[Federal Register Volume 61, Number 162 (Tuesday, August 20, 1996)]
[Notices]
[Pages 43051-43055]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-21151]
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DEPARTMENT OF ENERGY
Western Area Power Administration
Western Area Power Administration's Policy for the Purchase of
Non-Hydropower Renewable Resources
AGENCY: Western Area Power Administration, DOE.
ACTION: Notice of non-hydropower renewable resources policy.
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SUMMARY: This notice announces the Western Area Power Administration
(Western) adoption of a policy to purchase a portion of its expected
purchase power requirements on a project-by-project basis and in a
competitive manner, from non-hydropower renewable resource producers.
This concept includes a proposal to purchase 50 percent of those
purchases from solar resources. Western's policy focuses on technical
assistance and facilitation of renewables, as opposed to a mandatory
purchase power set-aside for renewables.
FOR FURTHER INFORMATION: For additional information, please contact Mr.
Michael S. Cowan, Chief Program Office, Western Area Power
Administration, P.O. Box 3402, Golden, CO 80401-0098, (303) 275-1630.
SUPPLEMENTARY INFORMATION: On April 15, 1996, Western published a
notice entitled Western Area Power Administration's Concept for
Purchase of Non-hydropower Renewable Resources, and Solicitation of
Interest (Concept) in the Federal Register (61 FR 16480). In response
to requests, the original 30-day comment period was extended in 61 FR
24789 (May 16, 1996). The comment period closed May 31, 1996, 45 days
after the publication of the Concept. Western received 150 comment
letters concerning the Concept. A summary discussion of those comments
and Western's responses are included in this notice along with
Western's policy on non-hydropower renewable resource purchases.
The primary focus of the Concept was the purchase of non-hydropower
renewable resources as part of Western's electric firming requirements.
Western also requested comments on the criteria that Western would use
to implement a new policy. These proposed criteria included: (1) The
assumption that additional costs associated with non-hydropower
renewable resource purchases would have little or no discernable rate
impact to Western's firm power customers; (2) the cost of the non-
hydropower renewable resources purchased by Western would be equal or
less than an established cost cap; and (3) the contract term for the
purchase of these renewable resources would vary project by project,
but in no case would the term extend beyond the termination date of
Western's long-term firm power sales contracts for a project.
Western specifically requested comments on the following points
related to the proposed Concept: (1) Whether or not the respondents
support the proposed Concept, (2) the magnitude of percentage of a
potential purchase power requirement set-aside, (3) whether it is
appropriate to have 50 percent reservation for solar resources within
the set-aside, and if so, whether the reservation amount for solar
should be increased or decreased, (4) the acceptable rate impact, (5) a
recommended cost cap in mills per kWh for non-hydropower renewable
resources, (6) a recommended contract term for purchases, (7)
recommendations on alternative methods whereby Western would facilitate
market opportunities for non-
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hydropower renewable resources, and (8) any other related issues.
Western also was interested in receiving comments concerning other
terms, requirements, and criteria of the proposed Concept such as:
dispatchability, point of delivery, dependability, resource diversity,
and environmental impact. The proposed Concept also indicated that
resource acquisitions would be made through the application of the
Concept on a project-by-project, cost competitive basis and in a manner
consistent with Western's formally adopted principles of integrated
resource planning published in the Federal Register (60 FR 54151).
Western also solicited comments from the public interested in
having Western facilitate the delivery of non-hydropower renewable
resources on their behalf and at their cost; for alternative Concepts;
and for information from renewable resource developers.
Comments were received from a variety of entities including power
customers, developers, environmentalists, government agencies,
investor-owned utilities, and Native American tribes.
Western has taken into consideration each comment in the
development of its non-hydropower renewable resource policy.
Discussion of Comments
Western received 150 comment letters representing both individual
commenters and groups of interested entities. The majority indicated
that they or the entities they represent do not support the proposed
Concept. Western reviewed each comment and responded to them in the
text which follows.
