Power industry critics decry federal ‘mission creep’ and ‘top down’ decisions

The federal government, whether it is the Department of Energy or the Federal Energy Regulatory Commission, needs to get out of local transmission and generation planning efforts, said several witnesses before a House panel at a June 26 hearing.

The Subcommittee on Water and Power of the House Natural Resources Committee held a hearing called: “The Power Marketing Administrations: A Ratepayer Perspective.” Notable is that no official from DOE or FERC was on the hearing witness list.

One focus of the hearing was a memo last year from then-U.S. Department of Energy Secretary Stephen Chu that asked the various federal power marketing administrations, including the Western Area Power Administration (WAPA), to get more active in renewable energy development on their extensive transmission systems. The memo has been a favorite target of Republicans since then. In his opening statement for the hearing, subcommittee Chairman Tom McClintock, R-Calif., said the Chu memo was an attempt to make ratepayers the “piggy-bank” for the “pet” and “wildly expensive” wind and solar projects of the political left.

Joel Bladow, who works at Colorado-based Tri-State Generation and Transmission Association as Senior Vice President of Transmission, said his company has been active on its own in encouraging renewable energy development. Since the end of 2010, it has integrated just over 30 MW of solar from the Cimmaron Solar facility in Northern New Mexico and 127 MW of wind from projects on the Eastern Plains of Colorado.

“Unfortunately, it appears that WAPA may be looking to depart from this successful management model in favor of more centralization,” Bladow wrote in his prepared testimony. “We are led to believe this is the future approach given the issuance of the Chu Memo from DOE headquarters in March 2012 and the recent Access to Capital efforts emanating from WAPA headquarters. The move to increased centralization very much concerns Tri-State and WAPA’s other customers. We believe it could lead to cost increases and inefficiencies in delivering federal power because each WAPA region and project is unique and must operate in the environment it was established in and has evolved over many years with neighboring utilities – both public and private.”

If WAPA speculates on or constructs surplus transmission over and above that needed to deliver federal hydropower to its customers and that transmission goes unutilized, the losses incurred are eventually rolled into its firm power rate and paid for by federal power customers, Bladow noted. Also included in these rates are the substantial costs incurred by WAPA, the Bureau of Reclamation and U.S. Army Corps of Engineers to comply with Endangered Species Act (ESA) requirements at Glen Canyon Dam, the Aspinall Unit and other federal hydropower projects throughout WAPA’s footprint. At Glen Canyon Dam alone, WAPA customers have had to incur an additional $50m annually since 1996 to comply with these costs, he pointed out.

As appropriations requests from DOE have been reduced for WAPA, the preference customers have stepped up to advance funding for capital improvements on the system, Bladow said. Over the last decade, just in the Pick-Sloan Program facilities, the preference customers have advanced over $500m in funds to help keep the system in excellent condition.

“WAPA’s new Access to Capital initiative concerns us due to the continued erosion of Congressional oversight over WAPA’s operational budget,” Bladow wrote. “In the Pick-Sloan project, WAPA’s customers worked with Congress to enact net zero funding for WAPA’s operational and maintenance costs as an alternative to relying on the annual appropriations process, which has been anything but consistent in recent years. The net zero legislation has proved to be a ‘double-edge sword.’ The implementation of the net zero initiative has increased timely access to operations and maintenance funding for WAPA, but the corresponding reduction of congressional oversight and customer involvement has led to a 32% increase in operational costs at WAPA headquarters over the last five years.”

Bladow added: “When the Chu Memo was released last year, it quickly became apparent that WAPA was proposed to serve as a ‘test-bed’ for many of initiatives outlined in the memo. Indeed, the memo inferred that WAPA was the key part of the transmission network due to its presence in 15 western states. Yet, the opposite is true. Its transmission footprint epitomizes the operational and geographic diversity of WAPA. WAPA’s transmission system is a mix of facilities that have been built over many decades. In some places WAPA has very little transmission infrastructure, in other areas it has a stronger presence. Its transmission system has been expanded and augmented by its customers over the years. It all works together – WAPA’s transmission system provides a base complemented by many enhancements paid for and owned its customers. If WAPA centralizes and optimizes their processes, it may very well increase overall consumer costs as all of the other partners must now modify their systems and processes to match WAPA’s.”

