
A. Energy Planning and Management Program-Overview
1. General
B. Integrated Resource Planning
1. Specificity of Regulations
2. IRP Content
3. IRP Review and Approval
4. Member-Based Associations
5. Economic Feasibility and Administrative Burden
6. IRP Cooperatives
7. Technical Assistance
8. Submittal Timing
9. Irrigator Issues
10. Future Program Review
11. Penalty
C. Power Marketing Initiative
1. Applicability
2. Contract Term
3. Extension Percentage
4. Resource Pool Creation
5. Resource Pool Uses
6. Resource Adjustment
7. Notice
8. Native American Issues
9. Resource Acquisition by Western
10. Implementation
11. Other Marketing Issues
D. Other Issues
1. Support of Renewables
2. Project Use
III. Summary of Changes from the Proposed Program
IV. Supplemental Explanation of the Rule
V. Regulatory Review
VI. Review under the Regulatory Flexibility Act
VII. Review under the Paperwork Reduction Act
VIII. Review under the National Environmental Policy Act
IX. Review under Executive Order 12612
X. Review under Executive Order 12778
I. Background
On April 19, 1991, the Western Area Power Administration (Western)
proposed an Energy Planning and Management Program (Program) (56 FR
16093). The goal of the Program was to require planning and efficient
electric energy use by Western's long-term firm power customers and to
extend Western's firm power resource commitments. On May 1, 1991,
Western announced its intention to prepare an environmental impact
statement (EIS) on the Program due to potentially significant
environmental and economic issues that may be of interest to the public
(56 FR 19995). Combined public information/environmental scoping
meetings on the Program were held in seven States in June of 1991.
Based on the feedback received from these meetings, Western developed
alternatives to be analyzed in the EIS. Alternatives workshops were
held in eight cities during March and April 1992. Based on further
public input received during these workshops, as well as comments
previously received, Western announced a tentative preferred
alternative for the EIS in a Program newsletter in June of 1992.
On October 24, 1992, the President signed the Energy Policy Act of
1992 (EPAct), Public Law 102-486, into law. Section 114 of that
legislation requires the preparation of integrated resource plans (IRP)
by Western's customers and amends Title II of the Hoover Power Plant
Act of 1984. Western has adjusted its Program to reflect fully the
provisions of this law.
On March 31, 1994, a notice of public availability of the draft EIS
was published in the Federal Register (59 FR 15198). The Environmental
Protection Agency also published a notice of availability of the draft
EIS on April 1, 1994, officially starting a 45-day public comment
period. Eight hearings were held throughout Western's service
territory, with more than 130 members of the public in attendance.
About 200 written comments were received on the draft EIS.
The Program goal is to promote the efficient use of electric energy
by Western's customers and to extend Western's long-term firm power
resource commitments in support of customer IRPs. A major purpose of
this action is to assure the customers which purchase Federal power
greater stability in planning for future resources than would exist in
the absence of the Program. The Program has two major components: (1)
An integrated resource planning provision conforming to the
requirements of EPAct and (2) a Power Marketing Initiative (PMI). The
IRP provision, formerly known as the Energy Management Program, would
require most long-term firm power customers to (1) develop and
implement an IRP, (2) submit an updated IRP every 5 years, and (3)
submit an annual progress report. A different requirement for small
customers with an annual load or usage of 25 GWh or less is
established, as allowed in the EPAct. This IRP provision and small
customer provision will amend Western's Final Amended Guidelines and
Acceptance Criteria (G&AC) for Customer Conservation and Renewable
Energy (C&RE) Programs of August 21, 1985 (50 FR 33892). Western will
continue to provide a wide range of technical assistance to customers.
As provided by EPAct, 42 U.S.C. (7276b(e)), a penalty provision for
noncompliance with the IRP provision will consist of a 10-percent
surcharge for the first 12 months of noncompliance, 20 percent for the
next 12 months of noncompliance, and 30 percent thereafter for as long
as noncompliance persists. In lieu of a surcharge after the first 12
months of noncompliance, Western may impose a 10-percent resource
reduction penalty if
[[Page 54152]]
such an approach is more effective in assuring compliance or is more
cost-effective for Western. The penalties in this Program will be
incorporated into the contracts that extend resources and will be
effective upon contract execution. Penalties in existing contracts will
continue to be in effect until changed.
The PMI establishes a framework for extending a major portion of
the power currently under contract with existing customers. Western
will extend its existing long-term firm resource commitments, subject
to the outcome of project-specific environmental analysis as
appropriate. Initially, the Pick-Sloan Missouri Basin Program-Eastern
Division and the Loveland Area Projects are covered by the PMI. The
term of the extension would be 20 years from the date that existing
contracts expire. The level of the commitment to existing customers
would be a project-specific percentage of the marketable resource
determined to be available when future resource extensions begin, as
described in section 905.33 of the regulations, with two withdrawals at
5-year intervals after the new contracts become effective. Unextended
resources would be available for allocation to new customers and other
purposes as determined by Western. In addition, marketable resources
placed under contract could be adjusted on 5 years' notice, and then
only in response to changes in hydrology and river operations.
II. Discussion of Comments
On August 9, 1994, a notice of the proposed Program and request for
public comments was published in the Federal Register (59 FR 40543).
Seven combined public information/comment forums were held throughout
Western's service territory in September 1994. The original comment
period of 60 days was extended in response to a public request. 59 FR
53976 (October 27, 1994). The comment period closed 90 days after
publication of the notice of the proposed Program.
Western has received numerous comments as a result of publication
of the proposed Program in the Federal Register on August 9, 1994. The
following section responds to those comments. Each issue is presented
in a format featuring background, public comments and discussion.
Responses to all comments on Native American issues are in section C.8.
Comments pertaining to the environmental impact statement are addressed
in Appendix G of the final EIS.
A. Energy Planning and Management Program--Overview
1. General
a. Background
Western initially proposed the Program in April of 1991, and has
devoted over 4 years to public process and Program development. The
publication of the proposed program on August 9, 1994, included
comprehensive responses to public comments received as of that date.
This response to comments section includes only those comments received
since that date.
b. Comments and Discussion
Comments were received in favor of finishing the public process
quickly. Public comment was received in support of the spirit of
compromise that is reflected in the Power Marketing Initiative. Western
was asked to keep the hydroelectric resource reliable and cost-based.
Others commended Western for the time and attention it has devoted to
produce an improved Program proposal. The proposed rule was viewed as a
substantial improvement over the alternatives presented in the draft
EIS. This Federal Register notice represents the final step in the
development of the Program. The Power Marketing Initiative and the
Integrated Resource Planning Provision will become effective 30 days
after publication of this rule in the Federal Register. Western is
appreciative of the widespread participation in the public process by
customers, Indian tribes, environmental groups and other interested
parties. This extensive participation has resulted in an improved
Program that is responsive to the comments of the public.
Western was asked to publish the final Program as a rule within the
Code of Federal Regulations. Western agrees with this comment. The
Program regulations will appear in Title 10, which deals with energy-
related subjects. Explanatory text and the detailed description of the
future application of the PMI have been moved to the preamble.
Another comment suggested that Western adopt the section of the
Federal Register publication entitled ``Response to Comments on the
Energy Planning and Management Program,'' specifically found at 59 FR
40552-40562, as interpretative guidelines to accompany the IRP rules.
Western concurs that the responses to comments contained in the August
9, 1994, Federal Register notice are useful in providing insight and
guidance to assist the public in understanding Western's rationale for
the proposed Program. The responses to comments in this notice of final
rulemaking play a similar role. Although Western's responses to
comments will not be published in the Code of Federal Regulations, they
serve the purpose of interpretative guidelines and are available to
clarify the intent of Western in promulgating the final Program.
Western received a request for an additional 120 day extension of
the comment period. Western initially provided for a 60 day comment
period, and later extended the comment period by 30 days in response to
a public request. The total comment period of 90 days presented ample
opportunity for the public to understand and comment on the proposed
Program.
B. Integrated Resource Planning
1. Specificity of Regulations
a. Background
Section 114 of the EPAct provides the framework for the IRP
requirement. It sets forth IRP criteria as well as administrative
principles and requirements. As set forth by section 114, Western shall
approve an IRP if, in developing the plan, the customer has addressed
the criteria provided.
b. Comments and Discussion
A number of customers commented that the distinction between
customers and purchasers should be dropped because the terms are
defined differently but used synonymously, so the term ``purchaser''
has been deleted from the rule to avoid confusion.
A commenter asked for clarification of the relationship between the
IRPs required under section 114 of EPAct and the requirement to
consider integrated resource planning under Section 111. Section
111(a)(7) of EPAct is an amendment to the Public Utility Regulatory
Policies Act. If a Western long-term firm power customer falls under
this regulatory authority, only one IRP will be required as long as the
IRP submitted to the State regulatory authority and to Western also
meets the approval criteria addressed in the IRP regulations and
section 114 of EPAct.
A few customers requested a refinement of IRP regulations to make
them ``more suitable for non-generating and end-use customers.'' Most
end-use customers will qualify for small customer status, which
requires that they submit a plan that (1) considers all reasonable
opportunities to meet future energy service requirements using demand-
side management (DSM) techniques, new renewable resources,
[[Page 54153]]
and other programs that are cost- effective, and (2) minimizes adverse
environmental effects to the extent practicable. For those that do not
qualify, Western will review IRPs based on the customer size, type,
resource needs, geographic area, and competitive situation. There is no
need to tailor these regulations further as the capabilities of non-
generating end-use customers are adequately recognized under the
``reasonableness'' review standard in 905.13.
Western was requested to delete the word ``new'' from the
definition of IRP, based on the viewpoint that integrated resource
planning is a planning process that can be applied to all resources.
Western has not removed the word ``new'' from the definition of IRP
because Congress included this adjective in section 114 of EPAct.
However, analysis of all resource options would allow the customer to
incorporate cost-effectiveness of current resources into utility
decision-making which in turn provides for sound long-term decisions
based on least-cost resource planning. To remain competitive in a
dynamic utility industry, Western's customers may find value in
evaluating continuously all costs, including those from both existing
and potential future resources.
2. IRP Content
a. Background
Section 114 of EPAct defines the elements and content that must be
addressed in an IRP. Although these requirements must be addressed,
Western understands the importance of balancing needs for flexibility
and equity among a diverse customer base. Western's primary interest is
in providing an adequate framework for customer use of the IRP process
as a tool for meeting resource needs.
b. Comments and Discussion
Many commenters requested that Western remove the ``Other
Criteria'' because it is overly broad. Western included element 8,
``Met such other criteria as the Administrator shall require,'' in the
proposed rules primarily to track the language and format of EPAct, and
to give the flexibility to add other requirements as might later become
necessary. In order to give customers reassurance that Western will not
arbitrarily change or add requirements without the proper public review
and comment process, this element has been dropped.
A stakeholder suggested that each IRP or small customer plan
submitted to Western should describe the formal and informal service
relationships the customer has with trade allies that can provide DSM
sales and service delivery to the utility and its customers if the IRP
or small customer action plan includes DSM resources. If a customer
chooses, partnerships can be formed with trade allies that can provide
DSM sales and services in support of IRP implementation plans. However,
it is not the intent of EPAct nor appropriate for Western to require
IRP or small customer plan submittals to describe the service
relationships that Western's customers have with trade allies. A trade
ally has the opportunity to participate in a customer's IRP process and
DSM pursuits through the customer's public process, and pursue a
voluntary partnership with Western's customers.
Western was asked to define practicable. EPAct states that IRPs
must identify and accurately compare all practicable energy efficiency
and energy supply resource options available to the customer. Using the
reasonableness test set forth in section 905.13(a), practicable in this
case means those energy efficiency and energy supply resource options
which are appropriate for the customer's size, type, resource needs,
geographic area, and competitive situation. Practicable resource
options are both economically and technically feasible. Western will
not dictate resource choices.
One customer noted that there is no option in the action plan to
report that there is nothing further that a customer can do than it is
already doing, and that this language needs to be added. Language has
been added in section 905.11 so that there is an option for customers
to report in an action plan that they are not experiencing or
anticipating load growth. Even when customers are not experiencing load
growth, action plans may describe how otherwise ``lost opportunities''
have been pursued, such as encouraging energy efficiency in new housing
to avoid the expense of retrofitting in the future.
Comment was received on the criteria for determining that customers
have complied with the requirements for minimizing adverse
environmental impacts associated with resource choices. The criteria
for assessing whether customers have complied with the requirements for
minimizing adverse environmental impacts of new resource acquisitions
are stated in EPAct and supplemented by this rule. In addition, Western
cannot exempt any organization from complying with existing
environmental laws and regulations due to customer size. Western will
not determine for its customers the level of environmental compliance
appropriate for each action.
A number of customers and stakeholders submitted comments regarding
environmental externalities. Western will not require customers to
include a quantitative analysis of environmental externalities in their
IRPs for the following reasons: (1) EPAct, which did not use the term
``externalities,'' created a different ``minimization to the extent
practicable'' review standard for IRPs; (2) the externality issue
continues to be subject to public debate and scientific analysis, with
no consensus being reached; (3) there is no consensus on the numbers
that should be used to value certain emissions and pollutants; (4)
quantification of externalities is a policy question that appears to
fall under state jurisdiction at the present time. Establishment of a
Western standard would not appropriately reflect comity between the
states within Western's service territory and the Federal government.
Complicating the issue is the fact, as described in more detail in the
EIS, that the Western states have widely varying policies on
quantification of externalities; (5) it would be impossible to
reconcile a common externality standard with the heterogeneous
approaches of the states; and (6) if Western were to require
quantification of externalities, Western's customers could find
themselves at a inappropriate competitive disadvantage as compared to
noncustomer utilities not bound by such a stringent standard under
state laws and regulations.
Customers asked what Western considers public involvement for a
rural electric cooperative. Additionally, customers and stakeholders
stated that Western should allow flexibility in interpreting the public
process requirements; outside entities should have the opportunity to
review and comment on submitted IRPs once Western receives them; and
Western should require that customer utilities meet minimum standards
for public participation, including the creation of public advisory
groups. Given the diversity of customers Western serves, Western
intentionally defined the term ``public participation'' in general
terms so as to allow customers the flexibility they need to comply with
this requirement. Full public participation will be interpreted to mean
that ample opportunity was provided for the public to participate in or
influence the preparation and development of an IRP, as required by
905.11. The summary of the public participation process in the IRP
should describe how the customer
[[Page 54154]]
(1) gathered information from the public, (2) identified public
concerns, (3) shared information with the public, and (4) responded to
public comments. Additionally, Western feels that public participation
at the local/regional level is adequate and that it is not necessary to
provide another opportunity for public comment once the IRP has been
filed with Western.
One customer commented that the load forecasting examples in the
rule ``make no sense'' for Federal load. No load forecasting examples
are given in the Rule except as referred to for a methodology (i.e.,
time series method, end-use method, econometric method). These are the
three methods most used for load forecasting, but they are not required
by Western. The customer should determine the method(s) best suited for
its own needs, though that method should use an accepted methodology
such as one or more of the three listed above. Customers should develop
forecasts upon which to base their IRPs. EPAct requires that, with the
exceptions addressed in section 905.11(b)(3), least-cost options must
be adopted by customers under the IRP.
Many customers commented on quantification and resource tests. The
following questions were asked: Is Western prescribing that a levelized
cost method be used? If renewable resources are not cost-effective, how
can they be included in the least-cost plan? If they are cost-
effective, why should they be given priority if they will be in the
least-cost plan? Additionally, customers stated that they preferred
that Western not prescribe a method. There is concern about how
utilities will deal with the least-cost provisions or whether they can
still use supply- and demand-side projects in the IRP process and still
do their planning in order to minimize rates and remain competitive.
Comment was also received that Western needs to address the additional
exemptions to least-cost based decision-making related to state law
requirements; and that Western's IRP requirement should impose no
standard stricter than the standard used by the state public utility
regulatory agency in which a given customer does business. Western is
not prescribing that a levelized cost method be used. Instead, the
final rule requires that evaluation of demand and supply resource cost
effectiveness for larger customers be done on a comparable basis.
Examples of types of methods Western expects from a larger customer are
given, but no specific method is required. The least-cost provisions,
as part of the IRP, are meant to allow utilities to be more
competitive. Analyses of a variety of situations--including possible
exceptions to least-cost based decisions--will promote competitiveness
as well as rate minimization. Renewables do not have to be given
priority, but must be fully evaluated alongside demand- and other
supply-side resources. EPAct states that to the extent practicable,
energy efficiency and renewables may be given priority in any least-
cost option. Language has been added, under section 905.11, stating
that exceptions to least-cost-based decisions may be made where Federal
or State requirements mandate other than a least-cost based decision.
EPAct allows the choices in this area to be made at the reasonable
discretion of the customer as long as supply- and demand-side resources
are compared using a consistent economic analysis. As long as the
customer meets the criteria as defined in EPAct and these regulations,
Western will not impose any standard stricter than the standard used by
the state public utility regulatory agency in which a given customer
does business.
Western received comment that the rule needs to better define
economic tests and more clearly describe the economic evaluations made.
Comment was received that Western should require customers to use the
total resource test to screen demand-side measures and the societal
test to evaluate demand-side programs; and that customers should be
required to use minimization of revenue requirements as the standard to
choose least-cost options. Western will not mandate the use of a
particular test to screen resource options or as a standard in the
resource selection process. While examples of analyses are set forth
elsewhere in this Federal Register notice, EPAct does not require the
use of any particular tests. There is no compelling reason to force
customers to take the same approach when a number of different tests
are currently used in IRP preparation by utilities and utility
commission review throughout the United States. Western will review the
approach chosen by its customers for reasonableness, taking into
account each customer's size, type, resource needs, geographic area,
and competitive situation.
A few customers commented that they are opposed to quantification
of savings. Western is not requiring unreasonable efforts by customers
to quantify savings. Section 905.11 describes the need for customers to
establish methods of validating predicted performance.
3. IRP Review and Approval
a. Background
Western has proposed that the required elements of an IRP or a
small customer plan must be addressed in a reasonable manner by a
customer before Western approves the IRP or small customer plan.
b. Comments and Discussion
Customers commented that the flexibility to amend IRPs at any time
should be incorporated into the regulations. Western was asked to
clarify the difference between good faith efforts and mitigating
circumstances. Comment was received regarding an apparent conflict
between the time tables for requesting small customer status and the
general time line when activities need to be accomplished. One customer
stated that the size of the Western allocation should be a factor in
IRP review. Western will apply a reasonableness test in its review and
approval of customer IRPs and small customer plans which asks the
following two questions:
1. Is the customer's application of the IRP or small customer
criteria consistent with the intent of EPAct and these regulations?
2. Is such application appropriate for the customer's size, type,
resource needs, geographic area, and competitive situation?
Western will use the reasonableness test, as applied to the criteria in
Subpart B, as a basis for plan review and approval. Western will not
use the size of the Western allocation as a factor in review, as EPAct
does not allow for such an approach.
In using this reasonableness test as the basis for approval of
plans, other language has been incorporated into the regulations which
clarifies the review and approval process. Specifically, language has
been added which: allows amendments and revisions to IRPs to be
submitted at any time (under section 905.12(c)(5)); delineates ``good
faith effort'' and deletes the term ``mitigating circumstances'' (under
section 905.17(b)); and amends the originally proposed time table for
IRPs and small customer plans (under section 905.12(c)), so that
requests for IRP cooperative and small customer status must be made to
Western within 30 days (not 60) of the effective date of the Program,
allowing the time tables to match and allowing for a more expedient
process. Additionally, there is no longer a requirement for customers
to submit a notification of intent to prepare an individual or MBA IRP.