Comments: The primary reason given for not supporting the proposed
Concept was the increased cost and subsequent adverse rate impact.
Several entities stated that ``any'' rate impact is significant and the
cost of these types of renewables is too high and should not be blended
into their costs. Although many Western firm power customers support
the development of renewables, they strongly oppose the proposed
Concept because of the increase in costs and lack of local choice for
customers to support renewables that make sense in their particular
community. The firm power customers strongly suggest that the proposed
Concept be abandoned.
Other commenters stated that the impact to rates is acceptable, and
an even higher rate impact should be used as a ceiling. Several of
those commenters stated that Western may have overestimated the rate
impacts and suggested alternative methodologies to calculate the rate
impacts and make the program more attractive to developers. The various
suggestions included: taking into account capacity values; aggregating
Western's purchase power needs into one contract; focusing on one large
resource where economies of scale would make it more cost competitive;
extending the length of the commitment; purchase year-round as opposed
to seasonal; and increasing the amount of the resource purchased.
Response: Western acknowledges that there are minimal rate impacts
associated with the Proposed Concept. Western also recognizes its
obligation to both the taxpayers and the power customers to keep rates
as low as possible to maintain a market for the Federal hydropower
resource and thereby assure project repayment to the Treasury. Western
reviewed the comments concerning the suggested rate impacts and
acknowledges that there are several ways to recalculate those impacts
and different methodologies that could be used to determine a larger or
smaller rate impact. However, Western has not ascertained a method of
purchasing nonhydropower renewable resources that does not increase
costs.
In response to the large negative response to the proposed Concept,
Western will not mandate the purchase of a certain portion of its
replacement and firming requirements from non-hydropower renewable
resources. The proposed concept is impracticable given Western's policy
in the Energy Planning and Management Program that allows customers to
provide their own firming energy and the customers strong opposition to
the proposed Concept. Consequently, proceeding with a non-hydropower
renewables firming energy purchase over the objection of customers
would likely result in customers exercising their option not to
purchase higher priced firming energy from Western. Western will
strongly support the use of these non-hydropower renewable resources by
means other than the conceptual purchase power set-aside and, when
available at competitive prices, will purchase replacement and firming
requirements from these renewable resources.
Comments: Many commenters stated that the proposed Concept is in
conflict with Western's primary mission and contradicts legislation,
regulations, and policies that Western is presently required to
observe. Numerous customers indicated that the Concept is not
consistent with Western's primary mission as stated in section 9(c),
Reclamation Act of 1939, 43 U.S.C. 485h and by section 5,
Flood Control Act of 1944, 16 U.S.C. 825s which obligates Western to
provide power ``* * * in such a manner as to encourage the most
widespread use thereof at the lowest possible rates to consumers
consistent with sound business principles''. In addition, commenters
explained that the proposed Concept is inconsistent with section 1809
of the Grand Canyon Protection Act of 1992, which states that the
Secretary of Energy will replace lost generation with ``economically
and technically'' feasible methods. Some commenters indicated that the
proposed Concept is not consistent with Western's policies established
in the Energy Planning and Management Program (EPAMP) and the
Integrated Resource Planning (IRP) section of EPAMP, and Western's IRP
principles. Additionally, commenters indicated that the proposed
Concept is incompatible with existing agency purchase power policies
that allow customers to choose to make their own replacement energy
purchases. A few commenters indicated that the proposed Concept is
contrary to the provision in the Public Utilities Regulatory Policies
Act that only requires utilities to purchase resources such as being
proposed for acquisition by Western at the ``avoided cost''. These
commenters' contention is that the 5.5 cents/KWH far exceeds the
``avoided cost''. A few commenters suggested that Western is violating
the National Environmental Policy Act by considering implementation of
the proposed Concept without an environmental impact statement.
Response: Western is an agency of the DOE and has responsibilities
to support DOE's mission and to provide benefits to the public, but
Western must also observe applicable legislation and fulfill its
contractual obligations. Western believes it has the authority to
implement the proposed Concept. Since Western has modified the method
Western will use to support the non-hydropower renewable resources
program, it will not address the specific legal issues raised by the
commenters.
