Notice of Issuance of Final Power Marketing Policy, Georgia- Alabama-South Carolina System of Projects

DEPARTMENT OF ENERGY

Southeastern Power Administration

Notice of Issuance of Final Power Marketing Policy, Georgia-

Alabama-South Carolina System of Projects

AGENCY: Southeastern Power Administration (Southeastern), Department of

Energy.

ACTION: Notice.

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SUMMARY: The Administrator has adopted the attached Final Power

Marketing Policy for Southeastern's Georgia-Alabama-South Carolina (Ga-

Ala-SC) System of Projects. It will be effective upon publication in

the Federal Register and will be applicable to the sale of system power

when contracts can be negotiated. The policy was developed in

accordance with Southeastern's Procedure for Public Participation in

the Formulation of Marketing Policy published in the Federal Register

on July 6, 1978, 43 FR 29186. The process was initiated by the

Administrator with a decision that a new written marketing policy for

the Ga-Ala-SC System of Projects was needed. A Notice of Intent to

Formulate Power Marketing Policy was subsequently published in the

Federal Register on September 8, 1993, 58 FR 47273, requesting, among

other things proposals and recommendations for consideration by

Southeastern.

On July 11, 1994, a Proposed Power Marketing Policy for the Ga-Ala-

SC System of Projects was published in the Federal Register, 59 FR

35332. Seven comments were received relative to the proposed policy.

Public Comment Forums were held in Columbia, South Carolina on

September 12, 1994 and in Atlanta, Georgia on September 14, 1994.

Comments were requested to be provided to the Administrator prior to

September 30, 1994. Several consultations were held with

representatives of entities or groups of entities interested in the

proposed policy. Additionally, a number of conferences were held with

representatives of the electric power companies in the area and the

Southeastern Federal Power Customers, Inc. to consider matters inherent

in facilitating whatever policy might be finally adopted. All of the

responses and comments from whatever source and within whatever

timeframe were considered.

Thereafter, a Southeastern staff committee was selected by the

Administrator to prepare a Staff Evaluation of all oral and written

comments and responses received by Southeastern. The Staff Evaluation

was completed on November 30, 1994.

Following the Staff Evaluation, the Administrator decided to adopt

the policy as modified.

SUPPLEMENTARY INFORMATION: The Final Power Marketing Policy sets forth

the guidelines which Southeastern will follow in the future disposition

of power from the Ga-Ala-SC System. The policy covers power from the

Allatoona, Buford, Carters, J. Strom Thurmond, Hartwell, Robert F.

Henry, Millers Ferry, Walter F. George, West Point and Richard B.

Russell projects. The policy establishes the marketing area for system

power and deals with the allocation of power to area preference

customers. It also deals with utilization of area utility systems for

essential purposes, wholesale rates, and energy and economic efficiency

measures.

An Environmental Assessment and a Finding of No Significant Impact

for the proposed policy was approved by the Assistant Secretary,

Environment, Safety and Health on June 9, 1994, and is available at

Southeastern's headquarters.

A recital of the primary comments regarding the proposed marketing

policy brief responses of explanations to those comments, and specific

decisions and changes in the proposed marketing policy approved by the

Administrator, precede the text of the final policy as adopted.

Issued at Elberton, Georgia: December 8, 1994.

John A. McAllister, Jr.,

Administrator.

Final Power Marketing Policy Georgia-Alabama-South Carolina System

of Projects

Introduction. The efforts to develop a new written power marketing

policy for Southeastern Power Administration's (Southeastern) Ga-Ala-SC

System of Porjects began on September 8, 1993. Southeastern has

followed the step by step requirements of its Procedure for Public

Participation in Formulation of Marketing Policy published in the

Federal Register on July 6, 1978, 43 FR 29186. Numerous public comments

have been received and evaluated. This public input, offered in an

orderly and timely fashion, was carefully considered in the decision

making process.

Purpose and Legal Authority. The purpose of the policy is to

establish with public input written guidelines which Southeastern will

follow in the future to reasonably and equitably carry out the

statutory requirements set forth in section 5 of the Flood Control Act

of 1944, 16 U.S.C. 825s. Southeastern's authority to formulate the

policy and perform these functions is derived from section 302(a) of

the Department of Energy (DOE) Organization Act, 42 U.S.C. 7152, and

delegations pursuant thereto.

