[Federal Register Volume 59, Number 152 (Tuesday, August 9, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-19294]
[[Page Unknown]]
[Federal Register: August 9, 1994]
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DEPARTMENT OF ENERGY
Western Area Power Administration
RIN: 1901-AA50
Proposed Energy Planning and Management Program
AGENCY: Western Area Power Administration, DOE.
ACTION: Notice of proposed Program and request for public comments.
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SUMMARY: The Western Area Power Administration (Western) proposes to
adopt an Energy Planning and Management Program (Program). The Program
is being proposed in part to implement section 114 of the Energy Policy
Act. The proposed Program would require the preparation of integrated
resource plans (IRP) by Western's customers and establish a framework
for extension of existing firm power resource commitments.
DATES AND ADDRESSES: Combined public information/comment forums on the
proposed Program will be held on the following dates and at the
following locations:
September 7, 1994, 9 a.m., Doublewood Inn, 3333 Thirteenth Avenue
South, Fargo, ND (701) 235-3333
September 8, 1994, 1 p.m., Ramkota Convention Center, 2400 North Louise
Avenue, Sioux Falls, SD (605) 336-0650
September 9, 1994, 10 a.m., Red Lion, 2001 Point West Way, Sacramento,
CA (916) 929-8855
September 13, 1994, 10 a.m., Holiday Inn, 10 East 120 Avenue,
Northglenn, CO (303) 452-4100
September 15, 1994, 1 p.m. Doubletree Hotel, 215 West South Temple,
Salt Lake City, UT (801) 531-7500
September 26, 1994, 1 p.m., Airport Hilton, 700 North Haven Avenue,
Ontario, CA (909) 980-0400
September 27, 1994, 1 p.m., Phoenix Area Office Conference Room, 615
South 43rd Avenue, Phoenix, AZ (602) 352-2662
Written comments on the proposed Program should be submitted to
Western by October 11, 1994.
FOR FURTHER INFORMATION CONTACT: To submit written comments, or for
additional information, please contact:
Robert C. Fullerton, Western Area Power Administration, P.O. Box 3402,
A6100, Golden, CO 80401-0098 (303) 275-1610
James D. Davies, Billings Area Office, Western Area Power
Administration, P.O. Box 35800, Billings, MT 59107-5800 (406) 657-6532
Stephen A. Fausett, Loveland Area Office, Western Area Power
Administration, P.O. Box 3700, Loveland, CO 80539-3003 (303) 490-7201
J. Tyler Carlson, Phoenix Area Office, Western Area Power
Administration, P.O. Box 6457, Phoenix, AZ 85005-6457 (602) 352-2453
James C. Feider, Sacramento Area Office, Western Area Power
Administration, 1825 Bell Street, Suite 105, Sacramento, CA 95825-1097
(916) 649-4418
Kenneth G. Maxey, Salt Lake City Area Office, Western Area Power
Administration, P.O. Box 11606, Salt Lake City, UT 84147-0606 (801)
524-6372
SUPPLEMENTAL INFORMATION:
Background
On April 19, 1991, Western proposed in concept an Energy Planning
and Management 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 into law the Energy
Policy Act of 1992 (EPAct), Public Law 102-486. Section 114 of that
legislation requires the preparation of IRPs by Western's customers and
amends Title II of the Hoover Power Plant Act of 1984. Western has
adjusted its Program proposal 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 over 130 members of the public in attendance. About 200
written comments were received on the draft EIS. Discussion of all
comments is attached to this Federal Register notice.
Western is now at the point in the Program development process when
issuance of proposed procedures is appropriate. A 60-day consultation
and comment period starts with the publication of this notice in the
Federal Register.
Proposed Action
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 who purchase Federal power
greater stability in planning for future resources than would exist in
the absence of the Program. The Program proposal has two major
components: (1) an IRP 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 gigawatthours (GWh) or less is proposed, as allowed in
the Energy Policy Act of 1992. 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 services to customers. A
penalty provision for noncompliance with the IRP provision would
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
proposes to impose a 10-percent resource reduction penalty if such an
approach is more effective in assuring compliance or is more cost-
effective for Western. Penalties in existing contracts will continue to
be in effect until changed. The penalties proposed in this Program will
be incorporated into the contracts that extend resources and will be
effective upon contract execution.
The proposed PMI would extend a major portion of the power
currently under contract with existing purchasers. Western proposes to
extend its existing long-term firm resource commitments, subject to the
outcome of project-specific environmental work as appropriate. Western
projects proposed for initial coverage under this PMI are the Pick-
Sloan Missouri Basin Program-Eastern Division and the Loveland Area
Projects. The term of the extension would be 18 years from the date
that existing contracts expire. The level of the commitment to existing
customers would be a project-specific percentage of the resource
available when existing contracts expire, as described in section IV.C
of the proposed Program, 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.
Western believes that customer actions taken as a result of
preparing an IRP should (1) either maintain or enhance existing energy
services provided to consumers served by Federal power customers; (2)
produce savings or benefits equal to or exceeding investment and
operational costs over some reasonable period of time for demand-side
management (DSM) alternatives, renewable energy investments, or supply-
side efficiency improvements; (3) produce measurable energy and/or
capacity benefits as a result of customer investments; and (4)
demonstrate sensitivity to environmental impacts and values.
In these proposed procedures, Western commits to the use of IRP
principles in its own resource acquisition and transmission planning
programs. Western's commitment concerning the use of IRP principles
will be pursued independently from the Program through a separate
public process by Western starting within 90 days after the publication
of this Federal Register notice. This separate public process will
commence with publication in the Federal Register of a draft set of IRP
principles, with opportunity for public comment prior to adoption of
formal IRP procedures applicable to Western.
The Program is being developed pursuant to Secs. 302(a) and 501 of
the Department of Energy (DOE) Organization Act, 42 U.S.C. Secs. 7152
and 7191; the Reclamation Act of 1902, 32 Stat. 388, as amended by
subsequent enactments and acts specifically applicable to the projects
involved; and section 114 of the Energy Policy Act of 1992, Public Law
102-486.
Proposed Program
Section I--Contents
Section II--Definitions
Section III--Integrated Resource Planning
A. Applicability
B. IRP Content
C. Submittal Information
D. Approval Criteria
E. Special Provisions
F. Processing of IRPs and Small Customer Plans
G. Annual IRP Progress Reports
H. Noncompliance
I. Administrative Appeal Process
J. Periodic Review by Western
K. IRP by Western
L. Western Annual Report
M. Freedom of Information Act
N. Program Review
Section IV--Power Marketing Initiative
A. Applicability
B. Term
C. Resource Extensions and Resource Pool Size
D. Extension Formula
E. Adjustment Provisions
F. New Purchaser Eligibility
G. Marketing Criteria
H. Process
Section V--Energy Services
Section VI--Effective Date
Section II--Definitions
A. The term ``Administrator'' means the Administrator of the
Western.
B. For any customer, the term ``applicable integrated resource
plan'' or ``applicable IRP'' means the IRP approved by Western under
these procedures for that customer.
C. The term ``customer'' or ``customers'' means any entity or
entities purchasing firm capacity with or without energy from Western
under a long-term firm power contract. Such terms include member-based
associations (MBA) and their distribution or user members that receive
direct benefit from Western's power.
D. The term ``integrated resource planning'' or ``IRP'' 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 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 conservation and efficiency and the projected durability of such
savings measured over time; and shall treat demand and supply resources
on a consistent and integrated basis.
E. The term ``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.
F. The term ``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.
G. The term ``member-based association,'' or ``MBA,'' means a
parent-type entity composed of utilities or user members.
H. The term ``purchaser'' means the entity that has signed a long-
term firm power contract with Western. It does not include distribution
or user members where the MBA is the purchaser, and it does not include
the MBA where the distribution or user members are the purchasers.
I. A ``small customer'' is defined as a customer with total annual
sales or usage of 25 GWh or less 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.
Section III--Integrated Resource Planning
A. Applicability: All customers of Western must prepare an IRP,
regardless of a customer's resource needs, with the following two
exceptions:
1. Those meeting the criteria for a ``small customer'' as detailed
in section III.E(1) of these procedures; and
2. State-regulated, investor-owned utilities.
Nothing in these procedures shall require a customer to take any
action inconsistent with a requirement imposed by the Rural
Electrification Administration.
B. IRP Content: An integrated resource plan should support
customer-developed goals and schedules. The plan should evaluate the
full range of practicable alternatives for energy resources, including
the appropriate use of cost-effective renewable and DSM resources to
meet future needs.
IRPs submitted pursuant to these procedures must consider
electrical energy resource needs and may also consider, at the
customer's option, water, natural gas, and other energy resources. Each
IRP submitted to Western must meet the requirements of the EPAct,
section 114, which provides that IRPs must:
1. Identify and accurately compare all practicable energy
efficiency and energy supply resource options available to the
customer.
2. Include a 2-year action plan and a 5-year action plan which
describe specific actions the customer will take to implement its IRP.
3. Designate least-cost options to be utilized by the customer for
the purpose of providing reliable electric service to its retail
consumers and explain the reasons why such options were selected.
4. To the extent practicable, minimize adverse environmental
effects of new resource acquisitions.
5. In preparation and development of the plan (and each revision or
amendment of the plan), have provided for full public participation,
including participation by governing bodies.
6. Include load forecasting.
7. Provide methods of validating predicted performance in order to
determine whether objectives in the plan are being met.
8. Meet such other criteria as the Administrator shall require in
this Program or subsequent revisions.
These criteria are discussed with more detail and guidance in
section III.D(1)(a-h).
C. Submittal Information:
1. General Information: An IRP submitted to Western for approval
may be a summary document with sufficient detail for Western to confirm
it meets the requirements of these procedures, or it may be the full
plan. Compliance with these procedures is primarily the responsibility
of the purchaser of long-term firm power from Western. If more than one
long-term firm power contract exists between Western and a purchaser,
only one IRP is required for that purchaser.
2. Submittal Options: Customers may submit IRPs to Western under
one of the following options:
a. Individual Submittal: Purchasers of long-term firm power may
submit IRPs individually.
b. MBAs: MBAs may submit individual IRPs for each of their members
or submit one IRP on behalf of all of their members, so long as
individual member responsibilities and participation levels are
identified. It is acceptable for any member of a purchaser MBA to
submit an individual IRP to Western.
c. IRP Cooperative: With Western's approval, customers may form
integrated resource planning cooperatives. 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. Western will allow the
submittal of joint IRPs if an appropriate resource planning decision
block exists, such as if all the entities covered by an IRP are
contained within a power supply chain, so long as individual member
responsibilities and participation levels are identified.
Examples of eligible entities 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 acquire 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.
3. Small Customers: Customers approved by Western as small
customers according to the small customer provision, discussed in
section III.E(1) of these procedures, shall submit a small customer
plan in place of an IRP.
4. Schedules: Every customer must provide written notification to
Western regarding how it intends to submit its initial IRP. This
notification must be provided to the Area Manager of the area in which
the customer is located within 60 days of the effective date of these
procedures. The submittal options are discussed in section III.C(2).
a. IRP Cooperative Status Requests: Requests for IRP cooperative
status must be made to the Area Manager of the area in which the
customer is located within 60 days of the effective date of these
procedures, and Western shall respond to the requests within 30 days of
their receipt. If a request for IRP cooperative status is disapproved,
the requesting purchasers 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.
b. Small Customer Requests: Requests for small customer status must
be made to the Area Manager of the area in which the customer is
located within 60 days of the effective date of these procedures.
Western shall respond to the 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. Initial IRP Submittals: Each customer must submit its initial
IRP to the appropriate Area Manager no later than 1 year after the
effective date of these procedures. Approved IRP cooperatives shall be
allowed 18 months from the effective date of these procedures to submit
an initial IRP.
d. IRP Resubmittals: 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 be
not greater than 9 months after the date of the disapproval.
e. Updated IRPs: Updated IRPs must be submitted to the appropriate
Area Manager every 5 years, beginning 5 years after Western's approval
of the initial IRP submitted.
D. Approval Criteria: IRP approval will be based upon (1) whether
or not the IRP criteria as defined within these procedures are
satisfactorily addressed, and (2) the reasonableness of the IRP given
the size, type, resource needs, and geographic area of the customer.
Customers will make their own choices regarding resource type,
quantity, and timing in accordance with their IRP. Western will not
dictate resource choices.
Where a customer or group of customers implements the IRP process
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
procedures, and therefore meets the IRP criteria.
Important elements of an IRP are (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, as opposed to a piecemeal and
sequential approach.
1. The IRP criteria must be addressed as follows:
a. 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, and geographic area. 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.
Supply-Side Options: Supply-side options include, but are not
limited to, purchased power contracts or conventional or
nonconventional generation options.
Demand-Side Options: 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.
Considerations that may be used to develop the potential options
include cost, market potential, consumer preferences, environmental
impacts, demand or energy impacts, implementation issues, and
commercial availability.
The IRP should discuss the comparisons made between resource
options by describing (1) the method(s) or rationale used to select the
options to be compared, (2) the options evaluated, (3) the assumptions
and costs related to the options, and (4) the evaluation methods.
Resource Comparison--The IRP should describe any quantitative and
qualitative methods used to compare the resource options.
b. Action Plans: Customers must submit an action plan covering a
minimum period of 5 years describing specific actions the customer will
take to implement its IRP. These plans must outline both short- (2
years) and long-term (5 years) actions proposed for implementation
during the period covered by the plan. Where a customer is implementing
IRP 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. This action plan must summarize the load profile
data and address the results of the IRP resource evaluation. In
addition, the action plan must include the following:
(1) Actions the customer expects to take in accomplishing the goals
identified in the IRP process.
(2) Milestones to be used to evaluate accomplishment of those
actions during implementation.
(3) Quantified estimated energy and capacity benefits for each
action planned.
(4) Estimated or proposed costs for implementing each action.
c. Designated Least-Cost Options to be Utilized: This is a
comparative evaluation of supply- and demand-side resources using a
consistent economic evaluation method. An objective of the evaluation
should be to achieve the most cost-effective energy services to the
consumer, taking into account reliability, economics, price 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 should be explicit and identify the rationale for
selection.
Cost-effectiveness is basic to this evaluation and therefore must
be undertaken. Western recognizes the criteria for determination of
least-cost options in each IRP will by nature vary between Western's
customers by size, type, resource needs, and geographic area. For
Western's smaller customers that prepare an IRP, this may be a
generalized analysis which describes the cost comparison processes
utilized and economic assumptions. These may be limited to the total
resource cost test for demand-side resources and may involve simplified
methods and procedures to analyze important variations in supply-side
characteristics such as service lives, construction periods, and price
inflation influences. For Western's larger customers Western would
expect a much more in-depth evaluation of demand and supply resource
cost effectiveness, on a levelized basis. This may include evaluation
of demand-side resources under some combination of the total resource
cost, participant, rate impact measure, utility, and 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.
Exceptions to least-cost-based decisions may be made if the
customer explains the basis for the decision and can show in the IRP
document that decisions were made on a clear analysis of resource
options and environmental effects.
d. Environmental Effects: To the extent practicable, the customer
should minimize adverse environmental effects of new resource
acquisitions and document these efforts in the IRP document. Customers
are neither precluded from nor required to include environmental
externalities as a part of their IRP process. Western will not
determine for its customers the level of environmental compliance
appropriate for each action.
e. Full Public Participation: Full public participation means that
ample opportunity exists for the public to participate in or influence
the preparation and development of an IRP. An effective public
participation program includes techniques for getting information to
the public (information techniques) as well as techniques for getting
information from the public (involvement techniques). Examples of
information techniques include newsletters, briefings, feature stories,
newspaper inserts, and bill stuffers. Involvement techniques include
activities such as interviews, meetings or workshops, informal
meetings, task force/advisory committees, and polls.
Member-based associations and their distribution or user members
must demonstrate public participation in the development and
implementation of the IRP. Given the wide diversity of customers that
Western serves and the variety of resource planning circumstances that
they face, Western is not proposing to mandate that customers hold a
specific number of public meetings. The summary of the public
participation process in the IRP must include descriptions of how the
public was involved, resolutions to public concerns, and how the public
influenced IRP decisions.
As part of the public participation process, the governing body of
each MBA member (such as a board of directors or city council) must
approve the IRP, confirming that all requirements have been met. In
addition to MBA approval, customer/member approvals must be indicated
by signature of a responsible official in the IRP document submitted to
Western or by documentation of passage of an approval resolution by the
appropriate governing body. The customer/member approvals should also
be included or referred to in the IRP document submitted to Western.
Several Western customers, such as Department of Defense
installations, Department of Energy laboratories, and State agencies,
do not have boards or consumers in the normal utility sense. The public
participation requirement for these customers 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
document submitted to Western.
f. Load Forecasts: Load forecasting, as a planning process used to
estimate future electrical demand and energy consumption patterns,
should include data which reflects the size, type, resource conditions,
and demographic nature of the customer using an accepted methodology
(such as the time series method, end-use method, and/or econometric
method).
g. Methods of Validating Predicted Performance: Customers must
provide methods of validating predicted performance in order to
determine whether objectives in the IRP are being met. Validation must
include identification of the baseline from which a customer will
measure the benefits of its IRP implementation and then demonstrate its
performance against targeted objectives. Western will assess the merits
of the validation methods and give latitude for any identified lack of
unavailable baseline data. A reasonable balance should be struck
between the cost of data collection and the benefits resulting from
obtaining exact information.
h. Other Criteria: Customers must meet such other criteria as the
Administrator shall require in this Program or subsequent revisions.
2. Reasonableness Test: Western will use a ``reasonableness test''
in the review and approval of IRPs and small customer plans to
determine plan adequacy. It shall answer both of the following
questions:
a. Is the IRP consistent, overall and for individual criteria, with
customer achievement of its own defined IRP goals?
b. Does the customer meet the full intent of EPAct and these
procedures in their definition of an IRP for each of the eight IRP
criteria, and are they appropriate for the customer's size, type,
resource needs, and geographic circumstances?
E. Special Provisions: 1. Small Customer Provision: Western
realizes that it may not be administratively or economically feasible
for small customers to submit an IRP. Therefore, as an alternative,
small customers may submit a request to prepare a small customer plan
which (1) considers all reasonable opportunities to meet future energy
service requirements using DSM techniques, new renewable resources, and
other programs that will provide retail consumers with electricity at
the lowest possible cost; and (2) minimizes, to the extent practicable,
adverse environmental effects. There is no expectation for small
customers to expend significant resources--time and money--in acquiring
the expertise and data with which to prepare these plans. Western will
be available to assist customers in developing an appropriate strategy
for preparing the plans.
In order to meet these criteria, an entity approved for small
customer status must submit in writing a small customer plan every 5
years which presents in summary form the following information: (a)
customer name, address, phone number, and contact person; (b) type of
customer; (c) current energy and demand profiles; (d) future energy
services projections; (e) the manner in which items (1) and (2) in the
preceding paragraph were considered; and (f) actions to be implemented
over the next 5 years. The first small customer plan is due to the
appropriate Western Area Manager 1 year after Western's approval of the
request to prepare the plan.
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 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.
When a small customer exceeds total annual energy sales or usage of
25 GWh, becomes a member of a joint action agency or G&T cooperative
with power supply responsibility, or no longer has a limited economic,
managerial, and resource capability, it will no longer be eligible for
the small customer provision. In this case, Western will work with the
customer in developing an appropriate timeframe, no longer than 1 year,
for submittal of an IRP.
