2017-17210. 2025 Power Marketing Plan

AGENCY:

Western Area Power Administration, DOE.

ACTION:

Notice of final plan.

SUMMARY:

The Department of Energy (DOE), Western Area Power Administration (WAPA), announces its final 2025 Power Marketing Plan (Marketing Plan) for the Sierra Nevada Region (SNR). On December 31, 2024, all of SNR's long-term power sales contracts will expire. This notice responds to comments received on the Proposed 2025 Power Marketing Plan (Proposed Plan) and sets forth the Marketing Plan. The Marketing Plan specifies the terms and conditions under which WAPA will market power from the Central Valley Project (CVP) and the Washoe Project beginning January 1, 2025. This Marketing Plan supersedes all previous marketing plans for these projects. WAPA will offer new contracts for the sale of power to existing customers as more fully described in the Marketing Plan. Entities who wish to apply for a new allocation of power from WAPA, and who meet the criteria defined in the Marketing Plan, should submit formal applications. Application procedures will be set forth in the Call for 2025 Resource Pool Applications in a separate Federal Register notice to be published after the Marketing Plan is applicable.

DATES:

The Marketing Plan will become applicable September 14, 2017 in order to make power allocations and complete the other processes necessary to begin providing services on January 1, 2025.

FOR FURTHER INFORMATION CONTACT:

Ms. Sonja Anderson, Vice President of Power Marketing, Sierra Nevada Customer Service Region, Western Area Power Administration, 114 Parkshore Drive, Folsom, CA, 95630-4710, by email at [e-mail], or by telephone [phone]. Information on development of the Marketing Plan can be found at https://www.wapa.gov/​regions/​SN/​PowerMarketing/​Pages/​2025-Program.aspx.

SUPPLEMENTARY INFORMATION:

Development of the 2025 Power Marketing Plan

WAPA currently markets power from the CVP and the Washoe Project under long-term contracts to approximately 80 preference customers in northern and central California and Nevada. On December 31, 2024, all of SNR's long-term power sales contracts will expire. This notice sets forth WAPA's Marketing Plan and responds to comments received on the Proposed Plan. The Marketing Plan specifies the terms and conditions under which WAPA will market power from CVP and the Washoe Project beginning January 1, 2025. This Marketing Plan supersedes all previous marketing plans for these projects.

CVP power facilities include 11 powerplants with a maximum operating capability of about 2,113 megawatts (MW) and an estimated average annual generation of 4.6 million megawatthours (MWh). The Washoe Project, Stampede Powerplant has a maximum operating capability of 3.65 MW with an estimated annual generation of 10,000 MWh.

To deliver CVP power, WAPA owns the 94 circuit-mile Malin-Round Mountain 500-kilovolt (kV) transmission line (an integral part of the Pacific AC Intertie (PACI)), the 84 circuit-mile Los Banos-Gates No. 3 500-kV transmission line, 803 circuit miles of 230-kV transmission line, 7 circuit miles of 115-kV transmission line, and approximately 63 circuit miles of 69-kV and below transmission line. WAPA also has partial ownership in the 342-mile California-Oregon Transmission Project (COTP) 500-kV transmission line. Many of WAPA's existing customers have no direct access to WAPA's transmission lines and receive service over transmission lines owned by other utilities. The Washoe Project is not directly connected to the CVP. Sierra Pacific Power Company (SPPC) owns and operates the only transmission system available for access to the Washoe Project.

The following table lists a range of estimated CVP and Washoe Project power resources and adjustments. This table is for informational purposes only and does not imply the power resources and adjustments shown will be the actual amounts available or adjustments applied.

Estimated CVP power resources and adjustments prior to first preference entitlements and base resource allocations
Power resources/adjustment	Range/value
Annual energy generation	2,400,000-8,600,000 MWh.
Monthly energy generation	87,000-1,100,000 MWh.
Monthly capacity	360-1,900 MW.
Annual project use	334,000 MWh-1,670,000 MWh.
Monthly project use	10,000-180,000 MWh.
Monthly project use (on peak)	30-360 MW.
Monthly maintenance	0-300 MW.
Reserves—hydro	minimum 5% of monthly capacity.
CVP transmission and transformation losses from the generator bus to a 230-kV load bus	1.6%.

WAPA began developing the Marketing Plan with a series of three informal public information meetings. These meetings helped WAPA identify pertinent issues, including contract provisions and methodologies for creating resource pools.

WAPA subsequently published its Proposed Plan (81 FR 27433, dated May 6, 2016). WAPA held a public information forum on June 1, 2016, to present the Proposed Plan and answer questions. On July 12, 2016, WAPA held a public comment forum to accept verbal comments, and accepted written comments from the public through August 4, 2016. WAPA considered the comments received in developing the Marketing Plan.

Responses to Comments Received on the Notice of Proposed Plan

During the public consultation and comment period, WAPA received 13 letters commenting on the Proposed Plan. In addition, six customers and interested stakeholder representatives commented during the July 12, 2016, public comment forum. In preparing the Marketing Plan, WAPA reviewed and considered all comments received during the public consultation and comment period.

The following is a summary of the comments received during the consultation and comment period, and WAPA's responses to those comments. Comments are grouped by subject and paraphrased for brevity. Specific comments are used for clarification where necessary.

I. Marketing Plan Term

Comment: All commenters supported the 30-year term; however, several stated without some additional balancing of the termination provisions and/or the rate procedures, the additional term could result in cost or risk exposure that negatively impacts Base Resource customers. Additionally, Base Resource customers will be exposed to increased risks due to the take-or-pay nature of the power contracts unless WAPA includes reduction and early termination provisions.

Response: Please see WAPA's response under Termination and Reduction Provisions for a response to the reduction and early termination portion of these comments.

II. Marketable Resource—Base Resource

Comment: Two commenters stated WAPA should explicitly define the Base Resource and list all applicable attributes including energy, capacity, ancillary services, reserves, transmission and environmental attributes.

Response: WAPA has modified the definition of Base Resource in the Marketing Plan to clarify that power includes capacity and energy. Transmission is not an attribute of the Base Resource. It is the customers' responsibility to secure any necessary transmission service; however, WAPA will provide transmission service to deliver the Base Resource on the CVP system. The definition continues to include ancillary services reserves, and environmental attributes.