[[Page 54155]]
One customer asked how customers should act when preparing their
IRPs which are dependent on time-limited offers of power from third
parties. When preparing plans dependent upon time-limited resource
offers, a customer should develop the plan based upon the best
information available. The customer determines its own resource needs,
so it should accept the time-limited offer if that is in its best
interests, and then let Western know through its annual progress report
or an amended action plan. Western will not disapprove such a decision
if it is in the best interests of the customer, was evaluated alongside
supply- and demand-side resources, and was a ``least-cost option'' (or
is an adequate cost-effective exception as addressed in section
905.11).
4. Member-Based Associations
a. Background
There is considerable variety in the contractual arrangements among
Western's member-based association (MBA) customers. Some MBAs are the
sole supplemental power supplier for the members and have load growth
responsibility, others act as a representative for the members and have
no generation or transmission capabilities, and others act as agents
for or subcontract with but do not assume power supply responsibility
for their principals or subcontractors.
b. Comments and Discussion
Concerns were raised over the role of the MBA and its members.
Comment was received that the submittal requirements need to be defined
for an MBA and its members. One customer stated that Western needs to
broaden the definition of MBA to cover both parent-type entities and
their user members and entities which act as agents for, or subcontract
with but do not assume power supply responsibility for, their
principals or subcontractors. The definition of MBA has been broadened
to include both parent-type entities and their user members and
entities which act as agents for or subcontract with but do not assume
power supply responsibility for their principals or subcontractors so
that the wide variety of Western customers which are MBAs under the
revised definition can submit IRPs on behalf of one, some, or all of
their customers. In adding this definition, the submittal requirements
have been further delineated.
Two additional questions were asked: (1) To what extent must
members of an MBA be identified in the IRP and action plans? (2) What
is the responsibility of an MBA with members outside of its marketing
area for an IRP? While Western agrees that members should support the
IRP process with data and during the decision making process, it is the
responsibility of each MBA to work with its affected membership on
these issues. Each member receiving the benefit of long-term firm power
from Western will be required to sign the IRP or a resolution accepting
the IRP prior to submittal to Western. Additionally, for IRPs developed
and submitted on behalf of the MBA's members, the IRPs must clearly
show how each of the seven approval criteria is addressed for each
member. MBA members outside of Western's service territory need not be
included in the MBA's IRP, but the benefits of joint planning may be
diminished by such an approach.
5. Economic Feasibility and Administrative Burden
a. Background
A number of Western's customers are small or medium-sized
utilities. Western is not proposing to define how much time and money a
customer should invest in IRP and small customer plan development and
implementation. Rather, Western's review will be focused on the end-
product IRP or small customer plan.
EPAct requires that customers develop and submit annual progress
reports to Western, which Western will in turn use in developing its
own annual report.
b. Comments and Discussion
Many customers asked what criteria will be used to determine that a
small customer has ``limited economic, managerial, and resource
capability'' to conduct an IRP. Three criteria will be used in
determining small customer status: (1) Does the customer have total
annual energy sales or usage of 25 GWh or less averaged over the
previous 5 year period? (2) Is the customer not a member of a joint
action agency or a generation and transmission cooperative with power
supply responsibilities? (3) Does the customer have limited economic,
managerial and resource capability to conduct integrated resource
planning? Prior experience with customers under the 25 GWh threshold
that are not members of a joint action agency or a generation and
transmission cooperative with power supply responsibility has shown
that many of these customers possess limited economic, managerial and
resource capability to conduct integrated resource planning. If the
customer meets all of these criteria, it will then be granted small
customer status if requested.
Other customers also suggested that small customers be able to
normalize or average over a period of time their energy use or sales in
order to qualify for the 25 GWh threshold for small customer status
which might otherwise not be met due to extreme circumstances such as
weather. In order to account for weather-related or other circumstances
which might put the small customer over the 25 GWh threshold, customers
will be responsible for documenting average annual energy sales and
usage for the 5 years prior to the initial request. Subsequent annual
letters documenting energy sales and use will be averaged thereafter on
a rolling basis to determine the under 25 GWh threshold. If the
customer exceeds 25 GWh average sales and usage after already receiving
small customer status, an IRP will be required.
Comments on annual progress reports included statements that the
reports should not be required, to statements that they only be
required every 2 or 3 years. Customers also commented that the
requirements for the annual progress reports are excessive, especially
the obligation to perform post mortem analysis to quantify the energy
capacity and dollars saved under an IRP. EPAct requires that annual
progress reports be submitted by customers to Western. The requirement
can be satisfied by customers as long as the annual progress reports
contain information describing the customer's progress towards the
goals established in the plan submitted, including a report of the
measured or estimated energy savings and renewable resource benefits
achieved. Western is required by law to report to Congress annually
``an estimate of the energy savings and renewable resource benefits
achieved as a result'' of customer IRP. Western cannot develop a
credible estimate without customer input. In the absence of credible
data, the accomplishments of Western's customers cannot be fairly
described.
In lieu of a separate annual progress report, all information may
be combined with any other report that the customer submits to Western,
at the customer's discretion, as long as that report is submitted
within 30 days of the IRP approval anniversary date.
6. IRP Cooperatives
a. Background
Customers may form IRP cooperatives under EPAct and request
Western's approval to submit IRPs for those cooperatives. Approved
cooperatives
[[Page 54156]]
shall have 18 months from the date of approval to submit their IRPs.
b. Comments and Discussion
Comments on IRP cooperatives concerned limitations to forming an
IRP cooperative, and clarification of the formation of an IRP
cooperative as being a matter solely between those potential members
and Western. Comment was also received that IRP cooperative status
should be based only on the determination that an appropriate resource
planning decision block exists; and the ``power supply chain'' example
be removed so that it is not read as an exhaustive sample. An IRP
cooperative allows customers with common interests, such as where a
resource decision block exists, to form an IRP cooperative for the
purpose of jointly developing and implementing an IRP. Individual
member responsibilities and participation levels, as with MBA IRPs,
must be identified in the IRP. A resource planning decision block
includes a situation such as if all entities covered by an IRP are
contained within a power supply chain, or regional entities covered by
an IRP will plan for joint supply-side, demand-side, and/or renewable
resources above and beyond the Western resource. It is permissible for
a customer to prepare an IRP jointly with an investor-owned utility.
These are examples and are not all-encompassing definitions.
Section IV of this supplementary information section gives examples
of entities that would be favorably considered for IRP cooperative
status.
7. Technical Assistance
a. Background
Western has provided technical assistance to customers, which
includes workshops, equipment loan programs, technical studies and
analyses, peer-match evaluations, and other support, since 1980. EPAct
authorizes Western to continue to provide technical assistance to help
customers with integrated resource planning.
b. Comments and Discussion
One customer commented that Western should charge for technical
assistance based on its use. At present, Western feels that technical
assistance, offered through its energy services program, is more
effective if offered to all customers without a use-based charge.
Western realizes the greatest need for technical assistance often falls
on the smallest customers which may not be able to pay for direct
technical assistance. Western will make every effort to cost-share
technical assistance activities to leverage costs so that many parties
benefit.
Some customers requested that Western develop sample IRP formats
for customers. Because of the great diversity of its customers, Western
will not develop sample IRP formats. A customer can, however, obtain
technical assistance from the appropriate Area Office to help it
prepare an IRP. Additionally, a customer's Area Office may already have
a collection of sample IRPs.
8. Submittal Timing
a. Background
Customers must submit their plans to the Area Manager of the area
in which they are located within 12 months of the effective date of
this rule for individual IRPs, within 12 months of the approval of a
request for small customer status for small customer plans, and within
18 months of the approval of a request for IRP cooperative status for
IRPs from IRP cooperatives. Additionally, EPAct requires updated IRPs
and small customer plans to be submitted to Western for review every 5
years.
b. Comment and Discussion
A comment was received that suggested that Western stagger IRP
submittals over 120 days, with small customer submittals processed
first. Western will not take additional steps to stagger the approval
of IRPs because the submittal time frame already is staged, and EPAct
offers Western limited ability to depart from defined submittal time
frames. Western expects that although many customers will submit IRPs
and small customer plans when due, others will submit them before the
plans are due. In addition, IRP cooperatives may submit IRPs 6 months
after individual IRPs and small customer plans are due.
9. Irrigator Issues
a. Background
The IRP provisions apply to all customers, including irrigators,
with the exception of those qualifying for small customer status.
Irrigation districts and other irrigation entities may qualify for
small customer status. Western shall consider water planning, water
efficiency improvements, and water conservation in evaluating an IRP or
small customer plan. Customers that provide water utility services and
customers that service irrigation load as part of their overall load
may include water conservation activities in the IRP.
b. Comments and Discussion
It was suggested that the irrigation provision language include
entities which are not necessarily irrigation districts but which have
irrigation loads. Language has been added to section 905.13, which has
the effect of expanding the term ``irrigation district'' to include
electrical districts, power and water conservation districts, and other
comparable entities. Therefore, entities with similar functions are
eligible for this provision.
It was also suggested that water efficiency should equate to
electrical savings for all customers that manage water utilities, not
just irrigators. Western agrees that customers with water utility
responsibility face the same issues as irrigators. In recognition of
the need for equity, new language has been added to section 905.13 to
cover customers that provide both energy and water utility services and
customers that serve irrigation load as part of their overall load.
Western requests that all types of customers covered by this section
convert their water savings to energy values to the extent practical.
10. Future Program Review
a. Background
EPAct requires that within 1 year after January 1, 1999, and at
appropriate intervals thereafter, Western shall initiate a public
process to review the Integrated Resource Planning provision
established by this rule.
b. Comments and Discussion
A customer commented that 1999 is too late to revise the Program,
given the increasingly competitive nature of the utility industry. 1999
is the date set forth by EPAct for review and revision, as appropriate,
of these regulations, and the point at which, using a public process to
review the program, Western has some ability to revise the criteria set
forth in EPAct to reflect any changes in technology, needs, or other
developments. However, IRPs may be amended or revised at any time, and
updated IRPs are required every 5 years. This flexibility allows
Western's customers to remain competitive.
11. Penalty
a. Background
As required by EPAct, penalties for noncompliance with these
regulations shall be imposed for failure to submit or resubmit an IRP
or small customer plan in accordance with these regulations and/or when
Western finds that the customer's activities are not consistent with
the applicable IRP or small customer plan unless a good faith effort
has been made to comply with the approved IRP or small customer plan.
[[Page 54157]]
b. Comments and Discussion
The public commented that Western should not impose the same
penalties for being late or not submitting an annual report as for not
submitting an IRP; that the time frame between receiving a notice of
noncompliance and the imposition of the penalty needs to be lengthened;
and that the phrase ``it is found that there are no mitigating
circumstances which justify those reactions'' should be removed. The
noncompliance section of this rule, section 905.17, has been revised
substantially in response to public comments. In recognition of the
severity of the proposal, Western has dropped the provision for
imposing penalties for failure to submit or for late submittal of
annual progress reports. Section 905.17 also has been revised to
provide that any penalties will be imposed beginning with the first
full billing period following the notice of noncompliance, allowing
customers 30 days to provide evidence of a good faith effort to comply.
A customer must still show evidence of a good faith effort to comply
which justifies its deficiency, but the term ``mitigating
circumstances'' has been deleted.
Customers also commented that customers should be able to choose
their own penalties (surcharge or allocation) and that penalties should
apply directly to the MBA member and not to or through the MBA. Comment
was also received that if a member of an MBA is not in compliance,
notice should be sent to both the member and the MBA. Customers will
not be allowed to choose the type of penalty that will be imposed for
noncompliance. Western will determine which penalty is most appropriate
for the situation in accordance with the criteria in section 905.17(d).
Language has been added to clarify the imposition of penalties on MBAs
and IRP cooperatives and their members. Members of MBAs and IRP
cooperatives which are found to be in noncompliance will be directly
penalized if they have a firm power contract with Western. For those
members which do not, the penalty will be imposed upon the member's MBA
or parent-type entity on a pro rata basis in proportion to that
member's share of the total MBA's power received from Western.
Assessment of penalties against MBAs is necessary in this situation to
ensure that MBA members comply with the IRP requirements in this rule.
The MBA or parent-type entity will be notified of a penalty assessment
on a member.
A comment was received that stated that the administrative appeal
process should allow a customer to appeal a decision about an IRP to
the Department of Energy's Deputy Secretary to ensure customers and
Western have an opportunity to seek an impartial ruling. A customer may
request reconsideration of an initial noncompliance determination by
filing a written appeal with the appropriate Area Manager. If the
customer disagrees with the Area Manager's decision, an appeal may be
filed with the Administrator. The Administrator's decision will be the
final agency decision for purposes of judicial review. Western will use
mutually agreeable alternative dispute resolution procedures, upon the
customer's request, to attempt resolution of any appeal. No penalty
will be imposed during the appeal, but if the dispute resolution is
unsuccessful for the customer, Western will impose the penalty
retroactively from the date the penalty would have been assessed
without an appeal.
One customer commented that resource withdrawal penalties should
not be imposed retroactively, as the impact on the annual ratchet
clause in supplemental power supply contracts is overly burdensome.
Western agrees that certain supplemental power supply contracts have
ratchets that could magnify the burden of a retroactive resource
penalty caused by an administrative appeal. However, Western will not
amend the regulations to address this unlikely event. This situation
would not arise under the final regulations until 12 months after the
initial 10 percent surcharge had been imposed. The customer can avoid
the impact of a ratchet by submitting an acceptable and timely IRP to
Western.
Finally, a customer asked why, if IRPs are not required of nonfirm
purchasers of Western energy, the penalty extends to nonfirm
interruptible/diversity contracts with customers. A penalty will be
assessed on the total charges for all power obtained by a customer from
Western and will not be limited to firm power charges. If a customer
has more than one long-term firm power contract with Western, the
penalty will be imposed under each contract. Under EPAct, 42 U.S.C.
7276b(e), these penalties apply to ``all power'' purchased from Western
by a customer which is in non-compliance; the penalty is not limited to
firm power.
C. POWER MARKETING INITIATIVE
1. Applicability
a. Background
In the proposed Program, the Pick-Sloan Missouri Basin Program-
Eastern Division and the Loveland Area Projects were proposed for
initial coverage under the Power Marketing Initiative. Western proposed
to defer making any decision about applying the PMI to the Central
Valley Project, which is the subject of a project-specific marketing
plan and associated EIS for the post-2004 time period. Western further
proposed to evaluate application of the PMI to the Salt Lake City Area/
Integrated Projects after its power marketing EIS is completed and the
associated marketing criteria and contract changes are implemented.
Finally, Western also proposed to evaluate application of the PMI to
the Parker-Davis Project and the Boulder Canyon Project no sooner than
10 years before existing contracts expire.
b. Comments and Discussion
A comment was received concerning Western's statement that its
customers have no equity position in Western's facilities, and that no
right exists to power in the absence of a contract. The comment further
states that this is not precisely true for the Boulder Canyon Project,
where there is a statutory allocation of power and upratings funded by
certain customers. The first of two other comments received on this
subject suggests that Hoover should be excluded from PMI applicability
in the final rule due to the statutory nature of the Hoover allocation.
The second states that the customers do not understand Western's
intentions on application of the Power Marketing Initiative to Hoover
and that Western needs to conduct workshops and hearings before
implementation takes place. Western has not proposed to apply the Power
Marketing Initiative to the Boulder Canyon Project at the present time.
The Boulder Canyon Project long-term firm sales contracts do not expire
until 2014. Western cannot make sound decisions today about how this
power might be marketed starting 20 years into the future. Western will
evaluate the applicability of the PMI to the Boulder Canyon Project no
sooner than the year 2004. No decision to apply the PMI will take place
until an appropriate public process takes place. At that time,
statutory interpretation issues can be addressed.
Comments were received suggesting that the Central Valley Project
should recognize the Sacramento Municipal Utility District's right to
31 percent of CVP power through the year 2014 and that the first
preference customers under the 1962 Flood Control Act should be exempt
from any loss of allocation under the Power Marketing Initiative.
Western does not intend to abrogate the statutory right of CVP first
preference customers pursuant to the Flood Control
[[Page 54158]]
Act of 1962. Nor does the Power Marketing Initiative impact the
contractual right of the Sacramento Municipal Utility District to
receive a defined share of CVP resources between 2004 and 2014. Section
905.30(b) of the final rule accommodates these concerns by stating that
the PMI will apply ``if consistent with other contractual and legal
rights.'' This broad statement of applicability protects the interests
of the commenters.
Western received several comments that favored applying the PMI to
the CVP. The comments had a common theme that the stability and
certainty of the CVP resource is critically important and that Western
should apply the PMI to the CVP now, and not wait until the 2004
marketing plan to make a decision on resource levels or contract term.
Western was also asked if the application of the PMI to the CVP would
take place with or without a public process. These comments also state
that applying the PMI to the CVP will assure consistency across all of
Western, and allow the 2004 process and the customers to focus on other
issues. The commenters believe that a definite level of commitment and
contract term, known now, is worth trading for larger percentage
allocations and longer contract terms in a more uncertain future and
that applying the PMI to the CVP will streamline the CVP EIS process,
and integrate the planning process between the two programs. Western is
impressed by the comments favoring an immediate but limited application
of the PMI to the Central Valley Project, subject to the findings of
the project-specific EIS currently underway. However, Western wants to
protect the integrity of the ongoing project-specific marketing
process. Application of the PMI to the CVP is best addressed in the
separate public process.
One comment expressed appreciation for the decision not to propose
application of the PMI to CVP and the SLCA/IP at this time, as large
adjustments of marketable resources will be needed to meet
environmental concerns for these projects. This comment expressed
concern that the Program will create a precedent for these two
projects. Western sees no reason to change its initial proposal to
evaluate applicability of the PMI after the Salt Lake City Area/
Integrated Projects Electric Power Marketing EIS is completed and the
associated marketing criteria and contract changes are implemented.
These steps are scheduled for completion in the near future. Western
expects to start the evaluation process soon thereafter.
A comment was received questioning the decision to apply the Power
Marketing Initiative to the LAP given that existing contracts do not
expire for another 10 years. Other comment received supports
application of the PMI to the Loveland Area Projects after the 1999
resource adjustments are complete. Western did not change its proposal
regarding application of the Power Marketing Initiative to the Loveland
Area Projects. No resource extension offer will take place until the
analysis of potential LAP resource adjustments in 1999 has been
completed. The analysis and implementation of any 1999 resource
adjustments will take place no later than 1996. Given the time period
that it takes to develop alternative resources to replace unextended
LAP power, application of the PMI to LAP now is prudent. The resource
certainty that results will assist Western's customers in developing
effective integrated resource plans.
