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Replacement Resources Process
Update Newsletter, December 1996

Western responds to public comments on Draft Methods Report

The Draft Methods Report was produced as an integral part of the Western Area Power Administration (Western) Replacement Resources Process. This process was initiated by Western in response to Title XVIII of the Reclamation Projects Authorization and Adjustment Act of 1992, P.L. 102-575, also known as the Grand Canyon Protection Act of 1992 (GCP Act).

The stated purpose of the GCP Act is to "protect, mitigate adverse impacts on, and improve the values for which the Grand Canyon National Park and the Glen Canyon National Recreation Area were established, while preserving the dam's water storage, allocation, and delivery functions." The identification of "economically and technically feasible methods" of replacing power generation made unavailable due to changes in long-range operating criteria of the hydroelectric generating facilities at Glen Canyon Dam (GCD), as specified in the GCP Act, is the subject of the Replacement Resources Methods Report.

The Draft Methods Report was issued to the public in July 1996. Four public meetings were held during July in Albuquerque, Denver, Phoenix, and Salt Lake City in which those attending offered comments on the Draft Methods Report and the overall Replacement Resources Process.

Attending were approximately 40 interested individuals and stakeholders from environmental organizations, firm electric power customers, state and Federal agencies, and various utilities and power marketers interested in becoming potential suppliers of replacement resources.

Seven organizations provided written comments before the Sept. 3 comment deadline. Overall, the comments supported efforts by the CRSP Customer Service Center staff in developing the Draft Methods Report. However, suggestions were offered to further involve the public, revise the Report, and delay the final report to Congress.

Comment Summary

Purchase Power Policy: Several commentors questioned the relevance of including Western's Purchase Power Policy (Policy) in the Replacement Resources Process, and believe it should be excluded because it had not been the subject of adequate public review, nor was it relevant to the process. They believe that since the Methods Report is required under specific legislation, it should be exempt from the policy, and that the Methods Report's requirements are intended to address a very specific replacement power need.

Response: Western will revise the Final Report to clarify that the Purchase Power Policy is an internal policy document created to provide guidance to Western employees involved in power purchases, but that it does not have priority over provisions of the firm power contracts or the GCP Act. Western will remove the Policy as a direct influence in the Replacement Resources Process.

Non-Hydro Renewable Resources Concept: Commentors also questioned the relevance of the April 1996 Concept for Purchase of Non-Hydropower Renewable Resources and Solicitations of Interest to the Replacement Resources Process because of the lack of adequate public consultation at the time the Draft Report was issued. One commenter believes it is critical that Western establishes that the replacement power program is a consequence of pursuing GCP Act policy objectives and that it should not be viewed as an opportunity to accomplish goals other than those set forth in the GCP Act.

Response: Western included the Concept as an influence on the Replacement Resources process because, at the time the Draft Methods Report was written, it was uncertain what final form the Concept would take, and whether it would affect the Replacement Resources process. Since the publication in July of the Draft Methods Report, the Final Concept was issued (August 2, 1996), eliminating the proposed set-aside for renewable resource purchases. Western will modify references to the Concept in the Final Methods Report and remove it as a direct influence on the Replacement Resources Process.

Technology Maturity: Western was asked to reconsider the policy guideline that requires replacement resource acquisitions be made only from mature resource technologies, as defined by the Electric Power Research Institute. Conversely, support for Western's strategic goals, particularly the goals of obtaining least-cost replacement power for customers and focusing on mature technologies, was also voiced.

Response: After reevaluating the issue of technology maturity in resource acquisition, Western believes that it can achieve the goal of shielding purchasers of Western Replacement Power from nonperformance risks by including appropriate protections in its future contracts with resource providers, rather than using the technology maturity criterion to screen out unproven technologies. Western will remove references to the technology maturity criterion from the Final Report, and include additional explanation of the types of protections it will include in future resource acquisition contracts.

Schedule: The schedule for completing the Methods Report brought several comments. Western was urged to delay completing the report until after completion of the Record of Decision on the Glen Canyon Environmental Impact Statement (GCD EIS) and until Western's firm power contract modification process is completed. It was recommended that the Draft Report be carefully reviewed to ensure consistency with definitions, interpretations, concepts, understandings, and agreements developed through the firm power contract modification process. Some want to review the Methods Report executive summary and any accompanying transmittals before they are completed and submitted to Congress.

Response: To ensure that methods are in place in time to potentially acquire short-term resources by the fall of 1997, Western believes that the Final Methods Report and report to Congress should be completed no later than early summer. This schedule should allow sufficient time for Western to incorporate changes to the amendment to the firm power contracts and operational criteria that come from the Record of Decision on the GCD EIS.

Salt River Project Exchange: Western received a comment that Western omitted discussion of its obligation to provide transmission service under the Salt River Project Exchange Agreement. Western transmits SRP's thermal generation from its Craig, Hayden, and Four Corners powerplants to Phoenix when this generation is greater than either Western's northern customer loads or GCD generation.

Response: Western will clarify the sections of the Final Methods Report that deal with the Salt River Project Exchange Agreement.

Integrated Resource Planning: Comments about Integrated Resource Planning varied. One commenter strongly supports the policy of requiring IRP principles to be used in evaluating replacement resource options. Another commenter suggests including the concept that the industry generally believes that IRP, as currently practiced, is outdated and that a competitive market will lead to the most economic choice of resource, and that Western should begin to make a case to remove this requirement from its customers. The commenter believes that information on the fund method (debt-to-equity ratio) is not a requirement of an IRP as outlined in the Criteria.

Response: The requirement for firm power customers to prepare IRPs is contained in the Energy Policy Act of 1992 and Western's Energy Planning and Management Program regulations, neither of which are affected by the Final Methods Report. The Final Methods Report will continue to include Western's Principles of IRP as a primary influence on resource acquisition decisions.

Proof-of-Concept Model: One commenter believes that since Western is proposing not adding generation, only purchasing, developing and maintaining an extensive production cost model, for which the Report seemed to make a case, is not necessary. Providing flexibility to customers for replacement of lost resources and transmission constraints will depend on the source and destination of the replacement resource.

Response: Western believes that the proof-of-concept production cost model developed for the Draft Methods Report is necessary to evaluate fairly and accurately the potentially wide variety of resources being offered to Western. As Western gains additional knowledge and experience with resource evaluations and acquisition in the future and as industry practice in resource evaluation changes, the proof-of-concept model can be revised.

Assistance: One commenter suggested using the expertise of the National Renewable Energy Laboratory, the Inland Power Pool, and other relevant pools to help Western, while another commenter offered customer representative assistance.

Response: Western plans to seek additional information and data to update the proof-of-concept model and incorporate the latest industry practices before actual resources are acquired.

Next Steps

Final Report Issued - Spring 1997
Report to Congress - Summer 1997

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