2. Irrigation District IRP: For purposes of these procedures,
Western shall equate water planning, efficiency improvements, and
conservation to energy planning and efficiencies. Therefore, irrigation
districts may comply with EPAct by quantifying results through
submission of their IRPs in terms of water conservation plans. However,
to the extent practical, irrigation district customers should convert
their water savings to energy values. In recognition of the impact of
weather and commodity prices on energy usage, progress in implementing
IRPs may be reported and measured based upon efficiency improvements
instead of power usage. These procedures do not require a customer to
engage in complex cost-benefit analysis when information on resource
cost-effectiveness is available from other sources. For example, an
irrigation district preparing an IRP 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 IRP resource
evaluation and selection process.
F. Processing of IRPs and Small Customer Plans: Western shall
review all IRP and small customer plan submittals and respond to
customers as to each plan's acceptability within 120 days after
receipt.
In order to ensure consistent application of these procedures in
all Area Offices, Western will utilize IRP evaluation criteria and
small customer plan checklists. The checklists will be provided to the
public as part of a future Program public involvement newsletter and
will provide for consistent review of IRPs. These are internal
documents to Western and are made available to the public for
informational purposes only.
G. Annual IRP Progress Reports: IRP progress reports must be
submitted each year within 30 days of the anniversary date of the
currently applicable IRP. Western will use this information to (1)
ascertain compliance with an approved IRP, (2) analyze overall program
impacts, (3) provide a basis for preparation of Western's annual
report, and (4) provide a basis for Western to furnish appropriate
technical assistance for customers.
Generally, annual progress reports must include actions taken by
the customer to implement its IRP and an evaluation of associated
quantitative and qualitative benefits achieved. The most important
subject in the annual progress report is quantification of the energy
and capacity saved under the IRP, dollars saved, renewable energy
benefits achieved, or other quantifiable benefits identified by the
customer. Measured values are preferred, but credible estimates are
acceptable if measurement is infeasible or not cost-effective. Western
is also interested in reporting on the qualitative benefits of IRP
related to (1) risk, (2) competition, (3) planning flexibility, and (4)
public involvement. Events or circumstances may occur which could
significantly alter the content or implementation of a customer's IRP.
Therefore, modifications to an approved IRP should be submitted in the
annual progress report.
Following is a list of items which must be included in annual
progress reports:
1. General customer information (i.e., name, address, phone,
contacts).
2. Accomplishments achieved pursuant to the action plan (i.e.,
projected goals, implementation schedules with anticipated quantifiable
benefits, milestones, and resource expenditures).
3. Quantitative and qualitative benefits (i.e., energy and capacity
savings and renewable energy developments) achieved as compared to
those anticipated.
4. Problems, issues, or achievements of note.
5. Any significant changes that may be planned for the IRP in the
coming year.
H. Noncompliance:
1. Definition of Noncompliance: A penalty for noncompliance shall
be imposed for (1) nonsubmittal of an IRP or an annual progress report
within the designated timeframe, (2) failing to obtain Western
acceptance of an IRP, or (3) failing to implement an IRP approved by
Western, unless Western determines that a good-faith effort has been
made to comply. A penalty for noncompliance will be imposed following
periodic review (see section III.J) if a customer's actions are
inconsistent with its approved IRP and it is found that there are no
mitigating circumstances which justify those actions.
2. Assessment of Penalties: If the entity submitting the IRP to
Western is in violation of these procedures, a notice of noncompliance
will be issued to the purchaser which will trigger the penalty
provisions. The 10-percent resource withdrawal penalty in existing
contracts will continue to be in effect until changed. The penalties
proposed below will be incorporated into the contracts that extend
resources and will be effective upon contract execution.
Beginning with the first full billing period following the notice,
a surcharge penalty of 10 percent of the monthly power charges will be
assessed for each of the next 12 months of noncompliance. The penalty
will then increase to 20 percent of the monthly power charges for each
of the following 12 months of noncompliance. If the entity remains in
noncompliance thereafter, Western will assess a 30-percent surcharge.
As an alternative to imposing the 20- and 30-percent graduated
surcharge on power charges, Western proposes a penalty which would
reduce the resource delivered under a purchaser's long-term firm power
contract(s) by 10 percent. The power withdrawal penalty may be imposed
in cases of either (1) when it is determined that the power withdrawal
will be more effective to assure compliance than the surcharge penalty
by itself, or (2) when the power withdrawal is more cost-effective for
Western, by avoiding acquisitions of resources from another entity to
meet the contractual obligation.
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 and/or power withdrawal will cease, beginning with the first
full billing period after compliance is achieved.
In situations involving an IRP submitted by a member-based
association on behalf of its members or an IRP cooperative where a
single member does not comply, a penalty or withdrawal shall be imposed
upon the member-based association or IRP cooperative on a pro rata
basis in proportion to that member's share of the total member-based
association's power received from Western.
If a customer has more than one long-term firm power contract with
Western, the penalty would be imposed under each contract.
If a small customer is found in noncompliance with any of the
requirements of the small customer provision, it will be subject to the
penalty conditions stipulated in this section.
I. Administrative Appeal Process: 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 issues, 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 very 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.
Upon request, Western is open to mutually agreeable alternative
dispute resolution procedures, to the extent allowed by law, on the
issues of IRP compliance and acceptability. Western will not impose a
penalty while an appeal process/alternative dispute resolution is
pending. However, if the appeal/alternative dispute resolution is
unsuccessful for the customer, Western will impose the penalty
retroactively from the date Western made the determination of
deficiency that led to the use of the appeal process/alternative
dispute resolution.
J. Periodic Review by Western:
1. Timeframe: Beginning 3 years after the effective date of these
procedures, Western shall periodically review a representative sample
of applicable 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 section
III.D of these procedures.
2. Purpose: The purpose of the review shall be to determine if
customer actions are consistent with the approved IRP. Small customer
plans are not subject to this periodic review.
3. Selection of Representative Sample: A representative sample of
IRPs from each of Western's marketing areas will be developed. 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:
--IRPs indicating a need to acquire resources in the IRP study period.
--IRPs prepared by individual customers, IRP cooperatives, and member-
based associations.
--IRPs that do not show plans to implement DSM programs in the IRP
study period.
4. Method of Review: Periodic reviews may consist of any
combination of (1) Review of the customer's annual IRP progress
reports, (2) telephone interviews, or (3) on-site visits. Western will
document these periodic reviews and shall report on the results of the
reviews in Western's annual report.
K. IRP by Western: In these proposed procedures, Western commits to
the use of IRP principles in its resource acquisition and transmission
planning programs. Western's commitment concerning the use of IRP
principles will be pursued independently from the Program through a
separate public process by Western starting within 90 days after the
publication of this Federal Register notice. This separate public
process will commence with publication in the Federal Register of a
draft set of IRP principles, with opportunity for public comment prior
to adoption of formal IRP procedures applicable to Western.
L. Western Annual Report: Western must prepare and include in its
annual report a description of the activities undertaken by Western and
by customers under these procedures and an estimate of the energy
savings and renewable resource benefits achieved as a result of such
activities.
M. Freedom of Information Act: IRPs and associated data submitted
to Western are not exempt from public access under the Freedom of
Information Act (FOIA). However, 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 meet the criteria stipulated in the FOIA will be treated as
exempt from FOIA inquiries.
N. Program Review: Within 1 year after January 1, 1999, and at
appropriate intervals thereafter, Western shall initiate a public
process to review these IRP procedures. Western may at that time revise
the eight criteria for approval of IRPs to reflect changes, if any, in
technology, needs, or other developments.
Section IV--Power Marketing Initiative
A. Applicability: The proposed PMI provides a general framework for
the marketing of Western's long-term firm hydroelectric resources. 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 purchasers must be decided on a project-specific basis, with
public input and appropriate environmental documentation.
Western proposes to make a major portion of the resources currently
under contract available to existing long-term firm power purchasers
for a period of time beyond the expiration date of their current
contracts. The PMI would apply if consistent with other contractual and
legal rights, subject to the outcome of project-specific environmental
work as appropriate. Western projects proposed for initial coverage
under this PMI are the Pick-Sloan Missouri Basin Program-Eastern
Division and the Loveland Area Projects (LAP).
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 at an early stage of the post-2004 decision-making process
and is preparing an 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.
Western will include the PMI as an alternative in the SAO marketing
plan EIS for purposes of impact assessment and comparison with other
alternatives. As a result of further analysis in the 2004 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 of 95 to 98 percent of the SAO resources
available at the end of the term of existing contracts would be made.
The additional resource pool increments described in section IV.C would
also be applicable.
Application of the PMI to the Salt Lake City Area/Integrated
Projects (SLCA/IP) resources would 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 analyses power marketing between now and
the year 2004. For customer planning purposes, Western estimates that
an initial extension level of 98 percent of the SLCA/IP resources
available at the end of the term of existing contracts would be made
upon PMI adoption. The additional resource pool increments described in
section IV.C would also be applicable.
If necessary, the resource pool size estimates for SAO and SLCA/IP
resources may be adjusted 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 also proposes to 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 would be published after a separate public process and would
take place no more than 10 years before termination of these contracts.
B. Term: For existing customers with long-term firm power
contracts, and in accordance with the applicability criteria in section
IV.A, Western proposes to extend resource commitments for 18 years from
the date existing contracts expire. All long-term firm power contracts
for a particular project would expire at the same time.
C. Resource Extensions and Resource Pool Size: Western proposes to
extend a project-specific percentage of the marketable resource
available at the time current contracts expire to existing customers
with long-term firm power contracts (see extension formula in section
IV.D below). The remaining unextended power would be used to establish
project-specific resource pools. The proposed project-specific resource
pools (including both the initial pool and future increments) could be
as large as 6 percent over the term of the contracts. Initially, an
extension level of 97 percent is proposed for the Pick-Sloan Missouri
Basin Program-Eastern Division and 97 percent for the Loveland Area
Projects. 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 proposes 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.
Another purpose of a graduated resource pool is to provide Western with
the flexibility that is necessary when long-term contracts are offered
to customers.
At two intervals of 5 years after the effective date of the
extension to existing customers, Western proposes to create a project-
specific resource pool increment of up to an additional 1.5 percent of
the marketable resource available at the time current contracts expire.
The size of the additional resource pool increment would reflect the
actual fair-share needs of eligible new customers and other purposes as
determined by Western. Since Western estimates a 3-year public process
will be needed to market resources after PMI extension contracts
expire, no additional resource pool increment is proposed for the last
8 years of the PMI contract term.
The additional resource pool increments will be established by pro
rata withdrawals from existing customers which could be mitigated or
delayed if good water conditions exist, or if Western acquires
sufficient energy made available as a result of investment in energy
efficiency and DSM, conventional supply-side, or renewable resources to
create the additional resource pool increments.
The following table illustrates the timing and size of the proposed
resource pool creation, as applied to the Pick-Sloan Missouri Basin
Program-Eastern Division and the Loveland Area Projects. In all cases,
the percentages are applied to the marketable resource available at the
time current contracts expire.
------------------------------------------------------------------------
Year P-SMBP-ED LAP
------------------------------------------------------------------------
2000................................ 3%..............
2004................................ ................ 3%
2005................................ up to 1.5%......
2009................................ ................ up to 1.5%
2010................................ up to 1.5%......
2014................................ ................ up to 1.5%
------------------------------------------------------------------------
Once the extensions for existing customers and allocations to new
purchasers from the resource pool have been made, additional power
resources may become available for various reasons.
Power reserved for new purchasers but not allocated and resources
offered but not placed under contract may become available. This power
would be offered on a pro rata basis to existing customers that
contributed to the resource pool through application of the extension
formula described in section IV.D.
Power resources freed up by Western's acquisition of cost-effective
energy efficiency/DSM may become available. Resources resulting from
the enhancement of existing generation, project-use load efficiency
upgrades, the development of new resources or resources turned back to
Western may also become available. Western proposes that this power be
used to reduce the need to acquire firming resources, retained for
operational flexibility, or allocated by the Administrator.
Resources may become available due to penalty imposition pursuant
to section III.H of these procedures; this power may be made available
to existing customers, subject to withdrawal on 30 days' notice.
For the Pick-Sloan Missouri Basin Program-Eastern Division, both
the State of South Dakota and the Department of Defense have been
allowed to transfer Western power from one location to another. After
existing contracts expire, Western proposes to 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, Western proposes that 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 further proposes to 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 there is closure of a Defense
installation or facility after the year 2000, the allocation may be
impacted 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 by November 30, 1994; this report 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.
D. Extension Formula: The amount of power to be extended to an
existing purchaser would be determined according to this formula:
(Purchaser contract rate of delivery (CROD) today/total project
CROD under contract today x project-specific percentage x resource
available at the end of the term of existing contracts) = CROD
extended.
If a purchaser's CROD is or would become (except for a resource
withdrawal penalty under section III.H) less than 1 megawatt (MW), no
reduction would take place.
Where contract rates of delivery vary by season, the formula would
be used on a seasonal basis. A similar pro rata approach would be used
for energy extensions. Determination of the amount of resource
available after existing contracts expire, if significantly different
from existing resource commitments, would take place only after an
appropriate public process.
Amounts of firm power subject to withdrawal at 5-year intervals
after the effective date of the extension to existing customers also
would use the formula set forth above, except the percentage used would
be up to 1.5 percent for each of the two withdrawal opportunities. New
customers who have received power from the resource pool would not be
subject to withdrawal to create a resource pool increment for other new
customers.
If no better information is available, for initial IRP planning
purposes, Western would 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 would be developed and included in
contracts as soon as practicable.
E. Adjustment Provisions: Western proposes to adjust marketable
resources committed to all customers with long-term firm power
contracts only in response to changes in hydrology and river
operations. Under the terms of contracts that extend resources under
this PMI, existing purchasers would be given at least 5 years' notice
before adjustments are made. Depending on when new customer contracts
are signed, new customers may receive less notice. The earliest that
any notice under this section would become effective is the date that
existing contractual commitments expire. Adjustment would only take
place after an appropriate public process. Withdrawals to serve project
use would continue to take place based on existing contract/marketing
criteria principles.
F. New Purchaser Eligibility: Allocations to new purchasers from
the project-specific resource pool would be determined through separate
public processes in each project's marketing area. New purchasers
receiving an allocation must execute a long-term firm power contract to
receive the allocated power and would be required to comply with the
IRP procedures. Contracts with new customers would expire on the same
date as firm power contracts with all other customers of a project.
To be eligible for an allocation, a potential new purchaser must be
a preference entity, as defined in Reclamation law, within the
currently established marketing area for a project. 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 purchasers would be determined during future, project-specific
public processes. All new applicants for power would 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. Sec. 450b) for use on the
reservation and will consider making allocations to national parks and
public mass transit agencies. Western also 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. This flexibility is critical, because an allocation of power is
of no value unless an organization has the means to receive power; the
potential customer must be ready, willing, and able to take delivery of
power. 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 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, also may be adopted.
Certain entities, such as municipalities, cooperatives, public
utility districts and public power districts, must have utility status
to purchase power from Western. 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 January 1, 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 would be established at a later date.
All potential new customers, both utilities and nonutilities, would
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 must be ready, willing, and able to receive and
distribute or use power from Western. A potential new purchaser would
be responsible for transmission arrangements beyond Western's system/
points of delivery necessary to receive power from Western.
An existing customer would 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 would not be eligible to receive additional power from a
subsequently available resource pool increment unless Western provides
otherwise on a project-specific basis.
G. Marketing Criteria: Western proposes to 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 proposed 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 would constitute the
future marketing plan for each project. 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.
H. Process: Resource extensions and allocations to new customers
from the initial resource pool would take effect when existing
contracts terminate. These dates would be the year 2000 for the Pick-
Sloan Missouri Basin Program-Eastern Division and 2004 for the Loveland
Area Projects. For the Pick-Sloan Missouri Basin Program-Eastern
Division, Western proposes to offer contracts to existing purchasers
for resource extensions as IRPs are received by Western from existing
purchasers. For the Loveland Area Projects, existing contracts provide
for potential adjustments to marketable resources in 1999. Western
proposes that no contracts 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.
The timing of offers of power to existing Salt Lake City Area/
Integrated Projects customers for the time period after 2004 may be
impacted 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.
Western proposes that no contracts 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.
Modified contractual language would be required to place resource
extensions under contract. 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.
Section V--Energy Services
Western will provide technical assistance to customers to conduct
integrated resource planning, implement applicable IRPs, and otherwise
comply with the requirements of these procedures. 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 and will not be addressed as a part of these customer IRP
procedures. Customers will be kept informed at all times of the
technical assistance available to them in support of their development
and implementation of IRPs through Western's energy services
publications.
Section VI--Effective Date
Western proposes that the final Program procedures become effective
on the date that the Record of Decision on the Program EIS is published
in the Federal Register, or 30 days after the final Program rule is
published in the Federal Register, whichever date is later.
Regulatory Procedure Requirements
Determination Under Executive Order 12866
DOE has determined that this is not a significant regulatory action
because it does not meet the criteria of Executive Order 12866, 58 FR
51735. 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.
Regulatory Flexibility Analysis
Pursuant to the Regulatory Flexibility Act of 1980, 5 U.S.C. 601 et
seq., each agency, when required to publish a proposed rule, is further
required to prepare and make available for public comment an initial
regulatory flexibility analysis to describe the impact of the rule on
small entities. Western has determined that this Program relates to
services offered by Western and therefore is not a rule within the
purview of the Act. In addition, the requirements of this Act can be
waived if the head of the agency certifies that the rule will not, if
promulgated, have a significant adverse economic impact on a
substantial number of small entities. By his execution of this Federal
Register notice, Western's Administrator certifies that this Program,
if promulgated, will not have a significant adverse economic impact on
a substantial number of small entities.
Paperwork Reduction Act of 1980
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 proposed herein.
National Environmental Policy Act
Western is preparing an environmental impact statement on the
Program, pursuant to the National Environmental Policy Act of 1969.
Issued in Golden, Colorado August 1, 1994.
William H. Clagett,
Administrator.
Response to Comments on the Energy Planning and Management Program.
The Western Area Power Administration (Western) has received
numerous comments on the proposed Energy Planning and Management
Program (Program) during the public process to date. The following
section responds to those comments and is intended to assist the public
in understanding Western's rationale for the proposed Program. Each
issue is presented in a format featuring background, public comments,
and discussion.
Contents
A. Energy Planning and Management Program-Overview
1. General
2. Public Process
3. Environmental Impact Statement
B. Integrated Resource Planning
1. Proposed Procedures
2. Specificity of Procedures
3. IRP Content
4. IRP Review and Approval
5. Member-Based Associations
6. IRPs Prepared for Others
7. IRPs for Utilities in Surplus
8. Economic Feasibility and Administrative Burden
9. IRP Cooperatives
10. Technical Assistance
11. Submittal Timing
12. Irrigator Issues
13. Future Program Review
14. Penalty
C. Power Marketing Initiative
1. Extension Term
2. Extension Percentage
3. Resource Pool Uses
4. Resource Adjustment Provisions
5. PMI Implementation
6. Purchase Power
7. Other Marketing Issues
D. Other Issues
1. IRP by Western
2. Price and Rate Design
3. Incentives
4. Project Use
5. Support of Renewables and DSM
6. Profile Data
7. Proprietary Information
8. Transmission Access
A. Energy Planning and Management Program-Overview
1. General
a. Background
Western has proposed to make future commitments of long-term firm
power at the same time that customers commit to identify and pursue
cost-effective supply- and demand-side resources through preparation of
an integrated resource plans (IRP).
b. Comments
--Western should link power marketing and energy management.
--If the current program were strengthened to the satisfaction of both
customers and its detractors, the perceived need to link resource
allocations with energy efficiency performance would prove unnecessary.