2. Contract Term
a. Background
In the proposed Program, an 18-year contract term was proposed,
with the contract term to start from the date existing contracts
expire.
b. Comments and Discussion
Western received many comments supporting extending the contract
term from 18 to 20 or 25 years. The reasons customers overwhelmingly
supported extending the contract term follow: a longer term would help
short and long range planning; a longer term would add resource and
rate stability; a longer term would benefit the environment by
customers being more willing to make financial commitments to
environmentally sound project enhancements; a 20 year term would be
consistent with the IRP submittal cycle of 5 years; a longer term would
be comparable to the amortization of long term investments in base load
power plants and renewable resources; a longer term would correspond to
existing all requirements contracts; an eighteen year term may
jeopardize Western's obligations under an existing exchange
arrangement; an eighteen year term would require existing customers
that contracted for Federal power when it was not economical to give up
too much of their existing benefits without equitable treatment; a
longer term conforms to the Tennessee Valley Authority practices; and a
longer term would allow customers to make commitments to demand side
management programs and capital-intensive renewables. Western is
persuaded by the comments supportive of a longer contract term. Section
905.31 of this final rule establishes a 20-year extension of resources.
In developing a proposal for the length of the resource extensions,
Western has considerable discretion. One of the limits on that
discretion is the prohibition, as set forth in the Reclamation Project
Act of 1939, on power sales contracts with terms in excess of 40 years.
Western may legally consider commitments of power up to, but not
beyond, this 40-year maximum.
Western adopts a resource extension period of 20 years for several
reasons. This time period is long enough to maintain a sufficient
customer planning horizon. Long-term project financing, whether for
supply-side, demand-side, or renewables, would be feasible with such an
extension. Western agrees that financing of renewable resources is
particularly sensitive to Federal hydropower resource uncertainty.
Twenty years will maintain the resource and rate stability necessary
for effective integrated resource planning. At the same time, 20 years
is not so long that Western cannot reasonably guarantee the
availability of the extended resource. The proposal of a graduated
resource pool available to new customers gives Western the flexibility
to allocate power equitably over the term of the contract.
Western's goal is to provide a sufficient incentive for new
customer preparation of IRPs and to offer a contract term compatible
with the time horizon for other resources evaluated in IRPs. Another
goal is to reduce the amount of Western, customer, and public time and
resources spent on marketing plan development. An extension of resource
commitments for 20 years beyond the expiration date of contracts with
existing customers would mean that new contracts would be in place
until at least 2020. In other words, initial extensions would be about
25 years from the date that extension commitments are offered to
customers of the Pick-Sloan Missouri Basin Program--Eastern Division;
this time period approaches the average useful life of thermal
generation.
Western agrees that a 20-year contract term is more comparable to
those existing between the Tennessee Valley Authority and its
customers. Western also agrees with the comments suggesting that a 20
to 25 year contract term is consistent with industry standards for firm
sales. Recently issued RFPs have also entertained resource acquisition
options on a long-term basis. Western also concurs with the comment
[[Page 54159]]
that a 20-year contract term fits better with the 5 year IRP
preparation and approval cycle.
The selection of a 20-year extension contract term helps to answer
the comment that the proposed Program asked existing customers to give
up too much. The additional 2 years helps to provide an appropriate
balance between existing customers, who in many cases chose to enter
into hydropower contracts with the United States before the economic
benefits of such a choice were clear, and other needs reflected in the
Program.
Western believes that adoption of a relatively short contract term
could impact the resource stability required to meet Western's
obligations under the exchange arrangement with the Salt River Project.
In particular, the pattern of power allocations over time could change
the use of Colorado River Storage Project transmission, which could in
turn impact the exchange arrangement. Twenty year contracts support the
resource stability that in turn impacts usage of Western's transmission
system.
A comment was received that stated eighteen year contracts are 3
years too long. According to this comment, most of the power contracts
that Western has signed have been for 15-year terms, and a 15-year
extension strikes the right balance between the customer's need for
certainty and the Federal government's desire for flexibility so the
changing needs of the West can be addressed. Western agrees that many
of its historic contract terms have been 15 years in length. Currently
effective contracts for the sale of power from the Pick-Sloan Missouri
Basin Program--Eastern Division, the Loveland Area Projects and the
Salt Lake City Area/Integrated Projects are all 15 years in length.
However, a significant number of contracts have been in excess of this
time period. Power sales contracts for the Parker-Davis Projects are 20
years in length, while the currently effective Boulder Canyon Project
contracts are 30 years. Contracts for the sale of Central Valley
Project power have variable terms, with the longest contracts
approaching 40 years in length. The historic precedent for contract
length is not confined to 15-year commitments, and is consistent with
the 20-year term adopted in the final Program regulations.
A comment received suggested rollover 18-year extensions every 5
years upon submittal of an updated IRP. A rolling extension of
contracts on a long-term basis at the customer's option, upon submittal
of future IRPs to Western, would cause hydropower resources to be
extended too far into the future for Western to respond to changing
circumstances over time.
Western has provided for resource adjustment capability as part of
the PMI. Initial extensions would be based on the resource available at
the time existing contracts expire. This allows Western to respond to
changes in operations at Corps of Engineers (Corps) and Bureau of
Reclamation (Reclamation) hydroelectric plants before the term of
contract starts for extended resources. In addition, Western can make
further adjustments in its marketable resources in response to changes
in hydrology and operations upon 5 years' notice. Because of this
capability, no need exists to extend resources for a minimal time
period to protect fish and wildlife resources. The impact of the PMI
can be summarized as an extension of existing commitments, with the
recognition that adjustments to the marketable resource as a result of
operational accommodations for fish and other wildlife resources can be
accomplished within the extension framework.
Western realizes that the draft EIS predicted relatively greater
environmental benefits for contract terms in excess of 20 years.
Western's proposal balances environmental benefits associated with
resource certainty against the need for flexibility to respond to
changing circumstances over time.
Some of Western's customers suggest that since they have paid for
projects in the past, they should have first call on resources in the
future. Western agrees that the resource choices made by customers in
the past have led to the construction or purchase of certain
supplemental generating resources, as well as investment in
transmission resources or negotiation of transmission service
contracts. Western does not want to disrupt regional power supply and
transmission arrangements at considerable economic and environmental
cost to the area. At the same time, Western's existing customers have
no equity position in Western's facilities, and they have no right to
receive power from Western in the absence of a contract. Western
believes the public interest is served by having the flexibility to
meet a fair share of the needs of new customers from the publicly owned
and financed hydroelectric facilities in the West.
Western agrees with a comment received that states the Program does
not provide its customers with absolute resource certainty. Instead,
the Program attempts to provide as much certainty as possible to
facilitate the development of integrated resource plans, while
retaining the flexibility to respond to changing conditions and
evolving needs.
A comment received stated Western should consider a longer contract
term, such as the 35-year term associated with FERC relicenses. This
comment recognized how virtually all access to hydropower is controlled
by Federal policy, either through FERC or the power marketing
administrations, but the costs for that power differ. FERC licensees
pay only for capital costs and O&M, while CVP customers must subsidize
other project purposes such as those under the Central Valley Project
Improvement Act. Differences in commitment lengths between FERC
licensees and CVP power sales contracts only compound the inequity in a
competitive and price-sensitive market. These comparability factors
should be an additional basis for extending contracts for the longest
possible term.
In response to these comments, Western notes that the holder of a
FERC license typically plans, funds, and constructs the hydropower
resource itself. A long-term license is appropriate in such a case,
given the length of the construction debt service and the
responsibilities of the licensee. With Western's resources, the
planning, construction, financing, operation, and maintenance of the
hydroelectric generation and high-voltage transmission is usually the
responsibility of the United States. Since the two situations are not
strictly comparable, Western feels that a proposal of a 20-year term of
contract is appropriate.
Western agrees with the comment that the utility industry is
increasingly dynamic, and that utilities must be flexible and forward-
looking in order to be successful. The IRP requirement in this Program
will provide Western's customers with the tools necessary to succeed in
a changing utility climate.
Many comments were received from the public indicating that an
extension of resources would assist IRP and not hinder future resource
planning.
Western does not agree with the comment that long-term contracts
will be a disincentive to improving energy efficiency. Short-term
contracts cause customers to focus on the uncertainty surrounding the
Western resource, rather than looking to implementation of cost-
effective energy efficiency and DSM to meet future needs. Western only
provides a portion of the resource needs of its customers, about 30
percent on average Western-wide. The cost of supplemental resources,
whether supply-side or demand-side, is usually significantly higher
than the cost of
[[Page 54160]]
Western's resources. Supplemental resource prices provide a significant
incentive to implementation of cost-effective energy efficiency
improvements.
Some customers indicated that their willingness to fund
environmental improvements would be impacted by short-term contracts.
Western agrees that short-term contracts could be a disincentive to the
implementation of environmentally beneficial project improvements in
support of the Clinton Administration's climate control action plan.
Several comments were received stating that Western power preserves
the competitive balance in the utility industry. Western's hydropower
commitments provide a yardstick that enhances competition in the
utility industry within Western's marketing area. Twenty-year contracts
help preserve the competitive balance in the regional utility industry.
3. Extension Percentage
a. Background
Western proposed to extend a major percentage of the power
currently under contract with long-term firm power customers. The exact
percentage to be extended would be determined on a project-specific
basis, based on the amount of power needed to meet a fair share of the
needs of potential new customers within the marketing area.
b. Comments and Discussion
Western received numerous comments that support a contract rate of
delivery extension of 97 or 98 percent. One comment did not support a
resource pool. Some comments were specific and suggested that current
allocations should be the basis for application of the extension
percentage or that the percentage withdrawal should be based on
customer allocations existing in the year 2000 for Pick-Sloan Missouri
Basin Program--Eastern Division customers and that withdrawals after
that time should be based on the resource available to the customer at
the time. One comment received stated that a 100 percent extension was
preferred and another comment suggested that existing customers should
receive maximum allocations.
The amount of unextended resource was determined on a project-
specific basis by assessing the amount of power that must be reserved
in order to meet a fair share of the needs of potential new customers.
In deriving the size of the initial resource pool for each project,
Western reviewed letters of interest from potential new allottees,
potential new customer load information and analysis of any hydropower
benefits currently being received by a potential new customer. Due to
significant expressions of interest by Native Americans, Western has
increased the size of the initial resource pool for those projects
initially subject to the PMI. Subsequent resource pool increments have
been reduced to compensate for the increase in the initial pool.
Section 905.32 provides that for the Pick-Sloan Missouri Basin
Program--Eastern Division and the Loveland Area Projects, Western will
reserve 4 percent of the marketable resource determined to be available
at the beginning of future resource extensions. Subsequent increments
of the resource pool have been reduced to no more than 1 percent.
The final rule recognizes that power reserved for new customers but
not allocated and resources offered but not placed under contract may
become available. Section 905.32 (e) provides that this power will be
offered on a pro rata basis to existing customers that contributed to
the resource pool through application of the extension formula. No firm
power is expected to go unmarketed at any time.
The Program provides for the creation of two additional resource
pool increments in the future for all of Western's projects covered by
the PMI. At two intervals of 5 years after the effective date of the
extension to existing customers, Western will create a project-specific
resource pool increment of up to an additional 1 percent of the
resource under contract at the time. The actual size of the additional
resource pool increment will reflect the actual fair share needs of new
customers and other purposes as determined by Western.
Western believes that the final Program provides an appropriate
balance that recognizes the importance of certainty in customer
planning efforts. An extension of Pick-Sloan Missouri Basin Program--
Eastern Division and Loveland Area Project resources at a 96 percent
level is substantial enough so existing customers will not have to
build new generation or enter into large purchases of thermal
generation. A lesser level of extension could cause customer pursuit of
other resources, with potential associated economic and environmental
impacts. The resource planning of auxiliary suppliers would be
disrupted by the nonextension of a significant percentage of Federal
power.
One comment stated that the percentage reduction should be applied
to the allocation existing at the time, not the resource existing at
the time of the contract extension. The current allocations to the
customers will not be adopted as the basis for application of the
resource percentage, as this approach could limit Western's short-term
capability to adjust its marketable resources in response to changed
operations and hydrology. Western believes a more flexible approach
would be to apply the percentage to the marketable resource that is
determined to be available at the beginning of future resource
extensions. In this way, changes in operations or hydrology between
today and the time existing contracts expire can be readily
accommodated.
One of two comments received concerning the resource pool stated
that given the great sacrifice of an initial 3 percent resource pool,
the 1.5 percent additional increments should be based on the resource
available at the time, while the other comment said there was no need
for two additional resource pool increments. Another comment stated
that they support a 2 percent resource pool. In the case of creation of
resource pool increments subsequent to the initial pool, Western agrees
with the comments that the percentage should be applied to the resource
available at the time. The proposed Program, which suggested
application of all percentages to the resource available at the time
existing contracts expire, had some disadvantages. Application of the
percentage to the resource available when existing contracts expire
could create administrative confusion if the actual resource under
contract was different. If the resource available several years into an
extension contract was less than the marketable hydropower at the
beginning of extension contracts, application of a percentage to the
earlier, larger amount would create a higher effective percentage as
applied to the existing resource. Western agrees with the comments
recommending a change in the proposed approach. The final rule reflects
this more simplified method.
One commenter points out that Western has not shown any reason for
increasing the Pick-Sloan resource pool above 3 percent. The initial
Pick-Sloan resource pool has been increased to 4 percent in the final
rule, to assure that a fair share of the needs of Native Americans can
be met. The rationale for creating two future resource pool increments
of up to 1 percent each is to meet future needs that Western cannot
currently identify. This flexibility is necessary to support a 20 year
contract term.
[[Page 54161]]
Western understands the comment expressing concern about tying
future allocations to a percentage of an amount to be determined,
especially when Western may not know what it has to market from the
Missouri River Basin generation until after the year 2000. Although
Western appreciates the suggestion that a percentage of today's
contractual amount be extended with an option to adjust the extended
resource, others have expressed the concern that such an approach would
create unwarranted power availability expectations on the part of firm
power customers. Western believes that either adoption of this comment
or retention of the approach of the proposed Program will lead to the
same resource commitment. Western chooses to retain the approach of the
proposed regulations.
One customer commented that a 97 percent initial extension level
asks existing Pick-Sloan customers to give up too much, especially when
coupled with the additional resource pool increments, exposure to
adjustments due to changes in hydrology and operations, and withdrawals
for project use. In contrast, another comment was received that the
resource pool percentages should be increased to a 6 percent initial
level, followed by two additional increments at 5 percent each. For the
reasons stated earlier, Western believes the final rule strikes an
appropriate balance among the relevant considerations.
Western recognizes that existing customers made an historic choice
to pursue Federal hydropower and that some customers elected to
purchase this resource before the economic advantages were clear.
However, Western does not believe that the historic enjoyment of the
benefits of Federal hydropower means that a customer has a perpetual
right that cannot be diminished. Western's policy of promoting
widespread use and the potential allocation of power to new preference
customers must be balanced against the fact that existing customers
have developed contractual relationships with supplemental suppliers,
transmission arrangements with Western or third parties, and in some
instances have constructed transmission facilities to receive Federal
power. Western believes that this final rule provides for a proper
balance among these policy considerations.
Comments concerning the marketable resources or the loss thereof
for the Salt Lake City Area/Integrated Projects and the Central Valley
Project were received that suggest that an additional 2 percent
resource pool seems inappropriate for the Salt Lake City Area/
Integrated Projects; that the resource pool for the Central Valley
Project may be premature and too restrictive; that extensions for CVP
resources should be in the 90-95 percent range and CVP unbundled
services should be offered pro rata in 2004 in line with these
percentages; that there is support for limiting the CVP resource pool
to no more than 6 percent of the available resource which would
minimize any disruption of customer planning efforts and avoids
confusion between allocation issues and resource availability, yet
allows Western to distribute the benefits of Federal power to new
customer; that a 3-5 percent initial CVP resource pool is reasonable
given the changes that are taking place within the industry; and that
the initial CVP pool should not be larger than 2 percent given the two
additional increments.
In the final rule, Western has not defined the size of the initial
resource pool for the Central Valley Project and the Salt Lake City
Area/Integrated Projects. The actual size of resource pools for these
projects will be determined at a later date through project-specific
public processes. Comments relating to these resource pools should be
advanced at that time.
Western received a comment that stated that the Master Operating
Manual process and the adverse impact of Corps of Engineers operations
on wetlands, fish and wildlife and endangered species will likely
affect electricity production on the Missouri River. Similar changes
are possible on the Platte, Arkansas and Rio Grande rivers. Western's
proposal will create an expectation that 94 percent of existing
allocations will be reserved for existing customers. This will make it
difficult to modify dam operations in the future. Evidence from the
comments received on the draft EIS suggest that 6 percent is not enough
to meet the needs of new customers and to respond to changing
environmental concerns.
Western does not agree that the resource pools for the Eastern
Division of Pick-Sloan and the Loveland Area Projects should be
increased in size to enhance the ability to modify dam operations.
Ample opportunity exists under the Program to adjust marketable
resources in response to changes in reservoir operations. In the short-
term, Western can accommodate such changes by applying the extension
percentages to the marketable resource determined to be available at
the beginning of future resource extensions. Operational decisions by
the generating agencies in the shorter term will be reflected in the
initial commitment to customers, as the extension percentage will be
applied to the resource available at the time current contracts expire.
Over the longer term, Western can adjust its commitments on 5 years'
notice due to changes in operations and hydrology. Western is not
creating a customer expectation that a percentage of existing
allocations will be reserved for existing customers. Considerable
flexibility exists in the final regulations to address the concerns
raised in this comment.
No evidence has been produced to show that 6 percent is not enough
to meet the needs of new customers. Environmental concerns will be
addressed through the extension approach and withdrawal opportunities
explained above, and not through use of the resource pools. Six percent
should be more than is needed to meet a fair share of the needs of
potential new customers. Western sees no reason to create a resource
pool larger than that needed to meet a fair share of the needs of
potential new customers.
4. Resource Pool Creation
a. Background
In the August 1994 Federal Register notice, Western proposed the
creation of project-specific resources pools through a reservation of
power not extended to existing customers. Existing customers with an
allocation of one MW or less were not subject to the reservation. New
customers receiving an allocation from an initial resource pool were
not subject to withdrawal to form subsequent resource pool increments.
The possibility of extending resources on a graduated scale, weighted
towards some customer characteristic, was suggested early in the public
process.
b. Comments and Discussion
Western received many comments on the issue of equity in the
proposed creation of the resource pool. The majority of the comments on
the issue objected to special treatment for customers with an
allocation of one MW or less. Specific comments are that Western has
provided no justification for exempting entities with a contract rate
of delivery of one MW or less from resource pool creation, that the
administrative burden of withdrawing power from entities with small
allocations is not great; that it is inequitable to have an exemption
from contributing to resource pools for customers with allocations of
one MW or less; and that all resource reductions should be shared pro
rata, with no exceptions for certain customers.
Western's rationale for exempting small entities from a
contribution to the
[[Page 54162]]
resource pool was threefold. First, Western felt that the benefits
associated with small allocations of hydropower would be diluted if all
customers contributed to the resource pool. Second, the administrative
issues of applying resource extension percentages to small allocations
influenced Western's proposal. Third, there were not many entities with
allocations of one MW or less, so the impact of the proposal on other
customers was not large.
Upon further consideration, Western withdraws the proposal to
exempt entities with allocations of one MW or less from contributing to
the resource pool. For some small customers, an allocation of one MW
represents a high percentage of their total load. Exempting an entity
because of the size of their allocation is inequitable if that customer
has a high percentage of its needs met by Western. The administrative
issues underlying the original proposal are manageable. In fact,
creating separate classes of customers leads to its own set of
administrative issues. The fact that a small amount of power is
involved is not dispositive, as the issue is more one of equity and
fairness than one which hinges on the amount of power involved.