Comment: A commenter stated it understands that Project Use, First Preference, maintenance, reserves, and system and transmission losses are subtracted from the CVP generation prior to determining the Base Resource available. The commenter asked if there were any other existing or new obligations on the CVP resource that should be explicitly identified in the Marketing Plan.

Response: At this time, there are no additional obligations on CVP power resources other than those listed.

Comment: A commenter stated WAPA should determine the amount of Base Resource available in an equitable manner, and not by which balancing authority area the customers are located. WAPA can improve the equity by considering all aspects of its CVP portfolio of assets, including generation, capacity, ancillaries, and transmission assets.

Response: The Marketing Plan defines Base Resource and allocates Base Resource to each preference customer based on the preference customer's percentage. WAPA does not consider a customer's balancing authority area when determining the amount of Base Resource available.

Comment: A commenter encouraged greater efforts by WAPA and the U.S. Department of the Interior, Bureau of Reclamation (Reclamation) to consider measures to increase the value and flexibility of the Base Resource.

Response: WAPA will continue to work with Reclamation to maximize the value of the Base Resource.

III. Marketable Resource—Custom Products

Comment: Several commenters supported offering Custom Products. The commenters stated that WAPA's commitment to explore requested Custom Products provides needed certainty and possible additional opportunities for customers to explore new uses for the Base Resource and transmission assets. The commenters further stated that WAPA's process for establishing Custom Products involves appropriate customer input, and ensures that WAPA's other customers may even benefit indirectly from the offering of Custom Products. The commenters also stated that Custom Products improve the value of the Base Resource to all customers. The customers support all costs incurred being paid by those customers contracting for such Custom Products.

Response: WAPA will continue to offer Custom Products with all costs incurred paid by those customers contracting for those products and/or services.

Comment: A commenter encouraged WAPA to identify the Custom Products being offered to customers, including the product terms and cost, and to increase the visibility and availability of the price and terms and conditions of Custom Products. The commenter suggested that WAPA provide periodic reports on the Custom Products used by preference customers, including data on prices, terms, and conditions for all products.

Response: WAPA anticipates it will continue to offer Full Load, Variable Resource, and Scheduling Coordinator Services. WAPA is open to assisting customers with their electric service needs under a Custom Product contract if WAPA is able to do so. Custom Products will initially be offered for 5-year terms. The cost for such products and services will be on a pass-through basis. WAPA will not know what other products or services it may provide until those services are requested, nor will WAPA know the cost of any Custom Products until those services are determined, along with the number of customers participating in those services, and other relevant parameters. At such time as the pricing, terms and conditions related to Custom Products is no longer considered proprietary and/or market sensitive, WAPA may provide it upon request.

Comment: A commenter asked WAPA to clarify how it will carry out the collaborative process to ensure all stakeholder perspectives are considered.

Response: Custom Products are any product or service requested by an individual customer or group of customers. These products or services will be mutually negotiated between a specific customer or a specific group of customers and WAPA.

Comment: A commenter stated that, to the extent the Custom Products offered reduce the value of the Base Resource to other preference customers by reducing the availability of electricity, capacity, reserves, ancillary services, transmission and/or environmental attributes, the beneficiary should pay for the value of the displaced Base Resource. WAPA should modify the Marketing Plan to clearly define the Custom Products that could reduce power and transmission available for Base Resource generation before all customers are asked to execute a contract in 2020.

Response: Custom Products do not include the Base Resource or CVP generation. Custom Products are meant to enhance the Base Resource for those customers that may need additional services from WAPA to maximize the benefit from the Base Resource. WAPA provides transmission with the Base Resource; therefore, Custom Products do not affect the availability of transmission for Base Resource delivery.

Comment: If WAPA is providing a service or facility for voltage support or some similar benefit to a specific entity, according to WAPA's Open Access Transmission Tariff (OATT), the costs for such a project must be paid by that individual entity. If WAPA does not follow its own OATT and allocates these costs to other entities, these other entities must be authorized an off-ramp.

Response: All costs associated with providing Custom Products are passed to those customers requesting Custom Products. If a Custom Product involves services under WAPA's OATT, the customer will take and pay for those services under the OATT.

IV. Exchange Program

Comment: A commenter supported the hourly and seasonal exchange programs provided that they are administered and implemented fairly whereby all who can share in the benefits of Base Resource can do so without taking on additional burdens.

Response: WAPA intends to develop the exchange program with input from the customers and the public to maximize the benefits and lessen any burdens associated with exchange program participation. The exchange program is an optional program.

V. Extension of the Resource

Comment: Several commenters support extending 98 percent of the Base Resource to existing customers.

Response: WAPA will extend 98 percent of the Base Resource to existing customers as specified in the Marketing Plan.

Comment: A commenter stated WAPA should allow existing customers to take less than 98 percent of their current Base Resource percentage.

Response: WAPA will allow an existing customer to reduce its base resource percentage allocation under this Marketing Plan with at least six months' written notice to WAPA prior to January 1, 2025.

Comment: A commenter supported limiting allocations to no more than 100 percent of load, but suggested using consistent data to determine load between existing and new customers.

Response: A customer should not have an allocation larger than its load. Reviewing a 5-year period of energy consumption for existing customers is appropriate so an existing customer is not unduly harmed due to unusual factors (drought, environmental impacts, etc.) that may affect their load for just one year.

VI. Resource Pools

Comment: Several commenters support creating the resource pools; the calculation methodology to create the resource pools; and the 2 and 1 percent resource pools in 2025 and 2040, respectively, which are sufficient to broaden the preference customer base without overly penalizing existing customers.

Response: WAPA acknowledges the comment.

Comment: Two commenters stated the Marketing Plan should have a provision to address how WAPA will manage returned allocations from customers that either do not opt for new power contracts or exercise early termination. A commenter recommends that surrendered or excess allocations (where load exceeds allocations) be offered to existing customers on a pro rata basis. Another commenter supports returning all surrendered allocations to existing customers, even if that amount is beyond 2 percent.

Response: The Marketing Plan states that surrendered allocations will be returned to existing customers on a pro rata basis, up to 100 percent of each existing customer's pre-2025 allocations. WAPA will not allocate Base Resource above an existing customer's pre-2025 allocation unless that existing customer applies for an additional allocation because some existing customers may neither need nor want more Base Resource. Any Base Resource available after returning existing customers to 100 percent of their pre-2025 allocations will be included in the resource pool. Any Base Resource available from excess allocations, which WAPA believes will be minimal, will also be included in the resource pool. Existing customers interested in receiving additional Base Resource are encouraged to apply for a resource pool allocation. This same process will be used for the 2040 resource pool.