Coombes points to successes, concerns about ‘mission creep’

Also testifying was Ted Coombes, Executive Director of the Southwestern Power Resources Association (SPRA), which represents the preference customers of the Southwestern Power Administration (SWPA). These preference customers are rural electric cooperatives, municipal utilities and state power agencies that, by federal law, have the first right to purchase hydropower from Corps of Engineers multipurpose water projects. SWPA markets the energy and capacity from 24 Corps dams in the region to SPRA members in Oklahoma, Arkansas, Missouri, Texas, Kansas and Louisiana.

“Unlike most federal programs, the federal Power Marketing Administrations pay their own way,” Coombes wrote in his prepared testimony. “Every dollar spent on the federal power program is returned to the Treasury. This includes the construction, operation and maintenance and transmission costs incurred in generating and marketing the hydroelectric energy and capacity incurred by both the generating agency (Corps, in our case) and the PMA, plus interest on capital costs. Meanwhile, the Corps and the PMA must depend upon Congressional appropriations to meet their annual expenditures.

Coombes had four main points to make:

  • A joint agreement between the Corps, SWPA and the its federal power customers, known as the Jonesboro Memorandum of Agreement, is a success story showing how cooperation can address dwindling federal appropriations for Corps hydropower maintenance, repair and replacement.
  • To further reduce the need for future appropriations, there should be a special receipts disbursement account for SWPA established with the U.S. Treasury.
  • Implementation of the authority granted SWPA and WAPA to participate with and assist nonfederal entities, including for-profit corporations, in the construction, operation, maintenance and/or ownership of new electric transmission facilities as authorized by Section 1222 of the Energy Policy Act of 2005; and
  • Concerns PMA customers have over increasing involvement of DOE headquarters in the day-to-day operation of the PMAs, which is leading to “mission creep.”

FERC also gets criticism for recent transmission order

DOE is not the only federal agency that some industry officials would like to back off.

Scott Corwin, Executive Director of the Public Power Council (PPC), a trade association representing the consumer-owned electric utilities of the Pacific Northwest that purchase power and transmission marketed by the Bonneville Power Administration (BPA), said the Federal Energy Regulatory Commission has also lately been practicing excessive “top down” authority.

“A striking example of a federal top-down approach came just last Thursday from the Federal Energy Regulatory Commission (FERC) when it issued an order on filings submitted by some utilities in the Northwest, including the Bonneville Power Administration (BPA), on their transmission planning processes to comply with FERC Order No. 1000,” Corwin wrote. “In effect, FERC rejected key portions of the regional approach for transmission planning and cost allocation that has been working well in the Northwest (the regional planning entity is called ColumbiaGrid). The dissent of FERC Commissioner Clark was notable. He stated, ‘The Commission has stressed throughout the Order No. 1000 process that flexibility and respect for regional differences would be a hallmark of this undertaking. I believe this order runs afoul of that stated principle.’ He also said, ‘By rejecting key elements of this filing, I am concerned that we may do more harm than good in this region.’ We agree with that assessment.”

The irony to these top-down policy directives is two-fold, Corwin said.

  • First, these “one-size fits all” directives do not recognize, and sometimes conflict with, the ability of regionally directed entities like BPA to move ahead without them. BPA has evolved, Corwin noted. It has achieved the highest rate of wind penetration of any balancing authority in the country (42% by generation to peak load) with over 4,500 MW of wind generation. This is a ten-fold increase over the amount of wind on the BPA system in August 2006.
  • Second, these directives overlook achievements of utilities at the local level, Corwin said. “In fact, some of the so-called regional accomplishments are often driven by local creation and implementation of programs. For example, the 5000 average megawatts of energy efficiency savings achieved by the Northwest region since passage of the Northwest Power Act in 1980 largely happens at the local level. And, in the future, with a tiered rate structure, BPA’s customers will be prepared to meet new demand for energy with a combination of new resources and energy efficiency.”
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.