--Linkage should not take place, especially if the Energy Management
Program (EMP) is subject to change every 5 years.
--Some linkage between allocations and efficient energy use is
desirable; but, if linked, flexibility and cost-based rates should
continue.
--Linkage is an important incentive to promote demand-side management
(DSM) on the part of Western's customers.
--Western's ability to link power allocations to energy efficiency
gains is one of the few options available for providing an affirmative
incentive to customers that promote DSM.
--The linkage should be expanded to holders of nonfirm power sales
contracts, such as investor-owned utilities. Nonfirm sales encourage
inefficiency, so the Program should apply to nonfirm purchasers from
Western.
--Western should either break the linkage, or couple a more modest
linkage proposal with a package of reforms. Western practices in need
of reform include the acquisition of supplementary resources to meet
customer needs, construction and use of transmission, moving of
renewables to market, and encouraging efficiency. Better decisional
processes based on IRP are needed.
--To our knowledge, no other power marketing administration has
combined the issues of long-term power allocations and conservation.
--If this environmental impact statement (EIS) takes longer than 2
years, Western should separate the Power Marketing Initiative (PMI)
from the EMP.
c. Discussion
Prior to the passage of the Energy Policy Act of 1992 (EPAct), the
PMI was viewed by Western as an important incentive to encourage energy
efficiency and promote cost-effective DSM by its customers. The
character of the incentive has now changed, as Congress has mandated
IRP preparation whether resources are extended or not. The IRP title in
the EPAct, while not referring to the PMI, certainly does not prohibit
making decisions on resource commitments in a time frame that promotes
the quality of integrated resource planning. The PMI remains an
incentive for potential new customers to apply for power and prepare
IRPs. In addition, the improved planning stability that results from an
appropriately timed extension of resources can be seen as an incentive
for future planning. Western creates a disincentive to energy efficient
resource choices, with their associated economic and environmental
benefits, when the existing customer resource base is uncertain.
Western has proposed a Program to meet a number of changes that are
taking place in the utility industry. The business of generating,
transmitting, and distributing electrical power is increasingly
dynamic. More competition and uncertainty exists in the industry than
ever before. Integrated resource planning, coupled with the resource
stability needed to effectively plan for the future, can meet the
challenges of the 1990s and beyond.
Diverse interests are reflected in the users of the multipurpose
water projects from which Western markets hydroelectric power. In the
past, such interests as irrigation, flood control, navigation, treaty
obligations, and hydropower generation dominated discussions on the use
of these multipurpose facilities. More recently, such purposes as
recreation and preservation and enhancement of endangered and
threatened species have become more prominent. Timely commitments of
hydropower resources are more difficult to make as a result of the
ongoing debate on the purpose and operations of Federal resources.
Western has designed the Program to provide the resource stability
necessary for integrated resource planning, while allowing for
adjustments in marketable resources in response to changing priorities
for multipurpose water projects.
Environmental issues are critically important to Western. Western
believes that the Program can and must be responsive to environmental
issues and concerns. For example, the PMI provides for flexibility in
the determination and marketing of Western's hydropower resources in
response to operational changes due to environmental factors. In
addition, Western believes that integrated resource planning must be
sensitive to the environmental effects of resource options. IRPs
should, to the extent practicable, minimize the adverse environmental
effects of new resource acquisitions.
Western's proposed Program will respond to all of these changes and
achieve several objectives. The Program has been proposed to promote
greater planning stability, to encourage energy efficiency, and to
promote the evaluation of both demand- and supply-side resource
alternatives through integrated resource planning by Western's
customers. Western is committed to achieving all of these goals and
objectives as a group, with a Program that meets several related
objectives simultaneously. The proposed Program meets all of these
goals and objectives as an integrated solution to the identified
issues.
Strengthening the existing Conservation and Renewable Energy (C&RE)
Guidelines and Acceptance Criteria (G&AC) alone does not meet the goals
and objectives that underlie Western's Program proposal. The existing
G&AC only require that a customer perform a certain number of
activities, usually demand-side or renewable in nature, to be in
compliance. When these activities are identified as the best resource
choice in an IRP, as required by the EPAct, only then do they represent
the most appropriate approach for meeting customer needs for cost-
effective electricity. Integrated resource planning, with its emphasis
on considering both cost-effective supply- and demand-side resource
opportunities, fulfills the goal of making Western's customers better
equipped to provide low-cost power to consumers and to meet the
challenges that exist in the more competitive utility environment of
today. The Program also provides Western's customers with the resource
stability necessary to effectively engage in integrated resource
planning, an objective that could not be met simply by strengthening
the existing G&AC.
Western agrees with the viewpoint that Energy Management Program
stability is undercut and the goals of the Program are not met if the
EMP is subject to change every 5 years. The EPAct is consistent with
this view. In accordance with this legislation, Western presently
anticipates no change in the integrated resource planning process
requirements until at least 1999, and then only if technology or other
developments warrant. No change will take place without a full and open
public process.
Western concurs with the comment that flexibility should be part of
the Program approach and philosophy. Western also concurs with the
comment that cost-based rates should continue, pursuant to applicable
law.
Western does not agree that the IRP requirement should be expanded
to purchasers of nonfirm power. Extension of the IRP requirement to
nonfirm purchasers would not significantly expand the scope of the
Program. Nonfirm purchasers who are also long-term preference customers
must comply with the IRP preparation requirement by virtue of the
conditions set forth in their long-term firm contracts with Western.
Although section 205(c) of the IRP title set forth in section 114 of
the EPAct specifically exempts investor-owned utilities from IRP
preparation pursuant to the bill, to the extent that nonfirm purchasers
of power are investor-owned utilities, they likely are or will soon be
preparing IRPs in response to State public utility commission
regulations.
Requiring preparation of IRPs as a condition of commitments that
can be terminated on telephone notice by either party offers little
opportunity for penalty imposition for noncompliance. Revenue levels
could be adversely impacted if purchasers who offer to pay an
attractive price for surpluses decide to stop purchasing nonfirm energy
due to Western's attempts to expand the scope of IRP preparation.
Preparation of an EIS on this Program has been proceeding, and
comments have been received on the draft. Western sees no reason to
abandon its proposed approach at this point in the process due to
delays in developing the necessary environmental documentation.
Western agrees that its purchase power and transmission planning
processes should be based on integrated resource planning principles.
Detailed responses to comments on this subject can be found in section
D.1 of these responses to comments.
2. Public Process
a. Background
Western has committed to preparing an EIS on the Program. A public
involvement process, including the development of a mailing list of
diverse members of the interested public, has been pursued. Newsletters
and brochures have been developed and distributed, and public meetings
and workshops have been held throughout Western's service area on the
substance of the Program and the draft EIS.
b. Comments
--Preparation of an EIS is not warranted. No negative environmental
impacts are foreseen, so an EIS need not be prepared.
--An EIS should be prepared, but in an expedited, 12- to 15-month time
period.
--Considering the diversity among Western's customers and service
territories, 12 to 15 months for EIS preparation is too short. Do not
go too quickly, as customers must respond to the radical changes that
have been proposed in the EMP.
--An EIS should be done because of the significant impacts that power
generation facilities could have on major river systems and on fishery
resources.
--Western should let customers know how it is reacting to and
evaluating issues before the draft EIS is made available.
--Western should address the issues raised in the scoping meetings.
Where in the alternatives are such options as 100-percent extension of
power resources for 40 years? Carrots versus sticks options on the EMP?
Retain existing G&AC with quantification of benefits?
--Western should tie the Salt Lake City Area/Integrated Projects (SLCA/
IP) Power Marketing Criteria EIS to the Program EIS.
--Western needs to integrate more fully the EIS with the decision
making process so that reviewers can understand both the economic and
environmental effects of Program alternatives.
--The several separate public processes currently envisioned under the
Program over the next 10 years should be abbreviated.
--The public development process is a good one that shows what can be
accomplished when cooperation exists between the private sector and
Government.
--Although an EIS is unneeded for this Program, socioeconomic impacts
do need to be evaluated.
--The lack of detailed Program regulations hampers review of the draft
EIS.
c. Discussion
Western initially decided that the proposed Program may involve
potentially significant environmental and economic issues and impacts
that may be of interest to the public. Preparation of an EIS would
document any significant impacts which could be taken into account by
Western's Administrator in his final decision on the Program.
After Western decided to prepare an EIS through its Federal
Register notice of May 1, 1991, Congress enacted the Energy Policy Act
of 1992. Section 205(a) of the integrated resource planning title of
that legislation mandates the preparation of an EIS by defining the IRP
provision as a major Federal action significantly affecting the quality
of the human environment. Therefore, Western will continue its EIS
preparation.
Western is taking all prudent steps to assure that the preparation
of the EIS is accomplished as soon as practicable so that the benefits
of integrated resource planning are realized by Western's customers and
their electrical consumers in the near future.
Western is responding to all comments received on the Program in
this Federal Register notice. Comments that were previously advanced
are addressed so that the public understands why Program development
has progressed in the way that it has.
Western is sensitive to the public's need for information as the
Program development process moves forward. In recognition of this need,
Western has held 46 meetings and workshops during the Program
development process to date and has issued a brochure and a series of
11 newsletters to entities who have expressed an interest in the
Program prior to the publication of this Federal Register notice.
Western has also scheduled several public meetings in this Federal
Register notice to receive comments on the Program proposal. Through
these mechanisms, Western keeps the public apprised of progress in
overall Program development.
Western has fully integrated the Program development process with
the ongoing environmental documentation. The notice of Western's intent
to prepare an EIS was published in the Federal Register soon after the
first notice announcing the proposed Program. EIS scoping meetings and
informational meetings on the substance of the Program were held on the
same day throughout Western's marketing area. Although not required by
the National Environmental Policy Act of 1969 (NEPA), a public meeting
was held in Denver to inform the public of the comments received during
the scoping meetings and to describe the range of alternatives under
consideration for evaluation in the draft EIS. Western also held a
series of alternatives workshops to gather public input on defined
alternatives in the spring of 1992. This Federal Register notice is
being published soon after the draft EIS was made available for public
comment. While open to more specific comments on how the integration of
the decision making and environmental processes could be enhanced,
Western believes that the process to date has demonstrated its
commitment to this goal.
Comment was received that the Power Marketing Criteria EIS for the
SLCA/IP should be tied to the Program EIS. Western agrees that a
relationship exists between these two processes. The Program EIS is
programmatic in nature. It analyzes on a Western-wide basis the
environmental impacts of the Program, including customer integrated
resource planning and the extension of resources for projects, with the
timing of the extension to be project-specific. Any necessary
environmental analysis resulting from project-specific application of
Program principles (e.g., significant changes in marketable resources,
size of the resource pool, and allocations to new customers) will be
tiered off the Program EIS. The SLCA/IP Power Marketing Criteria EIS
recognizes the programmatic nature of the Program EIS and further
recognizes Western's Program proposal that customers purchasing power
from the SLCA/IP will be required to prepare IRPs as soon as the
Program becomes final. The Program EIS will be incorporated into the
SLCA/IP Power Marketing Criteria EIS.
Western agrees that the lack of detailed Program procedures has
made it difficult for the public to comment on the draft EIS. Due to
the lack of a preferred alternative in the draft EIS, Western did not
find it appropriate to issue proposed procedures when the draft EIS was
released for public review. The detailed Program procedures are part of
this Federal Register notice.
3. Environmental Impact Statement
a. Background
Western has prepared a draft EIS on the Program. The draft EIS
predicts that environmental benefits will be realized upon Program
implementation. The majority of the projected benefits result from
implementation of integrated resource planning. Additional
environmental benefits are attributable to resource certainty and
stability resulting from implementation of the PMI.
b. Comments
--Although the draft EIS is not perfect, we agree with the general
trends identified within the document.
--We agree with the aggregated simulation in the draft EIS, as opposed
to a system-specific approach.
--The draft EIS does not adequately recognize the significant
conservation, renewable resource, and energy efficiency accomplishments
of Western's customers.
--The predicted energy savings and associated environmental benefits
projected in the draft EIS should not be used as a standard against
which future customer IRP implementation will be measured.
--Western should recognize that some end-use technologies are so
efficient that adoption leads to net reductions in CO2 emissions;
this is recognized in the Administration's Climate Control Action Plan.
--The environmental benefits associated with the extension of resources
identified in the draft EIS would be even stronger if the analysis
extended beyond 2015.
--Western should coordinate environmental mitigation strategies with
the Bonneville Power Administration (BPA).
--Rate stability and cost containment should be part of the purpose and
need statement for the EIS.
--There is no recognition in the draft EIS of the impact of resource
extensions on purchases of thermal power.
--The draft EIS is flawed in its lack of analysis of its relationship
to other EISs.
--Some numbers, trends, and assumptions in the draft EIS are
questionable.
--An alternative should be added allowing a 70-percent extension of
existing resources to existing customers.
--Due to the greater environmental benefits that would result, we
suggest an alternative of 35 to 40 years at a 100-percent level be
adopted.
--Wind energy will be a larger resource in the future than the draft
EIS suggests.
--The impact of extension options on SO2 emission credits needs to
be recognized.
--An alternative should be added reserving a noncompetitive allocation
of Federal power for Indian tribes in Western's service territory.
--The environmental benefits of long-term extensions may be far greater
than the draft EIS suggests.
--The draft EIS is flawed, as it does not provide a basis for
determining whether a 10-percent resource pool is too small, and does
not analyze disposition of new power resources, allocation criteria
based upon need, the economic impact of marketing policies on new
customers, the benefits of allocating power to Native Americans, the
need for utility status to receive an allocation of power, or the need
for equity in Western's marketing policies.
--The environmental benefits associated with resource certainty and
stability are understated in the draft EIS. Such factors as the ability
to borrow money, the impact on utility revenue requirements, the need
to acquire more supply-side resources at the expense of customer
efficiency programs, and the character of supply-side resources
acquired are impacted by short-term contracts.
c. Discussion
Western appreciates these comments and suggestions and will address
them in the final EIS. Several comments deserve brief responses here.
Western did not analyze the environmental impact of uses of the
resource pool, as we cannot predict with any certainty who will apply
successfully for power from project-specific resource pools during
future allocation processes. For example, entities considering
submitting an application for Western power may not be able to acquire
transmission access, or existing power supply contacts may be an
obstacle to receipt of hydropower from Western. Western will engage in
environmental analysis on issues arising from resource pool size and
allocation criteria on a project-specific basis at a time closer to the
expiration dates of existing contracts.
Although environmental benefits associated with Program
implementation are forecast in the Program draft EIS, Western will not
use those predicted energy savings as the measure of successful
customer IRP implementation. The predicted energy savings in the draft
EIS are useful in identifying regional trends for purposes of
environmental analysis, but the assumptions and analysis approach are
far too broad to be useful in setting customer-specific energy savings
goals. In fact, the establishment of customer conservation goals by
Western would be totally inappropriate, as an IRP should consist of
customer-defined goals and objectives.
B. Integrated Resource Planning
1. Proposed Procedures
a. Background
Options considered in the draft EIS include:
1. No change to the existing C&RE Program.
2. An IRP requirement for all customers.
3. An IRP requirement with a small customer provision. Western's
proposal is an IRP requirement with a small customer provision.
b. Comments
i. Comments Concerning Applicability:
--IRP provisions should be mandatory.
--IRP provisions should be voluntary.
--There should be exemption provisions.
--No exemption provisions should be proposed.
--Is there a possibility of waiver of the IRP provision for new
customers? Does the EPAct require it?
--The IRP rule should apply to contractors only and not all recipients
of Federal power.
--Some customers are concerned about the practicality of the IRP
analysis and process.
Discussion
Section 114 of the EPAct requires all of Western's firm power
customers to develop and implement IRP. The EPAct also provides Western
with the option of developing a small customer provision. Only State
regulated investor-owned utilities (IOU) are exempt from the IRP
requirement under EPAct. Beyond the State regulated IOU exemption,
Western has no flexibility to exempt new or existing customers from the
IRP requirement. The EPAct defines customer as including parent-type
entities and their distribution or user members. The IRP procedures are
not limited to contractors only because of this broad definition.
ii. Comments Concerning Special Provisions:
--Western should adopt a small customer provision for those
unaffiliated with member-based associations. The size for small
customers should be below 75 gigawatthours (GWh).
--Small customers should be allowed to submit an IRP but should be
allowed an option to invest a specific percentage of gross revenues
(\1/2\ to 1 percent) in DSM targeted to end-users. Western should allow
up to one third of this investment to be used for technical or economic
feasibility studies and evaluations.
Discussion
Western has included the small customer provision in response to
public comment. The small customer provision, as defined in section
114, will apply to customers whose annual sales or consumption is equal
to or less than 25 GWh and who have limited economic, managerial, and
resource capability to conduct integrated resource planning. Customers
may request small customer status, and Western will make a
determination as to the customers' qualifications. This Program does
not limit a customer that could otherwise qualify under the small
customer provision from preparing an IRP. In addition, there is nothing
in the proposed Program that restricts a customer from adopting a
policy to invest a percentage of gross revenues in DSM as part of its
small customer plan.
iii. Comments Concerning Flexibility:
--There are local and regional differences.
--Any final requirement must be reasonable and achievable.
--The level of effort required may be too much/little.
--IRP regulations should be flexible enough to respond to regional and
project differences.
Discussion
In the development of the proposed procedures, consideration was
given to the administrative burden, flexibility, and equity of the
alternatives on Western's diverse customers. In addition, consideration
was given to the regional diversity in Western's service area. We
believe that with the IRP requirement and small customer provision,
each customer will have the flexibility necessary to adequately address
regional needs and to expend an appropriate level of resources, such as
time and money, on these planning efforts. Western will not dictate
energy decisions a customer makes based upon regional conditions or
needs as long as all of the IRP criteria are met.
2. Specificity of Procedures
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 defined by section 114, Western shall
approve an IRP if, in developing the plan, the customer in a reasonable
manner has:
1. Identified and accurately compared all practicable energy
efficiency and energy supply resource options available to the
customer.
2. Included a 2-year action plan and 5-year action plan which
describe specific actions the customer will take to implement its IRP.
3. Designated least-cost options to be utilized by the customer for
the purpose of providing reliable electrical service to its retail
consumers and explained the reasons why such options were selected.
4. To the extent practicable, minimized adverse environmental
effects of new resource acquisitions.
5. In preparation and development of the plan (and each revision or
amendment of the plan) has provided for full public participation,
including participation by governing boards.
6. Included load forecasting.
7. Provided methods of validating predicted performance in order to
determine whether objectives in the plan are being met.
8. Met such other criteria as the Administrator shall require.
b. Comments
--The IRP option needs to be more specific and less subjective.
--There are too many specifics which could lead to insufficient
flexibility.
--Will Western recognize customer size and type differences?
--Should Western be specific in its definition of content and
evaluation criteria?
c. Discussion
In developing the IRP requirement, it is important to balance needs
for flexibility and equity among Western's diverse customers. For this
reason, the proposed Program is based upon the premise that the
development of each IRP must be tailored to each customer's unique
characteristics, reflecting that customer's size, type, resource needs,
and geographic area. Western's primary interest is in providing an
adequate framework for customer use of the IRP process as a tool for
meeting resource needs.
While some comments have expressed a preference for specific
standards, Western believes that quantitative standards are likely to
limit the potential of an IRP process, assuring only the achievement of
minimum standards. Flexible and general guidance will lead to locally
tailored, relevant, and meaningful IRP as the customer works with its
consumers in this planning process. Any need for specific technical
guidance on how to prepare and implement an IRP can be met through
technical services provided by Western's energy services program.