VII. Allocation Criteria

Comment: A commenter stated the Northern California Power Agency members with small allocations due to prior withdrawals should receive at least equal consideration with Native American tribes.

Response: WAPA will consider all applications received in response to the Calls for Applications. It is WAPA's policy to provide assistance to Native American tribes consistent with 25 U.S.C. 3505.

Comment: A commenter stated that under the Proposed Plan, a new customer could potentially receive up to 2 percent of the Base Resource in 2025 if additional customers are not available to split the resource pool. The commenter stated that if there are not enough new customers to fully subscribe to the 2 percent offering, the remaining share of the Base Resource product that is not allocated to a new customer can then be distributed to existing customers. The commenter also stated that existing customers could still potentially receive less than 1 percent of the Base Resource if several existing customers sign up to receive a share of unsubscribed Base Resource in the resource pool for new customers.

Response: WAPA has not determined how much Base Resource will be allocated to any allottee or group of allottees, which would include new allottees or increases in existing customers' allocations. Existing customers may apply for additional Base Resource.

Comment: A commenter said the allocation methodology states the allocation of Base Resource “will be based on applicant's load during the calendar year prior to the Call for Applications or the amount requested, whichever is less.” The commenter advocated establishing this load ratio share benchmark to determine which existing customers' Base Resource allocations exceed their load ratio share and subjecting only those excess allocations to the 2 percent reduction to establish the resource pool. Those existing customers whose Base Resource allocations fall below the benchmark would not be subject to the 2 percent reduction and would also be eligible for participation in the resource pool.

Response: WAPA considered several different methodologies to create the Resource Pools, including reducing only a subset of existing customers' allocations. After reviewing the comments received during informal stakeholder meetings, WAPA determined it would treat all customers equally by reducing the existing customers' allocation by 2 percent and 1 percent to create the 2025 and 2040 Resource Pools, respectively.

Comment: A commenter strongly encouraged development of minimum threshold criteria to ensure that the existing customers are not disadvantaged by the resource pool and that the resource value is not weakened or jeopardized by new customers. The commenter encouraged setting standards or carefully monitoring the resource pool process to ensure the resource is being used consistent with the project purposes.

Response: The Marketing Plan sets forth the eligibility criteria necessary to be met to qualify for an allocation of Federal power. The criteria apply to both existing and new customers. All new and existing customers will execute the same electric service contract and are bound by the same terms and conditions.

Comment: A commenter was concerned by the proposal to allow only those customers who have a load ratio share below 25 percent to receive additional allocations under the resource pool. The commenter understands the intent to avoid allocating additional Base Resource to entities who already have large allocations; however, the commenter stated the 25 percent threshold is somewhat arbitrary and that a set threshold neglects consideration of customers' socio-economic conditions or technical issues.

Response: In an informal public information meeting, WAPA proposed only existing customers whose allocation meets less than 25 percent of their load could apply for an additional allocation of Base Resource. Several stakeholders stated concerns with that proposal. Based on those concerns, the Marketing Plan does not contain a threshold. Any existing customer can apply for a resource pool allocation.

VIII. General Criteria and Contract Principles

Comment: Section V.B. states that “Allocation percentages are subject to adjustment.” A commenter stated the circumstances of such an adjustment need to be specified so customers have an understanding of the nature of their commitment to an allocation. WAPA should clarify that Base Resource percentage adjustments will only be made in very limited circumstances, such as by customer termination or reduction, or when a customer no longer exists.

Response: WAPA agrees there are limited circumstances when Base Resource percentages may be adjusted as defined by the Marketing Plan. For instance, existing customers' Base Resource percentages may be increased if one or more existing customers reduce their Base Resource percentage or terminate their contracts prior to 2025. All customers' Base Resource percentages will be reduced for the 2040 Resource Pool. If it is determined that a customer has too large of an allocation, or is using the Base Resource for purposes other than serving its own load, that customer's Base Resource percentage may be reduced or withdrawn. An assignment, or withdrawal of an assignment, also would cause an adjustment in a customer's Base Resource percentage.

Comment: Section V.I. states “Contracts will include clauses specifying criteria that customers must meet on a continuous basis to be eligible to receive electric service from WAPA.” Two commenters stated if WAPA intends to include criteria in the contracts that differ from the criteria for eligibility for an allocation, then the nature of the intended ongoing criteria should be explained. WAPA should clarify the criteria a customer must continue to meet to remain a customer.

Response: The eligibility criteria listed in the Marketing Plan will remain during the term of the Marketing Plan. However, other criteria may be required during the 30-year term to maintain flexibility and adapt to changes. Criteria that a customer may need to meet will be included in contracts which can be modified as necessary to correspond with changes in the electric utility industry.

Comment: A commenter asked what version of the General Power Contract Provisions (GPCP) will be attached to the new contracts.

Response: The GPCP in effect at the time of the contract offer will be attached to the contracts for electric service.

IX. Termination/Reduction

Comment: Several commenters expressed interest in contract termination/Base Resource reduction. Commenters stated that to achieve balance for a 30-year take-or-pay obligation, the contract should include a reasonable termination or reduction provision. Commenters asserted that precedent for contract termination provisions within contracts has been set by Federal Energy Regulatory Commission (FERC)-approved transmission contracts. Due to the vague language in the GPCP, commenters stated that the Marketing Plan should clearly articulate customers' ability to terminate or reduce their Base Resource percentages when rates are extended. Commenters asserted that the Marketing Plan should clarify a customer's ability to terminate its contract under the GPCP. While the current GPCP provide for any customer, during a 90-day notification window, to terminate a contract following a rate change or formula rate extension, commenters recommended that a clear termination or allocation reduction provision be included in the body of the new agreement. Commenters asserted that there is clear precedent in major WAPA agreements for a reasonable termination notice provision. Commenters stated that specific language should be included in the body of the power contracts to allow a customer to reduce or terminate its allocation upon notice to WAPA, because GPCP termination triggered by rate change action is not sufficient risk protection for customers.