Reasons for Marketing Policy. The current marketing policy became

effective on October 1, 1980 and the earliest contracts executed under

the marketing policy commenced at midnight, January 31, 1985. Contracts

negotiated under the existing marketing policy in the states of

Alabama, Florida, Georgia, and Mississippi were scheduled to expire on

May 31, 1994, but have been extended to expire on January 31, 1995.

Contracts negotiated under the policy in the states of North and South

Carolina expire at midnight, September 30, 1995. Because of the

expiration of contracts as well as DOE requirements for implementation

of the National Environmental Policy Act (NEPA) and the Energy Policy

Act of 1992 which is causing changes in the electric industry, it was

determined that a new marketing policy should be formulated.

Primary Comments and Responses. The primary comments to the

proposed marketing policy were:

1. Comment: We have serious concern about an energy commitment

exceeding 2\1/2\ hours use per day, on average. Overcommitment during

drought conditions will severely impact reservoir levels and will

adversely impact all users of the system. Limit contracts to a one year

or interim contract pending the results of the Apalachicola-

Chattahoochee-Flint/Alabama-Coosa-Tallapoosa (ACF/ACT) Comprehensive

Water Resources Study.

Response: The U.S. Army Corps of Engineers (Corps or Corps of

Engineers), taking into effect the minimum quantity of water needed for

electric generation, navigation, water quality, etc., determines the

quantity of water (energy) available for generation purposes. Energy is

allocated to customers on a percentage of energy available basis taking

into consideration that minimum quantities of energy are required to

make peaking capacity usable. Provisions to accommodate congressionally

mandated project operational changes which impact power production at

the Federal projects will be included in the implementing contracts for

this power marketing policy. Assuming that releases will be scheduled

by the Corps in accordance with criteria established by the results of

the ACF/ACT study, it was determined that a temporary contract would

serve no useful purpose.

2. Comment: Existing preference customers within the marketing area

should retain their present allocations of capacity and essentially the

same energy accompaniment.

Response: For the purposes of this power marketing policy,

Southeastern agrees that existing preference customers should retain

their present allocations of capacity and essentially the same energy

accompaniments.

3. Comment: The City of Oxford, Georgia, contends it should receive

an allocation of ``existing'' power as well as an allocation of any

future power. The City purchased its power from a neighboring

municipality when the existing allocation of power was made. The City

of Oxford received its ``allocation'' as part of the allocation of the

municipality through which it was purchasing its power. When the City

of Oxford changed its power source it no longer received an

``allocation'' of power. Now that the contracts are to be re-

negotiated, the City of Oxford should receive an allocation of

Government power in its own right.

Response: After reviewing the previous power marketing policy

allocation process as applied to the City of Oxford, it has been

determined that an allocation of existing power can be made to the City

of Oxford. Utilizing the need to schedule generation in whole megawatt

increments and the available capacity operating margin, it has been

determined that capacity is available in the system to provide an

allocation of power to the City of Oxford. This determination, however,

is independent of and should not be considered a precedent with regard

to the establishment of a marketing policy addressing allocation

portability. The issue of allocation portability is currently under

examination by Southeastern. (See Comment 4)

4. Comment: A current preference customer's allocation of SEPA

power should be freely transferable from one transmission system to

another.

Response: This is a very complex issue involving the nature of

peaking power, different system control areas, transmission systems,

industry standards, duplication of allocation, etc. Southeastern has

determined that, because of the complexity of the issue, a separate

marketing policy is needed to address this issue.

5. Comment: The Marketing Policy should include a statement that

pricing for transmission integration service will conform to Federal

Energy Regulatory Commission (FERC) principles that develop through

implementation of the National Energy Policy Act of 1992.

Response: Southeastern has no transmission system of its own.

Transmission is arranged through negotiated transmission contracts with

area utilities. Southeastern has always and will continue to consider

and utilize FERC guidance, however, any specific contract language will

have to be viewed in the context of overall contract negotiations.

6. Comment: Southeastern's wholesale rates need to continue to be

cost based rates.

Response: Southeastern will continue to use cost based rates,

subject to Congressional, FERC, and Department of Energy mandates.

7. Comment: The Policy should allow for contracts with terms up to

20 years. Not all contracts should be 20 years in length, merely allow

for such contract terms if appropriate.

Response: Southeastern agrees that this action will give maximum

flexibility in the negotiation of contracts under this policy, and will

allow for contracts to be entered into for a term greater than 10 years

if necessary or if found desirable during contract negotiations.

