Final Principles of Integrated Resource Planning for Use in Resource Acquisition and Transmission Planning

DEPARTMENT OF ENERGY

Western Area Power Administration

Final Principles of Integrated Resource Planning for Use in

Resource Acquisition and Transmission Planning

AGENCY: Western Area Power Administration, DOE.

ACTION: Notice of final principles.

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SUMMARY: The Western Area Power Administration (Western) will use

principles of integrated resource planning (IRP) in its acquisition of

resources (supply-side and demand-side) and in its transmission

planning. Western published proposed principles for public

consideration in the Federal Register on December 6, 1994 (59 FR

62724). After considering public comment on that proposal, Western has

adopted the final principles of IRP contained in this notice as the

policy under which project-specific resource acquisition and

transmission planning procedures will be developed. These project-

specific procedures will be developed through separate public

processes.

DATES: The final principles of IRP will be effective on July 10, 1995.

BACKGROUND: On August 9, 1994, Western provided notice of its proposed

Energy Planning and Management Program (Program), 59 FR 40543,

concerning requirements for Western's customers to undertake integrated

resource planning consistent with the statutory requirements of the

Energy Policy Act of 1992 (section 114 of the Energy Policy Act,

codified at 42 U.S.C. Secs. 7275-7276c). In that notice, Western

committed to develop and use principles of IRP in its own resource

acquisition and transmission planning. The separate public process to

develop principles of IRP began with publication of draft principles of

IRP in the Federal Register on December 6, 1994. A public information

and comment forum was held in Denver, Colorado, on January 12, 1995, to

explain the proposed principles and receive comments on the proposal.

Written comments on the proposal were received through March 7, 1995.

The final Western principles of IRP outlined in this notice will be

used by Western in its resource acquisition and transmission planning

and differ from those proposed in the Program for Western's customers.

Western's resource acquisitions are primarily short-term purchases of

supplemental resources to firm variable hydropower generation and are

not acquisitions of resources to meet long-term load growth. The

principles of IRP also have been adapted to Western's transmission

planning process, which does not deal with new generation resources,

only new or upgraded transmission facilities.

Western currently is involved in other public processes that can

have an impact on future purchase power and transmission requirements.

The final principles of IRP will be applied when acquiring resources or

planning transmission related to the decisions from these other public

processes. These principles will serve as the policy under which

specific procedures are developed as each project identifies the need

to acquire resources or increase Western's transmission capability.

RESPONSE TO COMMENTS: Western received 4 oral comments at the January

12, 1995, public meeting and 11 comment letters on the proposed

principles of IRP published December 6, 1994. The comments received and

Western's responses follow.

1. Comment: The scope of the principles of IRP should be broadened

to possibly include examination of project-use loads.

Response: Western is responsible for marketing the power surplus to

the needs of the Bureau of Reclamation (Reclamation) projects.

Reclamation has jurisdiction for operation of the projects. However, we

do agree that there may be opportunities for collaborating with

Reclamation to expand the IRP process to include, where feasible,

energy efficiency improvements at project-use facilities. Western and

Reclamation completed a study in 1992 that indicated very limited

opportunity for cost-effective improvements at Central Valley Project

project-use facilities. However, Western may continue to evaluate such

opportunities as part of project-specific resource acquisition

evaluation criteria.

2. Comment: Western should increase cooperation with Reclamation on

planning studies to extract the maximum possible benefit out of the

projects to reduce the need for additional purchases.

Response: We agree with this comment. As part of the National

Performance Review, Reclamation is reviewing its power functions and

operations. Western is cooperating in this effort.

3. Comment: The evaluation of supply-side and demand-side

alternatives requires some additional clarification of the interplay

between the customer demand-side management (DSM) and the Western DSM

programs.

Response: The evaluation of demand-side alternatives for customers

is generally focused on use of DSM to impact the customer's total load

to reduce or delay resource acquisitions. Since Western is a partial

requirements supplier for most of its customers, the evaluation of

Western DSM alternatives will focus upon whether DSM will impact that

portion of a customer's load supplied by Western (Western's contract

obligation) to reduce the customer's need for the Western resource,

which may, in some cases, reduce Western's resource acquisitions.

Western DSM alternatives also may include improvements that reduce

losses or project use energy efficiency improvements, if such

alternatives reduce the amount of energy that Western needs to acquire

to meet its contract commitments. A customer DSM activity that reduces

only the amount a customer self-generates or purchases from an

auxiliary supplier has no impact on Western's obligation and,

therefore, is not a Western DSM alternative under these principles.

4. Comment: Western's proposal to apply principles of IRP to

resource acquisition and transmission planning was strongly supported

by one commenter, and Western was commended for developing an internal

IRP process by two commenters at the January 12, 1995, public meeting.

Response: Western appreciates the support of these commenters.

5. Comment: Several commenters expressed concerns that these

principles of IRP should not interfere with or duplicate existing

partnership efforts between our firm power customers and Area Offices

for resource acquisition and transmission planning.