Western agrees that the proposed Program was not consistent in its
treatment of customers with small allocations. For example, Western did
not propose to insulate customers with small allocations from
withdrawals for project use or from withdrawals of marketable resources
due to changes in operations and hydrology. The final rule eliminates
this inconsistency by treating all customers alike.
Several comments suggested that the one MW limit on withdrawals
should apply even if the entity is a member of a member-based
association or an IRP cooperative. With the elimination of the one MW
exception, these comments are no longer relevant and need not be
addressed.
Other comments were that withdrawals should apply to all customers
with no exception for new customers; that allocations to new customers
should be allowed to increase rather than automatically be reduced in
their infancy through use of the extension formula; and that power
reserved for project use should be used for new customers instead of
taking it away from existing customers. This is another issue that
received a number of equity-based comments--Western's proposal to
exempt new customers receiving allocations out of the initial resource
pool from withdrawals to create future resource pool increments. The
rationale for this proposal was to avoid the dilution of recently-
received hydropower benefits.
After considering these comments, Western has decided to abandon
this aspect of its Program proposal. There is no strong policy reason
to depart from equitable treatment for all customers. A new customer
contribution to future resource pool increments would not be a large
amount of power, so the benefits of the Western allocation out of the
initial resource pool would not be diluted significantly. The
administrative complications that arise from creating more than one
class of firm power customer for withdrawal purposes are avoided by
treating all customers the same.
Customers also commented that Western should only create a resource
pool if there are set time periods, restrictions as to amount, and
defined customer demands; more consideration must be given to how
resource pool power will be priced and marketed; and subsequent
increments of the resource pool are inconsistent with Western's stated
goal of resource stability. Western concurs with the comment that a
resource pool should only be created if there are set time periods and
restrictions as to amount. However, it is difficult to define precisely
the demands of new customers prior to creation of the resource pool.
That can only be done after a call for applications is published in the
Federal Register, and applications are actually received. Western
cannot precisely define the needs of new customers at this time.
Instead, Western has promoted the widespread use of its hydropower
resources through establishment of a resource pool based upon a fair
share of estimated needs. If the pool size is too large, the
unallocated power or power not placed under contract is returned to the
customers who contributed power towards the initial resource pool on a
pro rata basis.
Western intends to charge new customers the same rate for power as
that charged to existing customers. Western will not purchase resources
for new but not yet identified customers, as the appropriate level of
Western's marketable resources should be determined through a project-
specific analysis of hydrology, project use load, losses and reserves.
Committing resources beyond this level would increase the risk of
purchasing firming resources.
Comment was received that the proposed Program does not recognize
that some customers get a high percentage of power from Western while
others do not. On the whole, little support was received for the
concept of extending resources on a graduated-scale basis. The issue
here is whether extensions should be offered on a pro rata basis to all
existing customers or if extensions should take place on some other
basis, such as the percentage of the total customer load that is served
by Western. Given the lack of significant public support for the
graduated scale concept and the associated administrative complexities,
Western has adopted a pro rata policy under which existing customers
will receive the same treatment in the application of the extension.
Comment was received that the wide variation in percentage of
customer load served from the Central Valley Project should be
addressed through the PMI. While Western will not depart from the
general policy of a pro rata extension of resources, Western's
Sacramento Area Office reserves the right to achieve more parity among
allocations to existing CVP customers. Allocations to existing
customers may be made out of the CVP resource pool to assure that each
customer has some minimum percentage of its needs met by Western. This
will be considered during the public process on the CVP power marketing
plan.
According to some commenters, the creation of subsequent increments
of the resource pools are inconsistent with Western's stated goal of
resource stability. To a limited extent, this comment is correct. The
final Program strikes a balance between the need for resource stability
and the need for flexibility to meet changing circumstances.
One customer commented that Western should use energy efficiency
improvements rather than withdrawals from existing customers to create
the initial resource pool, while another stated that savings
opportunities recognized in Western's use of IRP principles can be used
to develop resource pools, reducing the need to withdraw from existing
customers. To the extent that cost-effective energy efficiency
improvements can be captured, Western will take steps to make such
improvements a reality. Potential for such improvements could be
identified through the use of principles of integrated resource
planning. Flexibility has been retained in the Program to allocate
power available due to implementation of such efficiencies. If adopted
on a project-specific basis, Western could use efficiency improvements
to offset the need to form a resource pool through withdrawal of power
from existing customers.
[[Page 54163]]
Some of Western's projects have reserved power for future project
use loads, but have not marketed this resource as firm power on a
withdrawable basis. As an example, this marketing approach is used by
the SLCA/IP. If proposed and adopted on a project-specific basis,
Western could use project use power, marketed on a withdrawable basis,
to offset the need to form a resource pool through withdrawal of power
from existing customers.
5. Resource Pool Uses
a. Background
In the proposed Program, Western advanced a concept to allocate
power out of project-specific resource pools to new preference
customers within the marketing area, and to meet other purposes as
determined by Western. The specific terms and conditions associated
with allocations out of each resource pool would be determined during
future, project-specific public processes.
Western said it expected to make allocations to Native Americans
for use on the reservation, and would consider making allocations to
national parks, public mass transit agencies, in support of renewable
resources and fish and wildlife habitat.
b. Comments and Discussion
Comment was received that new customers don't need resources and
that they just want cheaper resources at the expense of those who made
wise long-term decisions many years ago. Western does not necessarily
agree that new customers don't need resources. Load growth could create
such a need, as could expiration of a purchase power contract or the
retirement of generation. One of Western's goals in the PMI is to
achieve widespread use of Western's resources. Reservation of a modest
percentage of resources to create a resource pool is consistent with a
policy of encouraging widespread use of Federal hydroelectric power.
One customer commented that the resource pool should be first used
to make adjustments in response to changes in operations/hydrology.
Western does not agree. In response to public comments in favor of
equity among all customers, Western has adopted in this final rule a
policy of treating new customers and existing customers alike. Making
the resource pool subject first to adjustments would discriminate
against new customers when allocations are made from the pool before
adjustments take place. Given the adoption of a separate resource
adjustment mechanism in these regulations, there is no need to make the
resource pool subject to resource adjustment.
It was suggested that all resources be marketed, and that resource
pools should have a maximum ceiling, but should only be allocated to
meet new loads that actually develop. Western agrees that all available
resources should be marketed. The intent underlying the PMI is to
market as much firm resource as would have been marketed in the absence
of the PMI. Allocations out of each resource pool will be completed
before the term of the extension contract begins. Power reserved in a
resource pool but not allocated and resources offered but not placed
under contract will be offered to existing customers that contributed
to the resource pool, in accordance with the final rule. The comment
which asks that resource pools have a maximum ceiling has been adopted
in the final rule.
Comment was received that under the current proposal an existing
customer will not be eligible to receive power out of a resource pool;
an existing customer receiving power from only one Federal project
would be precluded from applying for power from another project's
resource pool; and that this is a clear departure from Reclamation Law.
In the past, Western has allowed preference entities to receive power
from more than one project when marketing areas overlap. Given the
significant new customer load that exists in portions of Western's
service territory, Western is not willing to continue this policy on a
Western-wide basis. On this issue, Western will retain the flexibility
set forth in the proposed Program. An existing customer will not be
eligible to receive power from a resource pool unless Western provides
otherwise on a project-specific basis. Comments on the eligibility of
existing customers to receive resource pool power will be accepted as
part of the project-specific public process.
Comment was received favoring use of the Central Valley Project
resource pool to achieve a fairer distribution of power. Western
reserves the right to use the CVP resource pool in this manner, subject
to public input received during a project-specific public process.
Several comments advocated allocations of resource pool power to
customers with renewable resources in their mix and customers that have
documented efficiency improvements through IRP. Other comments suggest
that new customers represent emerging markets for Western, or that
allocations to the Federal government have national benefits. Since the
specific criteria associated with allocations to new customers will be
determined during future, project-specific public processes, these
comments are more appropriately raised and addressed at that time.
Customers commented that sales from the pool should be on the same
terms and conditions as with other contractors. Western also received
comment that a definition of ``fair share'' is needed. Western agrees
that sales from the pool should be on the same terms and conditions as
with other contractors. No definition of ``fair share'' will be adopted
as part of these regulations due to the difficulty of developing a
meaningful definition on a Western-wide basis. A specific determination
of ``fair share'' will be developed during the project-specific
allocation processes, which will take place during a time period closer
to the expiration date of existing contracts.
6. Resource Adjustment
a. Background
In the August 9 Federal Register notice, Western proposed to adjust
its long-term firm resources only in response to changes in hydrology
and river operations. Existing customers would receive at least 5
years' notice before adjustments are made.
b. Comments and Discussion
Comment was received that Western should change its marketable
resource in response to changes in operations after the extension term
begins only if such a change adversely impacts Western's ability to
meet its contractual obligations. Under the PMI resource adjustment
provision, section 905.34, however, Western retains the flexibility
needed to react to either changes that are adverse or beneficial to
Western's marketable resource. Western will not limit the exercise of
this adjustment provision to circumstances that adversely impact our
ability to meet contractual obligations.
A customer commented that any changes to marketable resources--not
just significant changes--should be subject to a public process, and
that adjustments in resources should be triggered only by changes in
river hydrology or mandated operating adjustments such as new
legislation and that if other factors affect determination of the
allocated resource, Western should conduct public proceedings. Western
agrees that any changes in our long-term marketable resource should be
subject to a public process. Western also agrees to limit the exercise
of this
[[Page 54164]]
resource adjustment provision to changes in hydrology and operations.
It was suggested that adjustments to contract rates of delivery be
limited to no more than 5 percent. Some customers also commented that
they support the 5 year window to make changes in resources based upon
changes in operations/hydrology. A 5 percent limitation on contract
rate of delivery adjustments would enhance the stability of Western's
hydropower commitment, but would not give Western the flexibility it
needs to react to changing circumstances such as generating agency
adjustments to operations.
Western has experienced adjustments in operations that have
impacted long-term firm power in excess of 5 percent in the past.
Western needs the ability to react to these situations, even though
they may be infrequent in nature.
Finally, comment was received concerning the withdrawal
opportunities not likely being large enough to manage future
environmental problems, encourage renewables, or meet the needs of new
customers. Comment was also received that the added flexibility that
Western has proposed on resource withdrawals is good. The more open-
ended approach in the final rule should satisfy the concern that the
withdrawal opportunities are not likely to be large enough to manage
future environmental problems. Other provisions of the Program, or
separate Western initiatives, will encourage renewables and meet the
needs of new customers.
7. Notice
a. Background
Western has proposed the creation of an incremental resource pool
that makes power available for potential new customers over time,
without the disruptive influence of creating a large pool all at once,
before the need exists. At two intervals of 5 years after the effective
date of the extension to existing customers, Western proposed to create
a project-specific resource pool increment of up to an additional 1.5
percent of the marketable resource. No provision for the timing of any
advance notice was proposed.
b. Comments and Discussion
Comments were received that Western needs to better define the
conditions and the notice provisions for future withdrawals of power,
and that advance notice of incremental resource pool reductions should
range from 2 to 5 years. Western agrees that customers need to have
advance notice of the amount of future withdrawals of power. Five
years' notice appears to be too long given the relatively low ceiling
of 1 percent of the marketable resource available at the time, and the
5 year intervals between the initial resource pool and the two
subsequent pool increments. Instead, Western has added a notice
provision that gives customers at least a 2 year notice on withdrawals
to create subsequent resource pool increments. The conditions for
future withdrawals of power will be defined on a project-specific
basis.
Comment was received that Western needs to clarify how it will
notify customers about the availability of power due to penalty
imposition. Other comment suggested that such power should be marketed
in the same Area Office region first, and that Western needs to
reconcile the reinstatement of power proposal with the notice to be
given to those purchasing the penalty power. Western plans to provide
notice to all long-term firm power customers within the project's
marketing area. Of these customers, only those not currently being
penalized for non-compliance with the IRP/small customer plan provision
of these regulations may be offered an opportunity to place the penalty
power under contract. The comment regarding the need to reconcile the
reinstatement of power with the withdrawal notice timing is valid. The
regulations have been changed to avoid any conflict.
8. Native American Issues
a. Background
In the proposed Program, Western expressed an expectation that
resource pool power would be made available to Indians for use on the
reservation. No utility status was required as a prerequisite to
receipt of an allocation.
b. Comments and Discussion
Western has taken several steps toward assisting Native Americans
in meeting their needs for cost-based hydroelectric power. In the past,
the benefits of hydropower have been realized by Indians through
allocations to cooperatives that serve tribal load. In the future,
Western expects to make allocations directly to the tribes.
A number of comments were received on Native American utility
status, ranging from strong objections to eliminating the utility
responsibility requirement to strong support for eliminating it.
Interested parties commented that the definition of preference
customers should remain fixed, or otherwise the maximum will be taken
from existing customers in later resource pool increments. Western has
always considered tribes to be preference entities, but has not
historically allocated power to Native Americans in the absence of
utility status, eligible irrigation load or special legislation enacted
by Congress. Western's change in policy, through removal of the utility
status requirement, is in keeping with the spirit of DOE's Indian
policy, and recognizes the special and unique relationship between the
United States and tribal governments.
This limited and narrow policy change does not subvert the
preference clause set forth in section 9(c) of the Reclamation Project
Act of 1939. An overview of the range of preference customers Western
currently serves helps put this issue in perspective. Western has
marketed power historically both to preference utilities, such as
municipal utilities and cooperatives, and non-utilities, such as
irrigation districts, Federal installations, universities and prisons.
Utility status is required for cities to be eligible to receive Western
power under the preference clause. Salt Lake City et al. v. Western
Area Power Administration, et al. 926 F.2d 974 (10th Cir. 1991). This
precedent is not disturbed or overturned by these regulations. Western
has discretion to determine the eligibility of Indian tribes and other
entities entitled to preference in the allocation of Federal power.
This policy change is limited in scope, in accordance with the policy
underpinning described above, and is not a precedent for future erosion
of the preference clause.
Comments were received favoring a 3 percent resource pool going to
Native Americans if there is no disruption to the preference customer
currently serving those loads. Comment was also received that new
customers should be accommodated from new/expanded resources instead of
taking power from existing customers that already have rates higher
than the regional average; and expressing the view that it is not in
the public's best interest to extend preference beyond the requirement
of utility status.
No disruption to the preference customers currently serving tribal
loads need occur. Proposals for providing allocations directly to the
tribes will be developed on a project-by-project basis during the
allocation of power from project-specific resource pools. Many of the
more detailed comments Western has received on the issue of delivery of
power to Native Americans cannot be answered at this time. However,
some basic approaches have been set forth in this rule in section
905.35 and in
[[Page 54165]]
section IV of this supplementary information section. Western will
consider arrangements for the delivery of the benefits of cost-based
Federal power to non-utility Native American tribes, such as through
credits on power bills.
Customers commented that preference and cost-based pricing must be
observed and there should be no disruption to preference entities
currently serving Native Americans. Customers and stakeholders
commented that most Indian tribes already get 50 percent of their needs
through coops; the arrangements should not result in financial hardship
or additional responsibilities for the cooperative; the distribution
cooperative should be kept as part of the transaction--possibly through
the use of bill credits; the existing service territories of
cooperatives must be protected; rural electric cooperation has been
pledged to assure that delivery of power allocated to the tribes takes
place and that a monthly billing credit approach is evolving in the
Eastern Division of Pick-Sloan; and Western's allocations to tribal
members should be based on usage within the servicing cooperative's
territory. Western was also asked to put provisions in firm power
contracts with cooperatives requiring distribution of power to the
tribes at fair and reasonable costs.
Entities providing delivery services, such as rural electric
cooperatives, should be fairly compensated for services provided. No
additional responsibility will be required without appropriate
financial compensation. Preference and cost-based pricing will be
observed. Due to the decision to allocate power directly to tribes,
without regard to utility status, there should not be any threat to the
existing service territories of cooperatives because of these
regulations. Western understands that some tribes are considering
utility formation, but this action would not be required to receive a
firm power allocation from Western.
It is true that many Indian tribes currently served by rural
electric cooperatives already receive a portion of their needs from
Western through the cooperative's blended rate. The amount varies from
tribe to tribe. The magnitude of the benefit already received, among
other factors, could influence Western's development of proposed
criteria for future allocations of power from project-specific resource
pools.
There was a question as to how tribes being served by investor-
owned utilities will be handled. Western has not decided how tribes
being served by investor-owned utilities might be handled. While
Western's rural electric cooperative customers have been cooperative in
working with Western and the tribes on workable delivery arrangements,
investor-owned utilities serving reservation load have not been
similarly involved to this point. A potential exists for the investor-
owned utility community to resist comparable delivery arrangements
based upon retail wheeling concerns. This issue will be addressed
during Program implementation.
Diverse comments were received on the Pick-Sloan marketing area,
with some comments favoring expansion; other comments favoring
reduction; with most arguing for maintenance of the current Pick-Sloan
marketing area. Western does not believe that equity or the public
interest is served by adjusting the Pick-Sloan Missouri Basin Program-
Eastern Division marketing area in the Power Marketing Initiative.
Existing customers outside of the Missouri River Basin, principally in
Minnesota and Iowa, have developed contractual arrangements with
supplemental suppliers, have transmission arrangements with Western or
third parties, or in some cases constructed transmission facilities to
receive Federal power. Changing the marketing area to exclude these
customers would create unnecessary disruption in regional power supply
arrangements and lead to resource uncertainty that could hinder quality
integrated resource planning. For these same reasons, Western will not
require a larger withdrawal from customers located outside the Missouri
River basin.
A comment was received that the Blackfeet Nation should be included
in the marketing area for the Eastern Division of Pick-Sloan. The
marketing area of the Pick-Sloan Missouri Basin Program-Eastern
Division need not be expanded to include the reservation of the
Blackfeet Nation. As the reservation is east of the Continental Divide
in Montana, it is currently within the marketing area.
It was suggested that there is a potential for cooperation between
a tribe and a rural electric cooperative on integrated resource
planning. Western agrees that there is potential for cooperation
between a tribe and a rural electric cooperative on an integrated
resource plan. In addition to the benefits of joint planning and
avoiding duplication, the tribe and the cooperative could apply for IRP
cooperative status and receive an additional 6 months to submit an
initial IRP.
The intent of the Program is for the benefits of hydropower
allocations to go directly to individual tribal consumers. This is
consistent with treatment of other Western customers. Tribal councils
will be involved in the process of accomplishing this goal.
There were many comments concerning power allocations. Questions
received were: (1) Will the tribes be able to act with complete
independence in determining who receives the benefits? (2) What types
of loads are appropriate targets for Western power? (3) Who will hold
the allocation? (4) How will transmission compensation be handled? (5)
How will the closed/open reservation issue be addressed? (6) Who must
approve the agreement? (7) Who will be responsible for paying Western?
Comments stated that a tribe should be required to demonstrate the
existence of an agreement with a viable utility capable of delivering
power and that the allocation should be made to the tribe and the
utility that will transfer the resource; Western must be willing to
reduce allocations to cooperatives that would otherwise benefit from
allocations to tribes; the benefit of the allocation should be
reflected on the power bills of the tribes; and allocations for tribes
should be based on ``usage by tribal members within the preference
customer's service territory.'' Western sees no need to reduce
allocations to cooperatives that would otherwise benefit from
allocations to tribes. In the Eastern Division of Pick-Sloan, most of
the discussion with tribes and customers regarding delivery of power
has focused on the use of a bill crediting mechanism that could avoid
this issue of undue benefits.