3. IRP Content
a. Background
During the early portion of the public process on this Program,
Western proposed in concept that IRPs address several subjects. The
EPAct directed Western to develop procedures regarding IRP content.
b. Comments
i. Comments of General Nature:
--The final requirements should not address small versus big customers,
but power suppliers versus all-requirements customers.
--Some customers should not have to address all elements.
ii. Comments on Identification and Comparison of Alternatives:
--Western should require customers to analyze the costs and benefits of
all options.
--Western's Program should identify and target all practicable
potential opportunities to save energy.
--Western should not stipulate the type of test (i.e., RIM test, total
resource cost test, etc.) that a customer uses in its IRP.
iii. Comments on Action Plans:
--IRPs should include budgets, milestones, and completion dates.
iv. Comments on Environmental Analysis:
--How far need a customer go on the supply-side for environmental
analysis?
--Western should not require customers to consider environmental
externalities in their IRPs. It should accept the decision of
individual States on externality issues.
--Quantification of environmental externalities should not be a
requirement.
--Environmental externalities should be required.
--Do not require a customer to prepare an EIS as a part of an IRP.
v. Comments on Public Involvement:
--Boards and city councils should be sufficient public involvement.
--Only local consumers and not the general public should be involved in
IRP development or implementation.
--Public review of an IRP is costly.
vi. Comments on Load Forecasting:
--Load forecasting methodologies which require lengthy lead times
(e.g., end-use) should not be required before the second round of IRPs.
vii. Comments on Quantification:
--IRPs should emphasize cost-effectiveness and demonstrated benefits.
--IRP approval criteria should include minimum standards for energy
efficiencies in each customer class, minimum annual progress
requirements for each customer class, recognition of the relative
environmental cost of resource alternatives, and guidelines for the
selection of new resources which always address environmental costs and
encourage selecting alternatives that minimize environmental damages.
--Western should let customers evaluate energy and capacity on an equal
level, so that demand options such as load shifting and peak reduction
are on an equal DSM level with conservation.
viii. Comments on IRP Updates:
--Updates should not require public review.
c. Discussion
The EPAct defines the elements or content that must be included in
IRPs. Western is proposing that the extent to which the elements are
addressed should reflect each customer's size, type, resource needs,
and geography. It would be expected that a power supplier and an all-
requirements customer would address each of the IRP criteria in a
unique manner and to a different extent. Western is not attempting to
develop different procedures for each type of customer situation, but
rather one Program which is flexible enough to be applied to any
customer situation.
Western is requiring that each customer identify and compare all
practicable demand- and supply-side alternatives. Western will not
prescribe the methods to be utilized in making these comparisons.
Western will require the customer to describe the method used to select
the options to be compared; describe the options, assumptions, and
costs related to the options; and describe the evaluation methods.
Western is proposing that each customer submit an action plan that
sets forth both short- (2 years) and long-term (5 years) actions that
it will take to implement its IRP. The action plans must contain goals
and milestones, quantify energy and capacity benefits, and give the
estimated or actual implementation costs for each action. Annual
progress reports will also be required. To the extent possible, Western
has attempted to combine reporting requirements in order to reduce
paperwork and avoid duplication of effort.
The IRP procedures require that, to the extent possible, customers
should minimize adverse environmental effects of new resources, either
supply or demand. Customers will not be required to quantify
environmental externalities since this is not required by the EPAct,
and the States within Western's marketing area have taken different and
sometimes conflicting positions on this issue. Western is not proposing
to require customers to prepare an EIS or any other environmental
compliance as part of their IRP submittal. In addition, Western will
not determine for its customers or review or approve plans with respect
to the level of environmental compliance appropriate for each proposed
action.
The EPAct requires governing board and full public involvement.
Western believes that public involvement will help assure that resource
planning and choices meet local needs. Western has defined full public
participation to mean that ample opportunity exists for the public to
participate in or influence the preparation and development of an IRP.
Western will be interested in how the public was involved, how
resolutions to public concerns were handled, and how the public
influenced IRP decisions. Western believes that each customer can
manage the costs of its public involvement process by planning a
process appropriate to the scope and magnitude of its IRP process.
Western is not requiring customers to adopt a specific load
forecasting method, only that customers utilize an accepted
methodology. We are proposing however that customers develop forecasts
upon which to base their IRPs.
The EPAct requires that least-cost options be adopted by utilities
as well as annual reporting on the benefits achieved under the IRP.
Western is proposing to allow exemptions to the least-cost requirement
if the customer can show in the IRP that decisions were made on a clear
analysis of demand- and supply-side resource options and environmental
effects.
Updated IRPs, at a minimum, must be submitted at least every 5
years after the anniversary date of approval of the initial IRP
submittal. The criteria utilized to review updated IRPs will be the
same as for initial IRP submittals. However, periodic changes and
updates to IRPs may be submitted as part of the customer's annual
progress report.
4. IRP Review and Approval
a. Background
Western has proposed that the required elements of an IRP must be
addressed in a reasonable manner by a customer before Western approves
the IRP.
b. Comments
--How much will Western expect from its customers in developing and
implementing an IRP?
--On what basis will customer IRPs be graded?
--Western should focus on having customers develop productive IRPs, not
on ``window dressing.''
--Western's IRP review should be administrative and not regulatory or
judicial. Acceptance of an IRP should be based on process and customer
goals. Western should not be analyzing customer choices or decisions.
--Western should be flexible for surplus utilities. It should accept
IRPs prepared for other governmental entities.
--Past customer efforts should be recognized.
--There should be a peer review of IRPs.
--Western should not hire consultants to review customer IRPs.
--A dispute resolution provision should be included.
c. Discussion
Western will apply a reasonableness test in its review and approval
of customer IRPs. The following two questions will be answered by
Western in the review and approval process:
1. Is the IRP consistent, overall and for individual criteria, with
customer achievement of its own defined IRP goals?
2. Does the customer meet the full intent of the EPAct and this
Program in their definition of an IRP for each of the IRP criteria, and
are they appropriate for the customer's size, type, resource needs, and
geographic circumstances?
Western will not direct a customer to utilize specific
methodologies in the development of its IRP. Customers will make their
own choices regarding resource type, quantity, and timing in accordance
with their IRP.
Western will not dictate resource choices but will review them for
reasonableness.
Western will accept an IRP prepared for another Federal, State, or
other regulatory body if the IRP substantially complies with the
requirements of Western's IRP procedures. Western recognizes that the
past efforts of many of its customers in implementing conservation and
demand-side management have been significant. Historic investments by
Western's customers will influence the future resources available for
consideration in an IRP or a small customer plan. However, the EPAct
makes no allowances for the approval of IRPs or small customer plans
based upon past efforts.
Only Western personnel will review customer IRPs. Western does not
plan to employ consultants to review IRPs, nor does it propose to use
peers for the review of customer IRPs. Western considered the merits of
peer reviews, but issues related to proprietary or sensitive customer
data and administrative burden seem to outweigh any potential benefits.
Most importantly, the EPAct requires Western's Administrator to review
IRPs; this responsibility should not be delegated to consultants or
customer peers.
Western has included an administrative appeal process that provides
for appeals to the Area Manager or Administrator in the event the
customer does not agree with Western's determination of the
acceptability of an IRP or small customer plan or its compliance with
an approved IRP or small customer plan. In addition, Western will
consider the use of mutually agreeable alternative dispute resolution
practices, to the extent allowed by law, on issues of IRP acceptability
and compliance.
5. Member Based-Associations
a. Background
There is a considerable mix of contractual arrangements among
Western's member-based associations (MBA) customers. Some MBAs are the
sole supplemental power supplier for the members and have load growth
responsibility, while others act as a representative for the members
and have no generation or transmission capabilities.
b. Comments
--In order to achieve the most cost-effective and operational IRPs
possible in their situations, all of the members/participants must
support the IRP with data and during the final decision making process.
--While most MBAs or power suppliers may wish to prepare a unified IRP
on behalf of all their membership, not all members may be supportive of
such a centralized approach and prefer the option of doing their own
IRP.
--Western should accommodate the variations represented by its
customers and their numerous organizational and supply arrangements.
c. Discussion
Western has proposed an IRP requirement which allows MBAs to submit
individual IRPs for each of their members, or submit one IRP on behalf
of all of their members, so long as individual member responsibilities
and participation are identified. Western has also provided an option
for any member of an MBA to submit an individual IRP to Western. 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 membership on these issues. Each member will
be required to sign the IRP or a resolution accepting the IRP prior to
submittal to Western.
All customers will be required to notify Western within 60 days of
the effective date of the final Program of their intent to submit an
IRP individually, through an MBA, or as an IRP cooperative.
6. IRPs Prepared for Others
a. Background
A number of Western customers are required to submit IRPs to
regulatory bodies and other agencies in addition to the requirement to
submit an IRP to Western.
b. Comments
--Western should accept IRPs prepared by its customers for other
entities.
--The Rural Electrification Administration requires an IRP only when a
customer applies for financing; Western should have a similar timing
requirement.
--Would Western adopt a different criteria for review and acceptance of
IRPs prepared for other entities than for IRPs prepared specifically
for Western?
--Western's energy planning and marketing programs are intruding into
customers' traditional utility responsibilities. Customers are
concerned about multiple jurisdictions requiring IRPs.
--The IRP regulations should not be burdensome or duplication for
customers preparing to meet State and other Federal requirements.
Conflicts with IRP requirements should be avoided. If IRP rules are
stringent or specific, they should not apply to entities subject to
IRPs from State regulations.
c. Discussion
The EPAct stipulates that Western will accept IRPs prepared for
other governing agencies if those IRPs substantially comply with
Western's Program. In addition, it stipulates that State-regulated IOUs
are exempt from Western's procedures. Western has, in the development
of this Program, considered resource planning regulations and policies
of other entities, particularly State public utilities commissions and
the Rural Electrification Administration. We have reviewed and compared
those other requirements and proposals with the fundamentals of this
proposal. While we have not found any other proposals, regulations, or
policies that are mirror images of the Western proposal, we believe
that this proposed Program is generally compatible with other
requirements. The EPAct does not provide an option to require IRPs only
when a new resource and/or associated financing are necessary.
7. IRPs for Utilities in Surplus
a. Background
Within Western's 15-State marketing area there is a great deal of
diversity in the resource situation in various regions and in the types
of customers. There are utilities and regions with surplus power and
utilities and regions facing the next resource acquisition decision.
There are both large and small utilities that may or may not have
direct control over generation decisions of their power supplier.
b. Comments
--Customers suffering from loss of load should be exempted from the new
programs for conservation and efficiency.
--In situations where utilities have surplus generation, marketing
should be considered an acceptable option.
--Western should not mandate additional expenditures on DSM which would
create additional surpluses and increase rates.
c. Discussion
Utilities in surplus could be viewed as having the time and tools
necessary today to plan better for the future without being under the
time pressure facing utilities with a more immediate need for
resources. The EPAct does not give Western the flexibility to exempt
customers with surpluses or in a load-loss situation from the IRP
requirements. The IRP process has no predetermined outcomes. Western
will not mandate the selection of a DSM technology over other resource
options; however, we are requiring the evaluation of the economics of
DSM technologies compared with other resource options. Should a DSM
technology be the least cost, Western believes that it should be
adopted or that there should be documentation explaining why another
option fits better with the utility's objectives. Exceptions to least-
cost-based decisions may be made if the customer can show in the IRP
document that decisions were made on a clear analysis of demand- and
supply-side resource options and environmental effects.
8. Economic Feasibility and Administrative Burden
a. Background
A number of Western's customers are smaller or medium-sized
utilities. To date, there are more examples of the costs of preparation
and implementation of IRPs by larger utilities, mostly IOUs. These
examples have tended to set the baseline for what smaller and medium-
sized utilities expect to incur in preparation and implementation of
IRPs. Western is not proposing to define how much time and money a
customer should invest in IRP development and implementation. Rather
Western's review will be focused on the end-product IRP. The EPAct
requires that customers develop and submit annual progress reports to
Western. Western is interested in both quantitative and qualitative
reporting. The draft IRP procedures list five items that must be
included in the annual report. A penalty may be assessed for
nonsubmittal of an annual report to Western.
b. Comments
i. Comments on Cost of IRP Development
--Some customers believe that the cost of preparing an IRP would be a
higher percentage of their revenues (as compared to a larger utility)
and subsequently serves to be a double penalty or inequity as compared
to larger customers.
--There should be a ceiling on the costs customers should be expected
to incur in preparation of an IRP; i.e., it has been suggested that IRP
costs should not be in excess of 1 percent of the customer revenues,
while others have suggested a ceiling based on 2 percent of annual
administrative cost (as averaged over 5 years).
--Do not stipulate an IRP funding percentage.
ii. Comments on Cost of IRP Implementation
--Some customers are concerned about the economic feasibility of
demand-side management for small utilities.
--The proposal threatens to shift load away from electricity toward
more reliance on petroleum and natural gas if, as a result of IRP
development and implementation, electric rates increase.
--The administrative cost of IRPs estimated in the draft EIS does not
appropriately recognize the cost of monitoring and verification.
--The IRP implementation costs may be too imposing.
--Western's actions could impact rates.
--Customers have resource limitations.
iii. Comments on Burden of Reporting
--Reporting requirements should be kept to a minimum.
--The administrative burden of reporting for small customers could be
too much.
--Since growth, weather, and changing economics drive power use as much
as or more than conservation, most data cannot be used to measure the
Program's effectiveness.
--Research and development should be recognized, even if no measurable
benefits are evident today.
--Western needs to simplify and streamline its reporting requirements.
c. Discussion
Western is sensitive to and understands the concerns about the
costs of development and implementation of an IRP and the importance of
practicality. Western believes that the benefits of preparing an IRP
could outweigh IRP development and implementation costs. The IRP
process holds the potential for customers to make better decisions,
develop greater credibility with their end-users, and provide more
cost-effective and valued service. The level of resources a customer
expends in the development and implementation of its IRP is not a
factor in the review and approval of the IRP.
Western believes that many of its customers are already performing
some of the aspects of IRP and subsequently incurring costs associated
with good planning and customer service activities. The costs of
developing and implementing an IRP are also somewhat staged. In this
sense, an IRP can be viewed as a risk management tool, since the
assessment of the best resource options can take place before the
resource need is imminent so that less start-up time is necessary when
resource needs are apparent. Western anticipates that the benefits from
IRP implementation will outweigh the administrative burden of data
collection, data preparation, and reporting.
The level and extent of reporting should be consistent with each
customer's size, type, resource needs, and geographic area in the same
manner as the IRP preparation itself. The IRP procedures identify
specific items that should be included in annual progress reports. The
most important portion of the annual progress report is quantification
of benefits achieved. Credible estimates of benefits are appropriate if
actual measurement is infeasible or not cost-effective. Western will
prepare a summary of customer IRP activity and publish it in its annual
report.
References to benefits in the procedures are not limited to
conservation. Integrated resource plans may lead to a variety of
different resource acquisition strategies, including the development of
supply-side resources. Although Western is proposing that customers
quantify both demand-side and supply-side investments that add to
supply or reduce demand, other less quantifiable benefits may result
from a successful IRP. Examples include creating a more diverse,
flexible, or reliable resource mix; improving external and internal
customer communications; improving the environmental sensitivity in
resource planning; and developing improved customer knowledge of its
system and its consumers. For utilities in surplus conditions, a
marketing program developed pursuant to an IRP also presents an
opportunity to measure benefits.
Research and development efforts related to a customer's IRP should
be valid components of the plan, since the result would eventually lead
to tangible and measurable benefits.
Western expects that the costs and methods of verifying,
monitoring, and reporting on IRPs will vary substantially among
Western's customers. For this reason we believe it is infeasible to
attempt to set a specific verification standard because of the
differences in customer size, type, resource needs, and geography
associated with the plans. Western will provide technical assistance,
upon request, to its customers in monitoring and verifying the results
of IRPs.
9. IRP Cooperatives
a. Background
Customers may form IRP cooperatives under the EPAct and request
Western's approval to submit IRPs for those cooperatives.
b. Comments
--Western should consider permitting the formation of cooperatives that
could represent the common interests of several customers.
--IRPs should be accepted from generation and transmission (G&T)
cooperatives.
c. Discussion
The IRP proposal allows purchasers 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. Western is
proposing to extend IRP cooperative status to existing first-level and
second-level G&T cooperatives that make such requests. For MBAs and IRP
cooperatives, individual member responsibilities and participation
levels must be identified in the IRP.
10. 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.
b. Comments
i. Comments Related to the Cost of Services and Resources
--Caution should be exercised in considering the rate and revenue
impacts which offering technical assistance may entail.
--The proposed action should indicate the level of effort that Western
intends to devote to the program (budget, staff, etc.).
--How can Western provide technical assistance, review, and approval of
IRPs within 120 days as required by the EPAct when it is reducing its
personnel?
--Anything beyond nominal technical assistance should be paid for by
the benefiting customer.
ii. Comments Related to Services
--Western should develop an idea list by activity and should cofund
IRPs and develop packaged demand-side management programs.
--Technical assistance should include cash, grants, reinstating cost-
share programs, and other financial assistance for such things as
circuit riders, plan monitoring techniques, developing a `cookbook' for
doing IRPs, and/or a general sharing of customer IRPs through an
electronic bulletin board or library.
--If IRPs are necessary, we need a copy of the Resource Planning Guide
(RPG) and technical assistance.
--In general, we are impressed with the comprehensive and thoughtful
nature of the IRP materials Western plans to provide to its customers.
--Western should do less technical assistance on IRPs and emphasize
customer acquisition of efficiency instead.
c. Discussion
Technical assistance will continue to be an integral part of
Western's programs and services. Western's present technical assistance
budget is about $5 million per year. Western also acquires cost sharing
and cosponsors whenever possible. We will continue to seek additional
funding and resources from potential cosponsors of services and
activities in order to leverage the benefits of the service, reduce
financial risk, and remove barriers to the successful application of
emerging technologies. While Western expects to continue to experience
limitations on staffing, we will make every effort to assure that the
technical assistance is available to customers upon request, while
ensuring review and approval of customer IRPs as provided by the EPAct.
The majority of Western's customers have not done an IRP before and
need technical assistance. The EPAct specifically directs Western to
give priority to providing technical assistance to customers that have
limited capability to conduct IRP. Requiring the benefiting customer to
pay for technical assistance would raise an obstacle to effective IRP
for those customers that have limited resources.
The range of customer technical assistance activities has been
extremely diverse and customer driven over the last decade. We do not
expect this to change as we focus on technical assistance in the
customer preparation and implementation of IRPs. Western is willing to
look at reinstating the cost-share program, has provided financial
assistance for circuit riders, developed the RPG to assist customers in
developing IRPs, and has instituted an electronic bulletin board
service. We are willing to assist in the development of IRPs and
demand-side management programs. Copies of the RPG are available upon
request to Western.
Western believes that an emphasis on IRP technical assistance is
appropriate at present and consistent with the EPAct emphasis. A
customer should not acquire an efficiency resource before an analysis
of cost-effectiveness takes place pursuant to an IRP.
Western's energy services program utilizes a 5-year planning
process, reviewed annually to ensure that customers are receiving the
best and most appropriate assistance possible. Customers can telephone
Western's energy service managers in the appropriate Area Office to
discuss their needs for technical assistance.
