2004 Power Marketing Plan

DEPARTMENT OF ENERGY

Western Area Power Administration

2004 Power Marketing Plan

AGENCY: Western Area Power Administration, DOE.

ACTION: Notice of the final 2004 Power Marketing Plan.

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SUMMARY: Western Area Power Administration (Western), a Federal power

marketing administration of DOE, announces its 2004 Power Marketing

Plan (Marketing Plan) for the Sierra Nevada Customer Service Region

(Sierra Nevada Region). On December 31, 2004, all of the Sierra Nevada

Region's long-term firm Central Valley Project (CVP) power sales

contracts will expire. This notice responds to the comments received on

the Proposed 2004 Power Marketing Plan (Proposed Plan) and sets forth

the final Marketing Plan. The Marketing Plan specifies the terms and

conditions under which Western will market power from the CVP and the

Washoe Project beginning January 1, 2005. This Marketing Plan

supersedes all previous marketing plans for these projects.

Western plans to amend existing customers' power sales contracts to

provide them with the right to purchase a percentage of the Sierra

Nevada Region's power resources beginning January 1, 2005. After

Western more fully develops products and services, it will offer new

contracts for the sale of power under the Marketing Plan. Western will

request entities who meet the criteria defined in the Marketing Plan,

and who wish to apply for a new allocation of power from Western, to

submit formal applications. Application procedures will be set forth in

the Call for 2005 Resource Pool Applications in a separate Federal

Register notice.

DATES: The Marketing Plan will become effective July 26, 1999.

FOR FURTHER INFORMATION CONTACT: Power Marketing Manager, Western Area

Power Administration, Sierra Nevada Customer Service Region, 114

Parkshore Drive, Folsom, CA 95630, telephone (916) 353-4416.

SUPPLEMENTARY INFORMATION:

Authorities

The Marketing Plan for marketing power after 2004 by the Sierra

Nevada Region is being established pursuant to the Department of Energy

Organization Act (42 U.S.C. 7101-7352); the Reclamation Act of June 17,

1902 (ch. 1093, 32 Stat. 388) as amended and supplemented by subsequent

enactments, particularly section 9(c) of the Reclamation Project Act of

1939 (43 U.S.C. 485(c)); and other acts specifically applicable to the

projects involved.

Development of the 2004 Power Marketing Plan

Western began developing the Marketing Plan with a series of three

informal public information meetings. These meetings helped Western

identify pertinent issues and possible marketing options, including

types of products and services, and eligibility and allocation

criteria. During that process, Western evaluated several options for

marketing power after existing contracts expire.

Western began the Administrative Procedure Act process with its

Notice of Proposed Plan in the Federal Register (62 FR 8710, February

26, 1997). Western held a public information forum on April 8, 1997, to

present the Proposed Plan and answer questions. On April 24, 1997,

Western held a public comment forum to accept verbal comments on the

Proposed Plan. In addition, Western accepted written comments from the

public through May 27, 1997. Western considered the comments received

in developing the Marketing Plan.

In a separate public process, Western explored the impact of

electric utility industry restructuring on Western's power allocation

policies. A Notice of Inquiry for this process was published in the

Federal Register (63 FR 66166, December 1, 1998). Western held a public

comment forum on January 6, 1999, and accepted written comments through

January 15, 1999. The results of this process will be published in a

separate Federal Register notice.

Western opened an additional comment period focused solely on the

size of project-specific resource pools because several Native American

tribes commented on the size of these pools. The Notice of Public

Process on Resource Pool Size was published in the Federal Register (64

FR 4646, January 29, 1999). Western held informational meetings on its

resource pool size proposals and the requirements for receiving an

allocation of power in Phoenix, Arizona, on February 3, 1999;

Albuquerque, New Mexico, on February 5, 1999; and Folsom, California,

on February 9, 1999. Western accepted written comments from the public

through March 1, 1999. Western also considered the comments related to

the Sierra Nevada Region's resource pool received during this comment

period in developing the Marketing Plan.

Western will market the Sierra Nevada Region's power resources

consistent with the Power Marketing Initiative under the Energy

Planning and Management Program (EPAMP) (60 FR 54151, October 20,

1995). Western will initially offer 96 percent of the Sierra Nevada

Region's power resources to existing customers and allocate, under a

separate process, the remaining resources using the criteria in the

Marketing Plan. Under a separate process, Western will reduce all

customers' allocation percentages by up to 2 percent and establish a

2015 Resource Pool. The Marketing Plan provides a balance between

existing and new customers, including Native American tribes, while

meeting Western's contractual obligations that continue beyond 2004. If

unexpected circumstances cause early termination of existing electric

service contracts, Western may market its power resources under the

Marketing Plan before January 1, 2005.

Background

CVP power facilities include 11 powerplants with a maximum

operating capability of about 2,044 megawatts (MW), and an estimated

average annual generation of 4.6 million megawatthours (MWh). Western

markets and transmits the power available from the CVP.

Western owns the 94 circuit-mile Malin-Round Mountain 500-kilovolt

(kV) transmission line (an integral section of the Pacific Northwest-

Pacific Southwest Intertie (Pacific Intertie)), 803 circuit miles of

230-kV transmission line, 7 circuit miles of 115-kV transmission line,

and 44 circuit miles of 69-kV and below transmission line. Western also

has part ownership in the 342-mile California-Oregon Transmission

Project. Many of Western's existing customers have no direct access to

Western's transmission lines and receive service over transmission

lines owned by other utilities.

The Washoe Project, Stampede Powerplant, has a maximum operating

capability of 3.65 MW with an estimated annual generation of 10,000

MWh. Sierra Pacific Power Company owns and operates the only

transmission system available for access to Stampede Powerplant.

The following table lists estimates of CVP power resources and

adjustments. This table is for informational purposes only, and does

not imply that the power resources and adjustments shown will

[[Page 34418]]

be the actual amounts available or adjustments applied.

Estimated CVP Power Resources and Adjustments

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Power resources/adjustment Range/value

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Annual energy generation........................ 2,400,000-8,600,000 MWh.

Monthly energy generation....................... 100,000-1,100,000 MWh.

Monthly capacity................................ 1,100-1,900 MW.

Annual project use.............................. 670,000-1,670,000 MWh.

Monthly project use............................. 10,000-180,000 MWh.

Monthly project use (on peak)................... 30-230 MW.

Monthly maintenance............................. 0-300 MW.

Reserves--hydro................................. Minimum 5% of monthly capacity

CVP transmission and transformation losses from 1.8% (currently).

the generator bus to a 230-kV load bus.

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Legal Analysis

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

services applicable to public property.

Environmental Compliance

In compliance with National Environmental Policy Act (NEPA) (42

U.S.C. 4321, et seq.), Council on Environmental Quality NEPA

implementing regulations (40 CFR parts 1500-1508), and DOE NEPA

implementing regulations (10 CFR part 1021), Western completed an

environmental impact statement (EIS) on EPAMP. The Record of Decision

was published in the Federal Register (60 FR 53181, October 12, 1995).

Western also completed the 2004 Power Marketing Program EIS (2004 EIS),

and the Record of Decision was published in the Federal Register (62 FR

22934, April 28, 1997). The Marketing Plan falls within the range of

alternatives considered in the 2004 EIS. This NEPA review identified

and analyzed environmental effects related to the Marketing Plan.

Marketable CVP and Washoe Project electrical capacity and energy is

influenced by available reservoir storage and water releases controlled

by the U.S. Department of the Interior, Bureau of Reclamation

(Reclamation). Pursuant to the CVP Improvement Act of 1992 (Pub. L.

102-575, Title 34) (CVPIA), Reclamation prepared a programmatic EIS

(PEIS) addressing improvements to fish and wildlife habitat stipulated

therein, and potential changes in CVP operations and water allocations

to meet those obligations. Actions based on the PEIS may result in

modifications to CVP facilities and operations that would affect the

timing and quantity of electric power generated by the CVP. Such

changes may, in turn, affect electric power products and services to be

marketed by Western. The Marketing Plan is designed to accommodate

these changes. Western is a cooperating agency in Reclamation's PEIS.

Review Under the Paperwork Reduction Act

In accordance with the Paperwork Reduction Act of 1980 (44 U.S.C.

3501, et seq.), Western has received approval from the Office of

Management and Budget for the collection of customer information in

this rule, under control number 1910-0100.

Determination 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.

Small Business Regulatory Enforcement Fairness Act

Western has determined that this rule is exempt from congressional

notification requirements under 5 U.S.C. 801 because the action is a

rulemaking of particular applicability relating to services and

involves matters of procedure.

Responses to Comments Received on the Notice of Proposed Plan (62

FR 8710, February 26, 1997)

During the public consultation and comment period, Western received

26 letters commenting on the Proposed Plan. In addition, 12 customer

and interested party representatives commented during the April 8 and

April 24, 1997, public forums. Western reviewed and considered all

comments received by the end of the public consultation and comment

period, May 27, 1997, in preparing the Marketing Plan.

The following is a summary of the comments received during the

consultation and comment period, and Western's responses to those

comments. Comments are grouped by subject and paraphrased for brevity.

Specific comments are used for clarification where necessary.

I. Public Participation and Process Implementation

Comment: Commentors supported the process Western used in

developing the Marketing Plan. One comment expressed concern about the

lack of opportunity for public participation.

Response: Western provided opportunities for public participation

in preparing the Marketing Plan, 2004 EIS, and EPAMP, as described in

this notice.

Comment: Some commentors said that since the contracts do not

expire until 2004, Western should delay the Marketing Plan process.

This delay would allow time to resolve uncertainty about the future of

the industry, and allow other interests time to make arrangements to

share power revenues with environmental and clean power goals. Other

comments supported developing the Marketing Plan on the proposed

schedule to provide customers with lead time for planning purposes.

Response: Because electric utility industry restructuring is

already underway, delaying decisions may foreclose options for Western

and its customers. To be an active participant in the newly

restructured industry, Western needs to identify and work with its

future customers to develop specific products to meet their needs. For

many of Western's customers, Federal hydropower is a critical component

of their resource mix, and knowledge of CVP resource availability is

crucial to planning strategies for

[[Page 34419]]

dealing with utility restructuring. It is important that the Marketing

Plan is not delayed because it takes time to develop contracts and

arrange for transmission service. Western recognizes the need for

flexibility in the changing utility industry and will offer Custom

Products, such as firming power and ancillary services, to meet

customers' needs. The Marketing Plan will not impact existing

arrangements concerning funding of environmental restoration or

advancement of clean power goals. These items are discussed more

thoroughly in our responses to other comments.

II. Environmental Issues

Comment: Commentors stated that there are unresolved environmental

issues associated with the operation of CVP dams, and that

environmental protection mechanisms are insufficient or outdated. A

commentor stated that if a contract extension decision is part of the

Marketing Plan, new environmental protection mechanisms must be

developed. Western was urged to create a trust fund(s) in which a

portion of Western's existing power revenues would be set aside to

mitigate environmental damage associated with operation of the Federal

dams and to support the development of energy efficiency and renewable

energy. Also, questions were raised as to whether Western has complied

with NEPA in developing the Marketing Plan.

