# Proposed Energy Planning and Management Program > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A94-19294 ## Record - **Collection:** Federal Register - **Document type:** Uncategorized Document - **Published:** August 9, 1994 ## Text 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. ----------------------------------------------------------------------- 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 resour [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A94-19294. Public record. Not legal advice.