11. Submittal Timing
a. Background
The EPAct requires updated IRPs to be submitted to Western for
review every 5 years. The Program is drafted to assure that customers
are benefiting from IRP development and implementation and to ensure
that customers meet the IRP criteria. The 5-year timeframe is also
consistent with a long-term action plan timeframe thereby ensuring that
the action plan is fully updated.
b. Comments
--Every 2 years is too frequent for IRP submittal because power
requirements studies for large generation and transmission cooperatives
are done every 3 years and end-use surveys are done every 3 years in
some utilities, and an IRP would be based on these documents.
--The frequency of submittal could be based on need to meet load growth
development.
--Suggestions included 5-year IRP submittal with biannual status
reports, and plans should be evaluated and revised every 5 years.
--There should be an evaluation period every 10 years for IRP
submittals.
c. Discussion
Western has proposed the 5-year IRP submittal period as set forth
in the EPAct. We believe that this period is more compatible with the
power requirements study and end-use survey frequencies of many Western
customers than other shorter periods of time. The proposal also allows
customers to submit other changes to their IRPs to Western as part of
the annual progress report.
12. Irrigator Issues
a. Background
Western is proposing that the IRP provisions required by the EPAct
apply to all customers, with the exception of those qualifying for the
small customer provision. Irrigation districts may qualify for small
customer status. This supersedes earlier proposals for accepting
previously approved and implemented energy and water efficiency plans
submitted to other Federal or State governmental agencies.
b. Comments
--Public review of irrigation district IRPs would be costly and staff-
consuming.
--Irrigators should not have to address all IRP elements--some elements
apply only to generating entities (e.g., resource comparisons,
environmental impacts of actions); it is not cost-effective for small
customers to look at all of this.
--Western must recognize water conservation activities.
--IRP rules need to recognize that agriculture is different from other
loads and that progress must be measured differently. Western must
recognize the unique character of irrigators and give credit for past
investments that are still providing benefits. Western's regulations
must take into account constraints such as water conservation mandates,
weather changes, and individual farmer decisions.
--Irrigators have no access to other sources of power supply.
--Irrigators cannot meet the rigid definition of IRPs as set forth in
Western's periodic newsletter; make the language more flexible and
allow irrigators to do a different type of energy management plan.
--Western should consider the best management practices plan and State
conservation plan as alternatives.
--Preparation of an IRP would be so costly and sophisticated in terms
of cost-benefit analysis that irrigators would have to hire consultants
at considerable expense to prepare the plan.
--Water districts of 2 megawatts (MW) or less should be exempt from
IRP.
c. Discussion
The EPAct limits Western's ability to propose special program
requirements or exemptions for irrigators. However, Western believes
that IRPs can be beneficial for irrigation customers. IRPs can be
developed to assess possible efficiencies in the use of power and water
and document accomplishments in water conservation.
An irrigation district might find that its IRP would consider more
demand-side resources in its assessment because it has limited control
over the supply side. An IRP prepared for a district in one area may
look entirely different from one prepared elsewhere due to regional
issues such as different soil types, irrigation practices, and water
availability and quality, which would necessitate different approaches
to planning.
Western recognizes that water conservation may be equated to energy
conservation practices and that the IRP process may easily address
both. Western feels that the IRP process, as we have now defined it,
can accommodate the wide range of differences among its customers. The
flexibility contained in the IRP language will allow for creativity in
the planning process and in resource selection. An IRP allows customers
to use their own resources, experiences, and talents to address the
requirements. Consultants need not be retained to do extensive analysis
of the costs and benefits of various resource opportunities when the
evaluation and resource decision is based on an irrigator's experience
or the preexisting analysis of agencies and institutions as it relates
to prudent management of resources.
13. Future Program Review
a. Background
The historic program review interval was based upon the existing
G&AC requirement of a C&RE program review every 5 years. Western
published its initial G&AC on November 13, 1981. An amendment to the
G&AC was issued on August 21, 1985, as a result of a 5-year review and
passage of the Hoover Power Plant Act of 1984. There is concern that
continued 5-year reviews of the program will create uncertainty and
work against acceptance of integrated resource planning.
b. Comments
--Western needs to clarify its intentions concerning the current 5-year
review period for the C&RE program to assure customers that radical
program changes are not anticipated in the near future.
--Western's 5-year review of conservation programs is not acceptable
unless significant changes in the Program are mutually agreed to by
Western and its customers.
--Periodic review of the Program is necessary; there was objection to
linking power contracts to an EMP which might undergo radical revisions
every 5 years.
--Customers cannot plan and achieve stability if subject to wholesale
revisions every 5 years.
--Program changes should be phased in gradually and done with the
approval of Western's customers once the Program is established.
c. Discussion
Western is sensitive to customer concerns and interest in the
planning stability that this Program offers. The EPAct requires that
Western review the IRP program requirement beginning 1 year after
January 1999 and at appropriate intervals thereafter. The review will
be for the purpose of reflecting changes, if any, in technology, needs,
or other developments. This review will take place pursuant to a public
process.
14. Penalty
a. Background
Western proposed that penalty imposition would be triggered by (1)
nonsubmittal of an IRP or a required annual progress report or (2) not
addressing each of the required IRP elements. Prior to the alternatives
workshops, Western proposed a rate penalty of 10 percent of the firm
monthly bill for each of the first 6 months of noncompliance with
Program requirements, increasing to 20 percent of the firm power
monthly bill for each of the next 6 months of noncompliance, followed
by withdrawal of the entire Federal resource commitment if
noncompliance persists for more than 1 year. Pursuant to the EPAct,
Western is now proposing a graduated surcharge on all power purchased
from Western for noncompliance with the Program.
b. Comments
--The allocation loss provision is unacceptable; the addition of
another rate penalty layer is better than a resource loss.
--Penalty provisions should be eliminated. Instead, the focus should be
on providing incentives.
--The existing 10-percent resource penalty provision should be
continued.
--A penalty provision with a sliding scale should be adopted. For
example, if a customer comes up 10 percent short of its energy
efficiency goals, the penalty should be a 10-percent resource
reduction.
--An appeals process is necessary. Western should use arbitration or
mediation to resolve disputes under the Alternative Dispute Resolution
Act.
--Be realistic about the ``death penalty'' loss of the entire
allocation approach. Western cannot be serious about pulling the plug
on a customer.
--Penalties should start 1 year after the noncompliance notice, then
10-percent rate penalty for the next year, 20 percent for the next
year, followed by a total resource loss.
--Western should adopt a 10-percent penalty for the first year of
noncompliance, followed by a 20-percent penalty for the second year,
with an additional 10-percent penalty for each succeeding year. A
partial loss of an allocation (up to 25 percent) should occur only if a
customer is more than 12 months behind in the payment of late charges.
--Compliment Western on the proposal of rate penalties before any
resource withdrawal.
--A resource withdrawal penalty is not favored, as it would be the most
severe for a customer and probably the most difficult to administer for
Western. Resource withdrawal would necessitate customer acquisition of
replacement power at higher rates, while Western would be faced with a
possible loss of revenues and would create an administrative burden of
marketing the withdrawn power.
--Federal agencies that are long-term firm power customers should be
exempt from penalty imposition.
--The withdrawal of the total Federal resource should not be permanent.
Customers losing their allocation due to noncompliance should be
allowed to recapture the power once compliance is achieved.
--Sanctions should be imposed at the final customer level and not on
the member-based association.
--How will Western impose a penalty when an IRP is being prepared by an
MBA and only one member of the MBA refuses to comply with Western's
program?
--There should be only one penalty imposition on a customer.
--Western begins by penalizing existing customers by proposing the
extension of less than the resource they possess today and then offers
nothing but more penalties for failure to comply with the EMP.
--We recommend a 1.0 mill per kilowatthour (mill/kWh) rate penalty for
the first year of customer noncompliance, increasing by .5 mill/kWh
increments annually up to a maximum rate penalty of 5.0 mills/kWh. The
resulting funds should be used for environmental mitigation activities
and energy conservation projects.
--A rate penalty is much preferred because it provides an appropriate
penalty without jeopardizing community health or safety. Impacts would
be economic rather than operational.
--A resource reduction penalty for noncompliance with the IRP
requirements may not be permissible under Federal law for Hoover
contractors.
c. Discussion
Since Western's original penalty proposal, Congress enacted the
Energy Policy Act of 1992. This law mandates the use of a graduated
surcharge on all power purchased by a customer from Western for
noncompliance with the Program. An alternative penalty of loss of 10
percent of the resource delivered under a long-term firm power contract
after the first 12 months of noncompliance has been proposed by
Western.
Due to the action by Congress, Western has lost its flexibility to
respond to many comments through changes to Program procedures
regarding penalties. Western will adopt the provisions of the EPAct on
this issue. Penalties in existing contracts, which provide for a 10-
percent reduction in firm power resources for noncompliance with the
G&AC, will continue to be in effect for the Program until changed. The
EPAct recognizes the appropriateness of the 10-percent resource penalty
approach. The graduated surcharge provisions in the EPAct and proposed
in these procedures will be incorporated into the contracts that extend
resources.
Western does not intend to impose Program penalties in an
unreasonable way. Western is much more interested in working with its
customers to comply with the IRP requirement so that the benefits of
IRPs are realized by electrical consumers. During customer interviews
that took place to help Western assess the organizational impacts of
the Program, many customers indicated that they supported integrated
resource planning. Western will continue to provide technical
assistance to customers so that IRP preparation can take place in a
timely and acceptable way.
In situations involving an IRP submitted by a member-based
association on behalf of its members where a single member does not
comply, the proposed penalty would be applied to the member-based
association on a pro rata basis in proportion to that member's share of
the total member-based association's long-term firm power contract.
Western does not believe that exempting Federal installations from
the proposed penalty provisions is good policy. As in the past, Western
does not believe that special treatment for any customer is fair or
appropriate. Federal installations would have a lesser incentive to
realize the potential benefits that may be identified in an IRP if a
penalty exemption were to be granted. Cost savings in acquiring
appropriate supply- and demand-side resources should be as beneficial
to Federal installations as any other customer. Moreover, the EPAct
does not exempt Federal installations from the statutory penalty
provisions.
Revenues resulting from the imposition of penalties cannot be used
to fund environmental mitigation activities and energy conservation
projects. By law, all of Western's revenues, including those from
penalty imposition, must be deposited in the United States Treasury and
are applied to project repayment. For most of Western's projects,
revenues cannot be used to fund activities; appropriations from
Congress are the budgetary resource from which expenditures are made.
Western does not agree that a resource reduction penalty for
noncompliance with the IRP requirements is not allowed for Hoover
customers. Section 114 of the EPAct amends Title II of the Hoover Power
Plant Act, indicating that Congress intended to apply the penalty to
Boulder Canyon Project purchasers. Moreover, existing Hoover contracts
already have a resource reduction penalty as part of their terms and
conditions. Western sees no obstacle to enforcement of the penalty, if
necessary, for purchasers of Boulder Canyon Project power.
Western has adopted several of the comments received. Provisions
for dispute resolution and administrative appeal have been included in
the proposed Program.
C. Power Marketing Initiative
1. Extension Term
a. Background
Western is proposing to extend resource commitments to existing
customers beyond the expiration date of currently effective contracts.
In the early stages of the Program public process, Western suggested
that 10 to 40 years would be an appropriate range of extension terms.
After receiving comments during the EIS scoping process, Western
developed a limited extension alternative of 10 years from the date of
IRP approval and three extension alternatives for evaluation in the
draft EIS: 15 years, 25 years, and 35 years, all from the date existing
contracts expire.
b. Comments
--We favor alternative eight in the draft EIS, with a term of 25 years.
--Recommendations for the length of resource extensions to existing
customers included 10 or more years, 15 years, at least 20 years, 25
years, 30 or more years, 40 years, and 50 years.
--Preference was expressed for a 15-year extension at a higher level,
as opposed to the other alternatives with lower levels of extension.
--Why should I opt for anything longer than 15 years? With
uncertainties that exist over Western's marketable resources due to
environmental concerns and the rising costs of Western's power, we may
not want to be tied into long-term contracts.
--Those who have paid for projects in the past should have first call
on future resources.
--Western customers who have developed resource plans with a planning
horizon beyond 10 years should be considered for allocation terms of a
comparable length.
--As many customers base load their Western allocation, an extension
should be for as long as the useful life of base-load capacity, such as
a thermal plant.
--The draft EIS alternatives do not provide resource stability.
--In order to meet the needs of fish and wildlife, Western needs to
extend resources for a minimal time period or provide for resource
adjustment capability. Western should explain the impact of resource
stability on fish.
--Western should extend resources for a 50-year period of time,
comparable to Federal Energy Regulatory Commission (FERC) licenses.
--A longer-term extension should be granted if the power is linked to a
specific renewable resource project with long-term benefits.
--Longer resource extensions at a high level have environmental
benefits.
--Resources should be extended for at least 25 years.
--Thirty-five-year contracts have superior environmental benefits as
compared to 25 years.
--Suggest 35- to 40-year contracts.
--We support a limited 10-year extension with a resource pool to
promote energy conservation and the use of renewables.
--Western should consider extending 70 percent of existing commitments
for 10 years.
--We strongly support nonextension alternatives, as resource extensions
are not needed for effective IRPs.
--Heavy reliance on long-term contracts is inconsistent with current
IRP practices and utility planning in the 1990s.
--Shorter-term planning horizons are needed to be competitive. The
trend is moving away from relative stability associated with exclusive
franchise monopolies.
--Many public utility commissions are discouraging utilities from
incurring costs associated with acquiring long-term resources.
--Customer willingness to fund environmental improvements will be
impacted if the Western resource is short-term.
--Twenty-five year contracts are objectionable on environmental
grounds; it will be more difficult to change hydropower operations to
protect the environment if resources are locked in.
--While it is true that long-term contracts will discourage
construction of new generating facilities, this will also be a
disincentive to improving energy efficiency and will frustrate IRP.
--The cost of borrowing goes up when resource uncertainty exists,
especially for renewables/DSM.
--Western power helps us remain competitive in a changing utility
industry.
--We prefer 25-year extensions of 100 percent of our current
allocations.
--Existing customers have provided enormous financial support to
Western; this should be recognized.
--Long-term contracts maintain the competitive balance in the utility
industry.
--Renewable resources, in particular, can require a longer period to
amortize and would be easier to select when a dependable cost-effective
long-term Western resource complements them in a customer resource mix.
c. Discussion
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 proposes a resource extension period of 18 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. Eighteen years will maintain the resource stability
necessary for effective integrated resource planning. At the same time,
18 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 an extension 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 18 years beyond the expiration date of contracts with
existing customers would mean that new contracts would be in place
until at least 2020. Initial extensions would be about 23 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.
The concern about being locked into long-term arrangements with
Western is answered by existing contractual language. The General Power
Contract Provisions, which are part of every long-term contract for the
sale of power by Western, allow a customer to terminate the contract if
a rate adjustment causes power to become uneconomical. This principle
will be retained in contracts extending resources pursuant to the PMI.
Western has provided for resource adjustment capability as part of
the PMI. 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 resource
stability on fish 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 prefers to encourage the development of cost-effective
renewable resources through means other than tailoring the extension
period to particular renewable resource development/payback time
periods. Such an approach would lead to varying contract terms, making
project-wide marketing difficult in the future. The proposed extension
term of 18 years is sufficiently long to make the long-term financing
of renewable resources feasible.
Western realizes that the draft EIS predicts relatively greater
environmental benefits for contract terms in excess of 18 years. At the
same time, an 18-year proposal has clear future environmental
advantages over a shorter extension period, such as those represented
by the limited extension alternatives. An even greater environmental
advantage exists for 18-year future resource extensions under the
Program as compared to the uncertainty and delays associated with a
potential project-specific marketing plan approach. 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. Certainly, 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, taxpayer-financed hydroelectric facilities in the West.
Western agrees that 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.
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 an 18-year term
of contract is appropriate.
Western does not concur with comments advocating adoption of either
a limited extension alternative or 10-year extensions of resources from
the date existing contracts expire. Integrated resource planning is a
future-oriented planning process that is enhanced by resource
stability. Instead of planning for the replacement of Western's
resources or customer hedging of bets on the future availability of
Western's resources, IRPs can be focused on implementing cost-effective
resources, including energy efficiency and renewables, to meet load
growth in the future. The Program public process to date illustrates
how long Western's marketing initiatives can take to implement. A 10-
year resource extension would require Western to commence the
development of post-extension, project-specific marketing plans in the
near future. The time and resources spent by Western and the public in
the continuous development of marketing plans could be better spent on
pursuing cost-effective energy efficiency and renewable resource
opportunities.
According to the attachments submitted as part of the comments of
the Edison Electric Institute, 25 States have mandated planning
horizons for regulated utility integrated resource planning; 13 of
these States have established a planning horizon of 20 years. Western's
18-year resource extension proposal is consistent with a planning
horizon of 20 years.
A comment was received stating that heavy reliance on long-term
contracts is unwarranted and incompatible with current IRP practices
and utility planning. Western's proposal does not lock a customer into
a long-term, take-or-pay arrangement, as the extension contracts would
allow a customer the option to terminate a contract upon implementation
of a rate adjustment by Western. Western agrees 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 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 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.
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. Eighteen-year
contracts help preserve the competitive balance in the regional utility
industry.
2. Extension Percentage
a. Background
Western is proposing to extend a major percentage of the power
currently under contract with long-term firm customers. In the early
stages of the Program public process, Western suggested that 70 percent
to 100 percent might be an appropriate extension range. The possibility
of extending resources on a graduated scale, weighted towards some
customer characteristic, was suggested. After receiving public comments
during the EIS scoping process, Western developed three extension
alternatives for evaluation in the draft EIS: 98 percent, 95 percent,
and 90 percent. A limited extension alternative would extend resources
at a 100-percent level for 10 years, starting at the time of IRP
approval by Western.
b. Comments
--The extension percentage should be as high as possible. Requests were
made for a 100-percent extension and a 98-percent extension.
--Extensions of resources at a high level have environmental benefits.
--The concept of a resource pool goes against Western's expressed goal
of providing customers with resource certainty.
--The PMI shifts the risk of resource availability to customers--this
does not promote long-term resource stability! Western should meet the
risk issue through power pooling or other creative approaches. Western
can do this more efficiently than customers due to economies of scale,
its extensive transmission system, and its experience.
--Twenty-five percent of Pick-Sloan Missouri Basin Program-Eastern
Division power should be made available to Native Americans.
--Get rid of the resource pool. A resource pool is unnecessary given
your marketable resource adjustment windows. What is the risk if
Western can withdraw?
--If necessary, extension reductions should be phased in. As part of a
35-year extension, Western should extend 98 percent of existing
commitments for the first 15 years, 95 percent for the next 10 years,
and 90 percent for the last 10 years.
--The impact of changes in hydroelectric commitments on auxiliary
suppliers must be considered.
--Extensions of firm, long-term resources should be provided sparingly,
and only to customers who are very diligent in setting and meeting
energy efficiency goals.
--The Program should be a requirement in all of Western's contracts and
should apply to the Central Valley Project's (CVP) post-1994 power
marketing criteria.
--Clean Air Act concerns exist if power is not renewed to existing
customers. Not only will a customer lose part of the Western power
allocation, but a utility must obtain Clean Air Act allowances to
generate to meet the shortfall.
--Western should extend 70 percent of the marketable resource presently
under contract, as opposed to a higher percentage of a resource to be
determined at a later date.
--Twenty-five percent of the power extended to Western's customers
should be designated as an ``efficiency allocation'' that must be
earned through energy efficiency efforts and results.
--Western should let customers know how much of their allocation is
tied to successful energy efficiency accomplishments.
--Western should allocate only 80 to 90 percent of the marketable
resource available to customers on a firm basis, rather than the 98
percent under consideration.