Comments: Numerous commenters objected to the Concept, citing that
it did not recognize the new competitive utility environment in light
of the Federal Energy Regulatory Commission's (FERC) recent Orders, 888
and 889. They stated that open access to the electric transmission
system will create a highly competitive industry and that high priced
resources would be an unnecessary obstacle to such competition. A few
commenters indicated that the proposed Concept would be directly at
odds with a
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competitive market place and that if the proposed Concept was
implemented, the creation of an artificial market may ultimately hurt
development of non-hydropower renewable resources.
Response: Western believes that competition by itself is not at
odds with the development of non-hydropower renewable resources.
Western recognizes the environmental and socioeconomic benefits that
non-hydropower renewable resources provide and will promote the use of
these types of resources. However, there are currently large amounts of
surplus power available in the spot market, with pricing detrimental to
the competitiveness of non-hydropower renewable resources. In response,
Western has developed a policy to commit staff resources to
continuously evaluate power pricing, identify market opportunities for
renewables, and facilitate transactions between renewable resource
developers and customers interested in purchasing renewable resources.
Comments: Many commenters believe the proposed Concept is not
equitable because Western's firm power customers would be the only ones
paying for the non-hydropower renewable resource program and the
program would benefit many other stakeholders. Most of these commenters
indicated that DOE should fund this ``subsidy'' program. Some
commenters are very much against financing any type of subsidy and
indicated that the proposed Concept, if implemented, should be funded
by all taxpayers. Some commenters stated that they were already funding
Federal policies detrimental to power, such as replacing the lost
generating capacity at Glen Canyon Dam and questioned the fairness of
the firm power customers being assigned the responsibility to pay
above-market costs to accommodate a policy that would increase their
costs to benefit the general public. However, one commenter stated that
Western's firm power customers have received the most direct benefits
from the Federal hydro projects, so they should fund the proposed
Concept's non-hydropower renewable purchases.
Response: Western understands that all Americans will benefit from
the research and development of the non-hydropower renewable resources.
Western believes that non-hydropower renewable resources are very
important and will benefit all Americans, including the commenters that
do not support the proposed Concept. Western has decided not to adopt a
policy that would include a mandatory set-aside of power purchases for
non-hydropower renewables, but Western will provide technical support
to customers willing to pursue non-hydropower renewable resource
transactions.
Comments: Several commenters indicated that the choice of
purchasing firming energy should be at the local level and they should
have the right to choose any resource that meets their needs. Some of
these commenters indicated that participation in the proposed Concept
should be on a voluntary basis. One commenter suggested the purchase of
the renewables should be incorporated into existing contracts and that
Western should re-evaluate its IRP process to provide purchase
alternatives for Western's customers.
Response: Western supports its existing policies of allowing the
firm power customers to choose the resources that provide for their
requirements. Western's policy incorporates the principles of voluntary
participation and least-cost resource acquisition.
Comments: A few commenters believe that Western should have
additional involvement with the public and hold meetings with
stakeholders to discuss the proposed Concept. In addition, a few
commenters stated that the purpose of the proposed Concept is unclear
and questioned a perceived lack of a goal or reasoning behind the
proposed Concept. One commenter stated it is illogical to use one
renewable resource (hydropower) to subsidize another renewable resource
(non-hydropower).
Response: Western published the proposed Concept in the Federal
Register to solicit comments from the public and to determine the level
of public interest in non-hydropower renewable resources. Western
supports the idea of developing non-hydropower renewable resources if
each local utility can make the appropriate decision, with customer
involvement. Western also believes that there was an appropriate amount
of public involvement, but as part of facilitating transactions under
the policy, Western is willing to consider other actions the agency can
perform to further the use of renewable resources.