Response: Western completed the 2004 EIS in accordance with NEPA,

the Council on Environmental Quality NEPA implementing regulations, and

DOE's NEPA implementing regulations. The 2004 EIS examined the

environmental impacts and identified no significant impacts to the

human environment from marketing power from the CVP and Washoe Project.

The Marketing Plan falls within the parameters analyzed in the 2004

EIS. The operation of CVP dams is dictated by other authorized project

purposes such as flood control, navigation, water supply, and fish and

wildlife. Environmental issues associated with the operation of CVP

dams are being addressed by the CVPIA PEIS, including direct and

indirect impacts on all fish, wildlife, and habitat restoration actions

and the potential renewal of existing CVP water contracts. Western is a

cooperating agency in Reclamation's PEIS process.

CVP power customers contribute significant revenue to the

Restoration Fund, established under the CVPIA, which is designed to

mitigate environmental consequences of the operation of Federal dams.

Western supports renewable energy through its Policy for the Purchase

of Non-Hydropower Renewable Resources (61 FR 43051, August 20, 1996).

In accordance with the Energy Policy Act of 1992, Western encourages

energy efficiency by requiring all firm power customers to prepare and

keep current integrated resource plans.

III. Products and Services

A. Base Resource

Comment: Several commentors requested that Western reconsider its

proposal to market power on an as-available basis. Suggestions were

made that the Base Resource be further developed, including evaluation

of purchasing energy, especially in dry years, to provide some minimum

level of firm power and maximize use of the transmission assets

available to Western, including the Pacific Intertie. Comments included

requests for more information on firm availability, pricing, timing of

commitment to purchase the Base Resource, and reliability of the Base

Resource.

Response: CVP generation is expected to vary hourly, daily,

monthly, and annually, based on hydrological conditions and other

constraints that govern CVP operations; therefore, Western cannot

accurately predict future availability. However, Western is willing to

purchase energy to maintain some firm level of service to all

customers. The amount of firming and the use of Western's transmission

resources will be further developed by Western through a collaborative

process with customers prior to product commitment by a customer.

Because Western's rates will be determined through a separate public

process, product pricing is outside the scope of the Marketing Plan.

However, the costs associated with the hydropower system may be

discussed during the collaborative process.

Comment: A commentor stated that the Base Resource concept will

require a new and much closer working relationship with Reclamation,

Federal water users, and other stakeholders.

Response: Western will continue to develop close working

relationships with Reclamation, Federal water users, and other

stakeholders.

Comment: One commentor asked if Western will include reserves or

other ancillary services in the Base Resource.

Response: The Base Resource may be used in a manner the customer

deems most beneficial, within operational constraints. Operating

reserves and other ancillary services will be consistent with industry

standards or may be provided with the Base Resource or the Custom

Product on an as-requested basis. Provision of ancillary services,

including reserves, will be developed with customer input.

B. Custom Product

Comment: Commentors suggested that Western develop some

``standardized'' Custom Products to allow customers to select a more

firm service, similar to what is currently marketed. A commentor stated

that negotiating with customers individually for firming the Base

Resource would be more difficult, less transparent, and would increase

risk. One commentor questioned whether the design of Custom Products

would potentially cause cost-shifting among customers.

Response: Western designed the Marketing Plan to provide maximum

flexibility to its customers. Development of ``standardized'' Custom

Products for a customer or group of customers is not precluded by the

Marketing Plan. The Marketing Plan was designed with this possibility

in mind. Prior to product commitments, using a collaborative process,

Western will develop Custom Products that most closely match customer

needs. Using this collaborative approach will help ensure that

information about Custom Product options will be available to everyone

to minimize the risk of inequities. Also, by considering the needs of

all similarly situated customers, due to economies of scale, Western

may obtain better prices in the electric utility market when making

firming purchases or obtaining other related services. Because all

customers will equitably share in the cost of the Base Resource and

each customer will pay only for the Custom Products which it

specifically requests, any potential for cost-shifting is minimal.

Comment: A commentor suggested that Western needs to consider

potential ramping rates if a customer chooses to schedule power

deliveries.

Response: Under the Marketing Plan, all customers will be required

to schedule power deliveries. Information on ramping rates applicable

to the hydropower system will be made available prior to beginning

service.

Comment: One commentor stated that preference customers should be

allowed to help provide the products and services needed to firm the

Base Resource for other customers wanting a firm Custom Product.

Response: The Marketing Plan does not preclude Western or customers

from purchasing products and services from any supplier.

[[Page 34420]]

C. Exchange Program

Comment: Commentors supported and recommended further development

of the concept of the Western-managed exchange program.

Response: Western will complete development of the exchange program

through a collaborative process with customers.

D. Energy Banking Arrangements

Comment: A commentor said Western should begin planning now for

termination of existing banking arrangements with Pacific Gas &

Electric Company (PG&E) under Contract 14-06-200-2948A. If the existing

account is ``cashed out,'' the benefits should be shared with all

customers. Commentors suggested that Western pursue energy banking and

firming arrangements beyond 2004, even though it may be difficult.

Response: Since existing banking arrangements will expire on

December 31, 2004, they are outside the scope of the Marketing Plan.

Western is willing to explore banking arrangements and other options

during further development of the exchange program and Custom Products.

IV. Proposed Resource Percentages/Pools

A. Allocation Methodology

Comment: A commentor requested that Western accommodate the

seasonal nature of agricultural loads.

Response: The Base Resource depends on the generation pattern of

the CVP, which is similar to the pattern of agricultural loads. If the

Base Resource does not accommodate the seasonal nature of agricultural

loads, Western will work with customers to develop Custom Products that

will meet the customers' needs to the extent possible.

Comment: One commentor stated the Marketing Plan should not affect

its contractual rights through 2004 to increase its contract rate of

delivery (CRD) up to 50 MW.

Response: The Marketing Plan does not affect current contractual

rights. If necessary, Western will accommodate these CRD increases and

will effectuate related CRD decreases as provided for in certain

existing contracts.

Comment: A suggestion was made that both energy and capacity should

be used to determine customer resource extensions instead of the

proposed CRD methodology. A comment further suggested that not using

energy penalized customers with higher load factors for maintaining

good load shapes. If rates are to be based on a split between capacity

and energy, then the allocation should be based on capacity and energy.

Response: Existing customers' current allocations are based on

capacity. Western believes that it is equitable to base the existing

customers' resource allocation percentages on existing capacity

commitments because, under existing contracts, Western's capacity

obligation is fixed but the energy obligation is not. Many customer CVP

energy purchases are based on economics, not on their load shape or

energy entitlement. Unlike the current allocation methodology, the

resources available under the Marketing Plan are based on generation

rather than load. Basing the right to purchase generation output, which

is limited by the capacity of the plants, on a CRD does not penalize

customers with high load factors, rather it gives them no greater

consideration. Allocating the power resources based on a rate design is

not appropriate because the rate design for power sold under the

Marketing Plan has not been determined and may be different from

today's rate design.

B. Allocation Amounts

Comment: Western was requested to increase the 2005 Resource Pool

percentage. Another comment requested withholding application of the

Power Marketing Initiative, particularly during the period from 2005

through 2014 (when the Sacramento Municipal Utility District (SMUD)

settlement is in effect).

Response: Comments received did not provide rationale for changing

the resource pool percentages. However, Western considered many factors

in determining the magnitude of the resource pools. Those factors

included: (1) The loads of preference entities that applied for but did

not receive power under the 1994 Power Marketing Plan; (2) impacts of

restructuring and open transmission access; (3) the potential for new

loads, including those of Native American tribes; and, (4) existing

customer loads with limited Federal power compared to their needs.

After careful consideration, Western determined that the combined

resource pools in 2005 and 2015, totaling up to 6 percent of the Base

Resource, would be equitable for potential new customers as well as

existing customers. Withholding application of the Power Marketing

Initiative (establishment of the resource pools) would potentially

eliminate the ability of Western to serve new customers that may

benefit from a Federal power allocation.

Comment: Some commentors stated that Western should maximize the

global value of its Base Resource by minimizing both reductions and

increases in the allocations that Western's current customers receive.

Response: The Marketing Plan provides for minimal increases or

reductions in the pro rata amount of the power resources available to

existing customers. However, due to the expiration of Contract 14-06-

200-2948A with PG&E, and the associated firming arrangements, the

Sierra Nevada Region may not be able to market power at the same level

as in the past. Under the Marketing Plan allocation method, each

allottee will receive a percentage of actual generation. The amount of

power associated with an allocation percentage will vary, based on

hydrological conditions and other constraints that govern CVP

operations. The Marketing Plan attempts to mitigate reductions in

availability or usability of the power resources for meeting customers'

loads by offering the Custom Product, which could include a level of

firming purchases.

Comment: A comment requested that allocation amounts reflect a

customer's CRD as opposed to actual load.

Response: Western has decided that an existing customer's

allocation percentage will be based on the customer's extension CRD.

Western will adjust the existing customer's percentage if its actual

load is less than the extension CRD. This criteria was adopted because

Western does not believe it is sound business practice to allocate

power based on a historical CRD that has never been fully used.

Comment: Commentors requested that temporary allocation increases

remain with the current recipients.

Response: Contracts implementing the temporary reallocations

provide that the original CRD be returned to the original customer.

Comment: One commentor suggested that the minimum load requirement

for the resource pools be 500 kW instead of 1 MW.

Response: To avoid precluding smaller entities from receiving

allocations from the resource pools, Western has modified the Marketing

Plan to allow requests to serve loads that are less than 1 MW, but at

least 500 kW, if they can be aggregated so Western can schedule and

deliver to a minimum load of 1 MW.

Comment: A commentor objected to Western's approach regarding

SMUD's rights under the 1983 Settlement Agreement in the Proposed Plan.

The commentor urged Western to reach an accommodation with SMUD that

would provide for SMUD's resource extension to be made on the same

basis as all other existing customers, and questioned the logical basis

for the fraction 360/1,152.

[[Page 34421]]

Public participation and joinder in regard to the SMUD settlement were

also questioned. Further, it was recommended that if SMUD does not

voluntarily agree to a reasonable accommodation, Western should recoup

the over-allocation during the second 10-year period. Another commentor

supported Western's approach.

Response: Contract DE-MS65-83WP59070 (Settlement Agreement) between

Western and SMUD, dated April 15, 1983, provides that SMUD has a right

to purchase 360/1,152 of all power allocated or sold by Western on or

after January 1, 2005, through December 31, 2014. This Settlement

Agreement was reached to resolve a lawsuit, United States of America v.

Sacramento Municipal Utility District, Civil No. S-75-277, United

States District Court for the Eastern District of California. The

Marketing Plan is designed to mitigate the impacts of the Settlement

Agreement on other customers by offering an Optional Purchase, which is

equal to the additional amount of power allocated to SMUD. Western will

adjust SMUD's percentage of the available resources after 2014 to put

it on the same basis as other existing customers. The adjustment will

include the amount that would have been contributed to the 2005

Resource Pool by SMUD in absence of the Settlement Agreement. Western

does not agree that SMUD will receive an over-allocation for the first

10 years under the Marketing Plan because SMUD's percentage allocation

is specified in the Settlement Agreement. Therefore, SMUD should not be

penalized during the second 10 years of the Marketing Plan. The

fraction 360/1,152 referenced in the Settlement Agreement represents

SMUD's CRD of 360 MW and Western's maximum simultaneous load level of

1,152 MW at the time of the settlement.