Concerns have been raised over Western providing power to tribes
``for free.'' Western will not provide power to tribes free of charge.
Native Americans will pay the same rate for power as any other
customer.
Additional comments state that a resource pool of 25 percent is
needed to meet the needs of tribes in the Missouri Basin today and into
the future; the benefits of hydropower allocations must go directly to
individual tribal consumers; tribes should get all new Pick-Sloan power
resources due to changes in operations; the tribal councils should
determine how the benefits of hydroelectric power are distributed to
tribal members; Western should support a congressional super-preference
for the tribes; and Western should serve all Native American existing
load and meet all load growth with Federal power. Resale of Western's
allocations should be allowed pending a need for the power. In
response, Western maintains that the tribes should
[[Page 54166]]
receive their fair share of the marketable resources available. A power
reservation for Native Americans of 25 percent of the current
commitments from the Eastern Division of the Pick-Sloan Missouri Basin
Program is far greater than that needed to meet a fair share of the
power needs of the requesting tribes. A 25 percent resource pool would
equal 500 MW of firm power, a resource far in excess of the loads of
all potential new preference customers in the region. As documented in
the EIS, there are increased environmental impacts associated with
progressively larger resource pool sizes. Western believes that an
extension of less than 90 percent of the resource to existing customers
may lead to unnecessary power supply dislocations and potential
development of new, but largely unneeded, supply-side resources,
lessening the efficiency of the integrated system and defeating the
purpose of the Program. Western sees no reason to allocate power to an
entity in amounts greater than its loads, as this would deny a valuable
renewable resource to existing customers. It is contrary to Western's
policy and undermines Federal law to allow a customer to resell
hydropower to third parties. Neither equity nor environmental quality
is served by withdrawing power from existing customers to meet the load
growth of new customers. Western intends to allocate power to Native
Americans for use on the reservation out of project-specific resource
pools, but will determine the size of the allocation based upon the
need to meet an appropriate share of the load for eligible new
customers.
Comment was received that the resource pool be enlarged to 4.5
percent to assure the pool is not so small that it limits a tribe's
``fair share'' or that the expectations of existing customers are not
fixed too high. Over the last several months, Western has developed an
estimate of the loads that exist on reservations within the marketing
area of the Pick-Sloan Missouri Basin Program-Eastern Division.
Information on the hydropower benefits currently being received by
reservations has also been compiled. Based upon this information, and
information from customers relating to Native American loads, a 3
percent initial resource pool was proposed. Comment was received that
the proposed 3 percent initial reservation of Pick-Sloan Eastern
Division power was not enough to meet a fair share of the needs of
tribes, and should be increased to 4.5 percent. To assure that a fair
share of the load of Native Americans is met, Western has increased the
size of the initial resource pool to 4 percent.
Comments were received regarding the size of the resource pool. At
present, Western supplies about 26 percent on average of the total load
of firm power customers in the Eastern Division of Pick-Sloan. The size
of the initial pool is large enough to meet a considerably higher
percentage of tribal load than many existing customers enjoy.
Comments on the ``fair share'' concept were that Western has not
addressed the tribal arguments in support of a greater than ``fair
share'' allocation; Western's estimate that 45 MW of Pick-Sloan power
is enough to meet a fair share of the needs of the tribes is flawed
because it assumes a ``fair share'' would not exceed 70 percent and the
load analysis was based on 1990 census data when the delivery of power
would actually begin in the year 2000; and the term ``fair share''
should be discontinued because it is ambiguous and promotes
misunderstanding and mistrust. Western regrets that tribes oppose the
use of the term ``fair share'' due to its ambiguity. Western will not
define ``fair share'' in this final rule, as this determination can be
made better during the future project-specific allocation process for
new customers within the Eastern Division marketing area.
During the comment period, it was suggested that tribes should
receive all ``new'' power resources resulting from operational changes
or upgrades. In contrast, another comment asked Western to accommodate
new customer needs exclusively from new resources and not from a
resource pool. According to this commenter, if needy groups need
assistance, it should be in the form of subsidies borne by all
taxpayers and not through actions that will increase power costs for
rural America.
Equity is not served by dedicating future increases in resources,
whether due to operational changes favorable to power production or
upratings at existing powerplants, to one class of customers. The Power
Marketing Initiative provides tribes with significant new benefits. Nor
will Western limit new customer access to power to new power resources
only. The creation of a resource pool serves the policy of promoting
widespread use of hydropower. Limiting new customer allocations to
potential new power resources would create additional uncertainty for
new customers, as there is no assurance of the availability of such
resources during any defined time period.
To date, Western has received full cooperation from Eastern
Division cooperatives on the issue of delivery of hydropower benefits
to reservations. Even if unanticipated obstacles to the delivery of
hydropower benefits arise, Western retains the right to provide the
economic benefits of its resources to Native Americans directly. Given
this flexibility, Western sees no reason to include language that makes
delivery of power/power benefits to tribes a condition of firm power
sales contracts for cooperatives. Western, Native Americans and
Western's Eastern Division customers will continue to work together to
assure that the tribes receive the benefit of their allocation. Western
has responded positively to requests for assistance in negotiations.
One comment suggested that Western evaluate tribal irrigation
potential and integrate that irrigation into the Pick-Sloan similar to
the Standing Rock Sioux and the Three Affiliated Tribes under the Water
Resources Development Act of 1992. Another comment asked that more
tribes receive compensation like that received by the Fort Berthoud,
Standing Rock Sioux and Three Affiliated tribes. Special legislation
would be required to accomplish these suggestions. Western will
consider allocation of power to eligible irrigation districts in a
future, project-specific resource pool allocation process.
Western has no authority to adjudicate Indian water rights and
negotiate such rights with the states. This activity is outside the
scope of Western's mission, and should be addressed through direct
discussions with the responsible agencies.
Western will not adopt the comment that only short-term commitments
of firm power should be made pending resolution of Missouri River Basin
tribal issues. Significant resource uncertainty would continue for
existing customers in the Eastern Division if this comment were
adopted, as contracts currently in place expire in the year 2000.
Instead, Western will continue to work with tribes in the upper Midwest
in parallel with Program implementation.
Several comments were received advocating flexibility in the
allocation of Western power to Indian tribes. Instead of limiting
allocations to use on the reservation, these commenters asked that
tribal members living adjacent to the reservation and within the
servicing cooperative's service territory also be allowed to receive
the benefits of cost-based Eastern Division power. Another comment
asked how Western intended to address the closed/open reservation
issue. In order to retain the flexibility to address these situations,
this Federal Register notice states that Western
[[Page 54167]]
expects to make allocations to Native American tribes for use on the
reservation and potentially off the reservation under certain
circumstances as determined by Western. Western wants to reserve the
flexibility to tailor the allocation of power from project-specific
resource pools to meet regional circumstances.
Western was requested to advise whether the Mni Wiconi special
allocation of 6 MW is part of the proposed 3 percent resource pool. The
Mni Wiconi special allocation of 6 MW is statutory, and is not part of
the Eastern Division proposed 3 percent initial resource pool.
An objection was raised regarding the distribution of power within
the Department of Defense where the total military electrical load is
being reduced, with comment being received that a higher Federal
purpose would be served by reallocating the power to the tribes.
Western does not have the contractual right to withdraw power from the
Department of Defense to meet Native American needs. Under an existing
contract that is effective through the year 2000, Western has agreed to
allow the Department of Defense to shift its allocation among Air Force
bases under circumstances such as a base closure. Western cannot
allocate this power to tribes, as it is already contractually
committed.
One comment stated that the tribes lost over 160,000 acres of land
without just compensation when Oahe was constructed, and that the
tribes have never received the power benefits from Pick-Sloan despite
the loss of land. Just compensation for the taking of lands to
construct the Pick-Sloan Program is not an issue that is appropriately
addressed through an allocation of power by Western. When the taking of
lands took place, compensation was given to tribes. If the compensation
was inadequate, redress is available through the courts, through
special legislation, or through the agencies that took the property.
It was suggested that a special tribal nation allocation be
established from power revenues to provide just compensation. Western
has no authority to use power revenues deposited in the Treasury to
create a special tribal allocation to provide just compensation. Only
Congress can direct the use of revenues in such a manner.
Western declines to create a special class of power exclusively for
tribes. In the absence of direction from Congress to the contrary,
Western believes it is inequitable to create administratively a
special, preferential classification for Indians. Instead, Western
intends to meet the needs of tribes through allocations from project-
specific resource pools.
Nor will Western create a special IRP provision for Indians. Under
section 114 of the Energy Policy Act of 1992, Western does not have the
discretion to develop special provisions for tribes. However, Western
intends to provide integrated resource planning technical assistance to
Native American tribes upon tribal request. We are committed to
assisting the tribes to successfully develop and implement IRPs.
Comment was received that the tribe must recapture capital
ownership rights in RUS plant equipment based on the Consumer Price
Index, and that Indians should be provided technical and financial
assistance in developing a utility on a par with the rural electric
cooperatives and investor-owned utilities. No authority exists for
Western to adopt the comment that a tribe must recapture capital
ownership rights in RUS plant equipment based on the Consumer Price
Index. Nor does Western have any role with respect to disconnection of
service policies. Western will remain neutral on the issue of tribal
utility formation. Technical and financial assistance to a tribe or any
other group in support of utility formation will not be provided, as
this cost is the responsibility of the entity seeking utility status
and should not be a project cost borne by all project ratepayers.
Western was asked whether it is implementing retail wheeling.
Western is not imposing retail wheeling on its Eastern Division rural
electric cooperative customers under the Power Marketing Initiative.
The cooperatives have been supportive of the delivery of the benefits
of power allocations to tribes, and are supportive of a bill crediting
approach to accomplish Western's goals in a manner that avoids the need
for a separate transmission service arrangement.
Comment was received asking why Western was expanding its resource
allocations to tribes when the overall SLCA/IP resource was declining.
No decision has been made on the size of the resource pool for
potential new customers within the SLCA/IP marketing area. The size of
this project- specific pool will be determined at a later date. Western
is working with the Ute Mountain Utes to determine if project use power
might be made available for certain irrigation pumping loads before
existing firm power contracts expire in the year 2004.
Comments were received by customers and stakeholders that the
efforts of Western to work with the tribes on implementing the Program
is appreciated; that the United States should abandon the policy of
decimating Indian water rights through court adjudication and
negotiation with the states; the relationship between Western and
Indian tribes is expected to be one of government to government; and
Western must follow DOE's commitment to the trust responsibility
reflected in DOE's Indian Policy and ``redo'' the Program to reflect
tribes' unique relationships with the Federal government. Western
supports the Department of Energy's American Indian policy which
stresses the need for a government-to-government, trust-based
relationship. The key theme throughout the Department's policy is
consultation with tribal governments so that tribal rights and concerns
are considered prior to action being taken. Western has met with Indian
tribes and tribal representatives throughout the Program public
process, and is currently meeting with tribes located in the Missouri
River Basin on a monthly basis. To mitigate the economic conditions on
reservations within Western's marketing area, Western has responded
favorably to the comment that tribal utility status should not be
required before a power sales contract can be offered, and has also
adopted tribal comment by agreeing to enter into contracts with the
tribe directly. These policy decisions show how Western has been
responsive to the needs of tribal nations, and that the consultation
has been meaningful and substantive.
9. Resource Acquisition by Western
a. Background
In the proposed Program, Western committed to the use of IRP
principles in its resource acquisition and transmission planning
principles. This commitment has been pursued through a separate public
process, commencing with a Federal Register notice published on
December 6, 1994, 59 FR 62724.
b. Comments and Discussion
The following are comments received which were addressed in the
separate public process on the use of IRP principles by Western, or are
more appropriately addressed in the project-specific implementation of
the IRP principles: (1) Western should not develop non-hydro resources,
as this would have a negative impact on our IRP. (2) Western's resource
acquisitions should be limited to meeting contract rates of delivery.
(3) Western should identify current and future transmission development
in its IRP, as this information is critical to our IRP. (4)
[[Page 54168]]
How will Western acquire DSM? Western should not conserve its
hydroelectric power, but should market all of the available resource.
(5) Western should emphasize the purchase of energy efficiency and
renewable energy from Western customers over other resources. (6)
Western should purchase efficiency and renewables, because cost-based
rates discourage the installation of energy efficiency measures. (7) We
support IRP by Western. It would be appropriate for the Bureau of
Reclamation to use IRP principles in its pump replacements, generator
rewinds or other project enhancements and system improvements. (8) Any
reduction in Western's costs will enhance our competitive position. (9)
We do not support the concept of Western reducing customer demand
through Western's adoption of IRP principles. (10) We are unclear
whether Western could free up power resources by funding energy
efficiency and demand-side management projects. (11) We are unsure if
Western's commitment to IRP principles will apply to investments
Western is considering in the very short term. (12) We are concerned
about the timing of the adoption of IRP principles by Western--it
should apply to Navajo transmission and Glen Canyon replacement power
and to resources that have not yet been acquired as of January 1, 1995.
(13) Western should use IRP principles immediately, without waiting for
completion of the public process.
Several relevant comments will be addressed briefly here.
One customer commented that Western's use of IRP principles could
impact customer resource planning, and that Western should implement
its commitment before requiring its customers to complete their IRPs.
Additionally, Western should be sensitive to the timing of customer
IRPs and Western's use of IRP principles, especially if Western's
actions impact the amount or the price of the Federal resource. Western
agrees that its use of IRP principles could impact customer planning.
Every attempt was made to conclude the parallel public process quickly,
to provide customers with more certainty as they prepare their
individual integrated resource plans. The implementation of Western's
commitment to use principles of integrated resource planning is
described in a Federal Register notice published on June 9, 1995 (60 FR
30533).
A customer commented that it supports future contracts that allow
customers the flexibility to acquire firming resources, and urges
Western to enter into contracts to purchase customer-owned renewable
resources. Additionally, customers should be given the opportunity to
refuse Western purchase of firming energy, and should be given a
priority to purchase surpluses. Western concurs that customers be given
the opportunity to refuse Western purchase of firming energy. For all
projects receiving resource extensions under the PMI, Western will
develop contractual language which would allow the customer to assume
the responsibility of acquiring resources to firm up Western's
hydroelectric commitments if the customer so chooses.
Another customer commented that adoption of IRP principles by
Western should not mean abandonment of lowest possible cost consistent
with sound business principles; and that Western's role is one of a
marketer of power from Federal generation, and not acquiring non-
Federal power through the use of power revenues. Adoption of IRP
principles does not mean abandonment of lowest possible costs
consistent with sound business principles. To the contrary, use of IRP
principles will be a tool that will assist Western in keeping costs
low.
10. Implementation
a. Background
Western proposed to offer extension contracts to existing Pick-
Sloan Missouri Basin Program-Eastern Division and Loveland Area Project
customers upon submittal of their IRPs to Western. Western also
proposed to extend to existing customers a pro rata percentage of
marketable resources available at the time current contracts expire.
b. Comments and Discussion
Comments were received stating that actual contract rate of
delivery values need to be in the contracts extending resources because
a percentage of a resource available at the end of the term of existing
contracts does not offer customers the certainty needed to prepare a
quality integrated resource plan; that it would be extremely beneficial
to know the marketable capacity and the resources to be committed as
soon as possible--when the Corps of Engineers operating procedures are
known, the marketable capacity should be determined; that contract rate
of delivery values must be specified in the contract; and that there
should be minimum resource values set forth in the post-2000 contracts.
While Western understands the concern that actual contract rate of
delivery values need to be in contracts extending resources, or that
some minimum resource values be established, there remains a need to
retain the flexibility to respond to changing circumstances in the
short term. The development and completion of the Missouri River Master
Operating Manual EIS is one of those changing circumstances. Western
will work with customers to determine the resources and marketable
capacity to be committed as soon as possible after the Corps operating
procedures are known. If no better information is available, for
initial IRP planning purposes, Western will provide existing customers
with estimated resource commitments (based upon application of the
percentages set forth in this final rule to the resources currently
under contract).
Customers commented that contracts should be offered upon
publication of the final rule, as the added certainty would promote
quality integrated resource planning; that customers are already
required to prepare and implement IRPs under the Energy Policy Act and
there is no need for a further incentive to encourage IRP; that
contracts should be offered upon issuance of the EIS Record of Decision
subject to the submission of the customer's initial IRP; that customers
will find it difficult to develop IRPs without knowing Western's exact
commitment; and that it may be necessary to delay the signing of
Eastern Division contracts if appropriate delivery arrangements to
Native Americans cannot be worked out. Western agrees with the comments
that individual customer contract offers for those projects initially
covered under the Power Marketing Initiative should be made before
individual customers are required by Western to submit an IRP. By
adopting this approach, the new penalty provisions under the extension
contracts will be effective and available if an IRP or small customer
plan is unsatisfactory. In 905.37 of this final rule, Western has
adopted the approach that Pick-Sloan Missouri Basin Program-Eastern
Division extension contracts may be offered 30 days after publication
of this Federal Register notice. This approach provides more certainty
to customers by advancing the date of the contract offer, but retains a
powerful incentive for quality and timely integrated resource planning
by making the penalties mandated by EPAct immediately applicable
pursuant to the terms of the extension contract. Contracts for
extensions of resources for the Loveland Area Projects will not be
offered until the analysis of potential resource adjustments in 1999
has been
[[Page 54169]]
completed and any adjustments are implemented. Existing power sales
contracts require that this analysis be completed by 1996.
It was also suggested that the Salt Lake City Area/Integrated
Projects marketing plan, Glen Canyon EIS and replacement power study
should be expedited, with contract extensions accomplished concurrent
with the Record of Decision on the SLCA/IP marketing plan EIS. Western
agrees that customer resource certainty is promoted by expediting the
Salt Lake City Area/Integrated Projects marketing plan, the Glen Canyon
EIS and the replacement power study. Western is making every effort to
complete the processes we are managing, and is working with the Bureau
of Reclamation to help complete the Glen Canyon EIS as well. Western
will evaluate application of the PMI to the SLCA/IP after its electric
power marketing EIS is completed and the associated marketing criteria
and contract changes are implemented.
11. Other Marketing Issues
a. Background
Historically, Western has marketed firm power at a level defined in
project- specific marketing criteria. During periods of drought,
Western has purchased firming power to meet the obligations defined in
the marketing criteria. When water conditions are good, surplus energy
(and occasionally surplus capacity) may be available for sale on a
short-term basis. Typically, these surpluses are sold to regional
utilities. These regional utilities may or may not be long-term firm
power customers; these sales are often made to both preference entities
and investor owned utilities.
Historically, Western's project-specific marketing approach has
been based upon public comment and policy decisions made during the
development of specific marketing criteria. Some resources are marketed
on a resource pattern basis, while others are based on the load pattern
of the customer.
Western proposed to extend a major percentage of the power
currently committed to existing customers beyond the expiration date of
existing contracts. Western is not proposing to acquire new resources
to meet customer load growth.
b. Comments and Discussion
A number of commenters supported the current definition of Pick-
Sloan Missouri Basin Program-Eastern Division marketable resources and
the marketing criteria. Any change should take place under a separate
public process after consultation with customers. Several commenters
suggested that existing preference entities should have a right of
first refusal to all non-firm power at the price of production and
transmission and that non-firm energy should be sold to customers that
demonstrate feasibility of purchase in their IRP, and when that
customer can firm the hydroelectric energy. They also suggested that
resources made available as a result of penalty impositions should be
marketed to customers of the same Area Office.