Response: WAPA acknowledges a 30-year term for a contract is a significant commitment and understands the concern regarding the ability to terminate the contract. WAPA's GPCP provide for customers to terminate service in the event of a change of rates. However, to address the commenters' concerns, WAPA will exclude Section 11 of the GPCP and, in collaboration with the customers, will clarify Section 11 and insert it directly into the contract.

Comment: Several commenters also stated the contracts should provide an exit clause at 5-year intervals during the term, after a change in the rates or terms of service, or after a significant regulatory change. According to the commenters, such a provision would provide protection for customers' ratepayers. Without an undisputable termination provision, commenters asserted that a 30-year take-or-pay contract will be a difficult commitment to make in the current environment of low cost renewable resources relative to the highly uncertain resource availability and allocated costs associated with the Base Resource. Commenters stated that sufficient notice periods would give WAPA time to explore alternative means for marketing power. The commenters strongly recommended consideration of a process that allows customers to terminate or reduce their Base Resource percentages under prescribed conditions. Such conditions could include a requirement that customers attempt to reassign the Base Resource percentage; longer notice provisions; or other criteria that would provide a balance for all parties. Some of these commenters advocated an opportunity for customers, upon reasonable notice, to terminate or modify their Base Resource allocation, for any reason, every five years throughout the term of the contract.

Response: As discussed above, WAPA will allow for termination as a result of a rate adjustment. WAPA anticipates electric utility industry changes and has provided for the ability to modify contracts in collaboration with customers in this Marketing Plan; therefore, WAPA does not believe an exit clause will be necessary in response to changes in the electric utility industry. Additionally, WAPA will use best efforts to assist customers that wish to reassign an allocation to the extent there are customers interested in additional allocations.

Comment: A commenter advocated a process whereby those customers intending to terminate their Base Resource contracts make an offering to other remaining Base Resource customers prior to filing a notice to terminate the contract. This would allow the remaining Base Resource customers to elect the level of additional Base Resource product that they would want to take and provide an overall balance of certainty for the entire program.

Response: If an existing customer surrenders some or all of its Base Resource percentage during a resource pool process, WAPA will first use that surrendered Base Resource percentage to return all existing customers up to their full Base Resource percentage prior to the resource pool reduction. Any remaining Base Resource percentage after all customers are returned to their full Base Resource percentage will be included in the resource pool. Outside of a resource pool period, if a customer were to surrender any or all of its Base Resource percentage, WAPA, at its discretion, will reallocate that Base Resource percentage.

X. First Preference Entitlement and Allocation

Comment: A commenter stated the Final Plan should state that any and all preference entities located within Calaveras County are eligible to join a joint powers authority (JPA) as members and receive power through such JPA, irrespective if any of those entities receive a Base Resource allocation.

Response: Increasing Calaveras County's first preference allocation to serve additional loads of other preference customers would circumvent the allocation process. Additionally, it would lower the amount of Base Resource available for all preference customers.

XI. Transmission

Comment: A commenter supported continued use of the CVP transmission for Base Resource deliveries.

Response: Western acknowledges the comment.

Comment: A commenter stated WAPA should work with customers to ensure transmission arrangements are completed to provide for delivery of power made available by the Marketing Plan.

Response: WAPA will use best efforts to assist customers with their transmission arrangements. However, because WAPA does not own all the transmission and distribution necessary to serve all customers' loads, obtaining the transmission and distribution service necessary for delivery of WAPA power is ultimately the customers' responsibility.

Comment: Several commenters support consideration of the PACI to aid and benefit the CVP. Commenters stated that WAPA's transmission assets can be used to improve the economic benefit of the CVP to preference customers. Commenters also stated that WAPA should carefully manage and use all of its transmission assets to maximize and enhance economic and operational benefits to allow CVP costs to be minimized and benefits to be shared with preference customers. Commenters supported WAPA's commitment to make surplus transmission available to aid and benefit the CVP. Commenters encouraged WAPA to explore the best use of its surplus transmission, including the Path 15 transmission line, to minimize costs for the CVP while honoring its existing commitments.

Response: Under WAPA's OATT, WAPA is required to charge all customers the same rate it charges itself, unless there is a statutory exemption. The PACI legislation (16 U.S.C. 837g) provides that WAPA should sell the excess capacity at equitable rates. Operational control of Path 15 has been turned over to the California Independent System Operator (CAISO). WAPA will continue to examine ways to utilize the PACI to aid and benefit the CVP.

XII. Changes in the Electric Utility Industry

Comment: Numerous commenters support WAPA incorporating specific provisions to negotiate changes to contracts should changes in the electric industry/markets be significant enough that CVP transactions would need to be managed differently than might be articulated in the contracts. Commenters stated that this may be important in light of the significant changes that continue to impact the electric utility industry. Commenters further stated that the Marketing Plan needs to remain flexible due to the evolving power system, and that WAPA may need to re-evaluate the products and services it offers to continue to provide power at the lowest possible rates consistent with sound business principles. Commenters requested that WAPA clarify that any changes will be done with mutual agreement by WAPA and the customers.

Response: WAPA may need to re-evaluate the manner in which it markets the resource due to changes in the electric market. Any contractual changes will be made via mutual consent through an amendment executed by both parties to the contract.

XIII. Additional Comments

Comment: A commenter stated that, in the Proposed 2025 Schedule, the one-time termination milestone should be removed and replaced with the opportunity to terminate or reduce the Base Resource percentage prior to contract start date.

Response: WAPA has determined that a minimum of 6 months is needed to allow time to reallocate any returned allocations. Customers may reduce or return their allocations no later than July 1, 2024.

Comment: A commenter asked what credit provisions will be applied to all customers.

Response: WAPA's standard credit provisions in effect at the time of contract execution will be applied to all customers.