8. Other Comment: It is imperative that new contracts permit real

time scheduling of preference customers Southeastern declarations by

the Generation and Transmission (G&T) cooperatives and public power

joint action agencies for the benefit of their participants which are

preference customers. Southeastern should offer both unreserved, non-

firm capacity and energy and reserved, firm capacity and energy to its

current preference customers as a choice. A storage arrangement to be

able to maximize utilization of the available water is needed. A rating

based on average water year (not adverse water year) should be used.

Response: Southeastern considers these diverse comments to be issue

related to future contract negotiations to implement this policy.

Traditionally, Southeastern has negotiated contracts in close

coordination and consultation with our customers; Southeastern intends

to continue this practice.

Changes or revisions in proposed marketing policy. It was

determined to allocate existing power to the City of Oxford, Georgia,

as well as to provide for an allocation of any future power which might

become available (See Comment 3). It was determined to allow for

contracts to be entered into for a period of time greater than 10 years

if necessary or if found desirable during contract negotiations (see

comment 7). It was also determined to have a separate power marketing

policy on the portability of a power allocation. (See Comment 4)

The Resale Rate section has been eliminated and will be addressed

in the forthcoming power marketing policy for portability of

allocations of power to preference customers. A new section, Transfer

of Preference Customer Allocation Between Utility Service Areas, has

been added.

Final Power Marketing Policy, Georgia-Alabama-South Carolina System

of Projects

General. The projects and power subject to this policy are:

------------------------------------------------------------------------

Capacity Energy

(kw) (mwh)

Projects (name- (average

plate) annual)

------------------------------------------------------------------------

Allatoona......................................... 74,000 156,000

Buford............................................ 86,000 193,000

Carters:

(1)............................................... 250,000 *198,000

(2)............................................... 250,000 .........

J. Strom Thurmond................................. 280,000 729,000

Hartwell.......................................... 344,000 483,000

Robert F. Henry................................... 68,000 343,000

Millers Ferry..................................... 75,000 397,000

Walter F. George.................................. 130,000 436,000

West Point........................................ 73,375 208,000

Richard B. Russell:

(1)............................................... 300,000 *484,000

(2)............................................... 340,000 .........

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(1) Carters has 2 generating units rated at 125,000 kw each. Russell has

4 generating units rated at 75,000 kw each.

(2) Carters has 2 pumping units rated at 125,000 kw each. Russell has 4

pumping units rated at 80,000 kw each. Based upon latest test

information.

*Natural stream flow energy only.

There will be one policy for the Ga-Ala-SC System of Projects

progressively implemented. It will become effective upon publication in

the Federal Register and will be applicable to the sale of system power

in respective utility areas as then existing contracts, or necessary

extensions, expire.

The policy will be implemented through negotiated contracts for

terms of approximately 10 years, but may be negotiated for terms of up

to 20 years if found desirable or necessary.

Transmission facilities owned by utilities within the marketing

area will be used for all necessary purposes including transmitting

power to load centers. Deliveries may be made at the projects, at

utilities interconnections or at customer substations, as determined by

Southeastern. The projects will be hydraulically, electrically, and

financially integrated, and will be operated to make maximum

contribution to the power supply of the selected utility areas.

Preference in the sale of the power shall be given to public bodies and

cooperative.

Marketing area. The marketing area shall consist of the approximate

112,000 square mile area generally known as The Southern Company

service area, and the approximate 40,000 square mile area generally

known as the service areas of the South Carolina Public Service

Authority and the South Carolina Electric and Gas Company plus that

portion of the Duke Power Company's service area within a radius of 150

miles of the Hartwell, Russell or Thurmond projects. Eligible public

bodies and cooperatives in this marketing area are listed in Appendix A

attached hereto.

Allocations of Existing Power. Existing power available under this

policy for allocation from the Ga-Ala-SC System will primarily be

peaking power. The power will be allocated as follows subject to

possible future adjustments to conform to a power marketing policy

regarding portability of allocation, change of power suppliers, change

of control areas, scheduling requirements, or other relevant factors

pertaining to portability of allocations:

------------------------------------------------------------------------

Customer KW

------------------------------------------------------------------------

Alabama Electric Cooperative............................... 91,000

South Carolina Public Service Authority.................... 215,000

South Mississippi Electric Power Association............... 61,000

Customers in Duke Power Company service area............... 238,000

Customers in S.C. Electric & Gas Co. service area.......... 16,000

Customers in The Southern Company service area (including

Oxford, GA)............................................... *1,298,000

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*Increased for scheduling purposes.