Allowing public participation in litigation would severely

undermine Western's ability to protect the Government's interest.

Western is not required to join every preference customer or every

potential preference customer in a lawsuit in which Western is a party.

Upon proper motion, the court determines when and if joinder of a

person is needed for just adjudication.

C. Allocations Due to Special Circumstances

Comment: Commentors requested that CVP power continue to be

available at cost to long-term customers. If these customers do not

receive a power allocation under the Marketing Plan, the economic

consequences would be significant.

Response: Western will offer the greater portion of the CVP

resources to existing customers. The economic analyses done for the

2004 EIS showed that the greatest socioeconomic benefits would be

expected to occur if Western's existing customers continued to receive

power from Western.

Comment: A few commentors stated that Federal hydroelectric power

should be used to benefit the public. They suggested that Western give

priority to those who meet certain additional criteria, including,

demonstrating environmental responsibility in mitigating any damages

associated with Federal dams; developing and/or integrating solar and

other renewable energy and energy efficiency into their resource mix;

supporting educational institutions; and not requiring supplemental

purchases.

Response: Western markets power in a manner that will encourage the

most widespread use at the lowest possible rates consistent with sound

business principles. Within broad statutory guidelines and operational

constraints of the CVP, Western has wide discretion as to whom and

under what terms it will contract for the sale of Federal power, as

long as preference is accorded to statutorily defined public bodies.

Western cannot measure the value of the public benefits provided by an

entity when allocating its power and, therefore, will not base an

allocation on an entity's mission. Although not specifically addressed

in the Marketing Plan, Western supports programs for the public good.

Western supports renewable energy through its Policy for the

Purchase of Non-Hydropower Renewable Resources, and encourages energy

efficiency by requiring all firm power customers to prepare and keep

current integrated resource plans. Further, CVP power customers

contribute significant revenue to the Restoration Fund, established

under the CVPIA, which is designed to mitigate environmental

consequences of the operation of Federal dams.

Comment: A comment suggested that priority be given to entities

with longstanding requests.

Response: Previous requests were considered in determining the size

of the resource pool. Western receives numerous requests for power and

does not believe a previous request should be given a higher priority

over requests by qualified entities that have not applied previously.

Comment: A commentor suggested Western give higher priority to

entities that can readily accept an allocation.

Response: The Marketing Plan includes eligibility criteria

requiring that all applicants requesting power must be ready, willing,

and able to receive and use or distribute Federal power.

Comment: Western was requested to extend the spirit and concept of

the National Defense Authorization (NDA) Act. Several comments

requested that the definition of extension CRD be modified so that NDA

Act power used for economic development is not excluded. By doing so,

entities receiving allocations of NDA Act power for economic

development purposes would be eligible for resource extensions under

the Marketing Plan. One comment stated that the definition of extension

CRD violates the provisions of the NDA Act because the legislation

requires that NDA Act power be reserved for allocation for a 10-year

period (commencing November 30, 1993). This commentor contends that the

legislation provides for allocations made during this 10-year period to

extend past December 31, 2004. Commentors requested that NDA Act power

extend through the completion of economic development. Another

commentor requested that Western not extend the provisions of the NDA

Act past December 31, 2004.

Response: The Proposed Plan is consistent with the NDA Act.

However, Western has reconsidered its position regarding allocations

for NDA Act customers. Western has decided to extend the spirit and

concepts of the NDA Act to those existing customers receiving NDA Act

power for economic development purposes, provided those customers

continue to meet the eligibility requirements for an allocation under

the Marketing Plan. The Marketing Plan has been modified to reflect

this change.

V. General Criteria and Contract Principles

Comment: A commentor suggested that, under take-or-pay provisions,

the resale (remarketing) prohibition should be eliminated. Other

commentors stated that, in the competitive environment, Western will

not be able to enforce the resale prohibition, and customers will

receive an unfair advantage with the ability to ``profiteer'' in

regional electricity markets.

Response: Western is not convinced that the prohibition on

reselling Federal power should be eliminated due to the take-or-pay

provisions. Customers' loads are expected to be sufficient to use all

available Western power most of the time. Western realizes that, at

times, due to the variability of CVP generation,

[[Page 34422]]

some customers may not be able to use their full power allocation.

Therefore, Western will establish and manage an exchange program. Any

Western power that cannot be used on a real-time basis must be offered

to Western or to other preference customers under this program.

Comment: A comment suggested Western consider marketing a portion

of CVP capacity to the California Power Exchange or other marketers.

Response: Western markets power first to preference entities under

Reclamation laws. However, if Western is unable to market all of its

power to preference entities, it may be sold to others.

Comment: Many commentors supported the 20-year contract term,

citing the additional value of a long-term contract which allows

customers who purchase Federal power greater stability in planning for

future resources than would exist with a shorter contract term.

Other comments objected to a 20-year contract term citing reasons

for a shorter contract term. One commentor suggested contract terms of

no more than 5 years or auctioning contracts to qualified bidders.

Response: The 20-year contract term provides greater resource

certainty for Western customers in a restructured industry, and greater

certainty of revenues for project repayment by Western. Shorter

contract terms degrade the marketability of the resource and create an

administrative burden. An EIS, which included a significant amount of

analysis as well as a public involvement process, was conducted on the

provisions of EPAMP, including a 20-year term. The EPAMP EIS found that

longer contract terms were positive for the environment, as customers

were more likely to invest in renewable resources if they had a stable

foundation of Federal hydropower. Short-term contracts could lead

customers to develop resources that are cheaper in the short term but

more environmentally adverse. Future load requirements are not a

significant consideration as Western is a partial requirements provider

and is generally not responsible for meeting customer load growth.

Contract extensions would not preclude any Congressional or

administrative actions because contracts or rate changes could be

included as part of a sale or restructuring package. The Marketing Plan

does not impact or preclude future operational changes at Federal dams

because Western will market only the available power generation.

Because Western is required to market power at cost-based rates,

auctioning contracts is not practical. Power must be sold to preference

entities first and not just to the highest bidder. Western has included

the 20-year contract term in the Marketing Plan.

VI. First Preference

Comment: A comment supported using 20-year average historical

generation to calculate the maximum entitlement of first preference

customers (MEFPC), rather than a 5-year average. Other commentors

stated using 20-year average historical generation to calculate the

MEFPC is inappropriate because it does not account for generation lost

due to fishery restoration operations and other environmental factors,

would unfairly penalize other preference customers, and would exceed

statutory requirements. A commentor stated that first preference

customers should not be immune to the vagaries of generation. Some

comments requested a floor MEFPC be established, based on generation

prior to CVPIA operations. Using all historic generation before fishery

restoration was also suggested.

Response: The New Melones Project provisions of the Flood Control

Act of 1962 (76 Stat. 1173, 1191-1192) and the Trinity River Division

(TRD) Act (69 Stat. 719) (Acts) specify that first preference customers

are entitled to up to 25 percent of the power generated as a result of

the construction of the New Melones Project and the Trinity River

Division (first preference projects). Under its discretionary

authority, Western determines how the entitlements are to be

calculated. Western believes the most recent 20-year average historical

generation is consistent with the Acts because it accounts for

generation resulting from the first preference projects under a variety

of hydrological conditions, and takes into consideration impacts of

changing operations such as those contemplated under the CVPIA. The

Acts do not guarantee a minimum amount of power to the counties of

origin; therefore, Western does not believe a floor MEFPC is

appropriate.

Comment: A commentor requested more information on the calculations

used to determine the MEFPC.

Response: The Marketing Plan specifies the data to be used and how

the MEFPC will be calculated.

Comment: A commentor questioned why the MEFPC will only be adjusted

if, upon recalculation, it is 10 percent above or below the currently

effective MEFPC.

Response: To eliminate minor or short-term fluctuations, Western

has decided to adjust only for a 10 percent or greater difference in

the MEFPC.

Comment: Comments were received both in favor of and in opposition

to the first preference customers' full requirements option at the Base

Resource rate, without the take-or-pay provision. One commentor stated

that all customers should be treated economically the same.

Response: The full requirements option will be supplied from the

same power resources as the Base Resource; therefore, it is reasonable

to apply the Base Resource rate. It is not appropriate to apply the

take-or-pay provision to the full requirements option because the first

preference customers will not have a fixed percentage amount under this

option. Western will continue to offer the full requirements option to

the first preference customers.

Comment: A commentor said he assumed that the load factor referred

to in the full requirements option is intended to apply only to those

first preference customers who cannot measure their demand.

Response: In the future it may be necessary to determine a maximum

capacity from the MEFPC. This calculation will require use of a load

factor for each first preference customer. However, it will not be

necessary to provide a load factor in the contracts, and the Marketing

Plan now reflects this clarification.

Comment: Some commentors who opposed the full requirements option

stated that it is beyond Western's statutory requirements and is unfair

to the other customers. It was suggested that a daily entitlement be

established based on actual generation. First preference customers

should be provided with the Base Resource and should pay the cost of

creating a Custom Product in the same manner as all other customers.

Response: The Acts specify that first preference customers are

entitled to receive up to 25 percent of the additional power generated

as a result of construction of the first preference projects. Western

has discretion in how it fulfills the requirements of the Acts. When

Congress authorized construction of the first preference projects, it

balanced the concerns of the counties of origin and the benefits the

first preference projects would have to the entire CVP. Western

believes that Congress attempted to provide a fair remedy to all

parties involved. It is within the spirit of the Acts to make the

maximum amount of the MEFPC available to the first preference

[[Page 34423]]

customers to the extent it can be used to meet their loads. Power

deliveries under this option would be nearly identical to what they are

today. Western believes this arrangement will have minimal impact on

the other customers; therefore, we will continue to offer the full

requirements option.

Comment: Comments requested that first preference customers who

choose the percentage option be allowed to participate in the exchange

program, using some or all of their MEFPC.

Response: Under the percentage option, first preference customers

would be allowed to participate in the exchange program to the same

extent as the other customers.

Comment: A commentor suggested that the Marketing Plan should

provide for first preference customers to receive 25 percent of the

energy generated from the TRD, exactly as the legislation provides, at

the cost to produce that energy.

Western was requested to provide additional options that would

allow first preference customers to schedule up to 25 percent of the

energy produced as a result of the first preference projects, at prices

that reflect the cost to produce first preference project energy.

Options should provide for first preference customers to call upon

historic generation that they did not use during times when 25 percent

of first preference project energy is less than their load. If first

preference customers are not allowed to call upon historic generation

that they did not use, Western should allow them to trade or bank some

of the 25 percent of what is produced by the first preference projects

in the future.

Other comments recommended that the Marketing Plan should reflect

past legal resolution of issues regarding use and pricing of first

preference power.

Response: The Acts do not provide for Western to furnish more power

than can actually be used by the first preference customers within the

counties of origin. First preference customers are not entitled to

historic generation they were unable to use. Also, the Acts do not

provide for energy banking arrangements. With respect to providing the

energy at the cost to generate power at the first preference projects,

both Acts state,

* * * contracts for the sale and delivery of the additional electric

energy available from the Central Valley Project power system as a

result of the construction of the plants * * *

In Trinity County Public Utilities District vs. Harrington (781 F.2d

163 (9th Cir. 1986)), the court held that since the first preference

projects are operationally and financially integrated with the CVP, the

first preference customers should pay rates based on the operating

costs of the CVP system.

