Power Allocation Issues

DEPARTMENT OF ENERGY

Western Area Power Administration

Power Allocation Issues

AGENCY: Western Area Power Administration, DOE.

ACTION: Notice of Inquiry on the Impact of Electric Utility Industry

Restructuring.

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SUMMARY: The Western Area Power Administration (Western) is initiating

an inquiry to explore the impact of electric utility industry

restructuring on Western's power allocation policies.

DATES: The consultation and comment period will begin on the date of

publication of this Federal Register notice and will end January 15,

1999. A public comment forum at which Western will receive oral and

written comments will be held on Wednesday, January 6, 1999, beginning

at 1 p.m., Mountain Standard Time, at the Four Points Denver Central

Hotel, 3535 Quebec Street, Denver, Colorado. To be assured of

consideration, written comments must be received by the end of the

consultation and comment period.

ADDRESSES: Written comments may be hand-delivered, mailed, emailed, or

faxed to Robert C. Fullerton, Project Manager, Corporate Services

Office, Western Area Power Administration, 1627 Cole Boulevard, P.O.

Box 3402, Golden, CO 80401-0098, telephone (303) 275-2700, fax (303)

275-1290, email: [email protected]. All documentation developed or

retained by Western during the course of this public process will be

available for inspection and copying at this address.

FOR FURTHER INFORMATION CONTACT:

Robert C. Fullerton, Project Manager, Corporate Services Office,

Western Area Power Administration, 1627 Cole Boulevard, P. O. Box 3402,

Golden, CO 80401-0098, telephone (303) 275-2700, email:

[email protected].

Joel K. Bladow, Regional Manager, Rocky Mountain Region, Western Area

Power Administration, P.O. Box 3700, Loveland, CO 80539-3003, telephone

(970) 490-7201, email: [email protected].

J. Tyler Carlson, Regional Manager, Desert Southwest Region, Western

Area Power Administration, P.O. Box 6457, Phoenix, AZ 85005-6457,

telephone (602) 352-2453, email: [email protected].

David Sabo, Customer Service Center Manager, Colorado River Storage

Project, Western Area Power Administration, P.O. Box 11606, Salt Lake

City, UT 84147-0606, telephone (801) 524-6372, email: [email protected].

Jerry W. Toenyes, Regional Manager, Sierra Nevada Region, Western Area

Power Administration, 114 Parkshore Drive, Folsom, CA 95630-4710,

telephone (916) 353-4418, email: [email protected].

Gerald C. Wegner, Regional Manager, Upper Great Plains Region, Western

Area Power Administration, P.O. Box 35800, Billings, MT 59107-5800,

telephone (406) 247-7405, email: [email protected].

SUPPLEMENTARY INFORMATION:

Authorities

This public process is being conducted pursuant to the Department

of Energy Organization Act (42 U.S.C. 7101, et seq.); the Reclamation

Act of 1902 (43 U.S.C. 371, et seq.), as amended and supplemented by

subsequent enactments, particularly section 9(c) of the Reclamation

Project Act of 1939 (43 U.S.C. 485h(c)); and other acts specifically

applicable to the projects involved.

Background

Western is a Federal power marketing administration, charged with

the responsibility of marketing electricity generated by power plants

operated by the Bureau of Reclamation, the Corps of Engineers, and the

International Boundary and Water Commission. Created in 1977, Western

markets on a wholesale basis and transmits Federal hydroelectric power

throughout 1.3 million square miles to more than 600 customers,

including rural electric cooperatives, municipal utilities, public

utility districts, Federal and State agencies, and irrigation

districts. Western's power customers, in turn, provide service to

millions of consumers in 15 western States.

Western markets power on a project-specific basis. A marketing plan

for each project is developed through a public process, with

opportunity for comment on a marketing proposal before publication of

the final marketing plan in the Federal Register. Reclamation law

governs how Western markets electricity, including the requirement that

Western offer power first to non-profit entities such as rural electric

cooperatives and municipalities.

In the first decade of Western's existence, marketing plans were

relatively inflexible. Unless new generation was available, the amount

of power made available for potential new customers was relatively

small. Contracts with terms up to 30 years were negotiated and signed.

No capability existed under contracts to adjust Western's marketable

resources in the event that power plant operational changes were

necessary due to environmental considerations.