There were numerous comments on how to establish the marketable
capacity. Some suggested that a separate approach may help maximize the
capacity Western has available to market. Several of Western's
customers are power suppliers that have energy flexibility with their
own resources. If that flexibility can be utilized by Western to
minimize their risk in high or low water years, the Western capacity
could be based on something other than a lower decile water year such
as a higher percentage of average hydrology. This would be a departure
from the load pattern type resource. In bad water years, the deliveries
would be lower, and the deliveries would be higher in good water years.
This would minimize the purchase and sale of firming energy. Marketable
capacity might be based on average water conditions if the customers
could handle some of the swings.
Changes to Western's project-specific marketing policies are not
appropriate in a Western-wide initiative such as the Energy Planning
and Management Program. Adjustments in Western's current marketing
approach for a specific project can be appropriately addressed in a
separate project-specific proceeding at a later date. The extension
formula provides for a pro rata commitment to existing customers, based
upon the resource available at the end of the term of existing
contracts. Changes in marketing approaches are best addressed at that
time on a project-specific basis and not during the Western-wide
development of the PMI. Marketing issues that might be appropriate for
discussion at that time include policies for sale of non-firm energy,
departure from a load pattern resource and adjusting the firm power
risk level to a different percentage.
Several comments were received on the proposal to restrict
transfers of Pick-Sloan Missouri Basin Program--Eastern Division
allocations held by the State of South Dakota and the Department of
Defense. Under existing contracts, these two customers have enjoyed the
flexibility to transfer Western's hydropower and concentrate
allocations in specific locations with the goal of maximizing the
benefits of Federal hydropower. This contractual right exposes
supplemental power suppliers to load variations, undermining the
resource stability which promotes quality integrated resource planning.
By proposing some restrictions in the final rule on this flexibility in
the contracts extending resources, Western intends to create a more
stable resource commitment to customers that would benefit regional
planning, and make future firm power customer contracts more consistent
and equitable.
Contrary to the comments of the Air Force, the final rule does not
require that an entire allocation be lost upon base closure after 2000.
Movements of allocations are allowed when the contract rate of delivery
exceeds the load at a particular site; this would be the case when a
base closes.
The final rule does not impose unfair or unusual constraints on
government customers. If anything, the regulations treat Federal and
state government the same as other Eastern Division customers by
removing an advantage other customers do not enjoy. While this
provision may impact power costs for the Air Force and the state of
South Dakota, broader regional advantages are also realized from the
increase in power supply stability.
The seasonal proportional share concept does not violate least-cost
principles. This same approach has been used in allocations to new
customers in many historic project-specific marketing plans.
Several commenters recommended that Western maximize the stability
of the planning environment, and do everything possible to control
costs and identify the costs of other agencies that adversely impact
the cost of power. They also suggested that Western recognize the
potential structural changes in the electric utility industry by
beginning a meaningful dialogue on unbundling of services and must
avoid new subsidies or perpetuating old ones. A further suggestion was
that Western should further unbundle services to expand Western's
customer base and those receiving project benefits.
Western is committed to enhancing resource stability through
control of costs. Many positive steps have been taken to reduce
Western's expenses, and more are planned for the future. Western
intends to be responsive to customer needs and utility industry
changes. This responsiveness includes a willingness to enter into a
meaningful dialogue on unbundling of services. Most recently, a
dialogue on this subject has taken place among Western and
[[Page 54170]]
Central Valley Project customers. Western agrees with the comment that
new subsidies must be avoided and old subsidies must be eliminated.
Western will take advantage of consultation opportunities with
customers to maximize communication.
One commenter was concerned that in the responses to comments that
were part of the proposed rule, Western makes the statement that it has
no general legal obligation to acquire additional resources to meet the
load growth of its customers. They felt that this statement is
unnecessary and constrains the considerable authority given to Western
by the Tenth Circuit Court of Appeals.
Western does not intend the publication of the proposed Program or
this final rule to limit Western's legal authorities recognized by the
Tenth Circuit Court of Appeals in Salt Lake City et al v. Western Area
Power Administration, et al., 926 F.2nd 974 (10th Cir. 1991). However,
Western does not have the legal authority to acquire resources to meet
customer load growth.
Several commenters supported efficiency improvements to existing
project facilities, and asked that customers have a right of first
refusal to participate. Any increases in capacity/energy should be made
available to the financing customer, or as a substitute for other
firming resources. Western should commence a process along the lines of
NCPA's 1992 proposal to the House Interior Committee.
On the issue of customer financing of improvements to project
facilities, Western has decided to retain its flexibility to address
unique opportunities in a tailored manner as opposed to establishing a
Western-wide policy. In the past, Western has made increases in
capacity/energy available to the financing customer. Western continues
to believe this concept makes sense, and will likely apply it in the
future under most circumstances.
Commenters applauded Western's decision to continue to provide
transmission access for renewables and endorsed Western marketing a
variety of products out of the Central Valley Project. Western
appreciates this supportive feedback.
One commenter remarked that access to Western hydropower should be
based on customer adoption of a mix of conventional, renewable, and
demand-side resources. This commenter believes that contract renewals
should be a reward for DSM implementation. Western declines to allocate
power based on customer adoption of a mix of conventional, renewable
and demand-side resources. Nor will contract renewals be a reward for
DSM implementation. Resource extensions should be the foundation for
customer IRP, and not a carrot to induce the selection of some
preconceived resource ideal. Integrated resource planning should lead
to the selection of resources based on their individual merits as
determined through the IRP process. Western addressed at length the
issue of incentives in the responses to comments that were part of the
Federal Register notice of August 9, 1994. That discussion is still
valid and is incorporated as a response to these comments.
Allocations from project-specific resource pools will be completed
before contracts with existing customers expire. Power that is reserved
for new customers but not allocated and resources offered but not
placed under contract will be offered to existing customers that
contributed to the resource pool. Western expects that all firm power
will be marketed. Withdrawal mechanisms will exist for purposes
described in the final regulations.
D. Other Issues
1. Support of Renewables
a. Background
In the proposed rule, Western stated that consideration would be
given to the allocation of power from project-specific resource pools
to firm up renewable resources.
b. Comments and Discussion
Western received several comments that strongly support the concept
of making power available to preference entities to firm up renewable
resources. Those comments stated that firming renewables would expand
that marketplace for renewables and facilitate the further development
and commercialization of this technology; that the initial pools for
the Pick-Sloan Missouri Basin Program--Eastern Division and the
Loveland Area Projects be increased to 6 percent of the available
resource, with half of the increased pool being dedicated to help firm
up renewables; and that the increased experience and economies of scale
would make renewables more attractive and cost-effective and renewable
investments would help utilities diversify against future fuel price
and environmental risks. However, one commenter stated that funding
renewable or nontraditional power supply may be a worthy social
objective, but this is not Western's role and incentives to encourage
non-traditional resources should be developed at the community level
through the customer IRP process.
Western has a strong desire to support the development of
renewables. Western has in the past and plans in the future to assure
the continued progress of renewable resources as an important national
resource. The following examples demonstrate Western's commitment.
In the Eastern Division of the Pick-Sloan Missouri Basin Program,
the Mid-Continent Area Power Pool (MAPP) has in place a means to
accredit capacity for renewable resources based on historical
performance. Accreditation relieves the renewable resource owner from
the cost of purchasing power reserves due to the intermittent nature of
power production by this type of resource. If a Western customer is not
a MAPP member, Western may act as an agent for the customer to gain
MAPP accreditation of capacity for the renewable resource.
Recently, Western has committed to undertake a market assessment of
the potential for solar power in the southwestern United States as part
of the Solar Enterprise Zone (SEZ) initiative. Western has offered its
marketing, transmission and power system operations expertise to the
SEZ.
Western has been active in promoting renewable energy in
partnership with Native American Indians. Western, in coordination with
the Navajo Nation, the Department of Energy and Sandia National
Laboratory, has supplied forty photovoltaic units to the Navajo Tribal
Utility Authority for installation at remote homes on the Navajo
reservation. As extensions of distribution lines to these remote
locations would be prohibitively expensive, installation of
photovoltaic technology is a commercially viable alternative. Western
has contributed to an assessment of the wood fuel supply on the White
Mountain Apache tribe reservation to determine the quantity of this
fuel available for power cogeneration. To promote Indian health,
Western is contributing to the Navajo Rootfuel Promotion project, which
will evaluate the feasibility of growing and harvesting rootfuels to
replace coal as a fuel in Indian homes. Another example of a
partnership between Western and Native Americans is an assessment of
the feasibility of producing biogas fuel from solid wastes to meet the
needs of remote Navajo villages and cluster homes.
In addition to sponsoring many workshops and publishing numerous
publications on IRP, Western has created the Resource Planning Guide, a
technical assistance tool that will help customers to prepare
integrated resource
[[Page 54171]]
plans as required by section 114 of the Energy Policy Act of 1992. The
RPG is a personal computer-based piece of software that will allow
customers to evaluate renewable resources as a future resource.
Western's Sacramento Area Office has provided technical assistance
for a feasibility analysis of using wind-generated energy at Lawrence
Livermore National Laboratory. If the analysis is favorable, Western
will work with the laboratory to develop the use of wind energy.
Western has also made its transmission system available to wheel power
from wind generation to load.
Most recently, Western has taken steps to implement its commitment
to use principles of integrated resource planning for its resource
acquisition and transmission planning activities. Demand-side and
renewable resource options will be considered side-by-side with thermal
generation purchase opportunities. The implementation of the commitment
to use principles of integrated resource planning is described in a
Federal Register notice published on June 9, 1995 (60 FR 30533).
Although strongly supportive of renewable resources, Western believes
that the concept of setting aside a portion of Western's purchase power
appropriations exclusively to acquire renewables is best addressed
through project-specific implementation of IRP principles.
While Western wants the ability to support renewable resources
through allocations from project-specific resource pools, it is
premature to designate a portion of the pool exclusively for the
support of renewable resources. Western's resource pool reservations
are for use beginning in the year 2000 for the Eastern Division of
Pick-Sloan. Western does not want to commit a block of power today for
the benefit of renewable technologies, when the targeting of resource
pool power can take place more effectively nearer the date that
existing contracts expire and regional needs are better known. Devotion
of a block of power today to a single use, such as fostering
renewables, could work to the disadvantage of other pool uses, such as
allocation of power to American Indians. Western reserves the right to
allocate resource pool power in support of renewables, but will not now
exercise that right.
2. Project Use
a. Background
Project use power is that power reserved to meet project needs
pursuant to law, such as pumping irrigation water. Power in excess of
that needed for project use is available to Western for allocation.
Western made no proposal to change the definition of project use power
in the proposed Program.
b. Comments and Discussion
One comment stated that Western should maintain the current
definition of project use and that an allocation of Pick-Sloan power to
the Garrison Diversion Conservancy District is important to them under
present operations and absolutely essential for future requirements.
Given the Garrison Diversion Unit reformulation legislation passed by
Congress in 1986, the commenter thought consideration should be given
to a specific power allocation on reserve in their name for operation
of facilities authorized in the 1986 legislation. Any change in the
suballocation of costs should take into account the interests of the
irrigation districts. This commenter also stated that all long-term
contracts should have provisions for withdrawal to meet the pumping
power needs of the Garrison Diversion Unit, as farmers need reasonably
priced electricity for use on the farm.
Project use power is not allocated but is reserved pursuant to the
authorizing legislation for each project. Since Western does not
allocate project use power for water pumping, this type of power is not
a part of the PMI. Western's firm power contracts for the Eastern
Division presently contain withdrawal provisions to meet project use
load as it develops. Future contracts will contain similar withdrawal
language for project use.
Since these regulations do not address any changes in the
definition or scope of project use power for pumping purposes, the
suballocation of costs is similarly not a part of the PMI.
III. Summary of Changes From the Proposed Program
Western has made several revisions to the proposed Program in
response to public comments on the Federal Register notice of August 9,
1994. All references to Program ``procedures'' have been deleted, and
replaced with ``final rule'' or ``regulations'' to better reflect
section 114 of the EPAct and the fact that the final rule will be
published in the Code of Federal Regulations. The final rule clearly
separates the Program's provisions from the explanatory text which has
been shifted to the supplemental explanation section. To eliminate
confusion, the definition and use of the word ``purchaser'' was
eliminated and replaced with ``customer.''
In the IRP subpart (subpart B), Western broadened language relating
to member-based associations in recognition of our wide variety of
customers. Determination of the small customer threshold of 25
gigawatthours (GWh) was changed to a 5 year average, instead of the
proposed annual measurement. A customer's competitive situation was
added as a factor in the determination of the reasonableness of an IRP.
Provisions relating to irrigation districts were extended to other
customers that serve water pumps and comparable equipment as part of
their load. The section dealing with the use of IRP principles by
Western was deleted, in recognition of the completion of a separate
public process (60 FR 30533 (June 9, 1995)) on this subject. Finally,
clarifying changes were made in a variety of areas, including
penalties, IRP action plans and progress reports, public participation
and small customer plans.
With regard to the Power Marketing Initiative (PMI) provision
(subpart C), the term of contract has been extended from 18 to 20
years. For any project initially covered by the PMI, offers of
extension contracts will take place upon no sooner than the effective
date of the final rule. For the Pick-Sloan Missouri Basin Program--
Eastern Division and the Loveland Area Projects, the initial resource
pool was increased to 4 percent, while the two subsequent pool
increments were reduced to 1 percent each. Application of the
percentage extension for subsequent resource pool increments was
changed to the resource that is under contract at the time. The
proposal to exempt customers with contract rates of delivery of one MW
or less from contributions to the resource pool was deleted, as was the
proposed new customer exemption from withdrawals to form later resource
pool increments. Delivery of the benefits of cost-based Federal power
to Indian tribes is now directly allowed. Various clarifying changes
were also made in the PMI.
IV. Supplemental Explanation of the Rule
This section includes an explanation of certain IRP provisions, and
it also sets forth Western's policy regarding the future application of
the Power Marketing Initiative. Section 905.11(b)(3) addresses the
concept of cost-effectiveness. Cost-effectiveness is basic to a
resource evaluation and therefore must be pursued. Western recognizes
the criteria for determination of least-cost options in each IRP will
[[Page 54172]]
vary among Western's customers because of differences in their size,
type, resource needs, geographic area and competitive situation. For
Western's smaller customers, Western may approve an IRP that is a
generalized analysis which describes the cost comparison processes
utilized and economic assumptions used. These may be limited to, for
example, the total resource cost test for demand-side resources and may
involve use of simplified methods and procedures to analyze important
variations in supply-side characteristics such as service lives,
construction periods, and price inflation influences. However, Western
would expect its larger customers to prepare a more in-depth evaluation
of demand and supply resource cost effectiveness, on a comparable
basis. This may include evaluation of demand-side resources under some
combination of the total resource cost, participant, rate impact
measure, utility, or societal tests; life-cycle screening and screening
curve analyses for the supply-side resources; production costing
analysis; rate impact analysis; risk analysis; and impacts to the power
supply chain as applicable.
Full public participation is the subject of section 905.11(b)(5).
Western will not require a customer to take any action inconsistent
with existing sunshine laws and other open meeting requirements. Given
the wide diversity of customers that Western serves and the variety of
resource planning circumstances that they face, Western will not
mandate that customers hold a specific number of public meetings.
Section 905.12 describes how customers may be allowed to form an
IRP cooperative. Western believes the benefits of joint integrated
resource planning can be significant and encourages customer
consideration of this approach when an appropriate resource planning
``decision block'' exists. Examples of such a ``decision block'' are
when all the entities covered by an IRP are contained within a power
supply chain or regional entities plan for joint supply-side, demand-
side, and/or renewable resources above and beyond the Western resource,
so long as individual member responsibilities and participation levels
are identified.
Examples of entities likely to receive Western's approval include
(1) existing first-level MBAs which were formed to meet the load growth
of their members through supply-side resources, such as G&T
cooperatives; (2) existing second-level MBAs, such as organizations
with G&T cooperative members, which may be granted IRP cooperative
status due to the magnitude and effort involved in development of such
comprehensive IRPs; and (3) new associations where potential members
have not previously evaluated supply-side and demand-side resources on
a joint basis.
The criteria that will be used in evaluating IRPs are set forth in
section 905.11(b). Customers will make their own choices regarding
resource type, quantity, and timing in accordance with their IRP.
Western will not dictate resource choices.
Section 905.13(d) contains special irrigation district and water
planning provisions. Irrigation and water utility customers may use
information available from an extension service or a university to
judge the merits of a demand-side resource opportunity; there is no
requirement to hire a consultant to independently verify this kind of
information. The customer's knowledge and experience should be central
in the integrated resource planning resource evaluation and selection
process.
Small customer plan requirements are set forth in section 905.14.
Western does not expect small customers to expend a significant amount
of time and money to acquire expertise and data to prepare these plans.
Western will be available to assist customers in developing an
appropriate strategy for preparing the plans.
Section 905.30 deals with the applicability of the Power Marketing
Initiative. It limits the initial application of the PMI to the Pick-
Sloan Missouri Basin Program--Eastern Division and the Loveland Area
Projects. Western's Program establishes an overall framework for the
marketing of power, while recognizing that future determinations must
be made on a project-specific basis. Many project-specific
determinations are necessary before any final decisions can be made on
marketing power. Such important issues as the resource available for
marketing in the future, the size of a resource pool, any adjustments
to the size of this pool, and allocation criteria for new customers
must be decided on a project-specific basis, with public input and
appropriate environmental documentation.
Application of the PMI to the Central Valley Project, Washoe
Project and Salt Lake City Area/Integrated Projects shall not take
place in the absence of a future, project-specific evaluation and
decision.
For Central Valley Project and Washoe Project resources, all power
contracts between Western and its long-term firm power customers expire
in 2004, as do the Western-Pacific Gas & Electric Company contracts.
Western is presently preparing an environmental impact statement (EIS)
for the Sacramento Area Office (SAO) 2004 marketing plan. Western will
not make any decision at this time about application of the PMI to SAO
resources for the post-2004 time period. The provisions of the PMI will
be within the range of alternatives in the SAO marketing plan EIS for
purposes of impact assessment. As a result of further analysis in the
2004 power marketing plan process, Western may at a later date propose
through the public process adoption of the PMI for SAO resources in the
post-2004 time period. If the PMI provision is implemented, Western
estimates that an initial extension level percentage would be similar
to those of the Pick-Sloan Missouri Basin Program--Eastern Division and
the Loveland Area Projects. The additional resource pool increments
described in section 905.32 would also be applicable.
Application of the PMI to the Salt Lake City Area/Integrated
Projects (SLCA/IP) resources will be evaluated after its electric power
marketing EIS is completed and the associated marketing criteria and
contract changes are implemented. Western's ongoing project-specific
EIS for the SLCA/IP analyzes power marketing between now and the year
2004. If the PMI provision is implemented, Western estimates that an
initial extension level percentage would be similar to those of the
Pick-Sloan Missouri Basin Program--Eastern Division and the Loveland
Area Projects. The additional resource pool increments described in
section 905.32 would also be applicable.
The resource pool size for SAO and SLCA/IP resources will be
determined during a project-specific public process to reflect the
actual fair share needs of eligible new customers and other purposes,
as determined by Western.
Western will evaluate application of this PMI to other Western firm
power contracts that expire after January 1, 2005--principally the
Parker-Davis and Boulder Canyon Projects. This evaluation will be
published after a separate public process and will take place no more
than 10 years before termination of these contracts.