Comment: It was requested that a menu of services be offered to the

first preference customers, coupled with certain first preference

rights, like the sale of energy at first preference project cost.

Response: First preference customers are offered two options--the

full requirements option and the percentage option. Under the

percentage option, first preference customers may choose to customize

their allocation with the Custom Product and participate in the

exchange program. See Western's response above concerning rates for

first preference customers.

Comment: One commentor stated that the percentage option could not

be used by first preference customers to gain greater benefits than

would be available under the full requirements option, even though they

are entitled to greater benefits. The commentor suggested that, other

than a few differences, the percentage option makes first preference

customers almost equal to other customers.

Response: The principal benefit granted to first preference

customers under the Acts is the first right to purchase a portion of

the additional generation made available to the CVP as a result of the

construction of the first preference projects, for use in the counties

of origin. Under the percentage option, the first preference customers'

allocations will be determined similarly to the other customers.

However, first preference customers' allocation percentages will be

based on their actual loads, not on a CRD. First preference customers

will not be subject to adjustments in their allocation percentages for

the resource pools. Additionally, first preference customers will have

the opportunity to adjust their allocation percentages, with a 7-month

notice to and approval by Western, up to their share of the MEFPC.

Western believes that both the percentage option and the full

requirements option provide the benefits required under the Acts.

Comment: One commentor stated that 12 months of load data is not

reflective of actual usage, and requested that Western modify the

factors used in the calculation to determine a first preference

customer's percentage.

Response: Western has modified the Marketing Plan to provide for

the maximum demand during the previous 4 years to be used in

determining an allocation percentage under the percentage option.

Comment: A few commentors stated that Western is required under

both Acts to provide transmission services to first preference

customers. Additionally, Western was requested to commit to provide

transmission service with the basic service at the basic rate to the

first preference customers. One commentor suggested that first

preference customers should be exempt from Section V.G.

Response: The TRD Act authorizes Western to provide electric

transmission facilities as may be necessary to furnish energy to

Trinity County. Western owns transmission facilities in Trinity County.

Should additional facilities be required, appropriations or customer

advancement of funds would be necessary before such facilities could be

constructed. There is no similar clause in the New Melones Project

provisions of the Flood Control Act of 1962 with respect to Calaveras

and Tuolumne Counties. Western will assist in providing transmission

service to the first preference customers. Although Western is willing

to assist, all customers are ultimately responsible to provide for the

delivery of Federal power to their loads. Accordingly, Section V.G,

requiring customers to obtain their own third-party transmission

service, is applicable to all customers.

Western has voluntarily filed an Open Access Tariff consistent with

FERC Order No. 888. Transmission costs will be identified separately

from power costs, and all transmission users will bear an equitable

share of those costs.

Comment: Comments were received both in favor of and in opposition

to the provisions of the Proposed Plan relating to the first preference

customers. Those in favor of the provisions stated they are appropriate

and encouraging. Those in opposition stated the provisions exceed

Western's requirements under the Acts and provide the first preference

customers with better products than those offered to the other

customers. Some first preference customers indicated dissatisfaction

with the benefits they are currently receiving under their respective

Acts in comparison to the sacrifices they made to allow construction of

the first preference projects.

Response: To compensate the counties of origin for their

sacrifices, both Acts require Western to provide the counties of origin

with the amount of energy they can use, up to 25 percent of the

additional energy generated by the CVP as a result of the construction

of the respective first preference projects. Under its discretionary

authority, Western determines the manner in which this energy is made

[[Page 34424]]

available to first preference customers. Western believes it is

appropriate to continue to provide these customers with the opportunity

to choose between the two options in the Marketing Plan. This will

allow those customers to decide how to make the best use of the

benefits they are entitled to receive. Whether either of the options

results in a ``better'' product than that received by other customers

would depend on many factors outside of Western's control, such as

future energy prices, and is secondary to meeting the spirit and intent

of the Acts.

Comment: A comment requested that Western provide a summary

supporting the Marketing Plan's compliance with the TRD Act.

Response: Section 4 of the TRD Act of 1955 states,

Contracts for the sale and delivery of the additional electric

energy available from the Central Valley Project power system as a

result of the construction of the plants herein authorized and their

integration with that system shall be made in accordance with

preferences expressed in the Federal reclamation laws: Provided,

That a first preference, to the extent of 25 per centum of such

additional energy, shall be given, under Reclamation law, to

preference customers in Trinity County, California, for use in that

county, who are ready, able, and willing within 12 months after

notice of availability by the Secretary, to enter into contracts for

the energy: Provided further, That Trinity County preference

customers may exercise their option on the same date in each

successive fifth year providing written notice of their intention to

use the energy is given to the Secretary not less than 18 months

prior to said date.

In accordance with the TRD Act, Section VI of the Marketing Plan

provides that Western will calculate and make available to preference

customers/entities in Trinity County, to the extent they can use it

within that county, 25 percent of the additional energy made available

to the CVP as a result of the construction of the TRD. These first

preference customers have the right to this power before it is made

available to other preference customers. Both options provide that the

power be made available to these first preference customers to meet

their needs, and the amount of power can be increased until it reaches

the limit set forth in the TRD Act. A first preference entity may

exercise its rights to use a portion of the MEFPC by providing written

notice to Western at least 18 months prior to the anniversary date of

the first preference project located in its county.

Comment: A commentor supported dividing the MEFPC from the New

Melones Project between Calaveras and Tuolumne Counties. That commentor

requested a provision be added to the Marketing Plan, allowing the

counties of Calaveras and Tuolumne to combine their allocations for the

purpose of joint load management.

Response: Western is willing to consider combining allocations for

the New Melones' counties of origin if it is requested by the affected

parties. Such an arrangement is an operational procedure and does not

need to be specified in the Marketing Plan.

Comment: A comment suggested that Western should share the revenue

received from sales of unused first preference power with the first

preference customers.

Response: Under applicable legislation, there is no basis to share

revenues with the first preference customers.

Comment: Some first preference customers stated that they are

assuming that they will not be charged for scheduling services. Western

was requested to clarify the phrase ``scheduling arrangements''

(Proposed Plan Section V.C).

Response: The phrase ``scheduling arrangement'' as used in Section

V.C of the Proposed Plan was included because Western anticipates that

power deliveries will no longer be determined after the fact, which is

allowed under Contract 14-06-200-2948A. Schedules will be agreed upon

prior to delivery. Scheduling is required under both options for the

first preference customers, as well as for all other customers. Under

the restructured electric utility industry in California, Western or

the customer's scheduling agent will be required to provide schedules

for all power deliveries within the California Independent System

Operator (ISO) control area. The first preference customers may perform

their own scheduling or contract with Western or a third party to

perform scheduling services. If Western is requested to perform

scheduling services, the cost will be borne by each customer requesting

such service. This cost will be identified separately from the Base

Resource rate.

Comment: Commentors requested that Western clarify the phrase

``power requirements'' (Proposed Plan Section VI.D.1).

Response: The reference to ``power requirements'' as used in

Section VI.D.1 of the Proposed Plan means the capacity and energy

necessary to serve a first preference customer's load from that first

preference customer's share of the MEFPC. The statement concerning

power requirements has been clarified in the Marketing Plan.

Comment: A commentor requested that Western clarify the statement

in Section VI.B of the Proposed Plan that Western may purchase power on

behalf of the first preference customers to compensate for any power

loss due to recalculation of the MEFPC.

Response: This provision has been clarified in the Marketing Plan.

Comment: Comments were received stating that priority should be

given to first preference entities that are wholly located within the

counties of origin. Also, if a contract extension is granted to a first

preference customer or a new contract is executed with a first

preference entity that is not entirely located within a county of

origin, it should be for power withdrawable to serve first preference

customers/entities that are wholly located within that county of

origin. A comment also requested the definition of a first preference

customer/entity include the following language,

one which serves and provides a direct and measurable benefit to the

residents of the counties of Trinity, Calaveras, and Tuolumne.

Response: The definition of a first preference customer/entity must

be consistent with the Acts and Reclamation law. Both Acts provide for

electric service to be made available to entities who qualify for

preference under Reclamation law and are located in their respective

counties. Therefore, entities located in Tuolumne, Calaveras, or

Trinity Counties who are preference entities qualify for first

preference rights. The Marketing Plan is consistent with the Acts.

Comment: A commentor said he assumed that Section VI.E of the

Proposed Plan is applicable only to new first preference customers.

Response: Section VI.E of the Proposed Plan, regarding applications

for first preference power, applies only to first preference entities.

First preference entities are entities who are qualified to use, but

are not currently using, preference power within a county of origin.

They are qualified to be first preference customers but are not yet

customers.

Comment: One commentor suggested that first preference customers

had been inappropriately exempted from Section V.B, allocation

percentage adjustment clause, as referenced in Section VI.J of the

Proposed Plan.

Response: Western has determined that Section V.B will be

applicable to the first preference customers, and the Marketing Plan

has been so modified.

[[Page 34425]]

VII. Transmission

Comment: One commentor stated that Western's transmission

obligations under separate transmission contracts must be honored.

Another commentor asked how Western plans to deal with the DOE Labs'

100 MW entitlement on the California-Oregon Transmission Project and

their capacity entitlement on the Tracy Tie Line.

Response: The Marketing Plan does not modify Western's existing

contractual transmission rights or obligations, including DOE's

entitlements.

Comment: A commentor expressed concern that the unbundling of

transmission service from power services would have an adverse impact

on Western's customers, and Western should not require customers to go

through a separate process to obtain transmission. It was suggested

that Western make a ``delivered'' product available, or otherwise use

transmission assets to firm the Base Resource, particularly in dry

years. It was further suggested that, if customers use the transmission

systems of others for delivery of CVP power, they should still be

responsible for a portion of Western's transmission system costs.

Response: Western is not a FERC jurisdictional utility, but has

agreed to comply with the spirit and intent of FERC Order No. 888, to

the extent it does not conflict with Western's legislative mandates. If

it is feasible in the restructured electric utility industry, Western

is willing to evaluate bundled services, including use of its

transmission access to the Northwest, during further development of the

Base Resource, Optional Purchase, and Custom Products. All customers

who use Western's transmission system will share cost responsibility

for the transmission system.

Comment: One commentor stated that Western's current Pacific

Intertie transmission service level does not fully reflect Western's

ownership of its portion of the Pacific Intertie.

Response: Western's current level of Pacific Intertie transmission

is outside the scope of the Marketing Plan.

Comment: One commentor stated that Western needs to consider its

products' impacts on other customers, particularly Western's direct-

connect customers who rely on Western's transmission system.

Response: Western considered the potential impacts of its products

on all customers, including direct-connect customers. It is Western's

intent to offer products which are useful and beneficial to all

customers.

Comment: One commentor objected to Western's proposal to assess

transmission losses to customers that are directly connected to

Western's transmission system.

Response: Under the Marketing Plan, power will be available as a

system sale, not from specific points of generation. It is necessary to

account for the power that is lost between generation and load.

Therefore, all power deliveries using the CVP transmission system will

be subject to loss assessments.

Comment: One commentor requested Western assume a position of

advocacy on its customers' behalf in regard to access and pricing of

third-party transmission. Western was urged to reserve sufficient

capacity on its transmission system to accommodate its customers'

requirements for wheeling of both CVP and purchased firming power.