In recent years, Western added more flexibility to its marketing

policies and power sales contracts. On October 20, 1995, Western

adopted a final rule for the Energy Planning and Management Program

(Program) (60 FR 54151), which established a framework for the project-

specific allocation of hydropower. Pursuant to the Program, Western

signed resource extension contracts with existing customers for the

sale of power from the Pick-Sloan Missouri Basin Program-Eastern

Division and the Loveland Area Projects. These 20-year contracts

contain withdrawal opportunities at 5 and 10 years to meet the needs of

potential new customers and other purposes as determined by Western.

Western also reserved the contractual ability to adjust power

commitments in response to changes in operations and hydrology. In

addition, Western has full flexibility to adjust its power rates under

the terms of the contracts. Resource pools of up to 6 percent of the

marketable resource were set aside to meet the needs of new customers,

including Indian tribes.

While the Program did not immediately impact the marketing of power

from the Central Valley Project (CVP), Washoe Project, and Salt Lake

City Area Integrated Projects (SLCA/IP), Western anticipated that

Program

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application would be evaluated for these projects in the future. Much

work has already been done to advance the completion of the marketing

plans for the CVP, Washoe Project, and SLCA/IP, pursuant to the

Program's framework.

There is now a further need to consider the impact of electric

utility industry restructuring on the way that we allocate power.

Western seeks public input on six questions to help in this

consideration.

Upon completion of this public process, Western will consult with

the Department of Energy (DOE) prior to taking further action to

complete pending power marketing plans.

While this public process was triggered by marketing proposals for

CVP, Washoe Project, and SLCA/IP firm power, Western regards the issues

addressed in this public process as relevant to all of our power

allocation efforts. However, the conclusions we reach will be applied

prospectively, and will not impact existing marketing plans and

contracts.

As electric utility industry restructuring progresses over time,

Western likely will evaluate the impact of industry change on a

periodic basis to assure that our power marketing policy continues to

be responsive to public needs.

Regulatory Procedure Requirements

Review Under Executive Order 12866

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.

Regulatory Flexibility Analysis

The Regulatory Flexibility Act of 1980 (5 U.S.C. 601, et seq.)

requires Federal agencies to perform a regulatory flexibility analysis

if a final rule is likely to have a significant economic impact on a

substantial number of small entities and there is a legal requirement

to issue a general notice of proposed rulemaking. Western has

determined that this action does not require a regulatory flexibility

analysis since it is a rulemaking of particular applicability involving

rates or services applicable to public property.

Environmental Compliance

DOE National Environmental Policy Act (NEPA) regulations

categorically exclude marketing plans from NEPA documentation unless

they involve new generation, new transmission, or a change in

operations. Therefore, Western will not conduct further evaluation

under NEPA. Considerable environmental evaluation has already occurred

under the Energy Planning and Management Program and during project-

specific marketing plan development.

Scope of Issues

Public comment is requested on the following questions:

1. Should Western's power allocations system, including the term of

firm power contract renewals, be modified to take into account changes

in electricity markets that have occurred, and are expected to occur in

the future, due to the enactment of California Assembly Bill 1890 and

other State retail competition statutes? If so, please explain what

modifications would be desirable. If not, please explain why the

present system should be preserved.

2. To the extent a utility with an allocation of preference power

loses load due to retail competition, should it receive the same

allocation as it received previously or should its allocation be

reduced proportionately?

3. Should Western allocate power directly to electricity end-users

that are preference entities such as publicly-owned schools in States

or localities that permit retail access? If so, how much power should

be allocated for this purpose? Alternatively, should Western continue

to allocate power primarily to its traditional customers such as

municipal and cooperative utilities and Federal and State agencies?

4. In a retail choice environment, what additional steps, if any,

should Western take to ensure that the full economic benefits of

preference power are passed through to end-users served by the

distribution utility that receives a power allocation from Western?

5. Should a distribution utility be permitted to transmit the

economic benefits of preference power exclusively to industrial and/or

commercial end users? Conversely, should a distribution utility be

required to pass on the benefits of preference power exclusively to a

certain class of customers such as residential or small business?

6. Should a distribution utility be required to offer retail access

to its distribution customers as a condition of receiving a preference

power allocation in the future?

Dated: November 20, 1998.

Michael S. Hacskaylo,

Administrator.

[FR Doc. 98-32009 Filed 11-30-98; 8:45 am]

BILLING CODE 6450-01-P