Except where duplication of allocation would result, each public

body and cooperative within the marketing areas as shown in Appendix A

will be eligible for an allocation of existing power. Existing

preference customers within the marketing area will retain their

present allocations of capacity and essentially the same energy

accompaniment. The City of Oxford, Georgia, will receive an allocation

of existing power. It is Southeastern's goal to allocate all available

and useful system power (that power remaining after provision for an

appropriate capacity operating margin and losses) to preference

customers, except power that may be used for pumping.

Allocation of Power From Russell Pumped Storage Units. Currently,

pump generator units at the Richard B. Russell Project are undergoing a

series of environmental tests to meet the requirements of an injunction

imposed by the U.S. District Court in the case of South Carolina

Department of Wildlife and Marine Resources v. Marsh et al, 866 F.2d 97

(4th Cir 1989). The first opportunity for commercial operation of the

pumping units is after the completion of these tests. The environmental

tests and schedules were agreed upon by the Corps of Engineers and the

party litigants, and the results of the tests must be approved by the

district court before the units become commercially available. Should

pumped storage units at the Russell project become commercially

available during the tenure of contracts implementing this policy,

after the approval of the district court, after further mitigating

modifications required by environmental concerns, or by any other

means, Southeastern will allocate this additional power to those

preference customers identified in the Power Marketing Policy for the

Ga-Ala-SC System of Projects promulgated on October 1, 1980 in the

Federal Register (45 FR 65140) and the City of Oxford, Georgia. The

Russell pumped storage power will be allocated as follows subject to

possible future adjustments to conform to a power marketing policy

regarding portability of allocation, change of power suppliers, change

of control areas, scheduling requirements, or other relevant factors

pertaining to portability of allocations:

------------------------------------------------------------------------

Customer KW

------------------------------------------------------------------------

Alabama Electric Cooperative................................. 9,000

South Carolina Public Service Authority...................... 60,000

South Mississippi Electric Power Association................. 7,000

Customers in Duke Power Company service area................. 65,000

Customers in S.C. Electric & Gas Co. service area............ 5,000

Customers in The Southern Company service area (including

City of Oxford)............................................. 114,000

------------------------------------------------------------------------

Adequate capacity may be retained to provide an appropriate

capacity operating margin. Russell pumped storage capacity is predicted

at this time on testing accomplished to date and reflects the best

estimate at this time. Energy accompaniment to the pumped storage

capacity will be sufficient to provide viable peaking capacity.

Power From Pumped Water. Southeastern will utilize its combination

pumped storage and generation resources to produce high-value on-peak

power. Pumping power, whether generated within the system of projects

or obtained by purchasing or exchange agreement, will be used in pumped

storage operations, at Southeastern's discretion. Should the purchase

alternative be selected, Southeastern will obtain pumping energy from

utilities offering the best terms, and/or resulting in the most

benefits to the system. Should the exchange alternative be selected,

pumped storage operations will be handled with public bodies,

cooperatives and the utilities in a manner not involving the direct

purchase and sales approach, with preference given to public bodies and

cooperatives.

Utilization of Utility Systems. In the absence of transmission

facilities of its own, Southeastern will use area generation and

transmission systems to integrate the Government's projects, provide

firming, wheeling, exchange and backup services and such other

functions as may be necessary to dispose of system power under

reasonable and acceptable marketing arrangements. Utilities systems

providing such services shall be entitled to adequate compensation.

Specific terms and conditions of all such arrangements shall be the

subject of negotiations between Southeastern and the generation and

transmission utilities providing the services. Individual preference

agencies directly affected by the negotiations shall, through

representatives selected at the outset of negotiations, be kept

currently advised on the status and progress of negotiations.

Southeastern also will consult with and seek advice from these affected

parties.

Wholesale Rates. Rate schedules shall be drawn to recover all costs

associated with producing and transmitting the power in accordance with

then current repayment criteria. Production costs will be determined on

a system basis and rate schedules will relate to the integrated output

of the projects. Rate schedules may be revised periodically.

Energy and Economic Efficiency Measures. Each customer who

purchases Southeastern's power is encouraged to participate in an

integrated resource plan that considers both supply and demand side

alternatives. It is recognized that some Southeastern customers are

members of a power supply organization that does resource planning for

its customers (i.e., power supply cooperatives and joint action

agencies). Where a customer, or a power supply organization that does

resource planning for a Southeastern customer, is responsible to a

regulatory body or another Government agency for an integrated resource

plan, the customer will make a copy of such integrated resource plan

available to Southeastern. All Southeastern customers shall agree to

encourage the efficient use of energy by ultimate customers.