Western was encouraged to explore ways in which its customers will have

a superior entitlement to schedule capacity on Western's transmission

system, while avoiding the problem of double-billing for transactions

utilizing both the Federal and non-Federal systems.

Response: Access to and pricing of third-party transmission is

outside the scope of the Marketing Plan. Western will provide

transmission services as appropriate in conjunction with its power

sales in a manner consistent with FERC Orders and legislated mandates.

Use of Western's transmission resources will be determined as the

products and services to be provided by Western are further developed.

VIII. Pricing and Rates

Comment: Commentors expressed concerns that, in order to commit to

a long-term Marketing Plan, a clear idea of prices and availability of

power is needed. They stated that the bulk power market is often

trading below Western's current price range, and uncertainties such as

the Restoration Fund make it even more unattractive to choose Western.

Response: Western will sell the Base Resource at a cost-based rate,

and the Custom Product at a pass-through cost. The ratemaking process

is separate from the Marketing Plan; however, as in all Administrative

Procedure Act processes, public participation will be encouraged. Costs

and availability will be more clearly identified by the time

commitments are required for the Base Resource.

Western has no control over Restoration Fund costs; however,

Western is striving to minimize Western components of power costs and

customize products in an attempt to provide the best possible service

at the lowest possible rates consistent with sound business principles.

Western expects its prices to be at or below the bulk market by the

time the Marketing Plan goes into effect.

Comment: Although the take-or-pay method was commented upon

favorably, some commentors stated take-or-pay contracts require details

on prices and products, and are unrealistic unless they are for short

terms. A comment was received favoring cost-of-service ratemaking with

a take-or-pay provision for ``must-run power.''

Response: The take-or-pay approach is expected to provide adequate

revenues to ensure project repayment. The Base Resource will be sold at

a cost-based rate that will be developed in a public process in which

customers and interested parties may participate. Other products will

be sold on a pass-through-cost basis. By the time product commitments

are required, individual customer need and pricing and availability

information will be more clearly defined.

Comment: A commentor requested that Western negotiate for firming

resources on behalf of its entire customer base so that certain

customers will not be competing in the bulk power market against

Western.

Response: The Marketing Plan reflects the option for Western to

negotiate for firming as part of the Custom Product on behalf of its

entire customer base, a group of customers, or individual customers, if

requested by those customers.

Comment: Western should postpone a decision on Washoe Project cost

recovery until more definitive information can be provided.

Response: Western believes all necessary information concerning the

marketing of Washoe Project power is available and has been considered.

Western sees no benefit in delaying the decision to market Washoe

Project power with the CVP resource.

IX. Industry Restructuring

Comment: A commentor stated that restructuring has changed the

rules of the game to the point that Western's proposals are

inconsistent with public interests. Another commentor encouraged

Western to retain flexibility to accommodate changes in the industry.

Response: Western believes it is in the public interest to provide

some resource certainty to its customers and to protect the Federal

investment in project facilities. The Marketing Plan is designed to be

flexible enough to respond to changes in CVP operations and the

industry, and to provide the

[[Page 34426]]

greatest value to customers and the Federal Government.

Comment: A commentor asked if joining the California ISO will pose

any problems for Western.

Response: Whether Western will join the California ISO is a

separate decision from development of the Marketing Plan. The Marketing

Plan does not preclude Western's participation in the California ISO.

Comment: A commentor suggested that Western should recognize the

new competitive market and help its preference customers wherever

possible with competition transition charge problems.

Response: Western designed the Marketing Plan to be flexible to

respond to changes in the industry and provide the greatest value to

its customers. Products and services available under the Marketing Plan

can be customized to meet individual customer's needs in the new

competitive market.

Competition transition charges are outside the scope of the

Marketing Plan.

Responses to Comments Received on the Notice of Public Process on

Resource Pool Size (64 FR 4646, January 29, 1999)

During the public consultation and comment period, Western received

five letters commenting on the Sierra Nevada Region's resource pool

size. No comments were received during the February 9, 1999, public

meeting in Folsom, California. Western reviewed and considered all

comments received by the end of the public consultation and comment

period, March 1, 1999, in preparation of the Marketing Plan.

The following is a summary of the comments received during the

consultation and comment period, and Western's responses to those

comments.

Comment: Some comments stated that the proposed sizes of the

resource pools were adequate to meet the needs of new customers,

including the fair share needs of eligible Native American tribes.

Response: Western considered the needs of new customers, including

Native American tribes, when determining the sizes of the resource

pools during development of the Marketing Plan. Western concurs with

this comment.

Comment: A commentor stated that a larger allocation percentage,

such as 30 percent, would be necessary for certain Native American

tribes in Southern California. That commentor also suggested that an

allocation be set aside for them and dedicated to tribal economic

development.

Response: Southern California is outside the primary marketing area

of the Sierra Nevada Region. The Desert Southwest Customer Service

Region of Western serves Southern California and will develop its

marketing program prior to the expiration of its current electric

service contracts.

Comment: As Western's Marketing Plan becomes more definitive, it

would be beneficial for PG&E to review the Marketing Plan in advance to

assure consistency with any possible post-Contract 14-06-200-2948A

(integration contract with PG&E) contractual relationship.

Response: Under the Administrative Procedure Act, Western cannot

discuss the final Marketing Plan with any entities prior to

publication.

Comment: In determining the level of benefits to Native Americans,

Western should take into account the benefits currently received

through rural electric cooperatives serving the reservations. Western

should attempt to fairly distribute the benefits of low-cost Federal

hydropower, ensuring equity among all eligible tribes and existing

customers.

Response: The allocation and eligibility criteria in the Marketing

Plan were developed to ensure the benefits of Federal power were

equitably distributed among new customers, including eligible Native

American tribes, and existing customers.

Comment: Power could be provided to a utility to serve a tribe;

however, the tribe would actually hold the allocation. By way of a bill

crediting system, the Federal power benefits could be passed on to the

tribe through a credit on its utility bill.

Response: Western intends to allocate power directly to any

eligible Native American tribes that apply for power. The Sierra Nevada

Region will work with tribes to receive power under the California

direct access rules or other applicable arrangements, which may include

bill crediting.

Comment: If a Native American tribe establishes a utility and seeks

an allocation from the resource pool, that tribal utility should be

treated as a utility applicant and subject to the same qualifications

and provisions to which all Federal power customers are subject.

Response: Native American tribal utility applicants will be treated

similarly to other utility applicants.

Summary of Revisions to the Proposed Plan

Western revised the Marketing Plan as a result of the comments

received during the comment period and public forums. Additionally,

some changes have been made to more clearly define the intent, but do

not change the original proposal. The major revisions are summarized as

follows.

The definitions of administrator, curtailable power, diversity

power, load factor, long-term, NDA Act power, peaking, power marketing

initiative, unbundled, and withdrawable have been deleted. These

definitions were deleted because they are not necessary terms in the

final Marketing Plan. The definition of customer was deleted and will

be used as a generic term to refer to new allottees and/or existing

customers. A definition for the Optional Purchase was added to assist

in understanding that product. These modifications appear in Section I,

and are used throughout the Marketing Plan.

In the formulas in Section IV.A.1 and IV.A.2, Western will base an

existing customer's allocation percentage on its extension CRD as of

December 31, 2003, rather than December 31, 2001. Western will adjust

an existing customer's percentage on December 31, 2003, if its maximum

monthly peak load for the previous 3 years is less than its extension

CRD, rather than basing the existing customer's extension CRD on 104

percent of its load during the previous 4 years. This modification also

appears in Appendix A.

Extension CRD was modified to include NDA Act power used for

economic development. This modification appears in Section I and

Appendix A.

Western has decided not to market unused first preference power on

a withdrawable basis. Unused first preference power will be included as

part of the Base Resource and available to all other customers.

Sections I and III were modified. Section V.F of the Proposed Plan has

been deleted.

The commitment date has been changed to December 31, 2000, for the

Base Resource and Optional Purchase, and to December 31, 2002, for the

Custom Product. Additionally, Western may extend the commitment dates

for the Base Resource, Optional Purchase, and Custom Product if Western

determines it is in the best interest of Western and the customers.

This modification appears in Sections III and V.

Unused power resources may be marketed outside the primary

marketing area. This modification appears in Section III.

Existing customers must commit to the Optional Purchase for a 10-

year period, from January 1, 2005, through December 31, 2014, rather

than an annual or greater period. This modification appears in Section

III.

The Call for Resource Pool Applications will be published in a

[[Page 34427]]

separate Federal Register notice. This modification appears in Section

IV.B.2.e.

Existing customers may apply for a resource pool allocation if

their extension CRD is not more than 15 percent of their peak load in

the calendar year prior to the Call for Applications, rather than

calendar year 1996. This modification appears in Section IV.B.2.g.

Requests to serve new loads that are less than 1 MW, but at least

500 kW, will be allowed if they can be aggregated so Western can

schedule and deliver to a minimum load of 1 MW. This modification

appears in Section IV.B.2.h.

Western will base a resource pool allocation on an applicant's peak

demand during the calendar year prior to publication of the Call for

Applications. The amount used to determine a resource pool allottee's

allocation percentage will not be rounded up to the nearest 100 kW.

This modification appears in Section IV.B.3.b.

Eligible Native American entities will receive greater

consideration for an allocation of up to 65 percent of their peak load

in the calendar year prior to the Call for Applications. This

modification appears in Section IV.B.3.e.

First preference customers will be subject to Section V.B, which

clarifies that allocation percentages provided for in the Marketing

Plan and the electric service contracts shall be subject to adjustment.

This modification appears in Sections V.B and VI.K.

Contracts will include a clause specifying criteria that customers

must meet on an ongoing basis to be eligible to continue receiving

electric service from Western. This modification appears in Section

V.F.

Although Western may assist, each customer will be responsible for

obtaining its own delivery arrangements to its load. This modification

appears in Section V.G.

Western may reduce or rescind a customer's allocation percentage,

upon 90-days notice, if Western determines that the customer is not

using the power to serve its own loads or the allocation amount is

consistently greater than the customer's maximum peak load. This

modification appears in Section V.K.

Contracts may include a clause providing for alternative funding

arrangements, including net billing, bill crediting, reimbursable

financing, and advance payment. This modification appears in Section

V.N.

The initial recalculation of the MEFPC pertaining to this Marketing

Plan will be completed by June 1, 2004. This modification appears in

Section VI.A.

The commitment date for first preference customers to commit to the

percentage option has been changed to December 31, 2002. This

modification appears in Section VI.D.

Under the full requirements option, if there is more than one first

preference customer in a county of origin, or a first preference entity

in that county makes a request for power, Western reserves the right to

establish a maximum amount of power available to each first preference

customer from the MEFPC. This modification appears in Section VI.D.1.

For first preference customers, Western will use the maximum demand

during the previous 4 years, rather than the last 12 months, in

determining an allocation percentage under the percentage option. This

modification appears in Section VI.D.2.

A first preference customer's request for an increase in its

allocation percentage under the percentage option must be accompanied

by justification for the increase. This modification appears in Section

VI.D.2.c.

First preference customers will be subject to Section V.L, which

states that any power not under contract may be allocated at any time,

at Western's sole discretion, or sold as deemed appropriate by Western.