Comments: Several commenters questioned the reasoning behind the
50% solar reservation of the purchases that would be provided under the
proposed Concept. Commenters questioned the reasoning behind the
promotion of any type of generation when there is already excess
capacity available. In addition, a number of comments recommended that
the set aside level be modified.
Response: The proposed Concept reflected Western's desire to ensure
a diversified mix of non-hydropower renewable resources and Western's
goal of supporting the DOE's commitment to commercializing a variety of
renewable resource technologies. In the modified program, each customer
will be free to choose the type and level of resource, since all costs
are paid for by the individual utility.
Comments: Several commenters expressed their support for the
proposed Concept, citing the environmental and societal benefits as a
primary reason Western should implement the proposal. One commenter
stated that Western should evaluate the impact of renewables using the
NEPA process. One commenter cited three environmental benefits from
implementing the proposed Concept; ``(1) mitigates the decision to add
firming power to Western's output mix, (2) improves the conservation
and economic efficiency of electrical use in the region, and (3) is a
prudent step toward responsible domestic participation in addressing
global environmental problems.'' This commenter also suggested Western
should adopt an environmental impact policy featuring the purchase of
non-hydropower renewable resources.
Response: Western recognizes the environmental and societal
benefits from renewable resource use. However, Western also recognizes
that firm power customers would be adversely impacted by implementing
the proposed Concept. Therefore, Western has determined to evaluate
opportunities on a case-by-case basis and to support voluntary efforts
to develop non-hydropower renewable resources.
Comments: Several commenters suggested that Western work with the
Nevada Corporation for Solar Technology and Renewable Resources (CSTRR)
by implementing the proposed Concept or a modified version of the
Concept. It was also suggested that Western could facilitate CSTRR
power sales and distribution and provide a market for solar power
generated from CSTRR. A few commenters encouraged Western to support
CSTRR's effort irrespective of statistical data. One commenter pointed
out that if Western supports CSTRR through this or a modified version
of the Concept, then Nevada will have a better opportunity to develop a
safe and reliable use for the Nevada Test Site as well as promoting the
abundant solar resource in southern Nevada. Commenters suggested that
Western should give priority to purchasing solar energy produced at the
Nevada Solar Enterprise Zone. Another
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commenter suggests that Western team up with the Utility Photovoltaic
Group and other partners to develop solar projects in the West.
Response: Western believes it can facilitate additional markets for
entities such as CSTRR through partnering and coordinating operations
with these and similar entities. The policy adopted will promote these
developments to assure that CSTRR and other renewable developments have
the maximum probability of success.
Comments: Several commenters expressed concern over the problems
with the dispatchability of the non-hydropower renewable resources.
A commenter pointed out that due to the intermittent, non-
dispatchable nature of renewable power generation, Western should allow
projects the flexibility to sell power in the off peak seasons. Another
commenter stated that the solar resource is significantly better for
the integrated operation of the Western system than the spot market,
non-firm fossil thermal resource presently used. Comment was received
that stated transmission requirements on the part of the supplier of
the renewable power is an important element. One comment suggests that
any switch to power from alternative uses should be directed to
residential end users. Comments also supported Western providing
discounted or free transmission and ancillary services. One commenter
suggested a modified Concept could provide for transmission services or
discounted ancillary services.
Response: Western agrees there are unique dispatching problems with
solar and wind generation. Western also believes that the dispatching
problems can be mitigated when the solar and wind resources are mixed
with traditional generation resources. Western will continuously seek
operational strategies to integrate non-hydropower renewable resources.
Comments: A significant number of commenters stated that they
support Western being a facilitator and providing staffing resources to
assist those entities that are willing to purchase non-hydropower
renewable resources at their own expense. Several commenters also
support a ``green pricing'' alternative strategy for non-hydropower
renewable resources.
One comment suggested that Western participate in identifying
locations that would be suitable for solar generation and that
preference for solar development at Bureau of Reclamation projects
should be extended. In addition, that commenter suggested Western
assist its customers in surveying the environmental preferences of
their retail users. Several commenters suggest developing a ``green
power'' marketing program and for Western to facilitate market
opportunities for non-hydropower renewable resources.