Transfer of Preference Customer Allocation Between Utility Service

Areas. This subject is being examined for formulation of a proposed

marketing policy on power allocation portability. Until such time as a

policy is established, Southeastern intends to include a clause in any

contract negotiated under this policy to leave this matter open for

negotiation after a policy has been established.

Appendix A.--Preference Agencies in the Georgia-Alabama-South

Carolina System Area

Distribution--Type Preference Agencies

Alabama

Alexander City, Dothan, Evergreen, Fairhope, Foley, Hartford,

LaFayette, Lanett, Luverne, Opelika, Piedmont, Robertsdale, Sylacauga,

Troy, Tuskegee, Baldwin County EMC, Black Warrior EMC, Central Alabama

EC, Clarke-Washington EMC, Coosa Valley EC, Dixie EC, Pea River EC,

Pioneer EC, Tallapoosa River EC, Tombigbee EC, Wiregrass EC.

Florida

Choctawhatchee EC, West Florida ECA.

Georgia

Acworth, Adel, Albany, Barnesville, Blakely, Brinson, Buford,

Cairo, Calhoun, Camilla, Cartersville, College Park, Commerce,

Covington, Dalton, Doerun, Douglas, East Point, Elberton, Ellaville,

Fairburn, Fitzgerald, Forsyth, Fort Vallley, Grantville, Griffin,

Hampton, Hogansille, Jackson, LaFayette, LaGrange, Lawrenceville,

Mansfield, Marietta, Monroe, Monticello, Moultrie, Newnan, Norcross,

Oxford, Palmetto, Quitman, Sandersville, Sylvania, Sylvester,

Thomaston, Thomasville, Washington, West Point, Whigham, Crisp County

Power Commission, Altamaha EMC, Amicalola EMC, Canoochee EMC, Carroll

EMC, Central Georgia EMC, Coastal EMC, Cobb EMC, Colquitt EMC, Coweta-

Fayette EMC, Excelsior EMC, Flint EMC, Grady EMC, GreyStone Power

Corporation, Habersham EMC, Hart EMC, Irwin EMC, Jackson EMC, Jefferson

EMC, Lamar EMC, Little Ocmulgee EMC, Middle Georgia EMC, Mitchell EMC,

Ocmulgee EMC, Oconee EMC, Okefenoke REMC, Pataula EMC, Planters EMC,

Rayle EMC, Satilla Rural EMC, Sawnee EMC, Slash Pine EMC, Snapping

Shoals EMC, Sumter EMC, Three Notch EMC, Tri-County EMC, Troup EMC,

Upson County EMC, Walton EMC, Washington EMC.

Mississippi

Coast EPA, East Mississippi EPA, Singing River EPA.

North Carolina

Bostic, Cherryville, Concord, Cornelius, Dallas, Drexel, Forest

City, Gastonia, Granite Falls, Huntersville, Kings Mountain, Landis,

Lincolton, Maiden, Monroe, Morgantown, Newton, Pineville, Shelby,

Stateville, Blue Ridge EMC, Crescent EMC, Haywood EMC, Pee Dee EMC,

Rutherford EMC, Union EMC.

South Carolina

Abbeville, Bamberg, Clinton, Due West, Easley, Gaffney, Georgetown,

Greenwood, Greer, Laurens, McCormick, Newberry, Orangeburg, Prosperity,

Seneca, Rock Hill, Union, Westminster, Winnsboro, S.C. Public Service

Authority,\1\ Blue Ridge EC, Broad River EC, Laurens EC, Little River

EC, York EC.

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\1\Also operates generation and transmission facilities and

serves at wholesale.

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Publicly-Owned Wholesale Power Supply Agencies

Alabama Electric Cooperative, South Mississippi Electric Power

Association. Central Electric Power Cooperative (S.C.), on behalf of

Aiken EC, Berkeley EC, Black River EC, Coastal EC, Edisto EC, Fairfield

EC, Horry EC, Lynches River EC, Marlboro EC, Mid-Carolina EC, Newberry

EC, Palmetto EC, Pee Dee EC, Santee EC and Tri-County EC.22.

[FR Doc. 94-31948 Filed 12-27-94; 8:45 am]

BILLING CODE 6150-01-M