This modification appears in Section VI.K.

Western will provide bundled or unbundled transmission services

with its power sales, consistent with FERC Orders, legislated mandates,

or California ISO Agreements. This modification appears in Section VII.

Appendix A was updated to reflect new customers and changes in CRD.

2004 Power Marketing Plan

This Marketing Plan addresses: (1) The power to be marketed after

December 31, 2004, which is the termination date for all Central Valley

Project (CVP) electric service contracts; (2) the general terms and

conditions under which the power will be marketed; (3) the resources

available to existing customers; and (4) the criteria to determine who

will receive allocations from the resource pools.

The Western Area Power Administration (Western) will continue a

collaborative process in implementing the terms set forth in this

Marketing Plan.

Within broad statutory guidelines and operational constraints of

the CVP and the Washoe Project, Western has wide discretion as to whom

and under what terms it will contract for the sale of Federal power, as

long as preference is accorded to statutorily defined public bodies.

Western markets power in a manner that will encourage the most

widespread use at the lowest possible rates consistent with sound

business principles. All products and services provided under this

Marketing Plan will be subject to operational requirements and

constraints of the CVP and Washoe Project, transmission availability,

purchase power limitations, and Federal authorities.

I. Acronyms and Definitions

As used herein, the following acronyms and terms, whether singular

or plural, shall have the following meanings:

Allocation: An offer from Western to sell Federal power for a

certain period of time, that will convert to a right to purchase after

execution of a contract.

Allocation Criteria: Conditions applied to all applicants who

receive an allocation.

Allottee: An entity receiving an allocation percentage under this

Marketing Plan.

Ancillary Services: Those services necessary to support the

transfer of electricity while maintaining reliable operation of the

transmission provider's transmission system in accordance with good

utility practice. Ancillary services are generally described in Federal

Energy Regulatory Commission (FERC) Order No. 888 (Docket Nos. RM95-8-

000 and RM94-7-001), issued April 24, 1996.

Base Resource: CVP and Washoe Project power output and existing

power purchase contracts extending beyond 2004, determined by Western

to be available for marketing, after meeting the requirements of

project use and first preference customers, and any adjustments for

maintenance, reserves, transformation losses, and certain ancillary

services.

Capacity: The electrical capability of a generator, transformer,

transmission circuit or other equipment.

Central Valley Project (CVP): A multipurpose Federal water

development project extending from the Cascade Range in northern

California to the plains along the Kern River, south of the City of

Bakersfield.

Contract Principles: Provisions of the electric service contracts,

including Western's General Power Contract Provisions.

Contract Rate of Delivery (CRD): The maximum amount of capacity

made available to a customer for a period specified under a contract.

Custom Product: A combination of products and services, excluding

[[Page 34428]]

provisions for load growth, which may be made available by Western per

customer request, using the customer's Base Resource and supplemental

purchases made by Western.

Eligibility Criteria: Conditions that must be met to qualify for an

allocation.

Energy: Measured in terms of the work it is capable of doing over a

period of time; electric energy is usually measured in kilowatthours or

megawatthours.

Existing Customer: A preference customer with a contract to

purchase firm power, offered under a previous allocation process or

marketing plan, that extends through December 31, 2004.

Extension CRD: An existing customer's CRD exclusive of diversity

and curtailable power, and peaking/excess capacity, as it may be

adjusted in accordance with this Marketing Plan.

Firm: A type of product and/or service that is available to a

customer at the times it is required.

First Preference Customer/Entity: A preference customer and/or a

preference entity (an entity qualified to use, but not using preference

power) within a county of origin (Trinity, Calaveras, and Tuolumne) as

specified under the Trinity River Division Act (69 Stat. 719) and the

New Melones project provisions of the Flood Control Act of 1962 (76

Stat. 1173, 1191-1192).

General Power Contract Provisions (GPCP): Standard terms and

conditions which are included in Western's electric service contracts.

Integrated Resource Plan (IRP): A process and framework within

which the costs and benefits of both demand and supply-side resources

are evaluated to develop the least total cost mix of utility resource

options.

Kilowatt (kW): A unit measuring the rate of production of

electricity; one kilowatt equals one thousand watts.

Marketing Plan: Western's final 2004 Power Marketing Plan for the

Sierra Nevada Region.

Megawatt (MW): A unit measuring the rate of production of

electricity; one megawatt equals one million watts.

National Defense Authorization Act (NDA Act): Section 2929 of the

National Defense Authorization Act, Pub. L. 103-160, 107 Stat. 1547,

1935 (1993), which provides that, for a 10-year period (starting in

1993), the CVP electric power allocations to military installations in

the State of California, which have been closed or approved for

closure, shall be reserved for sale through long-term contracts to

preference entities which agree to use such power to promote economic

development at the military installations closed or approved for

closure.

Optional Purchase: An additional increment of power purchased by

the Sierra Nevada Region at the request of an eligible existing

customer on a pass-through-cost basis. Such power will be made

available as a replacement for the Base Resource that is unavailable to

that existing customer due to the Sacramento Municipal Utility

District's (SMUD) percentage right of 360/1,152 of the Base Resource

provided for under the SMUD Settlement Agreement. The Optional Purchase

will terminate on December 31, 2014.

Power: Capacity and energy.

Preference: The requirements of Reclamation law which provide that

preference in the sale of Federal power be given to certain entities,

such as municipalities and other public corporations or agencies and

also to cooperatives and other nonprofit organizations financed in

whole or in part by loans made pursuant to the Rural Electrification

Act of 1936 (Reclamation Project Act of 1939, section 9(c), 43 U.S.C.

485h(c)).

Primary Marketing Area: The area which generally encompasses

northern and central California extending from the Cascade Range to the

Tehachapi Mountains, and west-central Nevada.

Project Use: Power as defined by Reclamation law and/or used to

operate CVP and Washoe Project facilities.

Reclamation Law: Refers to a series of Federal laws with a lineage

dating back to the turn of the century. Viewed as a whole, those laws

create the framework under which Western markets power.

Sierra Nevada Region: The Sierra Nevada Customer Service Region of

the Western Area Power Administration.

Washoe Project: A Federal water project located in the Lahontan

Basin in west-central Nevada and east-central California.

Western: Western Area Power Administration, United States

Department of Energy, a Federal power marketing administration

responsible for marketing and transmitting of Federal power pursuant to

Reclamation law and the DOE Organization Act (42 U.S.C. 7101-7352).

II. Base Resource

The Base Resource, as defined in Section I, will include CVP and

Washoe Project generation supported by certain power purchases. CVP

generation (energy and capacity) will vary hourly, daily, monthly, and

annually, because it is subject to hydrological conditions and other

constraints that may govern CVP operations. CVP generation must be

adjusted for project use, maintenance, reserves, transformation losses,

and certain ancillary services before CVP generation is available for

marketing. The power resources will be further adjusted for

transmission losses to the point of delivery. The power resources may

also be adjusted for first preference customers, when first preference

customers' needs increase, up to the maximum entitlement of first

preference customers.

Western will market part of the 3.65 MW and estimated annual energy

generation of 10,000 MWh available from the Washoe Project as part of

the Base Resource. The U.S. Department of the Interior, Fish and

Wildlife Service Lahontan National Fish Hatchery and Marble Bluff Fish

Facility are project use loads of the Washoe Project and have first

call on those power resources. The generation available after serving

the Fish and Wildlife Service needs will be marketed with the CVP power

resources. The Washoe Project is subject to the same variability and

constraints as the CVP.

Western will also include any power available from existing power

purchase contracts with terms extending beyond 2004 in the Base

Resource. Currently, Western has a contract with Enron Power Marketing,

Inc., that has a final termination date of December 31, 2014.

The adjustments and variables discussed above will influence the

amount of Base Resource available to customers. During some critically

dry months, purchases may be required to meet project use and

obligations to first preference customers, and only a minimal amount of

Base Resource will be available during such months. The usability of

the Base Resource for meeting customers' loads will be directly related

to the amount of firming provided by Western and a customer's ability

to integrate this power resource into its power resource mix.

III. Products and Services

Western will market its Base Resource alone or in combination with

the Optional Purchase and/or Custom Product, which could include

purchasing some level of firming power on behalf of all customers, a

group of customers, or individual customers. All costs incurred by

Western in providing additional services to customers will be paid by

those customers using the services. The degree to which Western

continues to purchase power will depend on customer requests and

Federal authorities. After the effective date of this Marketing Plan,

Western will determine, in a collaborative process with the customers,

the best use of Western's power and transmission

[[Page 34429]]

resources to provide the Base Resource, Optional Purchase, and Custom

Products.

Each allottee will be allocated a percentage of the Base Resource.

All customers will be required to commit to the Base Resource no later

than December 31, 2000.

Upon request, Western will provide a qualified existing customer

with the Optional Purchase. Commitments to the Optional Purchase must

be made by December 31, 2000. Existing customers requesting the

Optional Purchase must commit to the Optional Purchase at the time a

commitment is made for the Base Resource, through December 31, 2014.

Upon request, Western may develop a Custom Product for any

customer. A Custom Product may include ancillary services, reserves,

etc., or may include Western purchasing additional resources, including

firming power, to provide some of these services. Commitments to

purchase a Custom Product must be made by December 31, 2002, for a

period of no less than 5 years of service, beginning January 1, 2005.

Thereafter, the Custom Product will be offered for periods as agreed to

by Western.

Western may extend the commitment dates for the Base Resource,

Optional Purchase, and Custom Product if Western determines it is in

the best interest of Western and the customers.

Any unused power resources may be marketed under terms and

conditions and for periods of time as determined by Western, and may be

marketed outside the primary marketing area.

Western will establish and manage an exchange program to allow all

customers to fully and efficiently use their power allocations. The

exchange program will be further developed by Western through a

collaborative process with all customers. Specific criteria for the

exchange program will be included in electric service contracts. Any

power under contract that cannot be used on a real-time basis, due to a

customer's load profile, must be offered under this exchange program to

Western or other preference customers.

IV. Resource Available to Existing Customers and Resource Pool

Allocations

Western will allocate a portion of the Base Resource to existing

customers and set aside a portion for new allocations. Effective

January 1, 2015, Western will reduce all customers' allocation

percentages by up to 2 percent to establish a 2015 Resource Pool.

Initially, an existing customer, except first preference customers and

the Sacramento Municipal Utility District (SMUD), will be allocated 96

percent of its pro rata share of the Base Resource based on the ratio

of the existing customer's extension CRD to the total existing

customers' extension CRD. First preference customers are subject to

specific legislation and are addressed in Section VI. SMUD will have a

specific allocation through 2014 based on a prior settlement agreement.

Effective January 1, 2015, Western will recalculate the percentages

for all existing customers, including SMUD and customers receiving an

allocation from the 2005 Resource Pool. Western will derive each

customer's new percentage based on the change in SMUD's percentage

described later in this section and the reduction for the 2015 Resource

Pool. The new percentages will be applicable from 2015 through 2024.