--The need for a resource pool is acknowledged. The resource pool is a
good answer to critics of long-term extensions of power to existing
customers.
--The resource pool would undermine the tremendous benefit derived by
the ``yardstick'' service to preference customers in sparsely populated
areas.
--Up to 10 percent of existing resources would be sitting in a pool and
not being used. This policy has a major environmental impact for those
customers needing to acquire replacement resources.
--Withdraw capacity only, not both capacity and energy. The withdrawn
capacity could be used to firm up renewable resource or cogeneration
facilities.
--Build the resource pool with turnbacks of power from existing
contractors or out of project-use efficiency upgrades. Pool could also
be derived from contractual terminations or new resources that become
available.
--Capacity allocation reductions should be phased in at no more than 2
percent per year and should be applied on a pro rata basis to all
customers.
--Customers should have the ability to increase their allocations
through compliance with the Program.
--Extensions should be given on a pro rata basis; a graduated scale
approach is not warranted.
--Opposition is strongly expressed to any type of ``graduated scale''
extension concept.
--We prefer an extension of resources on an equal percentage basis to
all customers. If another concept must be used, the stepped-inverse
approach appears best.
--Prefer extension at 100-percent level for those who comply with
program regulations.
--Priority in the commitment of resources should be given to existing
customers who committed to Federal power when it was not the lowest
priced resource in the region. Western should recognize the historic
risk that many existing customers took in committing to hydropower and
the equity that existing customers have in the existing resources due
to their payment of bills through the years.
--Since CVP hydroelectric resources are more than 2,000 MW nameplate,
plus 400 MW or more Intertie capacity, a resource pool can be developed
without a mandatory reduction of existing contract rates of delivery.
--Reductions in the allocations could degrade the customer's ability to
meet obligations with respect to the financing of renewables and would
send the wrong signal regarding renewable resource development.
--Instead of reducing resources, Western has the responsibility to
develop additional resources.
--Due to the substantial impact on smaller customers of a reduction in
resources, Western should purchase power to cover any shortfalls.
--Small customer rates are high enough already. A reduction in the
Federal resource would unduly impact consumers and threaten the
continued financial stability of small customers.
--A reduction of power is unfair for our cooperative when Western
serves a higher percentage of the needs of other customers; this is
especially inequitable for Native Americans served by our cooperative.
--A relatively small extension of power would create a shortfall of
power for the customer that could not be made up by DSM alone. DSM
works well to meet incremental load growth, but a major loss of
resource would require supply-side action.
--Western should extend a customer's current allocation in full and
provide a 10- to 20-percent bonus if it currently meets Western's EMP
criteria.
--A lower extension amount would be unfair to CVP customers whose
contracts expire in 1994.
c. Discussion
Western believes that the Program proposal set forth in this
Federal Register notice provides certainty in customer planning
efforts. An extension of resources at this level is substantial enough
so that existing purchasers 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. Western agrees with the
comment that a substantial near-term shortfall in the Federal resource
could not likely be met in the short term by DSM alone.
Western agrees with the comment that significant reductions in
future allocations could degrade the purchaser's ability to meet
obligations with respect to the financing of renewables and would send
the wrong signal regarding renewable resource development.
Western also agrees that it is not appropriate under this Program
to shift the majority of the risk of resource availability onto
purchasers without their consent. Western's contracts will allow
customers to take on the responsibility of acquiring firming resources
in the future if the customer chooses to do so. If a purchaser prefers
that Western carry out this responsibility, Western can take advantage
of its extensive transmission system to purchase firming resources, in
accordance with IRP principles, to meet contractual obligations during
drought conditions. The use of resource adjustment provisions, rather
than a large resource pool, meets Western's need for flexibility in
making long-term resource commitments. Western agrees that reservation
of a large percentage of existing firm resources in an initial resource
pool could have economic and environmental impacts. Instead, Western is
proposing an incremental resource pool over time. This approach avoids
the disruption of one large resource pool implemented all at once, with
the potential for power being reserved for future needs but not being
used at present.
Western has developed a proposed extension formula that provides
equitable treatment to all existing purchasers, as the risk of change
in marketable resources before existing contracts expire is shared.
Existing purchasers may get more or less power if marketable resources
are redefined to a different amount.
Western has reserved the right to change the marketable resource
on 5 years' notice. Any change would take place only after an
appropriate public process. This flexibility balances the ``firm''
nature of Western's resource with the need to address changing
conditions throughout the contract term. Western agrees that the risk
of changing operational constraints is addressed by the resource
adjustment capability and a resource pool need not be created for this
purpose.
Withdrawal of only capacity from existing purchasers would not meet
the needs of new customers in the absence of energy availability from
other sources. Purchasing energy to go with this capacity would create
additional pressure on Western's firming resource acquisition budget
during future drought conditions. However, in the process of
determining the amount of project-specific marketable resource, Western
would consider the possibility of redefining resources to meet regional
needs. An appropriate public process and any necessary NEPA
documentation would occur before significant changes in the marketable
resource are implemented.
Very 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
purchasers 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 public support for the graduated-scale idea and the
associated administrative complexities, Western has decided to propose
an equitable pro rata policy. All existing purchasers will receive the
same treatment in the application of the extension.
Western received a number of comments that the resource pool should
be created in ways other than reducing the existing commitments to
Western's purchasers. Examples of these options include building a
resource pool with turnbacks of power from existing purchasers,
project-use efficiency upgrades, contractual terminations, new
resources, and power withdrawn from customers due to EMP penalty
imposition.
Once the extensions for existing customers and allocations to new
purchasers from the resource pool have been made, additional power
resources may become available for various reasons.
Power reserved for new purchasers but not allocated and resources
offered but not placed under contract may become available. This power
would be offered on a pro rata basis to existing customers that
contributed to the resource pool through application of the extension
formula described in section IV.D.
Power resources freed up by Western's acquisition of cost-effective
energy efficiency/DSM may become available. Resources resulting from
the enhancement of existing generation, project-use load efficiency
upgrades, the development of new resources or resources turned back to
Western may also become available. Western proposes that this power be
used to reduce the need to acquire firming resources, retained for
operational flexibility or allocated by the Administrator.
Resources may become available due to penalty imposition pursuant
to section III.H of these procedures; this power may be made available
to existing customers, subject to withdrawal on 30 days' notice.
An additional commenter observed that Western has the
responsibility to develop additional resources. Western does not agree,
as it does not have the statutory obligation to meet load growth.
Western markets power from water projects developed by the Corps,
Reclamation, and the International Boundary and Water Commission and is
not authorized to acquire additional generation as loads grow. One
exception to this general statement is contained in Public Law 102-575,
which allows Western to identify replacement resources for power that
may be lost as a result of decisions stemming from the Glen Canyon Dam
EIS and propose legislation necessary for the acquisition of such
replacement resources.
One comment suggested that a CVP resource pool could be created
without a reduction in commitments to existing purchasers by
redetermining the level of risk of availability of the marketable
resource. Other comments suggested that Western should purchase power
to cover any resource shortfalls, due to the substantial economic
impact to small purchasers of a reduction in resources. Western is not
proposing to alter existing methods of determining resources available
for marketing under the Program. Western has provided for an
opportunity to determine, before new commitments are effective, what
resource will be available at the end of the term of existing
contracts. This would be the appropriate time to evaluate whether any
change in risk level (including the risk of firming resource
acquisition) should be made for a particular project.
Several comments were received in favor of customer competition for
resources, so that a customer with demonstrated exemplary efforts in
energy efficiency and conservation could earn more Federal power than
it presently has under contract. Comment was received that long-term
firm resource extensions should be provided sparingly and only to
customers who are very diligent in setting and meeting energy
efficiency goals. Western also received suggestions that 25 percent of
the power extended to Western's customers, or some other defined
percentage, should be earned and contingent on energy efficiency
efforts and results.
Western has not adopted these comments for several reasons. First,
power purchased from Western is key to the resource mix that customers
possess today and central to a customer's planning for the future.
Periodic competition for the Federal hydropower, or requiring that a
customer earn a portion of its Federal power periodically, would
undercut Western's expressed need for the customer resource stability
that is necessary to enhance integrated resource planning. Second,
Western is concerned that making Federal power contingent in the
suggested manner will induce purchasers to address this uncertainty
through construction of new generation or new purchases of thermal
generation, with associated economic and environmental impacts. Third,
Western believes that it would be very difficult to judge comparatively
and reward customers who have pursued and achieved superior energy
efficiency results. With the great diversity that exists among
Western's customers, it would be a daunting task to decide whether the
conservation efforts of a small irrigation district are comparable to
the achievements of a much larger, vertically integrated utility. Since
larger utilities have more opportunities to excel in this area,
competition for power could serve to redistribute power from smaller
customers to larger utilities with the staff, resources, and knowledge
to succeed. As customers facing load growth have greater opportunity to
plan and implement cost-effective DSM and energy efficiency resources,
the concept of competition could similarly work to the detriment of
customers facing stable loads or experiencing supply-side resource
surpluses. However, Western remains open to comments that might assist
in determining how to measure energy efficiency achievement.
Western agrees with the observation that the Clean Air Act presents
a potential double penalty for existing purchasers if Federal resource
commitments are not extended at a high level. Not only will the
purchaser be faced with the added expense of replacing any Western
resource not extended, but the customer could well be forced to acquire
credits under the Clean Air Act emission trading scheme to generate or
purchase replacement power.
Western recognizes that existing purchasers 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 purchaser has a perpetual
right that cannot be diminished. Western's policy of widespread use and
the potential allocation of power to new preference customers must be
balanced against the fact that existing purchasers 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 its proposal, as set forth in this Federal Register
notice, provides for a proper balance among these policy issues. The
phasing in of resource reductions over a 35-year time period is a
creative approach. However, Western has chosen a less complicated
approach of allowing for the adjustment of marketable resources on 5
years' notice in response to changes in river operations and hydrology
only.
A CVP customer expressed the point of view that a lower extension
amount would be unfair to CVP purchasers whose contracts expire in
1994. This comment has been overtaken by events, as these CVP
commitments have been extended to 2004 through the execution of new
contracts. CVP customers party to contracts that expired in 1994 are
subject to the provisions of the 1994 CVP power marketing plan
developed and completed pursuant to a separate public process. The PMI
does not apply to these contracts, so no issue of equity exists.
However, the IRP provision of the Program will apply to all CVP
customers as of the effective date of the final Program.
Western agrees that a 10-percent reservation of power in a resource
pool would have an impact on existing customers. The draft EIS
documents these impacts.
Western realizes that the draft EIS predicts relatively greater
environmental benefits for high-percentage extensions. A need exists to
retain the flexibility to meet a fair share of the needs of new
customers and other purposes as determined by Western. Western's
proposal balances environmental benefits associated with resource
stability with the need for flexibility to respond to changing
circumstances over time.
The initial extension percentage is directly related to Western's
estimate of what hydropower must be reserved in a resource pool to meet
a fair share of the needs of potential new customers. Western's
project-specific estimate in this proposed Program could be adjusted
for certain projects to reflect more accurately potential new customer
needs at a time closer to the expiration date for existing contracts.
A reservation for Native Americans of 25 percent of the current
power 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. Western proposes to allocate
power to Native Americans for use on the reservation out of project-
specific resource pools but will determine the size of the pool based
upon the need to meet an appropriate share of the load for eligible new
customers.
Western proposes to define Indian tribe as provided for in the
Indian Self Determination Act of 1975, 25 U.S.C. Sec. 450b.
Rather than extend a percentage of the resource available at the
end of the term of existing contracts, one comment suggested that
Western extend 70 percent of the marketable resource under contract
today. Western believes that the approach set forth in the proposed
Program will result in a more precise commitment, based upon
information available nearer to the time that existing contracts
expire. The proposed Program better meets the need to balance resource
certainty with the flexibility to react to changing circumstances.
An extension of power at a 100-percent level to customers in
compliance with the IRP procedures will not be adopted, as it does not
recognize the need to react to changes in hydrology or river operations
and does not accommodate the need to make power available to potential
new customers.
A cooperative in the upper Midwest commented that it was unfair to
extend a relatively low level of resources when other entities were
meeting a higher percentage of their needs with Western's hydropower.
This entity remarked that this was especially unfair for Native
Americans served by the cooperative. For the same reasons that a
graduated-scale extension approach is not being adopted, Western will
treat this cooperative the same as all other project customers.
Allocations out of the resource pool for the benefit of Native
Americans may compensate for any initial reduction of resources
currently sold to this cooperative.
3. Resource Pool Uses
a. Background
The originally proposed purposes of the resource pool were to
absorb any changes in marketable resources, to make allocations to
potential new customers, to reward the energy efficiency
accomplishments of existing purchasers, to meet ``contingencies'' that
might arise, and to consider fostering the development of cost-
effective renewable resources.
b. Comments
--Western should not use the resource pool for allocations to new
customers or as incentives for developing renewable resources.
--Western should encourage development of cost-effective renewable
resources through allocations from the resource pool and should expand
the list of eligible technologies to include fuel cells.
--Western should not use the resource pool to encourage development of
renewable resources; these resources are unneeded and too indefinite to
warrant the reservation of firm power.
--There is no reason to use the resource pool to foster new
technologies. If these technologies are economical, customers will be
motivated to adopt them to save money.
--Western should not require Native Americans to acquire utility status
before tribes become eligible for an allocation of power out of the
resource pool.
--Western should allocate power based upon need. Our tribe has many
members living in poverty.
--Native Americans should receive power from Western, as they
sacrificed many acres of prime land when the Corps constructed dams on
the Missouri River.
--New customers should get new resources only. New customers should pay
for new resources at the marginal cost or at a 10-percent premium.
--Western should provide all power to existing customers. An apt
analogy is the first right of refusal for FERC licensees when a
hydropower license is up for renewal.
--Resource pool power should be used to reduce purchase power expense
and keep existing customer rates down.
--Use of firm power in a resource pool to meet ``contingencies'' is far
too vague. Do not cut back on power to existing customers because of
``pie in the sky'' future needs.
--Market ``contingency'' power in the pool to existing customers on a
withdrawable basis.
--Concern was expressed that power in the resource pool might be sold
to investor-owned utilities or to California pending a decision on how
to use it.
--Any use of the resource pool for contingencies should be temporary
until Western can acquire ``makeup'' supplies elsewhere. Shifting the
risk of power unavailability to customers means customers and Western
are competing against each other for resources; this is not efficient.
--Appreciate Western's recognition that a customer's rate of delivery
(CROD) should not be based on EMP compliance.
--Penalize those who do not conserve energy now to get the energy pool
you are trying to build.
--The concept of a resource pool is poorly justified by Western. The
establishment of the pool is also premature.
--It does not seem prudent to consider potential additional customers
at a time when water levels are so low and massive runoff is needed to
avoid purchases or reductions of CROD.
--Limit the use of a resource pool to just what is needed for an
enhanced planning and management program.
--The use of the resource pool is ill-defined. We object to reducing
Federal power commitments to existing customers for events that might
occur in the future.
--The resource pool should be used for resource adjustments first,
before withdrawals from existing customers.
--A customer should not be restricted from receiving an entitlement
above its current allocation.
--Existing customers should have the first right to any unallocated
power resulting from diminished extensions.
--Several existing preference customers (such as the National
Aeronautics and Space Administration Ames Research Center) are heavily
engaged in research and development activities in the fields of energy
conservation and environmental protection. These activities benefit not
only the residents in the area served by Western but the entire
population of the United States. The contributions of these customers
should be recognized by additional allocations from the resource pool.
--New customers should compensate existing customers for the benefit
they receive from not paying for all of the original investment.
--Offer prospective new customers a portion of the excess energy
available from time to time from Western on a nonfirm basis and leave
the capacity and energy already under existing contracts with the
existing customers.
--The only capacity that should be reserved in the resource pool is the
capacity needed to cover projected load growth.
--Only those customers who contribute to the pool by reduction of their
CROD prior to extensions should receive pool allocations. Historic
investments in energy efficiency should be recognized in resource pool
allocation criteria.
--Increase the energy allotment by a percentage of load growth of
existing customers.
--Resource pool allocations should be completed 5 years versus 3 years
in advance of the delivery of power to assist utilities in their
resource planning.
--Western must recognize the increased need for electrical energy to
enhance water pumping operations resulting from wildlife refuge
expansion, undependable surface water supplies, and other factors.
Meeting the goals for an anadromous fish hatchery production, including
the listed winter-run Chinook salmon, also would increase the
electrical energy needed for water chillers, disease control, and other
water treatment technologies.
--Several Indian tribes desire an allocation of 25 percent of the Pick-
Sloan Missouri Basin Program-Eastern Division resources. Western should
provide a mechanism for wheeling preference power over existing
transmission and distribution lines.
--The Nebraska cities of South Sioux City, Wakefield, Madison, and
Randolph request that their allocations be firmed up and that their
allocations be sized so as to compensate them for past losses.
c. Discussion
Western is persuaded that the Program goal of providing existing
customers with long-term resource stability is undermined by the
immediate creation of a large resource pool out of unextended power,
with the potential for firm power to be unused for a period of time.
Instead, an incremental resource pool is proposed.
Western is not proposing to extend all of the existing long-term
firm resource to existing purchasers. Balance must be achieved between
avoiding disruption in existing customer power supply and transmission
arrangements and Western's policy of encouraging widespread use of the
Federal resource. Principles of widespread use of preference power are
better served by making an appropriate amount of power available to new
customers who have not previously enjoyed the benefits of Federal
hydropower. Precedent for this approach exists for many of Western's
projects, including the Pick-Sloan Missouri Basin Program-Eastern
Division post-1985 power marketing plan, the post-1989 power marketing
plans for both the Loveland Area Projects and the SLCA/IP, and the CVP
1994 power marketing plan.
An advantage to making some power available to new customers is
that the benefits of IRP preparation will be available to a broader
customer base. In addition to receiving power from Western, new
customers not approved for small customer status will be required to
engage in integrated resource planning, a planning approach that many
utilities have found to result in lower-cost resources being provided
to the ultimate consumer.
Western will not adopt comments opposing resource pool use to
foster renewable energy and other new technologies. The resource pool
will be available to meet a fair share of the power needs of new
customers and other purposes found to be appropriate by Western.
Western believes that fostering renewable energy and new technologies
is an appropriate use for Federal hydropower. Western also will assist
in developing renewable resource technologies through such avenues as
providing transmission access, targeted technical assistance based upon
demonstrated or promising cost-effective technologies, and shaping and
storage service.
Western does not believe that new customers should pay a premium to
existing customers or pay for power at a level higher than the rate
charged existing customers for Western's hydropower resources. Neither
equity nor administrative convenience is served by the creation of
different classes of customers dependent upon the timing of initial
service from Western. Given the relatively small amount of power being
proposed for availability to new customers, the existing customer rate
impacts of charging a higher rate to new customers is not significant.
A comment was received suggesting that the resource pool could be
used to offset the need to purchase firming power. As described
elsewhere in this Federal Register notice, Western will employ IRP
principles in its acquisition of firming resources in the future.
Western will not use the resource pool power to mitigate the need to
acquire firming resources, as this would unfairly limit the power
available to new customers. Resources made available to Western from
the enhancement of existing generation, improved project use
efficiencies or the development of new resources could be used to
lessen Western's resource acquisition needs.
Western recognizes that allocations of power to new customers
during prevalent drought conditions may not seem prudent. However,
drought periods are cyclical in nature, and some regional water
conditions have improved recently.