Comment: Numerous commenters stated the Marketing Plan should include a limiter that would cap power customers' payments when power customers' combined CVP power and Restoration Fund payments exceed the annual average of the North of Path 15 market rate. A commenter strongly requested the Marketing Plan include a cap on costs that can be allocated to power customers under certain conditions to ensure the contract remains financially sustainable for customers and provides for a more proportionate allocation of costs between water and power customers. The commenters also stated that contracts should include a cap on power customers' payments when CVP power, Restoration Fund payments, Twin Tunnel payment and all other fees in total exceed the annual average market price. Commenters further stated that Restoration Fund costs are more than a third of the total cost of the Base Resource. While customers indicated that they understand that WAPA's cost recovery mechanisms for the CVP are based on the foundation of recovery for direct project costs through the power revenue requirement, they asked that WAPA explore further the Central Valley Project Improvement Act (CVPIA) costs that are being passed through by Reclamation before Plan implementation. Commenters stated that cost containment and cost certainty must be part of the equation so that Base Resource customers are able to better plan on power expenses and better justify budget impacts. If no significant benefits to power customers are associated with certain cost types, commenters argued that sound cost causation principles would suggest that those costs should not be passed on to power customers. Customers recommended that WAPA agree to suspend the collection of non-essential costs and projects when CVP generation levels are reduced, allowing Federal power to be assessed at rates equal or near alternative power costs. In the customers' view, the GPCP alone would not give customers protection from the CVP cost impacts occurring because of continually increasing CVPIA Restoration Fund costs. Because WAPA rate actions establish total revenue requirements, and not per unit costs, customers believe that the GPCP do not protect customers from increasing per unit costs due to declining CVP power production. Lastly, customers argued that because WAPA rate actions establish total revenue requirements, and do not consider the value of CVP power generated, the GPCP do not protect customers from declining value of CVP production due to water management shifts to periods when power is less valuable.

Response: WAPA will sell the Base Resource at a cost-based rate. WAPA is required to recover costs within a statutorily defined period. The public ratemaking process is separate from the development of, and allocation of power under, the Marketing Plan. WAPA encourages the public to participate in WAPA's rate processes. Costs and availability will be more clearly identified by the time commitments are required for the Base Resource. Reclamation develops and implements the programs under the CVPIA, and determines the costs associated with its programs. WAPA is the billing agent for the Restoration Fund charges to the power customers and has no control over those costs; however, WAPA minimizes WAPA components of power costs to provide the best possible service at the lowest possible rates consistent with sound business principles. WAPA will continue to work with Reclamation and the customers on the CVPIA costs Reclamation is passing on to WAPA's customers.

Summary of Revisions to the Proposed Plan

WAPA revised the Proposed Plan as a result of the comments received during the comment period and public forums. Additionally, changes have been made to more clearly define the intent, but not to alter the substance, of the original proposal. The revisions are summarized as follows:

WAPA will exclude GPCP Section 11 from the electric service contract and, instead, will include language in the electric service contract developed in collaboration with customers that clearly defines the customers' ability to terminate their contracts after certain rate processes.

The definition of Base Resource is modified to clarify that power includes both capacity and energy. Additionally, the word “forfeit” is being replaced with “surrender” to more accurately refer to a voluntary return of an allocation.

In response to comments regarding the Custom Product, the definition of Custom Product is modified to clarify it does not include Base Resource and may not necessarily be supplemental power.

2025 Power Marketing Plan

The Marketing Plan addresses: (1) The power to be marketed after December 31, 2024, which is the termination date for all existing SNR electric service contracts; (2) the general terms and conditions under which the power will be marketed January 1, 2025, through December 31, 2054; and (3) the criteria to determine who will be eligible to receive allocations from the resource pools.

WAPA will continue a collaborative process in implementing the terms set forth in this Marketing Plan.

Within broad statutory guidelines, WAPA has discretion as to whom and under what terms it will contract for the sale of Federal power, as long as preference is accorded to statutorily-defined public bodies. WAPA markets power in a manner that will encourage the most widespread use at the lowest possible rates consistent with sound business principles. All products and services provided under this Marketing Plan will be subject to the operational requirements and constraints of the CVP and the Washoe Project, transmission availability, purchase power limitations, and Federal authorities.

I. Acronyms and Definitions

As used herein, the following acronyms and terms, whether singular or plural, capitalized or not capitalized, shall have the following meanings:

Allocation An offer from WAPA to sell Federal power for a certain period of time, which will convert to a right to purchase after execution of a contract.

Allocation Criteria Criteria used to determine the amount of energy allocated to allottees.

Allottee  A preference entity receiving an allocation percentage.

Ancillary Services Those services necessary to support the transfer of electricity while maintaining reliable operation of the transmission provider's transmission system in accordance with good utility practice. Ancillary services are generally defined by the North American Electric Reliability Corporation.

Base Resource CVP and Washoe Project power (capacity and energy) output determined by WAPA to be available for marketing, including the environmental attributes, after meeting the requirements of project use and first preference customers, and any adjustments for maintenance, reserves, system losses, and certain ancillary services.

Bill Crediting Contractual provisions whereby payments due to WAPA by a customer shall be paid by a customer to a third party when so directed by WAPA.

Capacity The electrical capability of a generator, transformer, transmission circuit or other equipment.

Central Valley Project (CVP) A multipurpose Federal water development project extending from the Cascade Range in northern California to the plains along the Kern River, south of the City of Bakersfield.

Contract Principles Provisions of the electric service contracts, including WAPA's General Power Contract Provisions.

Custom Product A combination of products and services which may be made available by WAPA per customer request.

Customer An entity with a contract and receiving electric service from WAPA's Sierra Nevada Region.

Eligibility Criteria Conditions that must be met to qualify for an allocation.

Energy Measured in terms of the work it is capable of doing over a period of time; electric energy is usually measured in kilowatthours or megawatthours.

Firm A type of product and/or service that is available to a customer at the times it is required.

First Preference Customer/Entity A preference customer and/or a preference entity (an entity qualified to use, but not using, preference power) within a county of origin (Trinity, Calaveras, and Tuolumne) as specified under the Trinity River Division Act (69 Stat. 719) and the New Melones Project provisions of the Flood Control Act of 1962 (76 Stat. 1173, 1191-1192).

General Power Contract Provisions (GPCP) Standard terms and conditions included in WAPA's electric service contracts.

Integrated Resource Plan (IRP) A process and framework within which the costs and benefits of both demand and supply-side resources are evaluated to develop the least total cost mix of utility resource options.

Kilowatt (kW) A unit measuring the rate of production of electricity; one kilowatt equals one thousand watts.

Marketing Plan WAPA's final 2025 Power Marketing Plan for the Sierra Nevada Region.

Megawatt (MW) A unit measuring the rate of production of electricity; one megawatt equals one million watts.

Net Billing Payments due to WAPA by a customer may be offset against payments due to that customer by WAPA.

Power Capacity and energy.