A. Resource Available to Existing Customers

Existing customers, excluding SMUD, will have a right to purchase a

percentage of the Base Resource based on the ratio of each existing

customer's extension CRD to the total of all existing customers'

extension CRD, excluding SMUD, under the terms of this section. Current

extension CRD are set forth in appendix A. From 2005 through 2014, SMUD

will have a right to purchase 360/1,152 of the Base Resource, as

referenced in the Settlement Agreement with SMUD, Contract DE-MS65-

83WP59070, dated April 15, 1983. All other existing customers have a

right to purchase the Base Resource amount remaining after Western

adjusts it to accommodate SMUD's rights and the 2005 Resource Pool.

After 2014, Western will adjust SMUD's right to purchase the Base

Resource to reflect the ratio of SMUD's extension CRD to the total of

all existing customers' extension CRD. SMUD's right will also be

adjusted by 4 percent (2005 Resource Pool adjustment) and up to an

additional 2 percent to accommodate the 2015 Resource Pool.

Due to the diversity among existing customers' loads, including

SMUD's load, existing customers' total extension CRD exceeds the 1,152

MW referenced in the SMUD Settlement Agreement. This Marketing Plan

will result in SMUD receiving a proportionately greater share of the

Base Resource than other existing customers if the total extension CRD

remains at a level greater than 1,152 MW. Therefore, existing

customers, excluding SMUD and first preference customers, have the

right to request the Optional Purchase.

The following extension formulas are used to determine existing

customers' purchase rights to the Base Resource. Application of these

formulas also determines each existing customer's right to the Optional

Purchase. No allocation percentage will be based on an extension CRD

greater than an existing customer's load.

1. For the period 2005 through 2014, existing customers' purchase

rights to the CVP resource are calculated as follows:

a. SMUD's purchase right = (360/1,152) x BR

b. Other existing customers' purchase rights = (A/B) x ABR

Where:

A = An individual existing customer's extension CRD. Western may adjust

``A'', if Western determines that, as of December 31, 2003, the

extension CRD is greater than the existing customer's maximum monthly

peak load for the previous 3 years or if the existing customer's

extension CRD has been changed from the amount set forth in Appendix A

of this Marketing Plan.

B = The sum of all values for ``A'', excluding SMUD.

BR = Base Resource.

ABR = Adjusted Base Resource = {BR--[(360/1,152) x BR]} x (100%--

RP%). After 2014, the SMUD adjustment of [(360/1,152) x BR] will be

deleted.

RP% = 2005 Resource Pool percentage.

2. Existing customers' rights to the Optional Purchase will be

calculated as follows:

Individual existing customer's Optional Purchase = (A/B) x TOP

Where:

TOP = Total Optional Purchase = [(360/1,152)--(361/C)] x BR x

(100%--RP%).

C = The sum of all existing customers' extension CRD, including SMUD.

B. Resource Pool Allocations

Western will reserve a portion of the power available after 2004

for allocation to eligible applicants.

1. Resource Pool Amount:

The 2005 Resource Pool consists of up to 4 percent of the power

resources available after 2004. Western will also establish a 2015

Resource Pool. The 2015 Resource Pool will consist of up to 2 percent

of the power resource available after 2014, plus a portion of the

resource that becomes available from adjusting SMUD's percentage. That

portion will be equal to what SMUD would have been required to

contribute to the 2005 Resource Pool. SMUD will also be subject to the

2015 Resource Pool adjustment of up to 2 percent.

[[Page 34430]]

Western will, at its discretion, allocate a percentage of the 2005

Resource Pool to each applicant that meets the eligibility and

allocation criteria. This allocation percentage will be multiplied by

the 2005 Resource Pool percentage to determine the applicant's

percentage of the Base Resource. Allocations from the 2015 Resource

Pool will be determined through a separate public process conducted

prior to 2015.

2. Eligibility Criteria:

Western will apply the following eligibility criteria to all

applicants seeking a resource pool allocation under this Marketing

Plan.

a. Applicants must meet the preference requirements of Reclamation

law.

b. Applicants should be located within Sierra Nevada Region's

primary marketing area. If the Sierra Nevada Region's power resources

are not fully subscribed, Western may market its resource outside the

primary marketing area.

c. Applicants that require power for their own use must be ready,

willing, and able to receive and use Federal power. Federal power shall

not be resold to others.

d. Applicants that provide retail electric service must be ready,

willing, and able to receive and use the Federal power to provide

electric service to their customers, not for resale to others.

e. Applicants must submit an application in response to the Call

for Resource Pool Applications under a separate Federal Register

notice.

f. Native American applicants must be a Native American tribe as

defined in the Indian Self Determination Act of 1975 (25 U.S.C. 450b,

as amended).

g. Existing customers may apply for a resource pool allocation if

their extension CRD, set forth in Appendix A, is not more than 15

percent of their peak load in the calendar year prior to the Call for

Applications, and not more than 10 MW.

h. Western will normally not allocate power to applicants with

loads of less than 1 MW; however, allocations to applicants with loads

which are at least 500 kW may be considered, provided the loads can be

aggregated with other allottees' loads to schedule and deliver to a

minimum load of 1 MW.

3. Allocation Criteria:

Western will apply the following allocation criteria to all

applicants receiving a resource pool allocation under this Marketing

Plan.

a. Allocations will be made in amounts as determined solely by

Western in exercise of its discretion under Reclamation law and

considered to be in the best interest of the U.S. Government.

b. Allocations will be based on the applicant's peak demand during

the calendar year prior to the Call for Applications or the amount

requested, whichever is less.

c. An allottee will have the right to purchase power from Western

only upon the execution of an electric service contract between Western

and the allottee, and satisfaction of all conditions in that contract.

d. All customers, including those receiving an allocation from the

2005 Resource Pool, will be subject to the 2015 Resource Pool

adjustment.

e. Eligible Native American entities will receive greater

consideration for an allocation of up to 65 percent of their peak load

in the calendar year prior to the Call for Applications.

V. General Criteria and Contract Principles

Western will initially offer existing customers a contract

amendment for the right to purchase a percentage of the Base Resource

after 2004. After allocations are final, resource pool allottees will

be offered a contract to set forth their allocation percentage. In

order to finalize the electric service arrangements, new contracts will

be offered to new and existing customers subsequent to the date product

commitments are required, as set forth in this Marketing Plan. The

following criteria and contract principles will apply to all contracts

executed under this Marketing Plan, except that certain criteria may

not apply to first preference customers' contracts and 2015 Resource

Pool allottees' contracts:

A. Electric service contracts and amendments shall be executed

within 6 months of a contract offer, unless otherwise agreed to in

writing by Western.

B. Allocation percentages provided for in this Marketing Plan and

the electric service contracts shall be subject to adjustment.

C. All power supplied by Western will be delivered pursuant to a

scheduling arrangement.

D. All power will be provided on a take-or-pay basis. All costs

associated with the products and services provided, including costs

associated with ancillary services, Optional Purchases, Custom

Products, and transmission will be passed on to the customer(s) using

the product or service.

E. Contract amendments and contracts shall require a written

commitment to a percentage of the Base Resource and the Optional

Purchase on or before December 31, 2000, and the Custom Product on or

before December 31, 2002. Western may extend the final commitment dates

for the Base Resource, Custom Product, and Optional Purchase.

F. Contracts will include a clause specifying criteria that

customers must meet on a continuous basis to be eligible to receive

electric service from Western.

G. Upon request, Western shall provide, or assist each new and

existing customer in obtaining, transmission arrangements for delivery

of power marketed under this Marketing Plan; nonetheless, each entity

is ultimately responsible for obtaining its own delivery arrangements

to its load. Transmission service over the CVP system will be provided

in accordance with Section VII of this Marketing Plan.

H. Contracts shall provide for Western to furnish electric service

effective January 1, 2005, through December 31, 2024.

I. Specific products and services may be provided for periods of

time as agreed to in the electric service contract.

J. Contracts shall incorporate Western's standard provisions for

electric service contracts, integrated resource plans, and General

Power Contract Provisions, as determined by Western.

K. Contracts will include a clause that allows Western to reduce or

rescind a customer's allocation percentage, upon 90-days notice, if

Western determines that (1) the customer is not using this power to

serve its own loads, except as otherwise specified in Section III; or

(2) the allocation amounts are consistently greater than the customer's

maximum peak load.

L. Any power not under contract may be allocated at any time, at

Western's sole discretion, or sold as deemed appropriate by Western.

M. Contracts will include a clause providing for Western to adjust

the customers' allocation percentage for the 2015 Resource Pool.

N. Contracts may include a clause providing for alternative funding

arrangements, including net billing, bill crediting, reimbursable

financing, and advance payment.

VI. First Preference Entitlement and Allocation

The Trinity River Division Act and the New Melones Project

provisions of the Flood Control Act of 1962 (Acts) specify that

contracts for the sale and delivery of the additional electric energy,

available from the CVP power system as a result of the construction of

the plants authorized by these Acts and their integration into the CVP

system,

[[Page 34431]]

shall be made in accordance with preferences expressed in Federal

Reclamation laws. These Acts also provide that a first preference of up

to 25 percent of the additional energy shall be given, under

Reclamation law, to preference customers in the counties of origin

(Trinity, Tuolumne, and Calaveras), for use in those counties, who are

ready, willing, and able to enter into contracts for the energy.

To meet the requirements of the Acts, Western published the Final

Withdrawal Procedures (51 FR 7702, March 5, 1986). This Marketing Plan

supersedes the Final Withdrawal Procedures, or any successor

procedures, as of January 1, 2005.

Western will calculate and allocate the maximum entitlements of

first preference customers (MEFPC). The MEFPC is the maximum amount of

energy available to first preference customers/entities, in accordance

with the following:

A. The MEFPC will be calculated separately for the New Melones

Project, Calaveras and Tuolumne Counties, and the Trinity River

Division (TRD), Trinity County (first preference projects). To

determine the 25 percent of additional energy made available to the CVP

as a result of the construction of each of these projects, Western will

use the average of the previous 20 years of historical annual

generation. The TRD MEFPC includes generation from Trinity, Carr, and

Spring Creek Powerplants and a portion of the Keswick Powerplant

generation. The MEFPC will be recalculated every 5 years, with the

initial recalculation pertaining to this Marketing Plan completed by

June 1, 2004.

B. Upon recalculation, if the MEFPC from a first preference project

is 10 percent above or below the currently effective MEFPC from that

first preference project, the MEFPC will be adjusted to reflect that

increase or decrease. Western will notify affected first preference

customers at least 6 months before making an adjustment to the MEFPC.

If recalculation reduces the MEFPC to an amount less than the load

previously served, Western may, upon request and at its discretion,

make purchases necessary to replace that amount of power no longer

available. The costs for all such purchases made on behalf of a first

preference customer will be passed on to that first preference

customer.

C. An allocation made to a first preference customer/entity under

this Marketing Plan will be based on the power requirements of that

first preference customer/entity. The sum of allocations of first

preference power, including losses, shall not exceed the MEFPC from

each first preference project, or a county of origin's share of the

MEFPC, except as allowed under Section VI.G below.

D. Western will work with each first preference customer/entity to

identify its power requirements and the best use of its first

preference entitlement. Each first preference customer/entity may elect

one of the product and service options set forth below. A commitment to

one of these options must be made in writing no later than December 31,

2002. If a commitment is not made by December 31, 2002, the full

requirements option will be deemed chosen.

Under each option, the first preference customer will be

responsible for transformation and transmission losses to the first

preference customer delivery point. Transmission losses shall include

losses for CVP transmission and third-party transmission.