Western sees no need to reserve capacity in the resource pool to
meet future load growth of existing customers. Keeping power in a
resource pool that otherwise could be marketed to preference customers
has an adverse impact on the stability of the Federal resource for
existing customers and may impact Western's rates in the future.
Withdrawing power from existing purchasers to meet future load growth
of other existing purchasers creates a present need for power that
would not exist if the withdrawal did not take place in the first
instance.
Several existing and potential new customers commented that they
should receive new or increased allocations of Federal power. The
merits of allocating power to applicants not presently receiving the
benefits of Federal hydropower will be determined under a separate,
future public allocation process for each project.
Western disagrees with the suggestion that new customers should be
offered only a portion of the excess energy available from time to time
instead of a long-term firm commitment. This approach would relieve new
customers from the IRP provision and would mean that the benefits of
IRPs would not be available to a broader Western customer base. In
addition, Western expects many potential new customers will not be in a
position to use excess energy because of their small size and lack of
operational personnel. No change in Western's policies on excess energy
marketing is proposed at this time; this is a subject appropriate for
consideration at the time that any project-specific determinations of
changes to marketable resources are proposed.
With regard to Native Americans, Western has always considered
tribes to be preference entities. 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.
This flexibility is critical, since an allocation of power is of no
value unless an organization has the means to receive power; the
potential customer must be ready, willing, and able to take delivery of
power. The resource pools proposed in this Program are sized to include
a fair-share amount for allocation to Native American tribes. Western
is not requiring utility status for tribes as a precondition to receive
an allocation of power from Western.
4. Resource Adjustment Provisions
a. Background
Western originally proposed that both a resource pool and resource
adjustment provisions were necessary to allow Western the flexibility
to meet changing conditions, including changes in river operations and
hydrology. The adjustment provisions set forth fixed windows of
opportunity to adjust marketable resources; the timing of these
adjustment opportunities varied depending on the extension terms
discussed during alternatives workshops.
b. Comments
--Instead of fixed windows, define the withdrawal criteria up front.
Prefer 5 to 10 years' notice over a predefined time window.
--The reopener provision makes Western's power less than firm; it is
not a firm commitment when open-ended windows are featured.
--Limit resource adjustments to changes in hydrology or mandated
operational changes.
--Adjustments should be made on 5 years' notice only for changes in
hydrology or ``Law of the River.''
--Resource adjustments should be limited to those that make Western's
resources as firm as possible, while reducing the need for firming
purchases.
--Limit resource adjustments to changes in hydrology.
--Extend resources for 35 years and review the need for any change in
marketable resources after 15 years, but do not actually adjust the
resource until 25 years into the extension term.
--Limit resource adjustment provisions to hydrology, with operational
changes handled on a pass-through-cost basis like the SLCA/IP contract
amendments.
--Resource adjustments should be limited to 5 percent of existing
contact rates of delivery.
--Any adjustments in allocations due to the shortfalls in water runoff
as found under applicable hydrology studies should be accomplished upon
completion of the studies.
--The adjustment provisions are not sufficiently defined.
--Establish a floor/limit on withdrawals pursuant to contract.
--Allow a 10-year notice by Western for adjustment, with a shorter
period for customers to terminate in the event that Western power
becomes uneconomical.
--Western should establish a contract period that allows sufficient
advance notice of any change to accommodate utility planning horizons.
--Western needs to consider the ecological impacts of altering the flow
of Colorado River water into the northern Gulf of California.
--Program alternatives limit Western's flexibility to respond to
environmental issues and other changes that are sweeping the utility
industry.
c. Discussion
Western no longer proposes to use the resource pool as a means to
meet any changes in the marketable resources during the term of the
extended resource. Instead, Western believes that customer resource
stability is better served by an ability to adjust the marketable
resource upon 5 years' notice for changes in river operations and
hydrology only. This length of notice allows for timely response to
changes in river operations and hydrology, while giving customers ample
notice before any adjustments. In this way, Western believes a balance
will exist between customer resource stability and the ability to
respond to possible resource acquisition requirements to meet Western's
long-term firm resource commitments.
Western has also proposed to provide for flexibility prior to the
time that existing contractual commitments expire. In Western's
proposed Program, a proposal is set forth that would base pro rata
extensions on the resource available at the end of the term of existing
contracts. This would allow Western's commitments to take place with
full knowledge of any operational or hydrology study results. If the
determination of the future available resource is significantly
different from existing resource commitments, the change will only take
place after an appropriate public process. Any appropriate National
Environmental Policy Act documentation would also be prepared at that
time.
Western cannot commit to a floor or a limit on use of these
adjustment opportunities at present. The future is too uncertain for a
guarantee that the marketable resource cannot be changed beyond certain
limits. However, Western fully understands the need for customer
resource stability and will evaluate any changes in marketable
resources with an appreciation of the importance of any significant
change in Western commitments.
Existing contractual rights, as set forth in the applicable General
Power Contract Provisions, allow a customer to terminate its contract
if Western's rates become noncompetitive. Western plans to retain this
provision in future contracts.
Western's Program proposal is neutral on the issue of operations
for a particular project or hydropower facility. The approach set forth
in this Federal Register notice flexibly allows for changes in
operations but does not influence such changes. Any proposed changes in
river operations are properly evaluated on a project-specific basis
separate and apart from the Program proposal.
5. PMI Implementation
a. Background
Western originally proposed to make extensions of resource
commitments when the Record of Decision on the Program EIS is published
in the Federal Register. Later, Western asked the public for input on
what event should trigger contract execution. Initial extensions would
be offered to purchasers from the Pick-Sloan Missouri Basin Program-
Eastern Division and the Loveland Area Projects.
b. Comments
--Why does Western feel a need to offer extensions of the Pick-Sloan
Missouri Basin Program-Eastern Division power before the Corps finishes
the revision of the Master Operating Manual? If we wait, everyone will
know what the resource is.
--Western's approach of making an early commitment to extend
allocations to existing customers is supported and endorsed.
--Concerned that these allocation decisions will be made before
Western's customers can reasonably be expected to have engaged in
meaningful experiments with energy efficiency.
--Western should not limit the extension of resources to only those
projects where contracts expire between the years 1995 and 2004. If the
Program is desirable for some of Western's customers, it should be
desirable for all of them, including CVP customers.
--Resource extensions should not be considered for SLCA/IP resources
until all outstanding issues related to the Colorado River are
resolved.
--SLCA/IP customers should receive the same treatment under the PMI as
other customers and receive an extension of resources as soon as the
Program regulations become effective.
--No new allocations should be made until such time as it is known with
reasonable certainty what reductions in resources Western is likely to
experience.
--Contract extensions should be limited to term, resource, and IRP
implementation.
--Contract execution should be triggered by IRP submittal.
--Extension terms should start when existing contracts expire.
--The resource should be precisely defined--a number should be in the
contract.
--The commitment of Western power needs to be specific, and adjustments
well-defined, for transmission-dependent utilities to negotiate
wheeling agreements.
--Resources made available for tribes should be provided through their
present power supplies.
--Contract execution should be triggered by issuance of the EIS Record
of Decision.
c. Discussion
As Western receives IRPs from existing Pick-Sloan Missouri Basin
Program-Eastern Division customers, Western proposes to offer contracts
to those customers. This approach provides an incentive for customers
to prepare an IRP expeditiously, to avoid the uncertainty of not having
a signed contract for future resources. Extensions of resources upon
IRP receipt offers Western the flexibility of using the new penalty
provisions required by EPAct, as opposed to the 10-percent resource
reduction penalty in existing contracts. Extension terms will start
when existing contracts expire. Customers can include Federal
hydropower as a current resource in their IRPs based upon the
provisions of these procedures. Contracts will be offered to existing
LAP purchasers after the redetermination of marketable resources,
pursuant to existing LAP contracts, takes place.
There is no guarantee that the Master Operating Manual completion
schedule will be free from delay. Mechanisms exist in the proposed
Program to adjust the marketable resource if necessary to reflect the
results of the Master Operating Manual revisions.
Through the extension formula and the provision that allows for
adjustments to marketable resources on 5 years' notice, Western has
retained the flexibility to consider marketing changes in the event
that resource reductions are experienced. New allocations can be made
under these circumstances.
An early commitment to extend resources provides the foundation for
effective integrated resource planning. Western believes that customer
energy efficiency planning and achievement is enhanced by the stability
provided by resource extensions. Meaningful resource planning,
including demand-side and renewable resource evaluation, is difficult
if the existing resource is not relatively well-defined and stable.
Energy efficiency investments should take place following, and not
before, the preparation of IRPs. Otherwise, there is no way to assure
that investments are cost-effective. IRPs cannot be prepared with
assurance until resource extension commitments have taken place.
Western is proposing the initial application of the PMI be limited
to the Pick-Sloan Missouri Basin Program-Eastern Division and, after
any adjustment to resources pursuant to existing contracts, the
Loveland Area Projects. CVP resources under contracts expiring in 1994
have been marketed under a separate public process, and Western is
preparing an EIS on the 2004 marketing plan for the CVP. Given the
existing uncertainties regarding CVP marketing, application of the PMI
to the CVP will be determined at a future date. Western would evaluate
applying the PMI to the SLCA/IP after its electric power marketing EIS
is completed and the associated marketing criteria and contracts are
modified consistent with the results of the SLCA/IP EIS. Western
received comments that SLCA/IP customers should receive the same
treatment under the PMI as other customers and receive an extension of
resources as soon as the Program becomes effective. Such an approach
would extend resources committed under a marketing plan and contracts
that are not yet final. Western believes that offering contracts at
such an early date would be premature for the SLCA/IP.
Western expects to provide Federal hydropower to Native Americans.
Proposals for providing allocations directly to the tribes, or
providing the benefits of an allocation to tribes through a rural
electric cooperative, will be developed on a project-by-project basis
during the allocation of power from project-specific resource pools.
Extensions of resources under the PMI could take place either
through amendments to existing contracts or new contracts, depending on
the project. The nature of extension implementation would take place on
a project-specific basis.
Western has not adopted the comment that the resource should be
defined precisely and immediately in the contract through a numerical
commitment of capacity and energy. Western must retain the flexibility
to adjust its resource commitments. Numbers reflecting Western's
precise capacity and energy commitments will be included in each long-
term firm contract as soon as practicable, but this would not be
possible until the generating agencies have answered ongoing
operational questions, after extension commitments are offered pursuant
to this proposed Program.
6. Purchase Power
a. Background
Western proposed to continue its past practice of purchasing
firming resources to meet its firm power commitments.
b. Comments
--Western may overcommit its resources by providing contract extensions
up to 98 percent of the available resource. Such a large commitment can
have enormous consequences, both on the interconnected electrical
network and the regional environment. We believe these purchases
influence unit dispatch, regional loop flows, and emissions from coal
plants. Western will be under considerable pressure from its utility
customers to provide large amounts of energy even when Western cannot,
on a firm basis, provide such quantities from its hydropower resources.
--In response to these purchase power concerns, Western should ensure
the electricity it markets is used in the most efficient manner
possible and assist its customers to provide energy services to retail
customers in the most economical and environmentally benign fashion.
--Western could exchange power with BPA to avoid purchase power needs
for the SLCA/IP.
c. Discussion
In the proposed PMI, Western has set forth mechanisms to assure
that an appropriate level of resource is marketed. Western anticipates
that the extension formula, which allows for the determination of
future resources prior to the date that deliveries under new contracts
start, will allow for a better determination of a prudent level of
commitment. Significant changes from existing levels of resource
commitments will take place only after an appropriate public process.
In addition, Western has reserved the right to change the marketable
resource commitment on 5 years' notice after the new contracts become
effective. In this way, Western can adjust its commitments of resources
if necessary. An important factor in changes to Western's marketable
resources is the resource acquisition risk. Resource acquisition risk
factors to be evaluated would include economics and the availability of
firming resources.
In the future, Western will meet its firming resource needs through
employment of IRP principles. While Western has carried out the role of
acquiring firming resources on behalf of its customers in the past,
Western will design contracts which would allow customers to take on
this responsibility in the future. Whether Western or its customers
carry out this role in the future, there should not be a dual standard
in planning for and acquiring resources. The acquisition of resources
in support of Western's hydroelectric commitments should be based on
integrated resource planning principles, with cost-effective renewable
resources, demand-side management, and energy efficiency being treated
as viable alternatives to the purchase of firming energy.
Western has in the past explored the potential for mutually
beneficial exchanges of power between the SLCA/IP and BPA. Suitable
transmission arrangements are key to such an arrangement. Western will
continue to pursue cost-effective exchange arrangements in the future.
7. 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
IOUs.
Western's marketing approach has historically been project-
specific, based on 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. Restrictions on scheduling Western's hydropower
resources are also project-specific in nature.
Western is proposing 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
--Western should market all surpluses to preference customers in the
marketing area and not to California or to IOUs. Extension of less than
100 percent of present commitments to existing customers means IOUs
would get the benefit of power currently sold as a firm resource.
Marketing to IOUs violates the preference clause as set forth in
Reclamation law.
--Western should expand its role to meet the wholesale power needs of
all CVP public power utilities and should also do power pooling and
scheduling for small entities.
--Western should take on a greater level of risk regarding its long-
term firm commitments. The Billings Area Office should follow the
example of the Loveland Area Projects and market capacity on a 90-
percent level-of-probability basis.
--Western should market power on a load-pattern basis as opposed to a
resource-pattern approach.
--Western should market surplus power available in good water years to
existing customers first; this commitment would be in addition to the
base extension of long-term firm contracts.
--It is important that Western evaluate the type of product being
offered and consider the mix of capacity and energy. Western should
study reshaping the amount of energy being supplied because of the base
load capabilities of power suppliers such as Basin Electric.
--Western should consider changing the marketing approach for the
Eastern Division of the Pick-Sloan Missouri Basin Program to a
resource-pattern allocation rather than the existing load-pattern
policy. There will be greater direct benefit to customers, and it will
improve hydrothermal integration.
--The flexibility of hydroelectric resources in load following and
peaking must be retained.
--By changing the product from a predominately load-following resource
to a more capacity-oriented product and achieving greater energy
sufficiency through integration with regional thermal sources, we
believe that there is great potential to maintain or increase capacity
resources to existing customers and still supply resources to a pool.
--Western should not market to nonpreference customers.
--Alternative reformulations of the commodities should be evaluated,
such as moving to a run-of-the-river basis for energy.
--Western should consider offering more flexibility in scheduling firm
power, such as on an hour-by-hour or monthly basis.
--Department of Defense and State of South Dakota allocations must be
fixed in place for the Pick-Sloan Missouri Basin Program--Eastern
Division.
--Consider allowing adjustment of fixed deliveries, as this would delay
the need for new generation.
--Cost-effective investments should be made by Western in hydro
facilities.
c. Discussion
The preference clause generally applies to sales of capacity and
energy by Western. For most of Western's projects, long-term firm power
is offered to preference entities first before any resource is made
available to nonpreference entities. Short-term surplus Federal energy
is generally sold on a shared-savings basis. Within a range of rates,
short-term firm energy is usually made available first to preference
entities and then to IOUs. Short-term surplus energy is made available
to both preference entities and IOUs. Changes to this short-term
marketing policy, and other marketing approaches referred to in the
comments set forth above, are not within the scope of this proposal and
are not appropriate on a Western-wide basis, given the wide variety of
customer needs and regional differences that exist within Western's 15-
State service territory. Changes in Reclamation law and the preference
clause are outside the scope of the Program and its EIS.
Changes in Western's current marketing approach for a specific
project can be appropriately considered in a separate project-specific
proceeding at a later date. The extension formula provides for a pro
rata commitment to existing purchasers, based on the new resource
available at the end of the term of existing contracts. Changes in the
marketable resource are best addressed at that time on a project-
specific basis and not at this stage of the Western-wide development of
the PMI. Marketable resource issues that might be appropriate for
discussion at that time include adjustments to fixed deliveries,
scheduling flexibility, load pattern versus resource pattern, and the
way we sell nonfirm energy.
Western has no general legal obligation to acquire additional
resources to meet the load growth needs of its customers. Western is
open to discussions to provide power pooling and scheduling services
with any of its customers as long as such services are feasible and
cost-effective. However, these discussions should take place outside
the process of developing the Program.
Western does not have the authority to make cost-effective
investments in hydroelectric facilities. However, Western is willing,
in cooperation with the generating agencies, to use its existing
contractual authorities to support cost-effective investments by other
parties in hydroelectric improvements under appropriate terms and
conditions.
For the Pick-Sloan Missouri Basin Program--Eastern Division, both
the State of South Dakota and the Department of Defense have been
allowed to transfer Western power from one location to another. After
existing contracts expire, Western proposes to 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, Western proposes that 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 further proposes
to 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 there is closure of a
Defense installation or facility after the year 2000, the allocation
may be impacted 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 by November 30, 1994; this
report 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.
D. Other Issues
1. IRP by Western
a. Background
Western purchases firming energy and/or capacity to meet its firm
power contractual commitments when hydropower is unavailable, such as
during periods of drought. Firming purchases are typically made on a
least-cost basis. Western engages in regional transmission planning
with other entities and pursues joint participation in transmission
line planning and construction whenever possible.
b. Comments
--Western should not make conservation purchases; this should be done
by the utility responsible for load growth.
--Western should not do an integrated resource plan itself.
--Certain of Western's practices are in need of reform, such as
acquisition of supplementary resources to meet customer needs,
construction and use of transmission, moving of renewables to market,
and encouraging efficiency.
--Better decisional processes based on IRP are needed for Western's
purchase power/transmission investment and operation practices.
--Western should develop a strategic energy efficiency and renewable
resource plan with input from customers, National Renewable Energy
Laboratory, Department of Energy, and environmental groups.
--Western needs to diversify its resource acquisition practices.
c. Discussion
Western agrees that integrated resource planning principles should
be used in its future acquisition of firming resources. Customers rely
on Western to purchase firming energy on a least-cost basis. To meet
this responsibility in the future, Western will consider all energy
alternatives in its purchase mix, including renewables and energy
efficiency. Cost-effective renewable, energy efficiency, and demand-
side resources would all compete on an equal basis, with adverse
environmental effects of new resource acquisitions being minimized to
the extent practicable. Western wants to assume leadership in helping
to create a bigger renewables and efficiency resource in the west.
Western's customers will benefit by receiving the lowest possible
rates; the environment will benefit from Western's purchases of
environmentally sensitive sources of energy; and the larger public
interest will be served by Western's efforts to foster the use of clean
energy.
Western needs to develop policies that respond to changing
circumstances. In the future, Western will issue requests for proposals
to meet long-term resource needs, and the solicitation will not be
limited to conventional supply-side resources. While Western has
carried out the role of acquiring firming resources on behalf of its
customers in the past, Western will design contracts which would allow
customers to take on this responsibility in the future. Whether Western
or its customers carry out this role in the future, there should not be
a dual standard in planning for and acquiring resources. The
acquisition of resources in support of Western's hydroelectric
commitments should be based on integrated resource planning principles,
with cost-effective renewable resources, demand-side management, and
energy efficiency being treated as viable alternatives to the purchase
of firming energy.
Western also commits to the use of applicable integrated resource
planning principles and processes in its transmission planning. Use of
integrated resource planning principles and processes would be
beneficial to Western's ratepayers by assuring that investments are
cost-effective. Environmental benefits could also result as Western
evaluates new transmission or, as appropriate, significant line
upgrades in accordance with IRP principles.