Preference The requirements of Reclamation Law that provide for preference in the sale of Federal power be given to certain entities, such as governments (state, Federal and Native American), municipalities and other public corporations or agencies, and cooperatives and other nonprofit organizations financed in whole or in part by loans made pursuant to the Rural Electrification Act of 1936 (See, e.g., Reclamation Project Act of 1939, Section 9(c), 43 USC 485h(c)).

Primary Marketing Area The area generally encompassing northern and central California extending from the Cascade Range to the Tehachapi Mountains and west-central Nevada.

Project Use Power as defined by Reclamation Law and/or used to operate CVP and Washoe Project facilities.

Reclamation Law Refers to a series of Federal laws with a lineage dating back to the late 1800s. Viewed as a whole, those laws create the framework under which WAPA markets power.

Reimbursable Financing WAPA may purchase power or provide other services using reimbursable authority pursuant to the Economy Act, 31 USC 1535. This is a funding mechanism used by Federal customers.

Sierra Nevada Region (SNR) The Sierra Nevada Region of the Western Area Power Administration.

Unbundled Electric service that is separated into its components and offered for sale with separate rates for each component.

WAPA Western Area Power Administration, United States Department of Energy, a Federal power marketing administration responsible for marketing and transmitting Federal power pursuant to Reclamation Law and the DOE Organization Act (42 USC 7101, et seq.).

Washoe Project A Federal water project located in the Lahontan Basin in west-central Nevada and east-central California.

II. Base Resource

The Base Resource, as defined in Section I., will include CVP and Washoe Project power. CVP generation will vary hourly, daily, monthly, and annually because it is subject to hydrological conditions and other constraints that may govern CVP operations. CVP generation must be adjusted for project use, first preference, maintenance, reserves, system losses, and certain ancillary services before the Base Resource is available for marketing. The Base Resource will be further adjusted for transmission losses to the point of delivery.

The U.S. Department of the Interior, Fish and Wildlife Service (F&WS), Lahontan National Fish Hatchery and Marble Bluff Fish Facility are project use loads of the Washoe Project and have first priority to those power resources. WAPA will continue to make every effort to provide the Washoe Project power resource to F&WS. The generation available after serving the F&WS needs will be marketed with the CVP power resources. The Washoe Project is subject to the same variability and constraints as the CVP.

III. Products and Services

WAPA will market its Base Resource alone or in combination with a Custom Product, which could include purchasing some level of firming power on behalf of all customers, a group of customers, or individual customers. All costs incurred by WAPA in providing additional services to customers will be paid by those customers using the services. The degree to which WAPA continues to purchase power will depend on customer requests and Federal authorities.

Each allottee will be allocated a percentage of the Base Resource. All allottees will be required to commit to the Base Resource within 6 months of a contract offer.

Upon request, WAPA may develop a Custom Product for any customer. A Custom Product may include any products or services mutually negotiated between WAPA and a customer. This may include firming and/or renewable power purchases, ancillary services, reserves, portfolio management services, scheduling coordinator services, etc. Commitments to purchase a Custom Product must be made by January 1, 2023, for a period of no less than 5 years of service, beginning January 1, 2025. Thereafter, the Custom Product will be offered for periods as determined by WAPA. All costs incurred by WAPA in providing Custom Product services to customers will be paid by those customers using the services.

WAPA may, at its discretion, extend the commitment dates for the Base Resource and/or Custom Products.

WAPA will manage an exchange program to allow all customers to fully and efficiently use their power allocations. Any power allocated by WAPA to a customer that cannot be used on a real-time basis due to that customer's load profile will be offered under this program to other customers. The exchange program will be developed in collaboration with the customers.

Any unused resources may be marketed for periods of time as determined by WAPA, and may be marketed outside the primary marketing area. Such sales may be to any entity (preference or non-preference), under any terms, conditions, rates, or charges determined solely by WAPA.

IV. Resource Extensions and Resource Pool Allocations

WAPA will initially provide 98 percent of its available power resources to existing customers and establish a resource pool with the remaining power resources for new allocations. Starting on January 1, 2040, WAPA will reduce the then-existing customers' allocations by 1 percent to develop the 2040 resource pool.

A. Extension for Existing Customers

Starting January 1, 2025, existing customers will have a right to purchase 98 percent of their current Base Resource percentage amount; except as provided below:

1. In the event that an existing customer(s) surrenders some or all of its allocation prior to 2025, that percentage, up to 2 percent of the total Base Resource, will be returned to the existing customers on a pro rata basis.

2. In January 2024, WAPA will compare all existing customers' allocations to their loads. WAPA will use the average Base Resource MWh annual generation and the customers' previous 5 years energy consumption to compare allocations to loads. No customer should have an allocation greater than its load. If, after the comparison, WAPA believes a customer(s) has an allocation greater than its load, WAPA will consult with the customer(s) to determine if the allocation is, in fact, larger than its load. If WAPA determines the allocation is too large, WAPA will reduce that customer(s) allocation to 98 percent of its load.

3. Starting on January 1, 2040, WAPA will reduce all customers' allocations, including 2025 Resource Pool customers, by an additional 1 percent to create the 2040 Resource Pool. WAPA will follow the steps listed in IV.A.1. and IV.A.2. in January 2039 when creating the 2040 Resource Pool.

B. Resource Pool Allocations

WAPA will establish a resource pool by reserving a portion of the power available after 2024 for allocation to eligible preference entities and existing customers. A second resource pool will be established for service starting on January 1, 2040. Allocations from the resource pools will be determined through a separate public process at a later date.

1. Resource Pool Amount

The 2025 Resource Pool will initially consist of 2 percent of the power resources available after 2024, and the 2040 Resource Pool will initially consist of 1 percent of the power resources available after 2039. Should any Base Resource become available because of Sections IV.A.1., IV.A.2., or IV.A.3., above, WAPA will include the additional Base Resource in the appropriate resource pool. WAPA will, at its discretion, allocate a percentage of the resource pools to applicants that meet the Eligibility and Allocation Criteria.