1. Full Requirements: Western will provide the first preference

customer with its full power requirements (capacity and energy) up to

its right to the MEFPC at the Base Resource rate. If there is more than

one first preference customer in a county of origin, or a first

preference entity in that county makes a request for power, Western

reserves the right to establish a maximum amount of power available to

each first preference customer from the MEFPC. Payment under this

option will be based on usage.

2. Percentage: Western will determine the allocation percentage in

a manner similar to that of the other customers receiving a power

allocation. The first preference customer's maximum demand during the

previous 4 years will be used in determining an allocation percentage

of the power resource under this option. Power will be provided on a

take-or-pay basis under this option. The following will apply to each

first preference customer selecting this percentage option.

a. First preference customers will not be subject to adjustments

for the resource pool or the SMUD settlement, and will not be eligible

for the Optional Purchase. Under this option, first preference

customers are eligible for the Custom Product as defined in Section

III.

b. The allocation percentage made available to each first

preference customer under this Marketing Plan will be applied to the

power resources which have been adjusted for project use.

c. First preference customers will have the opportunity to have

their allocation percentage adjusted, as agreed to by Western.

Increases, up to a first preference customer's share of the MEFPC, will

require a written notice 7 months in advance of the first day of the

month in which the increase is requested to become effective.

Justification for the increase must accompany the request.

E. A first preference entity may exercise its right to use a

portion of the MEFPC by providing written notice to Western at least 18

months prior to the anniversary date of the first preference project

located in its county. The anniversary date is the successive fifth

year anniversary of the date the Secretary of the Interior declared the

availability of power from the powerplants in the counties of origin.

New applications for service to begin on January 1, 2005, under this

Marketing Plan must be received 18 months prior to January 1, 2002

(i.e., July 1, 2000) for Trinity County and 18 months prior to April 5,

2002 (i.e., October 5, 2000) for Calaveras and Tuolumne Counties. Other

anniversary years applicable to this Marketing Plan are 2007, 2012,

2017, and 2022.

F. If the request of a first preference customer/entity for power,

including adjustment for losses, is greater than the remaining MEFPC

from that county's first preference project, then Western will allocate

the remaining MEFPC to the first preference customer/entity first

making a request for a power allocation or a justified increase in its

allocation percentage.

G. Power allocated to first preference customers/entities in

Tuolumne and Calaveras Counties will be subject to the following

additional conditions:

1. Tuolumne and Calaveras Counties shall each be entitled to one-

half of the New Melones Project MEFPC.

2. If first preference customers in either Tuolumne County or

Calaveras County are not using their county's full one-half share, and

a first preference customer/entity in the other county requests power

in an amount exceeding that county's one-half share, then Western will

allocate the unused power, on a withdrawable basis, to the requesting

first preference customer/entity. Such power may be withdrawn for use

by a first preference customer/entity in the county not using its full

one-half share upon 6-months written notice from Western.

H. Trinity Public Utilities District is currently the sole

recipient of the TRD's first preference rights.

I. Transmission service will be provided in accordance with

applicable laws and Section VII of this Marketing Plan.

[[Page 34432]]

J. For planning purposes, first preference customers may be

required to provide forecasts and other information required by Western

as set forth in the electric service contract.

K. The general criteria and contract principles set forth in

Sections V.A through C, F through L, and N of this Marketing Plan will

apply to first preference customers.

VII. Transmission Service

Western will provide bundled or unbundled transmission services as

appropriate in conjunction with its power sales in a manner consistent

with FERC Orders, legislated mandates, or California ISO Agreements, as

appropriate. Western will determine the use of its transmission

resources concurrently with further development of the products and

services under this Marketing Plan. Specific terms and conditions for

transmission will be provided for in future service agreements.

Dated: June 10, 1999.

Michael S. Hacskaylo,

Administrator.

Appendix A

This Appendix lists the existing customers' CRD amounts and

extension percentages as of May 1, 1999. Final percentages will be

available after December 31, 2003.

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

Extension CRD

(CRD \1\ \2\ Percentage of

Existing customers CRD \1\ (kW) less excluded base resource

types of (2005-2014)

power) \3\

---------------------------------------------------------------------------------------(kW)---------------------

Air Force--Beale................................................ 21,575 21,575 1.42461

Air Force--McClellan \4\........................................ 12,000 12,000 0.79237

Air Force--Onizuka \4\.......................................... 1,500 1,500 0.09905

Air Force--Travis............................................... 12,651 12,651 0.83535

Air Force--Travis/David Grant Medical Center \4\................ 4,000 4,000 0.26412

Air Force--Travis Wherry Housing................................ 1,400 1,400 0.09244

Alameda, City of \5\............................................ 21,145 21,145 1.39622

Arvin-Edison Water Storage District............................. 30,000 30,000 1.98092

Avenal, City of................................................. 622 622 0.04107

Banta-Carbona Irrigation District............................... 3,700 3,700 0.24431

Bay Area Rapid Transit District................................. 4,000 4,000 0.26412

Biggs, City of.................................................. 4,200 4,200 0.27733

Broadview Water District........................................ 500 500 0.03302

Byron-Bethany Irrigation District............................... 2,200 2,200 0.14527

Calaveras Public Power Agency................................... 8,000 .............. ..............

California State University, Sacramento--Nimbus................. 40 40 0.00264

Cawelo Water District........................................... 500 500 0.03302

Corrections--California State Prison--Sacramento................ 2,300 2,300 0.15187

Corrections--Deuel Vocational Institute......................... 1,700 1,700 0.11225

Corrections--Northern California Youth Center................... 1,700 1,700 0.11225

Corrections--Sierra Conservation Center......................... 3,000 .............. ..............

Corrections--Vacaville Medical Facility......................... 1,800 1,800 0.11886

Defense Logistics Agency--Sharpe Facility....................... 4,000 4,000 0.26412

Defense Logistics Agency--Tracy Facility........................ 3,800 3,800 0.25092

East Bay Municipal Utility District \5\......................... 1,965 1,965 0.12975

East Contra Costa Irrigation District........................... 2,500 2,500 0.16508

Eastside Power Authority \5\.................................... 2,961 2,961 0.19552

Energy--Lawrence Berkeley National Laboratory................... 9,000 9,000 0.59428

Energy--Lawrence Livermore National Laboratory.................. 44,711 44,711 2.95229

Energy--Lawrence Livermore, Site 300............................ 2,000 2,000 0.13206

Energy--Stanford Linear Accelerator Center...................... 21,903 12,903 0.85199

Glenn-Colusa Irrigation District................................ 3,343 3,343 0.22074

Gridley, City of................................................ 9,400 9,400 0.62069

Healdsburg, City of \5\......................................... 3,241 3,241 0.21401

James Irrigation District \5\................................... 987 987 0.06517

Kern-Tulare Water District \5\.................................. 987 987 0.06517

Lassen Municipal Utility District............................... 3,000 3,000 0.19809

Lodi, City of \5\............................................... 13,236 13,236 0.87398

Lompoc, City of \5\............................................. 5,197 5,197 0.34316

Lower Tule River Irrigation District \5\........................ 1,965 1,965 0.12975

Merced Irrigation District \4\.................................. 5,000 5,000 0.33015

Modesto Irrigation District \5\................................. 10,805 10,805 0.71346

NASA--Ames Research Center...................................... 80,000 80,000 5.28245

NASA--Moffett Federal Airfield \4\.............................. 5,009 5,009 0.33075

Navy--Naval Weapons Station, Concord \4\........................ 2,898 2,898 0.19136

Navy--Naval Radio Station, Dixon................................ 915 915 0.06042

Navy--Naval Air Station, Lemoore \4\............................ 23,000 23,000 1.51870

Navy--Naval Communications Station, Stockton.................... 3,700 3,700 0.24431

Oakland Army Base............................................... 2,275 2,275 0.15022

Oakland, Port of \4\............................................ 1,000 1,000 0.06603

Palo Alto, City of.............................................. 175,000 175,000 11.55535

Parks & Recreation, California Department of.................... 100 100 0.00660

Parks Reserve Forces Training Area.............................. 500 500 0.03302

Patterson Water District........................................ 2,000 2,000 0.13206

Pittsburg Power Company \4\..................................... 5,000 5,000 0.33015

Plumas-Sierra Rural Electric Cooperative........................ 25,000 25,000 1.65076

[[Page 34433]]

Provident Irrigation District................................... 750 750 0.04952

Rag Gulch Water District........................................ 500 500 0.03302

Reclamation District 2035....................................... 1,600 1,600 0.10565

Redding, City of................................................ 116,000 116,000 7.65955

Roseville, City of.............................................. 69,000 69,000 4.55611

Sacramento Municipal Utility District \7\....................... 361,000 361,000 31.25000

Sacramento Municipal Utility District........................... 100,000 .............. ..............

San Francisco, City and County of \4\........................... 2,600 2,600 0.17168

San Juan Water District......................................... 1,000 1,000 0.06603

San Luis Water District......................................... 6,650 6,650 0.43910

Santa Clara Valley Water District \5\........................... 987 987 0.06517

Shasta Lake, City of............................................ 11,450 11,450 0.75605

Silicon Valley Power............................................ 216,532 136,532 9.01529

Sonoma County Water Agency...................................... 1,500 1,500 0.09905

Trinity Public Utilities District............................... 17,000 .............. ..............

Tuolumne Public Power Agency.................................... 7,000 .............. ..............

Turlock Irrigation District \5\................................. 3,941 3,941 0.26023

Ukiah, City of \5\.............................................. 8,773 8,773 0.57929

University of California, Davis................................. 14,682 14,682 0.96946

West Side Irrigation District................................... 2,000 2,000 0.13206

West Stanislaus Irrigation District............................. 5,200 5,200 0.34336

Westlands Water District \5\.................................... 21,441 21,441 1.41576

2005 Resource Pool \6\.......................................... .............. .............. 2.75000

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

Total....................................................... 1,584,537 1,360,537 100.00000

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

Notes:

\1\ CRD temporarily laid off and temporarily allocated to other existing customers is reflected in this Appendix

A, under both CRD and extension CRD, as being returned to the existing customer who received the original

allocation.

\2\ Western will reduce the extension CRD if Western determines that, as of December 31, 2003, the extension CRD

is greater than the existing customer's load.

\3\ Exclusions are diversity, curtailable, and first preference power; and peaking and excess capacity.

\4\ These extension CRD could be adjusted as a result of the NDA Act procedures. Also, new NDA Act customers

could be added through November 30, 2003.

\5\ Westlands Water District has a right to 50 MW through December 31, 2004. Certain existing customers have

been allocated a portion of the 50 MW, subject to withdrawal for use by Westlands Water District. Allocation

percentages effective after December 31, 2004, will be adjusted to reflect changes made as a result of

Westlands Water District's use and withdrawals, in accordance with Section IV.A.1.b.

\6\ The 4 percent 2005 Resource Pool is adjusted for SMUD's non-participation due to the Settlement Agreement.

\7\ 31.25 percent reflects the 360/1,152 ratio in the SMUD Settlement Agreement. After December 31, 2014, SMUD's

percentage will be based on its extension CRD.

[FR Doc. 99-16018 Filed 6-24-99; 8:45 am]

BILLING CODE 6450-01-P