Any adjustment shall only take place after an appropriate public
process. Withdrawals to serve project use and other purposes provided
for by contract shall continue to take place based on existing
contract/marketing criteria principles.
Section 905.32 addresses both resource extensions and resource pool
size. Western's policy on these subjects is as follows. For the
projects initially covered under this PMI, the project-specific
resource pools (including both the initial pool and future increments)
[[Page 54173]]
could be as large as 6 percent over the term of the contracts. These
percentages are based on Western's judgment of the hydropower needed to
meet a fair share of the projected power needs of potential new
customers in the applicable marketing area at the time existing
contracts expire.
Western will establish incremental resource pools that make power
available for potential new customers over time, without the disruptive
influence of creating a large pool all at once, before the need exists.
Another purpose of incremental resource pools is to provide Western
with the flexibility to meet new needs that is necessary when long-term
contracts are offered to customers. The following table illustrates the
timing and size of the resource pool creation, as applied to the Pick-
Sloan Missouri Basin Program--Eastern Division and the Loveland Area
Projects.
------------------------------------------------------------------------
Year P-SMBP-ED LAP
------------------------------------------------------------------------
2001............................ 4%................
2004............................ .................. 4%.
2006............................ Up to 1%..........
2009............................ .................. Up to 1%.
2011............................ Up to 1%..........
2014............................ .................. Up to 1%.
------------------------------------------------------------------------
For the Pick-Sloan Missouri Basin Program--Eastern Division, both
the State of South Dakota (State) and the Department of Defense
(Defense) have been allowed to transfer Western power from one location
to another. After existing contracts expire, Western will require that
power commitments to specific State and Defense sites not be changed
unless the contract rate of delivery exceeds the total load at that
site. If the contract rate of delivery exceeds the total load at a
State or Defense site, only the excess power at that site may be
transferred to other State or Defense sites. Transfers are subject to
negotiation of transmission service contracts for the delivery of
transferred power. To be consistent with requirements for other firm
power deliveries, Western will require the delivery of a proportional
share of firm Pick-Sloan Missouri Basin Program--Eastern Division power
at each State or Defense site in both the summer and winter seasons. If
a Defense installation or facility is closed after the year 2000, the
allocation may be affected by the report required in section 2929 of
the 1993 National Defense Authorization Act, Pub. L. No. 103-160.
Section 2929 requires the Secretary of Energy, in consultation with the
Secretary of Defense, to submit a report to Congress that must contain
recommendations regarding the disposition of hydroelectric power
allocations to military installations closed or approved for closure
outside of the marketing area of the Central Valley Project.
In section 905.33, the PMI extension formula is described. If no
better information is available for initial IRP planning purposes,
Western will provide existing customers with estimated resource
commitments (based on application of the percentages set forth in these
procedures to the resources currently under contract). Actual resource
commitment numbers will be developed and included in contracts as soon
as practicable.
New customer eligibility is addressed in section 905.35. Western's
policy on allocation of power to new customers in the future is as
follows. In order to increase widespread distribution of hydropower
resources, Western will allocate a fair share of power to eligible new
preference entities who do not have a contract with Western or are not
a member of a parent entity that has a contract with Western.
The specific terms and conditions associated with allocations to
new customers will be determined during future, project-specific public
processes. All new applicants for power will be considered and be given
an opportunity to receive an allocation in accordance with Reclamation
law. For example, Western expects to make allocations to Native
American tribes (as that term is defined in the Indian Self
Determination Act of 1975, 25 U.S.C. 450b) for use on the reservation
and potentially off the reservation under certain circumstances as
determined by Western. Utility status will not be a prerequisite for an
allocation to Native American tribes. Western will also consider making
allocations to national parks and public mass transit agencies. Western
will consider making power available to preference entities in support
of fish and wildlife (such as power to pump water to increase or
improve wildlife habitat) and to firm up renewable resources.
Proposals for providing allocations directly to Native American
tribes will be developed on a project-by-project basis, during the
allocation of project-specific resource pools.
Western will consider arrangements for the delivery of the benefits
of cost-based Federal power to Native American tribes without utility
status.
All potential new customers, both utilities and nonutilities, will
be required to apply for power in a project-specific marketing plan by
a date to be determined in the project-specific process. All potential
new customers, except Native American tribes, must be ready, willing,
and able to receive and distribute or use power from Western. Ready,
willing, and able means that (1) the potential customer has the
facilities needed for the receipt of power or has made the necessary
arrangements for transmission and/or distribution service, (2) the
potential customer's power supply contracts with third parties permit
the delivery of Western's power, and (3) metering, scheduling, and
billing arrangements are in place. Limits on the power received by any
customer, as well as minimum load requirements, may be adopted. If
required in project-specific marketing criteria, a potential new
customer is responsible for transmission arrangements beyond Western's
system/points of delivery necessary to receive power from Western.
An existing customer will not be eligible to receive power from a
resource pool unless Western provides otherwise on a project-specific
basis. A new customer receiving power from a project-specific resource
pool will not be eligible to receive additional power from a
subsequently available resource pool increment unless Western provides
otherwise on a project-specific basis.
Existing power marketing criteria, which will remain in effect
unless amended by the PMI, may be amended in the future if necessary.
Section 905.36 addresses the relationship between existing marketing
criteria and the PMI. Any necessary amendments to existing power
marketing criteria could be pursued at the time Western determines the
amount of resource available after existing contracts expire. For the
Central Valley Project, Western plans to develop future marketing
criteria during the 2004 Marketing Plan process.
The process of implementing the PMI is addressed in section 905.37.
Modified contractual language will be required to place resource
extensions under contract. For all projects receiving resource
extensions under the PMI Western will develop alternative contractual
language which would allow the customer to assume the responsibility of
acquiring resources to firm up Western's hydroelectric commitments to a
customer if the customer so chooses. The timing of any offers of power
to existing Salt Lake City Area/Integrated Projects customers for the
time period after 2004 may be affected by the replacement power process
relating to loss of capacity due to changes in operations at Glen
Canyon Dam. For the SLCA/IP, existing contracts provide for potential
resource adjustments in 1999. No contracts will
[[Page 54174]]
be offered to existing customers for post-2004 SLCA/IP resources until
the analysis of potential resources in 1999 has been completed and any
adjustments are implemented. Existing power sales contracts require
that this analysis be completed by 1996.
Western is committed to providing IRP technical assistance to
customers. In section 905.40, Western will establish a program to
assist customers with technical questions or concerns relating to the
development and implementation of an IRP or small customer plan.
Technical assistance, which may include publications, workshops,
conferences, individual assistance, equipment loans, technology and
resource assessment studies, marketing studies, and other mechanisms to
transfer information on energy efficiency and renewable energy options
and programs to customers, will be provided under Western's energy
services functions. Customers will be kept informed of the technical
assistance available to them in support of their development and
implementation of IRPs through Western's energy services publications
and other communications efforts.
V. Regulatory Review
Western has an exemption from centralized regulatory review under
Executive Order 12866; accordingly, no clearance of this notice by the
Office of Management and Budget (OMB) is required.
VI. Review Under the Regulatory Flexibility Act
The Regulatory Flexibility Act, 5 U.S.C. 601 et seq., requires
federal agencies to perform a regulatory flexibility analysis if a
proposed regulation is likely to have a significant economic impact on
a substantial number of small entities. In the notice proposing the
Program, Western's Administrator certified that this Program, if
promulgated, would not have a significant adverse economic impact on a
substantial number of small entities. Western did not receive any
comments that addressed the certification.
VII. Review Under the Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1980, 44 U.S.C.
3501-3520, Western has received approval from OMB for the collection of
customer information in this rule, under control number 1910-1200.
VIII. Review Under the National Environmental Policy Act
Western has completed an environmental impact statement on the
Program, pursuant to the National Environmental Policy Act of 1969. The
Record of Decision was published in the Federal Register on October 12,
1995 (60 FR 53181).
IX. Review Under Executive Order 12612
Executive Order 12612 requires review of regulations or rules for
any substantial direct effects on States, on the relationship between
National Government and the States, or on the distribution of power and
responsibilities among various levels of Government. This rule carries
out the requirements of EPAct in a manner that reflects comity between
the States and the United States Government. Western has assessed this
rule in light of the criteria in Sections 2 through 5 of Executive
Order 12612. Western has determined that the rule is consistent with
those criteria, and that the rule will not impose significant costs or
burdens on States or affect the States' ability to discharge
traditional State functions.
X. Review Under Executive Order 12778
Section 2 of Executive Order 12778 instructs each agency to adhere
to certain requirements in promulgating new regulations. These
requirements, set forth in section 2(a) and (b)(2), include eliminating
drafting errors and needless ambiguity, drafting the regulations to
minimize litigation, providing clear and certain legal standards for
affected legal conduct, and promoting simplification and burden
reduction. Agencies are also instructed to make every reasonable effort
to ensure that regulations define key terms and are clear on such
matters as exhaustion of administrative remedies and preemption. The
Department certifies that today's regulatory action meets the
requirements of section 2(a) and (b)(2) of Executive Order 12778.
XI. List of Subjects in 10 CFR Part 905
Electric Power, Electric Utilities, Energy, Energy Conservation,
Hydroelectric Power and Utilities.
Issued in Golden, Colorado, September 21, 1995.
J.M. Shafer,
Administrator.
For the reasons set forth in the preamble, Title 10 of the Code of
Federal Regulations is amended by adding a new part 905 to read as set
forth below.
PART 905--ENERGY PLANNING AND MANAGEMENT PROGRAM
Subpart A--General Provisions
905.1 Purpose.
905.2 Definitions.
Subpart B--Integrated Resource Planning
905.10 Applicability.
905.11 Integrated resource plan contents.
905.12 Submittal procedures.
905.13 Approval criteria.
905.14 Small customer plan.
905.15 Processing of IRPs and small customer plans.
905.16 Annual IRP progress reports.
905.17 Noncompliance.
905.18 Administrative appeal process.
905.19 Periodic review by Western.
905.20 Freedom of information Act.
905.21 Program review.
Subpart C--Power Marketing Initiative
905.30 Purpose and applicability.
905.31 Term.
905.32 Resource extensions and resource pool size.
905.33 Extension formula.
905.34 Adjustment provisions.
905.35 New customer eligibility.
905.36 Marketing criteria.
905.37 Process.
Subpart D--Energy Services
905.40 Technical assistance.
Authority: 42 U.S.C. Secs. 7152 and 7191; 32 Stat. 388, as
amended; and 42 U.S.C. Secs. 7275-7276c.
PART 905--ENERGY PLANNING AND MANAGEMENT PROGRAM
Subpart A--General Provisions
Sec. 905.1 Purpose.
The purposes of the Energy Planning and Management Program
(Program) are to implement section 114 of the Energy Policy Act of 1992
(EPAct) and to extend the Western Area Power Administration's (Western)
long-term firm power resource commitments in support of customer
integrated resource planning.
Sec. 905.2 Definitions.
Administrator means the Administrator of Western.
Applicable integrated resource plan or applicable IRP, when used
with reference to a customer, means the integrated resource plan (IRP)
approved by Western under these regulations for that customer.
Customer means any entity that purchases firm capacity, with or
without energy, from Western under a long-term firm power contract. The
term includes a member-based association (MBA) and its distribution or
user members that receive direct benefit from Western's power.
[[Page 54175]]
Integrated resource planning means a planning process for new
energy resources that evaluates the full range of alternatives,
including new generating capacity, power purchases, energy conservation
and efficiency, cogeneration and district heating and cooling
applications, and renewable energy resources, in order to provide
adequate and reliable service to a customer's electric consumers at the
customer's or member's lowest system cost. The process shall take into
account necessary features for system operation, such as diversity,
reliability, dispatchability, and other factors of risk; shall take
into account the ability to verify energy savings achieved through
energy efficiency and the projected durability of such savings measured
over time; and shall treat demand and supply resources on a consistent
and integrated basis.
Least-cost option means an option for providing reliable electric
services to electric consumers which will, to the extent practicable,
minimize life-cycle system costs, including adverse environmental
effects, of providing such service. To the extent practicable, energy
efficiency and renewable resources may be given priority in any least-
cost option.
Long-term firm power contract means any contract with Western for
the sale of firm capacity, with or without energy, which is to be
delivered over a period of more than 1 year. This term includes
contracts for the long-term sale of power from the Boulder Canyon
Project.
Member-Based Association or MBA means:
(1) an entity composed of utilities or user members; or
(2) an entity which acts as an agent for, or subcontracts with, but
does not assume power supply responsibility for its principals or
subcontractors, who are its members.
Small customer means a customer with total annual sales or usage of
25 GWh or less, as averaged over the previous 5 years, which is not a
member of a joint action agency or a generation and transmission (G&T)
cooperative with power supply responsibility, and that Western finds
has limited economic, managerial, and resource capability to conduct
integrated resource planning.
Western means the Western Area Power Administration.
Subpart B--Integrated Resource Planning
Sec. 905.10 Applicability.
(a) Each customer of Western must address its power resource needs
in an IRP prepared and submitted to Western as provided herein, except
for:
(1) Those meeting the criteria for a small customer as detailed in
Sec. 905.14 this part; and
(2) State-regulated, investor-owned utilities.
(b) Nothing in these regulations shall require a customer to take
any action inconsistent with a requirement imposed by the Rural
Utilities Service or a state utility commission which receives IRP
filings from that customer.
Sec. 905.11 Integrated resource plan contents.
(a) An integrated resource plan should support customer-developed
goals and schedules. The plan should evaluate the full range of
practicable alternatives for energy resources, and include:
(1) an assessment of resources on an equitable basis, where supply-
side, demand-side, and renewable resources are compared on a fair and
accurate basis to determine an appropriate low-cost resource portfolio,
and
(2) an integration of all options in a comprehensive manner.
(b) IRPs must consider electrical energy resource needs and may
consider, at the customer's option, water, natural gas, and other
energy resources. Each IRP submitted to Western must satisfy the
following requirements of section 114 of EPAct:
(1) Identification and Comparison of All Practicable Energy
Efficiency and Energy Supply Resource Options. This is an assessment
and comparison of existing and future supply- and demand-side resource
options available to a customer based upon its size, type, resource
needs, geographic area, and competitive situation. Identification of
resource options evaluated by the specific customer, or members in the
case of IRP cooperatives or MBAs, must be provided. The options
evaluated should relate to the resource situation unique to each
Western customer as determined by profile data (such as service area,
geographical characteristics, customer mix, historical loads, projected
growth, existing system data, rates, and financial information) and
load forecasts.
(i) Supply-side options include, but are not limited to, purchased
power contracts, conventional or renewable generation options.
(ii) Demand-side options alter the customer's use pattern in a
manner that provides for an improved combination of energy services at
least cost to the customer and the ultimate consumer.
(iii) Considerations that may be used to develop the potential
options include cost, market potential, consumer preferences,
environmental impacts, demand or energy impacts, implementation issues,
revenue impacts, and commercial availability.
(iv) The IRP discussion comparing resource options must include:
(A) the method or rationale used to select the options to be
compared,
(B) the options evaluated,
(C) the assumptions and costs related to the options, and
(D) the evaluation methods, including any quantitative and
qualitative methods used to compare the resource options.
(2) An IRP must include an action plan covering a minimum period of
5 years describing specific actions the customer will take to implement
its IRP. This plan must outline both short-term (2 years) and long-term
(5 years) actions proposed for implementation during the period covered
by the plan. The action plan must summarize the load profile data and
address the results of the resource evaluation. Where a customer is
implementing integrated resource planning in response to State,
Federal, and other initiatives, Western will accept action plans of
other than 2 and 5 years if they substantially comply with EPAct. For
those customers not experiencing or anticipating load growth, the
action plan requirement for the IRP may be satisfied by a discussion of
current actions and procedures in place to reevaluate periodically the
possible future need for new resources. The action plan must include
the following four items:
(i) Actions the customer expects to take in accomplishing the goals
identified in the IRP;
(ii) Milestones to be used to evaluate accomplishment of those
actions during implementation;
(iii) Quantified estimated energy and capacity benefits for each
action planned; and
(iv) Estimated or proposed costs for implementing each action.
(3) An IRP must designate least-cost options to be utilized by the
customer. This requires a comparative evaluation of supply- and demand-
side resources using a consistent economic evaluation method. This
evaluation should identify the most cost-effective energy services to
the consumer, taking into account reliability, economics, price,
adverse environmental effects, risk, and all other factors influencing
the quality of energy services. The analysis should consider impacts on
suppliers, distribution entities, and end-use consumers, as applicable.
The resource selection process and criteria must be explicit and
identify the rationale for selection. An IRP may strike a reasonable
balance
[[Page 54176]]
among the applicable evaluation factors, as opposed to a plan which
seeks to optimize any single criterion. Exceptions to least-cost-based
decisions may be made if the customer explains the basis for the
decision and can show in the IRP that decisions were based on a
reasonable analysis of resource options and environmental effects, were
based on response to public input, or were required by Federal or State
mandates.
(4) To the extent practicable, the customer shall minimize adverse
environmental effects of new resource acquisitions and document these
efforts in the IRP. Customers are neither precluded from nor required
to include a quantitative analysis of environmental externalities as a
part of their integrated resource planning process. Customers are
required to include a qualitative analysis of environmental effects.
(5) In the preparation and development of an IRP (or any revision
or amendment of an IRP), ample opportunity for full public
participation shall be provided. The IRP shall describe how the
customer: gathered information from the public, identified public
concerns, shared information with the public, and responded to public
comments.
(i) Member-based associations and their members must demonstrate
public participation in the preparation and development, revision, or
amendment of the IRP. No specific number of meetings is required.
(ii) As part of the public participation process, the governing
body of an MBA and each MBA member (such as a board of directors or
city council) must approve the IRP, confirming that all requirements
have been met. MBA and member approvals must be indicated by signature
of a responsible official in the IRP submitted to Western or by
documentation of passage of an approval resolution by the appropriate
governing body included or referred to in the IRP submitted to Western.
(iii) For Western customers that do not purchase for resale, such
as Federal and State government agencies, the public participation
requirement is satisfied if there is review and concurrence by a top
management official with resource acquisition responsibility, and the
concurrence is noted in the IRP submitted to Western.
(6) An IRP must include load forecasting. Load forecasting should
include data which reflects the size, type, resource conditions, and
demographic nature of the customer using an accepted load forecasting
methodology, including but not limited to the time series, end-use, and
econometric methods.
(7) Customers must provide methods of validating predicted
performance in order to determine whether objectives in the IRP are
being met. These validation methods must include identification of the
baseline from which a customer will measure the benefits of its IRP
implementation. Baseline data that is unavailable should be identified.
A reasonable balance must be struck between the cost of data collection
and the benefits resulting from obtaining exact information.
Sec. 905.12 Submittal procedures.
(a) An IRP submitted to Western for approval must have sufficient
detail for Western to confirm it meets the requirements of these
regulations. Only one IRP is required per customer, regardless of the
number of long-term firm power contracts between the customer and
Western.
(b) Customers may submit IRPs to Western under one of the following
options:
(1) Customers may submit IRPs individually.
(2) MBAs may submit individual IRPs for each of their members or
submit one IRP on behalf of all or some of their members, that
specifies the responsibilities and participation levels of individual
members and the MBA. Such IRP or IRPs shall constitute the MBA's IRP
where the MBA subcontracts or acts as an agent but does not assume
power supply responsibility. Any member of an MBA may submit an
individual IRP to Western in lieu of inclusion in an MBA IRP.