2. Eligibility Criteria

WAPA will apply the following Eligibility Criteria to all applicants seeking a resource pool allocation under the Marketing Plan:

a. Applicants must meet the preference requirements under Section 9(c) of the Reclamation Project Act of 1939 (43 U.S.C. 485h(c)(1)), as amended and supplemented.

b. Applicants should be located within SNR's primary marketing area (map of marketing area available upon request). If SNR's power resources are not fully subscribed, WAPA may market its resource outside the primary marketing area.

c. Applicants that require power for their own use must be ready, willing, and able to receive and use Federal power.

d. Applicants that provide retail electric service must be ready, willing, and able to receive and use the Federal power to provide electric service to their customers, not for resale to others.

e. Applicants must submit an application in response to the Call for Resource Pool Applications issued by WAPA in a separate Federal Register notice. The notice will include the deadline for receipt of those applications.

f. Native American applicants must be a Native American tribe as defined in the Indian Self Determination Act of 1975 (25 U.S.C. 5304).

g. WAPA generally will not allocate power to applicants with loads of less than 1 MW; however, allocations to applicants with loads which are at least 500 kilowatts may be considered, provided the loads can be aggregated with other allottees' loads to schedule and deliver to a minimum load of 1 MW.

3. Allocation Criteria

The following Allocation Criteria will apply to all applicants receiving a resource pool allocation under the Marketing Plan:

a. Allocations will be made in amounts as determined solely by WAPA in the exercise of its discretion under Reclamation Law and considered to be in the best interest of the U.S. Government.

b. Allocations will be based on the applicant's load during the calendar year prior to the Call for Applications or the amount requested, whichever is less.

c. An allottee will have the right to purchase power from WAPA only upon the execution of an electric service contract between WAPA and the allottee, and satisfaction of all conditions in that contract.

d. All customers, including those receiving an allocation from the 2025 Resource Pool, will be subject to the 2040 Resource Pool adjustment.

e. Eligible Native American applicants will receive greater consideration for an allocation of up to 65 percent of their total energy load in the calendar year prior to the Call for Applications, as authorized by 25 U.S.C. 3505.

V. General Criteria and Contract Principles

The following criteria and contract principles apply to all contracts executed under the Marketing Plan, except that certain criteria may not apply to contracts for first preference customers (see Section VI.):

A. Electric service contracts shall be executed within 6 months of a contract offer, unless otherwise agreed to in writing by WAPA.

B. Allocation percentages shall be subject to adjustment.

C. All power supplied by WAPA will be delivered pursuant to a scheduling arrangement.

D. Customers will be required to pay for their percentage of the Base Resource, regardless of whether they can actually use the power.

E. Customers must pay for all charges associated with the products and services provided, including charges associated with ancillary services, Custom Products, and transmission. Those charges will be passed on to the customer(s) contracting for the product or service.

F. WAPA will develop rate schedules for services provided under the Marketing Plan. Such rates will be developed through a separate public process.

G. Customers must pay all applicable rates and charges in the manner and within the time prescribed in the contract.

H. A written commitment to the Custom Product will be required on or before January 1, 2023. WAPA may extend the final commitment dates for the Custom Product.

I. Contracts will include clauses specifying criteria that customers must meet on a continuous basis to be eligible to receive electric service from WAPA.

J. Upon request, WAPA may provide, or assist each new and existing customer in obtaining, transmission arrangements for delivery of power marketed under the Marketing Plan; nonetheless, each entity is ultimately responsible for obtaining its own delivery arrangements for its load. Transmission service over the CVP system will be provided in accordance with Section VII. of this Marketing Plan.

K. Contracts shall provide for WAPA to furnish electric service beginning either January 1, 2025, or January 1, 2040, and continuing through December 31, 2054.

L. Specific products and services may be provided for periods of time as agreed to in the electric service contract.

M. Contracts shall incorporate WAPA's standard provisions, policies and procedures for electric service contracts, integrated resource plans, and GPCP, as determined by WAPA. WAPA will exclude Section 11 of the GPCP from the electric service contracts and, instead, will include language developed in collaboration with the customers that clearly defines the customers' ability to terminate their electric service contracts after certain rate processes.

N. Contracts will include a clause that allows WAPA to reduce or rescind a customer's allocation percentage, upon 90 days' notice, if WAPA determines that (1) the customer is not using this power to serve its own loads, except as otherwise specified in Section III.; or (2) the allocation amounts are consistently greater than the customer's maximum load.

O. Any power not under contract may be allocated at any time, at WAPA's sole discretion, or sold as deemed appropriate by WAPA, consistent with Federal law.

P. Contracts will include a clause providing for WAPA to adjust the customers' allocation percentage for the 2040 Resource Pool.

Q. Contracts may include a clause providing for alternative funding arrangements, including Net Billing, Bill Crediting, Reimbursable Financing, and advance payment.

VI. First Preference Entitlement and Allocation

The Trinity River Division Act and the New Melones Project provisions of the Flood Control Act of 1962 (Acts) specify that contracts for the sale and delivery of the additional electric energy, available from the CVP power system as a result of the construction of the plants authorized by these Acts and their integration into the CVP system, shall be made in accordance with preferences expressed in Reclamation Laws. These Acts also provide that a first preference of up to 25 percent of the additional energy shall be given, under Reclamation Law, to preference customers in the counties of origin (Trinity, Tuolumne, and Calaveras), for use in those counties, who are ready, willing, and able to enter into contracts for the energy.

WAPA will calculate and allocate the Maximum Entitlements of First Preference Customers (MEFPC), which is the maximum amount of energy available to first preference customers/entities, in accordance with the following:

A. The MEFPC will be calculated separately for the New Melones Project, Calaveras and Tuolumne Counties, and the Trinity River Division (TRD), Trinity County (first preference projects). To determine the 25 percent of additional energy made available to the CVP as a result of the construction of each of these projects, WAPA will use the average of the previous 20 years of historical annual generation. The TRD MEFPC includes generation from Trinity, Carr, and Spring Creek Powerplants and a portion of the Keswick Powerplant generation. Based on the most current information available, this calculation results in an estimated MEFPC of 122,800 MWh available from the New Melones Project, and an estimated MEFPC of 361,500 MWh available from the TRD. WAPA will calculate the MEFPC on June 1, 2024, to be applicable January 1, 2025. WAPA will recalculate the MEFPC every 5 years thereafter.

B. Upon recalculation, if the MEFPC from a first preference project is 10 percent above or below the currently applicable MEFPC from that first preference project, the MEFPC will be adjusted to reflect that increase or decrease. WAPA will notify affected first preference customers at least 6 months before making an adjustment to the MEFPC. If recalculation reduces the MEFPC to an amount less than the load previously served, WAPA may, upon request and at its discretion, make purchases necessary to replace that amount of power no longer available. The costs for all such purchases made on behalf of a first preference customer will be passed on to that first preference customer.