Use of integrated resource planning principles in Western's
transmission planning would complement the decision rules recently
adopted by Western as part of its strategic planning process. Proposals
for construction of new facilities must pass at least one of three
criteria before Western will consider construction: (1) Increased
revenues from the new facilities must exceed the annual cost over the
first 5 years of service, (2) customers must benefit sufficiently to
support the new facilities in spite of a possible rate increase, or (3)
the new facilities will be funded by others. Western will also continue
to engage in regional transmission planning with other entities and
pursue joint participation in transmission line planning and
construction whenever possible.
While the commitment is clearly being made in this Federal Register
notice, the use of integrated resource planning principles for
Western's purchase power and transmission planning activities will be
pursued independently from the Program. One possible vehicle for
implementing this commitment is through a Western process to consider
developing an IRP, pursuant to section 111 of the Energy Policy Act of
1992. Coordination with interested entities will take place.
Western is not proposing to develop a regional IRP to plan for the
resource needs of its customers. The use of IRP principles by Western
will be limited to Western's resource acquisition needs for firming of
its hydroelectric resources and to Western's transmission planning
activities.
2. Price and Rate Design
a. Background
Western is committed to providing power to its customers, as
directed by Congress, at the lowest possible cost consistent with sound
business principles. However, rate issues are best dealt with in
project-specific rate processes. Rates and rate design are outside the
scope of the Program.
b. Comments
--Western has stated that a goal of the Program is to provide resource
stability to customers so they can engage in effective integrated
resource planning. Rates can contribute to resource stability or
instability. Western should commit to price stability.
--Western should commit to consistent rate design policies,
particularly for the CVP, to enhance resource stability.
--Western should coordinate the development of the Program with its
rate adjustment activities.
--Western should develop rates that send appropriate price signals to
customers and the ultimate consumer.
--Western's rates must remain stable if the resource is to remain
dependable for customer planning purposes.
--Some suggest that rate increases are justified simply because they
create the incentive to become more efficient in energy use. In this
regard, Western has not been lax in exerting rate pressures on its
customers in recent years.
--Incentive rates are the first step to repayment reform as advocated
by the Office of Management and Budget.
--As opposed to establishing incentive rates by Western, incentive
rates for conservation must be set at the customer level so that price
signals are presented directly to the retail consumer.
--Incentive rates are undesirable because they may penalize those who
have already invested in agricultural systems that have maximized
conservation measures.
--Providing differential price signals to elicit appropriate
conservation and load management responses could provide a substitute
for or could supplement the power allocation approach proposed by
Western. Rates could be designed for different types of service at
different times that better reflect the cost of service, including the
incremental costs and benefits associated with energy management
activities.
--Rewards and penalties must be devised to make customers act as if
they were facing efficiency prices, rather than Western's below-market
prices. Because Western's prices are far less than ``market'' prices,
more effort is required to reduce demand for Western's power.
--We are concerned about a lack of competitive pricing, as low-cost
power sold by Western is offsetting customer efficiency goals.
--Rate design changes should be analyzed.
--Western should adopt an honest, market-based pricing system.
c. Discussion
Due to drought conditions, changes in operations at certain
hydroelectric plants, increasing purchase power expense, and other
factors, rates for power from several projects have increased
substantially over the last several years. Western recognizes that such
increases adversely impact the customers' power supply expense and hold
the potential for disruptions in power supply planning.
Western is committed to cost containment so as to provide its
customers with a predictably priced resource. However, major portions
of these rate increases, such as those associated with certain changes
in river operations, are beyond the control of Western. Western will
continue to use its best efforts to keep rates stable into the future.
Western also commits to evaluate fully all equity and stability issues
prior to making any changes in rate design. The appropriate place for
accomplishing this is through project-specific rate adjustment
processes.
Incentive rates and rate design modifications should not be
analyzed as part of the Program EIS, as they are outside the scope of
the proposed Program. Rate issues, including incentive rates and rate
design, should be addressed within Western's long-established public
ratemaking process.
Although not within the scope of the Program, some discussion of
the price and rate design issue may help in understanding Western's
existing policies. Western markets power predominately at wholesale to
utilities for resale to that utility's retail consumers. In some cases,
Western markets its power to MBAs that blend the Federal resource with
thermally generated or purchased power prior to sale to utility
members, adding another organizational layer between Western and the
ultimate consumer. Price signals are most effective when they take
place at the retail level. Attempts to influence consumer actions
through pricing strategies at least one level removed from the consumer
are not as effective.
Western does not meet the total power requirements of its
customers. Given the price differential between Western's power and the
cost of power from other sources, customer energy efficiency is driven
by the cost of supplemental power supply. Western believes that the
price signals resulting from this price disparity offer a significant
incentive to its customers.
Western's Salt Lake City Area Office is providing technical
assistance to two customers who will participate in a 5-year pilot
project to determine the effects of a change in rate design. The
objective of the pilot project will be to shift load from on-peak to
off-peak using price differentials to encourage DSM and to improve the
efficiency of the overall power system.
Western anticipates that the use of incentive rates and rate design
by Western's utility customers could be a reasonable option to pursue
as part of their IRPs. Western will provide technical assistance on
this subject to customers on request.
3. Incentives
a. Background
When Western originally proposed the Program, extending a major
portion of long-term firm commitments was viewed as a major incentive
for IRP preparation by existing customers. As part of this proposal, it
was suggested that a resource pool, made up of unextended resources,
could be established. One of the possible uses of this pool was
allocation of power to preference customers for exemplary achievement
in energy efficiency.
b. Comments
--Western's proposal is far too heavy on penalties and not heavy enough
on incentives. Carrots would do more than sticks to assure Program
compliance.
--Western should consider such incentives as (a) rate reductions/
billing credits; (b) maintaining existing rates; (c) bonus MW out of a
pool or from new resources; (d) allocate surplus energy; (e) build
resources through efficiency improvements (such as project use); (f)
build transmission for those who have no access; (g) do not charge for
the full CROD when customers are trying to manage loads; (h) rebates;
(i) buybacks--if a customer with 100-MW allocation saves 10 MW, Western
could sell the 10 MW on a shared-revenue basis and return the 10 MW to
the customer later when it is needed; (j) put dollar penalties into a
pool to buy power to reward good performers; (k) if a customer does not
need an allocation at present due to conservation, Western should allow
future use of the full allocation; and (l) allocate dollars out of an
assistance pool to customers to help energy efficiency and renewables
investments.
--Western should impose a surcharge on all of its customers to create a
conservation/DSM fund.
--Western should follow the example of the collaborative process in
California, where incentives for IOUs rather than penalties are
emphasized. Why should Western approach this issue differently?
--The resource pool should be composed of power resources from penalty
imposition or dollars resulting from penalty imposition; this resource
should be available to reward good EMP compliance. Dollar penalties
could also enhance Western's IRP and DSM assistance programs.
--Incentives should not be created by reducing existing allocations or
otherwise penalizing existing customers.
--Western should return to the original incentive-based pool, where EMP
accomplishments would allow existing customers to earn 100 percent or
more of their existing allocations as a reward for aggressive
conservation efforts.
--Western should let a customer resell Western power that is saved.
--Existing customers should be allowed to fund new resources and system
upgrades and receive the resulting power benefits.
--Western should acquire resources and promote more hydropower
development instead of diminishing commitments to existing customers.
--Incentives like additional CVP allocations to promote renewable
resources, like those that took place in 1981, should be considered.
Power could be derived from Shasta rewinds and conservation savings
from project-use efficiency improvements.
--Incentives favor larger utilities at the expense of smaller
customers. All customers pay for incentives, but larger customers are
more likely to benefit from the incentive program itself.
--Western needs to proactively administer meaningful and balanced
incentives and penalties.
--The rates of supplemental suppliers are much higher than the costs of
Western's power. Customer energy efficiency is driven by the cost of
supplemental supply. This price differential is much more effective
than any incentive rates developed by Western.
--Western needs to identify barriers to wind energy development in its
region. Cost-sharing by Western on the first major renewable energy
power plants in the region would help to overcome a critical barrier to
widespread wind development.
--Western should quantify environmental costs and establish a system of
rewards for technologies, such as wind, which do not generate any air
pollutants.
--Western should consider establishing system-wide C&RE goals and
institute a system of tradable credits (similar to the Clean Air Act)
among Western's customers. This would allow the lowest cost
opportunities for conservation to be acquired first, no matter their
geographic location.
--The provision for a 10-percent withdrawal of power creates the
necessary incentive mechanism.
--Western's package of incentives and penalties should include rate
surcharges and power supply reductions for noncompliance, Western cost-
sharing of conservation measures, short-term allotments of power for
the achievement of goals, purchase of conserved power at prices higher
than Western's contract rate, and other ``feebate'' schemes that reward
overachievers and penalize underachievers. Western should fund the EMP
through power rates so that customers will receive a price signal to
participate in the Program.
--Western can get a headstart on the proposed Program by leading
workshops on DSM and least-cost energy planning, devising peak pricing
schedules, enforcing existing penalty provisions, and financing cost-
effective energy conservation improvements.
--Set aside some part of revenue from surplus power sales to fund
conservation and other Program activities.
--Failure to comply should be penalized rather than compliance being
rewarded.
--Customers in compliance should be rewarded with a 10- to 20-percent
bonus of firm power over and above existing allocations.
--Energy conservation measures should be funded through add-on charges
to the monthly Western power bill.
--Prefer extension at a 100-percent level for 35 years for those who
comply with Program regulations.
--Stricter requirements for IRP are acceptable if contract extensions
are more generous.
--Contracts should be extended an additional 25 years at the customer's
option upon approval of subsequent IRPs by Western.
--Western provides a significant incentive to its customers by keeping
its costs as low as possible, as this will motivate customers to do
whatever is necessary to retain the resource.
c. Discussion
Western serves a wide variety of different types of customers.
Western has recognized from the outset that there will be varying
levels in the sophistication and complexity of IRPs, reflecting each
customer's size, type, resource needs, and geographic area. Resource
choices and the timing of implementation will vary depending upon the
circumstances involved. Given this diversity of customer
characteristics and resource strategies, Western has not found an
equitable way to judge and appropriately reward the energy efficiency
achievements of its customers. For this reason, this proposed Program
does not feature rewards for exceptional energy efficiency achievement,
such as the allocation of long-term firm power.
Western has decided against providing incentive allocations out of
a resource pool for an additional reason. When an incentive allocation
is made up of long-term firm power taken from existing customers,
Western undermines its need to provide resource stability to existing
customers. Due to customer uncertainty of receipt of power from such a
pool, otherwise unnecessary power purchases could take place, causing
increased expense to the consumer. In regions where surpluses are not
available for purchase on a long-term basis, construction of supply-
side generation or transmission lines could be induced if Western
creates a relatively large resource pool from power currently allocated
to existing purchasers. Balance must be achieved between avoiding
disruption in existing power supply and transmission arrangements and
the development of appropriate incentives for IRP preparation.
The planning stability that results when a purchaser can depend on
its Federal power commitment can be seen as an incentive. Planning for
the future cannot take place with any confidence if this stability is
compromised. Energy-efficient resource choices, with their associated
economic and environmental benefits, cannot be realized if the existing
resource base is uncertain. The financing of new renewable and DSM
resources could be adversely impacted if existing resources are not
sufficiently firm for planning purposes.
Western also views its technical assistance program as offering a
significant incentive for customers to pursue energy efficiency. A
major goal of Western's technical assistance program is to inform its
customers of the economic benefits of energy efficiency and strategies
for selecting and implementing C&RE activities, so that opportunities
identified in IRPs are pursued with an understanding of the benefits.
Technical assistance will continue to be available from Western to aid
customers in developing consumer incentives for energy efficiency.
Western supports the concept of a pool of assistance dollars that
could help supplement and support customer investments in energy
efficiency and renewables. Budgetary constraints prevent Western from
implementing such a pool in the near future.
Technical assistance will also support the marketing efforts of
Western's customers as they pursue cost-effective DSM activities. The
benefits resulting from IRP preparation, developed with full public
participation, are sufficient incentives for IRP implementation without
further incentive from Western.
Western originally viewed the extension of resource commitments to
existing customers as a significant inducement to preparing IRPs. With
the passage of the EPAct, Western's long-term firm power customers now
must prepare IRPs whether resources are extended or not. However, the
availability of power for allocation to new customers remains a
powerful incentive for the preparation of IRPs by those not presently
receiving the benefits of Federal hydropower.
Western is not proposing the imposition of a surcharge on its
customers to create a conservation/DSM fund as part of this Program,
since rate issues are outside of the scope of the Program proposal. Use
of the funds collected pursuant to a surcharge would not be authorized
without an appropriation or establishment of a revolving fund.
In response to the suggestion that Western should establish a
system of credits like the Clean Air Act, such an approach is too
costly and administratively burdensome and would excessively impact
rates. Western's role is principally one of a power supplier to
preference entities and not to all regional utilities. The setting of
C&RE goals for the region would inject Western into the planning
process of regional utilities to an inappropriate degree.
Western cannot reserve power for potential new customer needs if
contracts are extended at a 100-percent level for those entities that
comply with the Program. Extensions of contracts for an additional 25
years at the customer's option, upon approval of subsequent IRPs by
Western, would cause hydropower resources to be extended too far into
the future for Western to respond to changing circumstances over time.
Western will not make the PMI extensions more generous as a quid
pro quo for a tough IRP requirement. The stringency of the IRP
requirement is fundamentally set forth in section 114 of the EPAct. The
character of the PMI more appropriately is determined by such factors
as the need to support quality IRP through resource stability and
balancing the need for certainty with flexibility requirements.
Western disagrees with the comment that a customer should be
allowed to resell Western power that is saved as an incentive for
conservation. Resale of power to a nonpreference entity would violate
the preference clause set forth in Reclamation law. Even if the power
were proposed for sale to another preference entity, several policies
and laws could be undermined by a purchaser's resale of Federal power.
Power produced from Federal hydrogeneration is made possible by the
appropriation of public funds and should not be a vehicle for profit.
The legal requirement that Western's rates be cost based would be
undermined if that power could be resold at a higher cost to others.
The Administrator's allocation decisions, made during an open and
public process, would be undermined and distorted if the benefits of
Federal hydropower were subject to resale. Sales outside of the
marketing area for a particular project would be in violation of the
marketing criteria for a particular project. For all of these reasons,
Western declines to adjust its policies, as reflected in its long-term
firm power contractual language.
Even though Western remains convinced that additional Western-wide
incentives to encourage energy efficiency are not necessary, the
possibility exists that regional incentives might be appropriate.
Western reserves the right, on a project-by-project basis, to develop
targeted incentives if such an approach has regional merit. One
opportunity for consideration of such an incentive approach would be at
the time that Western determines the resources available at the end of
the term of existing contracts.
4. Project Use
a. Background
Project-use power is that power reserved to meet project needs.
Western markets power available in excess of that needed to serve
project purposes.
b. Comments
--Western should work with Reclamation to assure that cost-effective
efficiency improvements for project-use power are identified.
--Project-use power efficiencies should go to those customers who
assist project-use customers in reducing those inefficiencies.
--Western should invest in energy-use efficiencies for project-use
loads. Western could then allocate the energy saved to preference
customers or reduce firming purchase power requirements.
--Customers could be given the opportunity to make project-use
efficiency improvements in exchange for energy saved.
c. Discussion
Investment opportunities have been discussed with Reclamation and
the Corps, which are responsible for project-use facilities. A December
1991 evaluation report by Western and Reclamation on project-use
efficiency opportunities for the CVP indicated limited cost-effective
opportunities for development. However, the four potential generation
improvements that were cost-effective could increase project generation
by 123 GWhs per year at a cost of 0.7 to 36.9 mills/kWh. Most of this
energy is attributable to the potential uprating of generation at
Shasta Dam.
Within the scope of its legal authority, Western will pursue
opportunities that are cost-effective and feasible but will not address
this issue within the Program. Opportunities will be pursued
independently from the Program.
5. Support of Renewables and DSM
a. Background
Western has purchased power from cost-effective suppliers of
renewable resources in the past and has a transmission access policy
that allows for delivery of renewable resources to load.
b. Comments
--Western should/should not fund customer DSM activities and pilot
programs.
--Western should share in the capital costs of renewables since
financing is a key barrier to development.
--Western should do more with renewables to fund site studies,
transmission analysis, and feasibility.
c. Discussion
Western will use IRP principles in its resource acquisition
programs in the future and will pursue cost-effective DSM and renewable
resources. In a period of cost containment and declining budgetary
resources for Federal agencies, Western cannot commit to extensive
funding for investments in resources that are not needed to firm its
hydroelectric resources. Western will continue to provide technical
assistance in the planning, design, and evaluation of feasibility of
DSM and renewable resources. Western will also continue to provide
transmission access for renewable resources and look for other
opportunities to promote DSM and renewable resource development.
Western remains open to taking on a greater role in this area should
budgetary resources become available for these purposes in the future.
6. Profile Data
a. Background
Western proposed that all customers would provide an annual update
of information for implementing and evaluating the EMP. The data was
proposed to be used for analyzing overall Program impacts; comparative
analysis and annual reporting on Program benefits; identifying basic
supply, load, or consumption data for plan evaluations; and assisting
Western in targeting technical assistance for customers.
b. Comments
--The profile data sheet included in the April 14, 1991, Federal
Register notice did not ask for information that would have addressed
the purposes proposed, especially measuring program effectiveness.
--Western should accept the current Rural Electrification
Administration Form 7 in place of Western's proposed form or any other
form currently being prepared for other agencies or regulatory bodies.
c. Discussion
Western has reconsidered this aspect of its Program. In an effort
to decrease the administrative burden of proposed Program provisions
and because this information is available elsewhere, Western is
eliminating the annual profile data requirement from its proposal.
While the need for this type of information still exists, Western has
the capability of acquiring the data from other sources such as the
Rural Electrification Administration and the Energy Information
Administration or published customer annual reports and annual progress
reports.
7. Proprietary Information
a. Background
Western serves a few retail customers who do not sell to other
consumers.
b. Comments
--Some of the retail customers of MBA members objected to providing
Western information that they consider proprietary to their business
concerns, knowledge of which by outside parties could be detrimental to
the customers' business.
c. Discussion
Although Western proposes to require certain information from
customers and customer members in fulfillment of IRP provisions,
customers who feel that information being provided is proprietary
should so state and identify the sensitive information. Western will
make every effort to honor this confidentiality.
8. Transmission Access
a. Background
Early in the development of this proposal, Western received a
variety of comments concerning the issue of transmission access.
Neither the PMI nor the EMP features of this Program proposal have
included a specific transmission access component.
b. Comments
--Western should provide transmission service to other utilities at
cost-based rates.
--Transmission access beneficiaries should provide compensation to
those who own the lines.
--Customers having transmission capacity should be encouraged to
provide, and be given credit for providing, transmission service to
other utilities at cost-based rates.
c. Discussion
Western has a transmission access policy which provides
transmission service to other utilities at cost-based rates. There is a
specific cost-based transmission rate for each ratesetting system.
Ratemaking proceedings are open to the public.
Western agrees that transmission access should yield compensation
to the transmission provider. The issue here as related to this Program
proposal is that transmission access may be a key in the implementation
of a particular strategy identified in an IRP. In the absence of
transmission access, otherwise beneficial resource choices are
foreclosed. Availability of transmission access above a certain rate
level has the same effect.
The comment that customers with transmission capacity should be
encouraged to provide, and be given credit for providing, transmission
service to other utilities at cost-based rates was primarily related to
an earlier proposed option called the Performance Plan. This option has
since been replaced by a proposal for IRP for all customers. Western
encourages an open transmission access policy by its customers.
[FR Doc. 94-19294 Filed 8-8-94; 8:45 am]
BILLING CODE 6450-01-P