(3) Integrated resource planning cooperatives approved by Western
pursuant to paragraph (d) of this section must submit an IRP for its
members.
(4) Customers that Western determines to be small customers
pursuant to section 905.14 may submit a small customer plan in lieu of
an IRP.
(c) Schedules.
(1) Except as provided in paragraph (c)(2) of this section,
customers must submit their initial IRP to the appropriate Area Manager
no later than 1 year after the effective date of this rule, or after
becoming a customer, whichever is later. Approved IRP cooperatives
shall be allowed 18 months from Western's approval of the IRP
cooperative request to submit an initial IRP.
(2) Every customer must provide written notification to Western if
it intends to seek approval for IRP cooperative or small customer
status. This notification must be provided by the customer to the
Western Area Manager of the Area in which the customer is located by
December 19, 1995, or within 30 days from the time it becomes a
customer, whichever is later.
(3) If an IRP submittal is found to be insufficient after Western
review, a notice of deficiencies will be provided to the entity that
submitted the IRP. Western, working together with the customer, will
determine the time allowable for resubmitting the IRP. However, the
time allowed for resubmittal will not be greater than 9 months after
the date of the disapproval, unless otherwise provided by contract
language in effect as of the effective date of these regulations.
(4) Updated IRPs must be submitted to the appropriate Area Manager
every 5 years after Western's approval of the initial IRP.
(5) Amendments and revisions to IRPs may be submitted at any time.
(d) Western shall respond to IRP cooperative status requests within
30 days of receipt. If a request for IRP cooperative status is
disapproved, the requesting customers must submit their initial IRPs no
later than 1 year after the date of the letter of disapproval. Any
subsequent requests by customers for IRP cooperative status will be
responded to by Western within 30 days of receipt of the request.
Western's approval of IRP cooperative status will not be based on any
potential member's contractual status with Western.
Sec. 905.13 Approval criteria.
(a) IRP or small customer plan approval will be based upon:
(1) whether the IRP or small customer plan satisfactorily addresses
the criteria in these regulations; and
(2) the reasonableness of the IRP or small customer plan given the
size, type, resource needs, geographic area, and competitive situation
of the customer.
(b) Western will review resource choices in accordance with section
114 of EPAct and these regulations. Western will disapprove IRPs if
resource choices do not meet the reasonableness test set forth in
(a)(2) of this section and the provisions of section 114 of EPAct.
(c) Where a customer or group of customers implements integrated
resource planning under a program responding to other Federal, State,
or other initiatives, Western shall accept and approve such a plan as
long as the IRP substantially complies with the requirements of these
regulations.
(d) In evaluating an IRP or small customer plan, Western shall
consider water planning, efficiency improvements, and conservation in
the
[[Page 54177]]
same manner it considers energy planning and efficiencies. Customers
that provide water utility services and customers that service
irrigation load as part of their overall load may include water
conservation activities in the IRP. To the extent practical, customers
should convert their water savings to energy values.
Sec. 905.14 Small customer plan.
(a) Small customers may submit a request to prepare a small
customer plan in lieu of an IRP. Requests for small customer status
must include data on total annual energy sales and usage for the 5
years prior to the request. This data will be averaged to determine
overall annual energy sales and usage so that uncontrollable events,
such as extreme weather, do not distort levelized energy sales and
usage. Documentation of limited economic, managerial and resource
capability must also be included in a request.
(b) Western shall respond to small customer status requests within
30 days of receipt of the request. If a request for small customer
status is disapproved, the requesting customer must submit its initial
IRP no later than 1 year after the date of the letter of disapproval.
Any subsequent requests by customers for small customer status will be
responded to by Western within 30 days of receipt of the request.
(c) Small Customer Plan Contents.
Small customer plans shall:
(1) consider all reasonable opportunities to meet future energy
service requirements using demand-side management techniques, new
renewable resources, and other programs that will provide retail
consumers with electricity at the lowest possible cost;
(2) minimize, to the extent practicable, adverse environmental
effects; and
(3) present in summary form the following information:
(i) customer name, address, phone number, and contact person;
(ii) type of customer;
(iii) current energy and demand profiles and data on total annual
energy sales and usage for the previous 5 years;
(iv) future energy services projections;
(v) the manner in which paragraphs (c) (1) and (2) of this section
were considered; and
(vi) actions to be implemented over the next 5 years.
(d) The first small customer plan must be submitted to the
appropriate Western Area Manager within 1 year after Western's approval
of the request for small customer status. Small customers must submit
in writing a small customer plan every 5 years.
(e) Maintenance of Small Customer Status.
(1) Every year on the anniversary of submittal of the plan, small
customers must submit a letter to Western verifying that their annual
energy sales or usage is 25 GWh or less averaged over the previous 5
years, and identifying their achievements against their targeted action
plans. The letter will be used for overall program evaluation and
comparison with the customer's plan, and for verification of continued
small customer status.
(2) A customer ceases to be a small customer if it:
(i) exceeds total annual energy sales or usage of 25 GWh, as
averaged over the previous 5 years,
(ii) becomes a member of a joint action agency or G&T cooperative
with power supply responsibility, or
(iii) no longer has a limited economic, managerial, and resource
capability. Western will work with a customer who loses small customer
status to develop an appropriate schedule, no longer than 1 year, for
submittal of an IRP.
(3) Membership in or contracting with an MBA that does not have
power supply responsibility shall not affect a customer's status as a
small customer. A small customer plan or annual letter may be submitted
by or through an MBA that does not have power supply responsibility.
Sec. 905.15 Processing of IRPs and small customer plans.
Western shall review all IRP and small customer plan submittals and
notify the submitting entity of the plan's acceptability within 120
days after receipt.
Sec. 905.16 Annual IRP progress reports.
IRP progress reports must be submitted each year within 30 days of
the anniversary date of the approval of the currently applicable IRP in
such form and containing such information as to describe the customer's
accomplishments achieved pursuant to the action plan, including
projected goals, implementation schedules, and resource expenditures,
and energy and capacity benefits and renewable energy developments
achieved as compared to those anticipated. Measured values are
preferred, but reasonable estimates are acceptable if measurement is
infeasible or not cost-effective. In lieu of a separate progress
report, all information from the progress report may be combined with
any other report that the customer submits to Western, at the
customer's discretion, if that report is submitted within 30 days of
the approval anniversary date of the currently applicable IRP.
Sec. 905.17 Noncompliance.
(a) The penalty set forth in this section shall be imposed for
failure to submit or resubmit an IRP or small customer plan in
accordance with these regulations. The penalty also will be imposed
when Western finds that the customer's activities are not consistent
with the applicable IRP or small customer plan unless Western finds
that a good faith effort has been made to comply with the approved IRP
or small customer plan.
(b) If it appears that a customer's activities may be inconsistent
with the applicable IRP or small customer plan, Western will so notify
the customer and offer the customer 30 days in which to provide
evidence of its good faith effort to comply. If the customer does not
correct the specified deficiency or submit such evidence, or if Western
finds, after receipt of information from the customer, that a good
faith effort has not been made, a penalty shall be imposed.
(c) Western shall provide written notice of the imposition of a
penalty to the customer, and to the MBA or IRP cooperative where
applicable. The notice must specify the reasons for imposition of the
penalty.
(d) Imposition of Penalty.
(1) Beginning with the first full billing period following the
notice specified in paragraph (c) of this section a surcharge of 10
percent of the monthly power charges will be imposed until the
deficiency specified in the notice is cured, or until 12 months pass,
provided that no such penalty shall be immediately imposed if the
customer or its MBA or IRP cooperative has requested reconsideration by
filing a written appeal with the appropriate Area Manager, pursuant to
905.18.
(2) The surcharge imposed shall increase to 20 percent for the
second 12 months and to 30 percent per year thereafter until the
deficiency is cured.
(3) After the first 12 months of imposition of the surcharge and in
lieu of imposition of any further surcharge, Western may impose a
penalty which would reduce the resource delivered under a customer's
long-term firm power contract(s) by 10 percent. The resource reduction
may be imposed either
(i) when it appears to Western to be more effective to assure
customer compliance, or
(ii) when such reduction may be more cost-effective for Western.
(4) The penalty provisions in existing contracts will continue to
be in effect
[[Page 54178]]
and shall be administered and enforced in accordance with such contract
provisions.
(e) The surcharge will be assessed on the total charges for all
power obtained by a customer from Western and will not be limited to
firm power charges. When a customer resolves the deficiencies, the
imposed surcharge or power withdrawal will cease, beginning with the
first full billing period after compliance is achieved.
(f) In situations involving an IRP submitted by a member-based
association on behalf of its members where a single member does not
comply, a penalty or withdrawal shall be imposed upon the MBA on a pro
rata basis in proportion to that member's share of the total MBA's
power received from Western. In situations involving noncompliance by a
member of an IRP cooperative, any applicable penalty shall be imposed
directly upon that member if it has a firm power contract with Western.
If the IRP cooperative member does not have a firm power contract with
Western then a penalty or withdrawal shall be imposed upon the member's
MBA or parent-type entity on a pro rata basis in proportion to that
member's share of the total MBA's power received from Western.
Sec. 905.18 Administrative appeal process.
(a) If a customer disagrees with Western's determination of the
acceptability of its IRP submittal, its compliance with an approved
IRP, or any other compliance issue, the customer may request
reconsideration by filing a written appeal with the appropriate Area
Manager. Appeals may be submitted any time such disagreements occur and
should be specific as to the nature of the issue, the reasons for the
disagreement, and any other pertinent facts which the customer believes
should be brought to Western's attention. The Area Manager will respond
within 45 days of receipt of the appeal. If resolution is not achieved
at the Area Office level, a further appeal may then be made to the
Administrator who will respond within 30 days of receipt.
(b) Upon request, Western will agree to use mutually agreeable
alternative dispute resolution procedures, to the extent allowed by
law, to resolve issues or disputes relating to compliance with IRP
requirements.
(c) Western shall not impose a penalty while an appeal process is
pending. However, if the appeal is unsuccessful for the customer,
Western shall impose the penalty retroactively from the date the
penalty would have been assessed if an appeal had not been filed.
(d) A written appeal or use of alternative dispute resolution
procedures does not suspend other reporting and compliance requirements
under these regulations.
Sec. 905.19 Periodic review by Western.
(a) Western will periodically review customer actions to determine
whether they are consistent with the approved IRP. Small customer plans
are not subject to this periodic review.
(b) Beginning 3 years after the effective date of these
regulations, Western shall periodically review selected, representative
IRPs and the customer's implementation of the applicable IRP. These
reviews are in addition to, and separate and apart from, the review of
initial IRP submittals and updated IRPs made under Secs. 905.11 and
905.13 of these regulations.
(c) Western will review a representative sample of IRPs from each
of its marketing areas. The representative samples will consist of IRPs
that reflect the diverse characteristics and circumstances of the
customers that purchase power from Western. At a minimum, Western will
review a sample of IRPs from the following:
(1) IRPs indicating a need to acquire resources in the IRP study
period;
(2) IRPs prepared by individual customers, IRP cooperatives, and
member-based associations; and
(3) IRPs that do not show plans to implement DSM programs in the
IRP study period.
(d) Periodic reviews may consist of any combination of review of
the customer's annual IRP progress reports, telephone interviews, or
on-site visits. Western will document these periodic reviews and shall
report on the results of the reviews in Western's annual report.
Sec. 905.20 Freedom of Information Act.
IRPs and associated data submitted to Western will be made
available to the public unless Western has determined, pursuant to 10
CFR Part 1004, that particular information is exempt from public access
under the Freedom of Information Act (FOIA). Customers may request
confidential treatment of all or part of a submitted document under
FOIA's exemption for confidential business information. Materials so
designated and which Western determines to meet the exemption criteria
in the FOIA will be treated as confidential and will not be disclosed
to the public.
Sec. 905.21 Program review.
Before January 1, 2000, and at appropriate intervals thereafter,
Western shall initiate a public process to review these IRP regulations
in order to determine whether the criteria for approval of IRPs should
be revised to reflect changes in technology, needs, or other
developments.
Subpart C--Power Marketing Initiative
Sec. 905.30 Purpose and applicability.
(a) The Power Marketing Initiative (PMI) provides a framework for
marketing Western's long-term firm hydroelectric resources. For covered
projects, Western will make a major portion of the resources currently
under contract available to existing long-term firm power customers for
a period of time beyond the expiration date of their current contracts.
(b) The Western projects covered by this subpart are the Pick-Sloan
Missouri Basin Program--Eastern Division and the Loveland Area Projects
(LAP). The PMI applies to covered projects to the extent it is
consistent with other contractual and legal rights, and subject to any
applicable project-specific environmental requirements.
Sec. 905.31 Term.
Western will extend resource commitments for 20 years from the date
existing contracts expire to existing customers with long-term firm
power contracts from projects identified in section 905.30(b).
Sec. 905.32 Resource extensions and resource pool size.
(a) Western will extend a project-specific percentage of the
marketable resource, determined to be available at the time future
resource extensions begin, to existing customers with long-term firm
power contracts. The remaining unextended power will be used to
establish project-specific resource pools. An initial level of 96
percent of the marketable resource will be extended for the Pick-Sloan
Missouri Basin Program--Eastern Division and the Loveland Area
Projects.
(b) At two 5-year intervals after the effective date of the
extension to existing customers, Western shall create a project-
specific resource pool increment of up to an additional 1 percent of
the long-term marketable resource under contract at the time. The size
of the additional resource pool increment shall be determined by
Western based on consideration of the actual fair-share needs of
eligible new customers and other appropriate purposes.
[[Page 54179]]
(c) The initial pool percentages shall be applied to the marketable
resource determined to be available at the time future resource
extensions begin. Subsequent percentages shall be applied to the
resource under contract at the time.
(d) The additional resource pool increments shall be established by
pro rata withdrawals, on 2 years' notice, from then-existing customers.
Withdrawals could be mitigated or delayed if good water conditions
exist.
(e) Once the extensions for existing customers and allocations to
new customers from the resource pool have been made, additional power
resources may become available for various reasons. Any additional
available resources will be used as follows:
(1) If power is reserved for new customers but not allocated, or
resources are offered but not placed under contract, this power will be
offered on a pro rata basis to customers that contributed to the
resource pool through application of the extension formula in
Sec. 905.33.
(2) If power resources become available as a result of the
enhancement of existing generation, project-use load efficiency
upgrades, the development of new resources, or resources turned back to
Western, Western may elect to use this power to reduce the need to
acquire firming resources, retain the power for operational
flexibility, sell these resources on a short-term basis, or allocate
the power.
(3) If resources become available due to imposition of penalties
pursuant to Sec. 905.17, Western may make such resources available
within the marketing area to existing customers that are in compliance
with Subpart B, subject to withdrawal.
Sec. 905.33 Extension formula.
(a) The amount of power to be extended to an existing customer
shall be determined according to this formula:
Customer Contract Rate of Delivery (CROD) today/total project CROD
under contract today x project-specific percentage x marketable
resource determined to be available at the time future resource
extensions begin = CROD extended.
(b) Where contract rates of delivery vary by season, the formula
shall be used on a seasonal basis to determine the extended power
resource. A similar pro rata approach shall be used for energy
extensions.
(c) Determination of the amount of resource available after
existing contracts expire, if significantly different from existing
resource commitments, shall take place only after an appropriate public
process.
(d) The formula set forth in paragraph (a) of this section also
should be used to determine the amounts of firm power subject to
withdrawal at 5-year intervals after the effective date of the
extension to existing customers, except that the percentage used would
be up to 1 percent for each of the two withdrawal opportunities, and
the formula would use the customer CROD, project CROD and the resource
under contract at the time.
Sec. 905.34 Adjustment provisions.
Western reserves the right to adjust marketable resources committed
to all customers with long-term firm power contracts only as required
to respond to changes in hydrology and river operations, except as
otherwise expressly provided in these regulations. Under contracts that
extend resources under this PMI, existing customers shall be given at
least 5 years' notice before adjustments are made. New customers may
receive less notice. The earliest that any notice under this section
shall become effective is the date that existing contractual
commitments expire. Any adjustment shall only take place after an
appropriate public process. Withdrawals to serve project use and other
purposes provided for by contract shall continue to take place based on
existing contract/marketing criteria principles.
Sec. 905.35 New customer eligibility.
(a) Allocations to new customers from the project-specific resource
pools established under Sec. 905.32 shall be determined through
separate public processes in each project's marketing area. New
customers receiving an allocation must execute a long-term firm power
contract to receive the allocated power and are required to comply with
the IRP requirements in this part. Contracts with new customers shall
expire on the same date as firm power contracts with all other
customers of a project.
(b) To be eligible for an allocation, a potential new customer must
be a preference entity, as defined in Reclamation law, within the
currently established marketing area for a project.
(c) Entities that desire to purchase power from Western for resale
to consumers, including municipalities, cooperatives, public utility
districts and public power districts, must have utility status. Native
American tribes are not subject to this requirement. Utility status
means that the entity has responsibility to meet load growth, has a
distribution system, and is ready, willing, and able to purchase power
from Western on a wholesale basis for resale to retail consumers. To be
eligible to apply for power available from a project's initial resource
pool, those entities that desire to purchase Western power for resale
to consumers must have attained utility status by December 31, 1996,
for the Pick-Sloan Missouri Basin Program--Eastern Division, and by
September 30, 2000, for the Loveland Area Projects. To be eligible to
apply for power from subsequent resource pool increments, these
entities must have attained utility status no later than 3 years prior
to availability of the incremental addition to the resource pool.
Deadlines for attaining utility status for other projects will be
established at a later date.
Sec. 905.36 Marketing criteria.
Western shall retain applicable provisions of existing marketing
criteria for projects where resource commitments are extended beyond
the current expiration date of long-term firm power sales contracts.
Western must retain important marketing plan provisions such as classes
of service, marketing area, and points of delivery, to the extent that
these provisions are consistent with the PMI. The PMI, eligibility and
allocation criteria for potential new customers, retained or amended
provisions of existing marketing criteria, the project-specific
resource definition, and the size of a project-specific resource pool
shall constitute the future marketing plan for each project.
Sec. 905.37 Process.
Modified contractual language shall be required to place resource
extensions under contract. Resource extensions and allocations to new
customers from the initial resource pool will take effect when existing
contracts expire. These dates are December 31, 2000, for the Pick-Sloan
Missouri Basin Program--Eastern Division and September 30, 2004, for
the Loveland Area Projects. For the Pick-Sloan Missouri Basin Program--
Eastern Division, Western will offer contracts to existing customers
for resource extensions no sooner than the effective date of the final
regulations. For the Loveland Area Projects, existing contracts provide
for potential adjustments to marketable resources in 1999. No contracts
will be offered to existing customers for post-2004 Loveland Area
Projects resources until the analysis of potential resource adjustments
in 1999 has been completed and any adjustments are implemented.
Existing power sales contracts require that this analysis be completed
by 1996.
[[Page 54180]]
Subpart D--Energy Services
Sec. 905.40 Technical assistance.
Western shall establish a program that provides technical
assistance to customers to conduct integrated resource planning,
implement applicable IRPs and small customer plans, and otherwise
comply with the requirements of these regulations.
[FR Doc. 95-25829 Filed 10-19-95; 8:45 am]
BILLING CODE 6450-01-P
