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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