Response: Commenters that agreed and disagreed with the proposed
Concept suggest or imply that Western should facilitate non-hydropower
renewable resource transactions and consider developing ``green power''
programs. Western agrees with these comments and as part of the policy
will facilitate such services to assure renewable resources are fully
evaluated.
Comments: One commenter requested clarification as to whether an
ethanol facility would qualify as a non-hydropower renewable resource
and another commenter as to whether small wind generators would be
considered solar power.
Response: For purposes of this proposed Concept the ethanol
facility would not have been considered a non-hydropower renewable
resource and the small wind generators would have been considered wind
generation, not solar generation.
Policy: Western will not mandate that each project must purchase a
portion of its firming power requirements from non-hydropower renewable
resources. Western will continue to consider the purchase of non-
hydropower renewable resources where they are competitive with other
supplies, consistent with Western's IRP principles.
Western shall establish a program to facilitate the voluntary use
of renewable resources by Western's wholesale customers. Western shall
provide technical expertise, marketing information, and act as a
facilitator with Western's customers and renewable energy developers.
The goal of the program is to identify customers that desire renewable
resources in their generation mix, and provide the technical and
marketing assistance required for them to fully evaluate the option.
Determination Under Execution Order 12866
DOE has determined this policy does not meet the criteria of
Executive Order 12866 and is not a significant regulatory action.
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 is required.
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
Concept, Western's Administrator certified that, if promulgated, it
would not have significant adverse economic impact on a substantial
number of small entities. Western did not receive any comments that
addressed the certification.
Review Under the National Environmental Policy Act
As per Department of Energy 10 CFR 1021 National Environmental
Policy Act (NEPA) Implementing Procedures and Guidelines; Final Rule
and Notice section 1021.102, Applicability, this action is not a major
federal action affecting the quality of the environment of the United
States, and therefore no NEPA documentation is required.
Review Under Executive Order 12612
Executive Order 12612 requires review of regulations or rules for
any substantial direct efforts on States, on the relationship between
National Government and the States, or on the distribution of power and
responsibilities among various levels of Government. Western has
assessed this policy in light of the criteria in sections 2 through 5
of Executive Order 12612. Western has determined that its policy is
consistent with those criteria, and that the policy will not impose
significant costs or burdens on States or affect the States' ability to
discharge traditional State functions.
Review Under Executive Order 12988
With respect to the review of existing regulations and the
promulgation of new regulations, section 3(a) of Executive Order 12988,
``Civil Justice Reform,'' 61 FR 4729 (February 7, 1966), imposes on
Executive agencies the general duty to adhere to the following
requirements: (1) Eliminate drafting errors and ambiguity; (2) write
regulations to minimize litigation, and (3) provide a clear legal
standard for affected conduct rather than a general standard and
promote simplification and burden reduction. With regard to the review
required by Section 3(a), section 3(b) of Executive Order 12988
specifically requires the Executive agencies make every reasonable
effort to ensure that the regulation: (1) clearly specifies preemptive
effect, if any; (2) clearly specifies any effect on existing
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Federal Law or regulations, (3) provides a clear legal standard for
affected conduct while promoting simplification and burden reduction;
(4) specifies the retroactive effect, if any; (5) adequately defines
key terms; and (6) addresses other important issues affecting clarity
and general draftsmanship under any guidelines issued by the Attorney
General. Section 3(c) of Executive Order 12988 requires Executive
agencies to review regulations in light of applicable standards in
section 3(a) and section 3(b) to determine whether they are met or it
is unreasonable to meet one or more of them. The Administrator has
completed the required review and determined that, to the extent
permitted by law, today's action meets the relevant standards of
Executive Order 12988.
Issued in Golden, Colorado, August 2, 1996.
J.M. Shafer,
Administrator.
[FR Doc. 96-21151 Filed 8-19-96; 8:45 am]
BILLING CODE 6450-01-P