C. An allocation made to a first preference customer/entity under the Marketing Plan will be based on the power requirements of that first preference customer/entity. The sum of allocations of first preference power, including losses, shall not exceed the MEFPC from each first preference project, or a county of origin's share of the MEFPC, except as allowed under Section VI.G. below.

D. WAPA will provide full requirements service as described below to first preference customers. The first preference customer will be responsible for transformation and transmission losses to the first preference customer delivery point. Transmission losses shall include losses for CVP transmission and third-party transmission.

WAPA will provide the first preference customer with its full power requirements (capacity and energy) up to its right to the MEFPC at the Base Resource rate. If there is more than one first preference customer in a county of origin, or a first preference entity in that county makes a request for power, WAPA reserves the right to establish a maximum amount of power available to each first preference customer from the MEFPC. Payment for full requirements service will be based on usage.

E. A first preference entity may exercise its right to use a portion of the MEFPC by providing written notice to WAPA at least 18 months prior to the anniversary date of the first preference project located in its county. The anniversary date is the successive fifth year anniversary of the date the Secretary of the Interior declared the availability of power from the powerplants in the counties of origin. New applications for service to begin on January 1, 2025, must be received 18 months prior to January 1, 2022 (i.e., July 1, 2020), for Trinity County and 18 months prior to April 5, 2022 (i.e., October 5, 2020), for Calaveras and Tuolumne Counties. Other anniversary years applicable to this Marketing Plan are 2027, 2032, 2037, 2042, 2047, and 2052.

F. If the request of a first preference customer/entity for power, including adjustment for losses, is greater than the remaining MEFPC from that county's first preference project, then WAPA will allocate the remaining MEFPC to the first preference customer/entity first making a request for a power allocation or a justified increase in its allocation percentage.

G. Power allocated to first preference customers/entities in Tuolumne and Calaveras Counties will be subject to the following additional conditions:

1. Tuolumne and Calaveras Counties shall each be entitled to one-half of the New Melones Project MEFPC.

2. If first preference customers in either Tuolumne County or Calaveras County are not using their county's full one-half share, and a first preference customer/entity in the other county requests power in an amount exceeding that county's one-half share, then WAPA will allocate the unused power, on a withdrawable basis, to the requesting first preference customer/entity. Such power may be withdrawn for use by a first preference customer/entity in the county not using its full one-half share upon 6 months' written notice from WAPA.

H. Trinity Public Utilities District is currently the sole recipient of the TRD's first preference rights.

I. Transmission service will be provided in accordance with applicable laws and Section VII. of this Marketing Plan.

J. For planning purposes, first preference customers may be required to provide forecasts and other information required by WAPA as set forth in the electric service contract.

K. The general criteria and contract principles set forth in Sections V.A., C. through I., K., M., and O. of this Marketing Plan will apply to first preference customers.

VII. Transmission Service

Allottees and customers must secure necessary transmission service to deliver Federal power. WAPA will provide transmission service to deliver the Base Resource over the CVP transmission system. WAPA will work with allottees and customers to secure bundled or unbundled transmission services as appropriate beyond its CVP transmission system in conjunction with its power sales in a manner consistent with FERC orders, legislated mandates, or CAISO agreements. While WAPA will work with allottees and customers, it is the allottees' and customers' obligations to secure all necessary transmission service.

Generally, WAPA will market surplus transmission capacity on the CVP and COTP available under WAPA's OATT. The legislation authorizing the PACI (16 U.S.C. 837g) provides for the Secretary of Energy to market surplus available transmission capacity on the PACI at equitable rates to aid and benefit the CVP. WAPA will determine the use of its transmission resources concurrently with further development of the products and services under this Marketing Plan. Specific terms and conditions for surplus transmission sales will be provided for in future service agreements. WAPA will develop transmission rates under a separate proceeding.

VIII. Changes in the Electric Utility Industry

WAPA recognizes that there have been, and continue to be, significant changes in the electric utility industry. To address this concern, WAPA, in collaboration with its customers, will include the ability to make changes in how the Federal resource is marketed if there is deemed a benefit to WAPA and its customers. Any changes implemented would be done through negotiation and revision to individual customer contracts.

Authorities

WAPA developed this Marketing Plan in accordance with its power marketing authorities pursuant to the Department of Energy Organization Act (42 U.S.C. 7101, et seq.); the Reclamation Act of June 17, 1902 (ch. 1093, 32 Stat. 388), as amended and supplemented by subsequent enactments, particularly Section 9(c) of the Reclamation Project Act of 1939 (43 U.S.C. 485h(c)); and other acts specifically applicable to the projects involved.

Regulatory Procedure Requirements

Review Under the Paperwork Reduction Act

In accordance with the Paperwork Reduction Act of 1980 (44 U.S.C. 3501, et seq.), WAPA has received approval from the Office of Management and Budget for the collection of customer information in this rule, under control number 1910-5136, which expires on September 30, 2017.

Regulatory Flexibility Analysis

The Regulatory Flexibility Act of 1980 (5 U.S.C. 601, et seq.) requires preparation of an initial regulatory flexibility analysis whenever an agency is required by 5 U.S.C. 553, or any other law, to publish general notice of proposed rulemaking for any proposed rule. A final regulatory flexibility analysis is required whenever the agency promulgates a final rule under 5 U.S.C. 553, after being required by that section or any other law to publish a general notice of proposed rulemaking. WAPA has determined that the analytical requirements of the Regulatory Flexibility Act do not apply to this rulemaking because it is a rulemaking involving services applicable to public property.

Environmental Compliance

In compliance with the National Environmental Policy Act (NEPA) (42 U.S.C. 4321-4370), Council on Environmental Quality NEPA implementing regulations (40 CFR parts 1500-1508), and DOE NEPA implementing regulations (10 CFR part 1021), WAPA completed a Categorical Exclusion (CX). Since WAPA is reallocating its existing resources and is not planning to increase its generation or transmission under this Marketing Plan, a CX is the appropriate level of environmental review.

Determination Under Executive Order 12866

WAPA has an exemption from centralized regulatory review under Executive Order 12866; accordingly, no clearance of this Federal Register notice by the Office of Management and Budget is required.

Dated: July 6, 2017.

Mark A. Gabriel,

Administrator.