Response: Western fully supports the on-going processes between

Area Offices and customers relating to cost containment, transmission

planning and resource acquisition. However, one of the basic

foundations of IRP is full public involvement in resource decisions. To

the extent that on-going partnership processes, such as the Glen Canyon

Replacement Power process, include involvement by all interested

stakeholders, those processes can integrate these final principles of

IRP within their decision making process without additional effort.

6. Comment: The Salt Lake City Area replacement power process for

Glen Canyon resources provides for each [[Page 30534]] customer to

decide if it wants its lost resource to be replaced by Western or by

the customer. Principle number I.2 would violate this by taking the

decision away from the customer and letting it be made by interested

stakeholders.

Response: Western has no intent to overturn any agreements in the

Glen Canyon power replacement process. At the January 12, 1995, public

meeting, Western recognized that ``* * * the extent of Western's future

resource acquisitions * * * will depend on the choices made by long-

term firm power customers to arrange their own purchases of firming

energy or to have Western acquire firming resources for them.''

Principle number I.2 has been modified to avoid confusion by deleting

the provision for public input into the necessity for resource

acquisitions and only provide for public input in the development of

criteria to be used in evaluating power resource alternatives. This

allows customers to decide whether or not Western should acquire

firming resources for them and allows all interested stakeholders input

into the criteria for evaluating resource alternatives consistent with

the intent of integrated resource planning.

7. Comment: Several commenters questioned the costs and benefits to

Western and the power customers of yet another public process.

Response: It is not Western's intent to add the additional cost and

burden of yet another process. It is, however, Western's intent to

fully integrate the principles of IRP into ongoing Western-Customer

partnership processes and to ensure that all stakeholders have an

opportunity to provide input into Western's resource acquisition and

transmission planning processes. Western believes that making informed,

least-cost resource acquisition and transmission planning decisions

with involvement by all interested stakeholders will be worth the

effort.

8. Comment: Principles of IRP will become less useful as the

industry becomes more competitive.

Response: Western believes that the principles of IRP contained in

this notice will facilitate Western's competitiveness by helping it

make informed decisions with input from all interested stakeholders. In

addition, the principles of IRP can be used to identify uncertainties

associated with the more competitive generation sector of the industry,

thereby providing the mechanism to evaluate risks associated with

resource acquisition and transmission planning decisions.

9. Comment: These principles could duplicate, delay, and complicate

Western's participation in transmission projects proposed through a

regional transmission group, such as the Western Regional Transmission

Association (WRTA) and the Southwest Regional Transmission Association

(SWRTA).

Response: Western does not believe that these principles will

impede its ability to participate in regional transmission groups. It

is Western's intent to integrate the principles of IRP into Western's

ongoing processes in order to ensure that transmission plans proposed

by Western will have the benefit of input from all interested

stakeholders. Western has joined WRTA and SWRTA. Both groups will

promote coordinated planning and efficient use of transmission capacity

and will provide another means for involvement by Western's customers.

As appropriate, Western can invite other interested parties to attend

SWRTA meetings as guests of Western. Additionally, both WRTA and SWRTA

allow for State regulatory commissions' involvement as ex officio

members. It is anticipated that some form of regional transmission

group will be established in the Mid-Continent Area Power Pool. This

will also facilitate public involvement in considering Western's future

transmission needs.

10. Comment: Western needs to be creative about DSM when applying

these principles to actual decisions.

Response: We agree. This issue will be addressed during Area Office

development of resource evaluation criteria at the time that a resource

acquisition appears to be necessary.

11. Comment: Customers and the broader public should have

opportunity to comment before Western signs long-term purchase power

contracts.

Response: These principles provide opportunity for all interested

stakeholders to participate in the development of resource evaluation

criteria by an Area Office for project-specific resource acquisitions.

In addition, customers and the broader public will continue to have an

opportunity to comment on power marketing plans which determine the

need for long-term purchase power contracts. It is unnecessary and

duplicative to have an additional comment opportunity on individual

contracts implementing the evaluation criteria decisions.

12. Comment: The transmission planning evaluation criteria should

include the following criteria that were discussed at the January 12,

1995, public meeting: (1) increased revenues from new transmission

exceed costs; (2) customers benefit sufficiently that they support the

project; or (3) new facilities are funded directly by others.

Response: Western does not feel that it is appropriate to include

these criteria in the final principles of IRP since they are part of

Western's internal decision rules as currently adopted in its strategic

planning process that may change from time to time based on customer

feedback or Department of Energy or Congressional direction. However,

Western is committed to our strategic planning process which currently

includes these evaluation criteria. The intent of the principles of IRP

as applied to transmission planning is to foster wide and early public

involvement and a free exchange of ideas to develop alternatives that

best meet regional needs.

13. Comment: Western should change the scope to specify purchases

for 2 years or longer or recurring purchases of more than 250

gigawatthours per year.

