Power industry sees Chu effort on PMAs as disorganized

The House Natural Resources Committee held a Sept. 11 oversight hearing on concerns that Energy Secretary Steven Chu’s controversial March 16 memorandum to the Power Marketing Administrations (PMAs), including the Bonneville Power Administration, could increase electricity rates on 40 million Americans.

“Through the Chu memo, the Obama Administration seems determined to pursue a Washington D.C.-knows-best mentality by imposing costly mandates at a time when American families can least afford them,” according to a statement issued after the hearing by the committee’s majority Republicans. Secretary Chu, for the second time, refused to appear before the committee, the majority statement stated.

Committee Chairman Doc Hastings, R-Wash, said in a post-hearing statement that DOE has “repeatedly and very obviously dodged” when asked if power rates could be driven up. “All we were given is the cold comfort that DOE doesn’t know if power rates will be forced higher because a committee of faceless federal bureaucrats are still trying to decide,” Hastings said.

The March 16 Chu memo to the PMAs said that those organizations had long ago gone beyond their initial role of providing power from federal hydro dams and urged them to go further in modernizing operation of the nation’s electrical grid. “I will be directing that each of the PMA’ s strategic plans and capital improvement plans recognize the changing nature of the electric sector, including but not limited to complying with NERC reliability standards, integrating variable resources, scheduling on an intra-hour basis, centralizing dispatch, responding to solar flares and minimizing cyber-security vulnerabilities,” Chu wrote in the memo.

APPA finds some Chu ideas workable, others not so much

Mark Crisson, President and CEO of the American Public Power Association, noted at the hearing that approximately 600 public power utilities in 33 states purchase hydropower from the four federal PMAs – Bonneville Power Administration (BPA), Western Area Power Administration (WAPA), Southwestern Power Administration (SWPA) and Southeastern Power Administration (SEPA). While there were “admirable” goals outlined in the Chu memo, there were points that would take the PMAs beyond their basic mission, he added.

“Included in the changes proposed in this March 16 Memorandum were concepts such as construction of new transmission through third-party financing mechanisms and new borrowing authorities; ‘improvement’ of the PMAs’ rate designs; the institution of an energy imbalance market for the West; the creation of revolving funds for transmission improvements, and other changes described in the sections below,” Crisson wrote in his prepared testimony. “These plans, as introduced, were very short on specificity. They were described by Ms. Lauren Azar, the DOE Senior Advisor working on these issues, in written testimony to this Committee as ‘foundational goals.’”

Crisson added that APPA and its PMA-customer members had hoped that more specificity would soon be forthcoming. “However, the March 16 Memorandum’s rollout was only the first step in a confusing and secretive process that could be described as, at best, poorly organized, and, at worst, misleading and misinformed,” Crisson said. “DOE has consistently shifted its rationale for its proposed changes to the PMAs. While DOE has used words such as ‘collaboration’ and ‘transparency’ to describe its intentions for the PMA-change process, APPA believes this process has been full of shifting justifications and opaque processes.”

Some broad goals laid out in the March 16 memo, from modernizing and increasing the efficiency of the grid to integrating renewable power to preventing future blackouts are admirable, Crisson said.

“While laudable, there are numerous, well-established processes in place to address electric reliability at the bulk power system level,” said the APPA official. “In addition, the PMAs’ total transmission footprint only encompasses eight percent of the entire transmission system of the continental U.S. This limited ability to impact bulk power system reliability underscores that the PMAs must work through existing processes and institutions to ensure regional reliability,” Crisson said.

APPA recommends that the DOE step back and start this process anew, and essentially ‘plug in’ to the long-established processes that identify the needs and objectives for each PMA, Crisson said.

Azar said DOE is pursuing its goals – with WAPA the first in the process

DOE’s Azar said in Sept. 11 testimony that the agency is in the middle of a collaborative process to work out the specifics of the ideas outlined in the Chu memo. “In order to address these goals, DOE intends to work with each PMA sequentially to develop tailored approaches to ensure each region has the infrastructure necessary to power the U.S. economy,” Azar noted. “DOE has begun this work with the Western Area Power Administration (WAPA) and our approach to the other PMAs will be revised in light of our experience with WAPA.”

In addition to selling federally generated electricity, three of the four PMAs (WAPA, BPA and SWPA) own and operate 33,700 miles of transmission lines that make up a significant portion of the U.S. power grid, Azar pointed out. To bolster the competitiveness of the electricity marketplace and to ensure grid reliability, Congress in 1992 and 2005 passed comprehensive legislation creating obligations on grid operations and reliability. The Chu memo is intended, among other things, to ensure the PMAs are complying with these obligations, Azar wrote.

“In cases in which Congress exempted the PMAs from some of these requirements, DOE has further required that the PMAs comply with transmission requirements, to the extent allowed under the PMAs’ enabling statutes, to enable market competition and ensure grid resilience,” Azar added. “That policy remains in place to this day.”

The overwhelming majority of the proposed activities relate to the PMAs’ obligations and goals for transmission and not to the marketing of federally generated power to the preference customers, Azar said. As a consequence, the Chu memo will have minimal applicability to SEPA, which owns and operates no transmission.

Tri-State’s Bladow calls DOE/WAPA workshops disorganized

Joel Bladow, Senior Vice President at the Colorado-based Tri-State Generation and Transmission Association, stated in his prepared Sept. 11 testimony that hydropower purchased from WAPA accounts for approximately 12% of Tri-State’s generation needs. “Given that it is an important component of fulfilling our mission to provide affordable and reliable electricity to the rural membership we serve, we are very concerned about the directives for WAPA and the other power marketing administrations laid out in the Chu memo.”

Bladow said DOE/WAPA workshops held this past summer were disorganized. “This appeared to be a direct result of a goal to get the workshops done quickly as opposed to a focus on collaborating with customers and stakeholders to identify and prioritize issues and concerns of impacted consumers,” Bladow said. “It is a shame that time was not allowed to conduct a more meaningful, collaborative process that could have built support for important changes as opposed to a top down, time constrained process that has no support from those it will impact the most,” Bladow went on to say.

“Given the superficial nature of the DOE workshops and listening sessions that transpired over the summer – Tri-State remains concerned about the initiatives highlighted in the Chu Memo and the associated costs. It is important to re-emphasize that the Federal power system operates under the fundamental principle that the beneficiary pays for the initiatives from which it benefits,” Bladow said. “Therefore, the existing Federal power customers should see no harm to their rates as a result of these initiatives; if the initiatives do not benefit existing customers, the funding should come through the form of non-reimbursable appropriations. One customer should not be burdened with the subsidization costs of an initiative which solely benefits another customer.”

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.