Response: Western believes such a requirement in the scope would

reduce the flexibility of the Area Offices and interested stakeholders

to collaboratively determine the amount of recurring purchases that

would justify use of these principles. At the January 12, 1995,

meeting, Western described a ``continuous'' or ``recurring'' purchase

to mean, ``* * * a resource need, capacity and/or energy of a fixed

quantity and seasonal pattern and over an extended period, usually

longer than 5 years.'' Western believes that it is important to

maintain flexibility within these principles.

14. Comment: The principles of IRP do not apply to transmission

planning.

Response: Western believes that the principles of IRP do apply for

public participation and consideration of alternatives to construction.

15. Comment: One commenter asked several questions concerning

implementation of these principles: What are classified as renewables?

Will decentralized, smaller resources, such as PV, be considered as

renewables? Will public education and incentives for conservation be

included in DSM programs? Will global climate change needs be included

in considerations of environmental impact?

Response: Western believes that consideration of these important

issues at this time is beyond the scope of these principles. However,

these issues will be considered in Area Office development of

evaluation criteria for specific resource acquisition or transmission

planning activities.

SCOPE: The principles of IRP will apply specifically to:

1. Resource acquisitions involving a commitment to purchase a

resource [[Page 30535]] continuously or a commitment to make recurring

purchases. Normally, formal principles will not be applied to

unpredictable seasonal purchases, day-to-day economy energy purchases,

and other short-term transactions.

2. New or upgraded transmission system construction with a 1995

total cost estimate in excess of $5 million for an individual project.

This 1995 cost level will be adjusted each year using the construction

cost index. Normally, formal principles of IRP will not be applied to

transmission facilities needed for reliability. Transmission facilities

needed for reliability will be based on mitigating problems related to

power system operations or replacing unsafe, aged, worn out, or

inefficient equipment.

Where practicable, principles of IRP will also be applied

informally to other Western transmission projects and/or resource

acquisitions.

PROPOSED PRINCIPLES OF INTEGRATED RESOURCE PLANNING:

I. Resource Acquisition Principles: Western's resource acquisition

activities will be determined by project-specific power marketing

plans, hydropower production capability, and the application of the

following proposed principles of IRP:

1. Western will consider a full range of resource options, both

supply-side and demand-side, as well as renewable resource options.

2. On a project-by-project basis, Western, through a public process

involving interested stakeholders, will develop criteria to be used in

evaluating power resource alternatives.

3. Evaluation criteria will address cost, environmental impact,

dependability, dispatchability, risk, diversity, and the ability to

verify demand-side alternatives. Evaluation criteria will be reviewed

as the need for resources changes or when long-term commitments to

purchase power expire.

4. Evaluation criteria will be consistent with Western's power

marketing policy, which states that Federal power is to be marketed in

such a manner as to encourage the most widespread use thereof at the

lowest possible rates to consumers consistent with sound business

principles. The policy, found in Delegation Order No. 0204-108, is

derived from statutes authorizing the sale of power from both

Department of the Army and Department of the Interior hydroelectric

projects. These statutes include section 5 of the Flood Control Act of

1944, 16 U.S.C. 825 and section 9(c) of the Reclamation Project Act of

1939 .

5. Resource acquisition planning will be consistent with power

marketing plans and associated contractual obligations.

6. Resource acquisition decisions will be documented and made

available to Western's power customers and the public.

II. Transmission Planning Principles: Western's transmission

planning is conducted to assess the capability of the Federal

transmission system to provide adequate and reliable electric service

to its customers and the interconnected power grid. The principles of

IRP that will apply to Western's transmission planning are as follows:

1. Western will conduct early and wide public involvement to

confirm the purpose and need of a proposed transmission project.

Western proposes that a public meeting be held early in the planning

process once the need for system modifications has been identified and

prior to start of the National Environmental Policy Act of 1969 (NEPA)

process. To the extent appropriate, Western's use of principles of IRP

for transmission planning will include existing forums and customer

partnerships with regard to public involvement.

2. At the public meeting, Western will describe the need to be met

and seek comments on alternative ways to address the need, including

demand-side management, new construction, or upgrade of existing

facilities.

3. Western will include opportunity for participation in the early

and wide public involvement process by interested parties, including

power customers, residents of the area, environmental groups, various

resource suppliers, including renewable generation entities, and other

transmission utilities in the area, as well as other participants in

the proposed transmission project if it is a joint participation

project.

4. Alternatives that are reasonable will be initially evaluated for

cost, general environmental impacts, and system reliability concerns in

coordination with interested parties. Data from this initial evaluation

will be included in the subsequent NEPA analysis.

5. The results of this preliminary evaluation will be made

available to Western's power customers and the public.

ENVIRONMENTAL EVALUATION: Methods, procedures, and criteria for

implementing these principles of IRP and any related environmental

effects will be project-specific. Western will conduct appropriate

public processes under NEPA and its implementing regulations for these

project-specific actions.

DETERMINATION UNDER EXECUTIVE ORDER 12866: DOE has determined 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 is required.

Issued at Golden, Colorado, May 17, 1995.

J.M. Shafer,

Administrator.

[FR Doc. 95-14208 Filed 6-8-95; 8:45 am]

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