LAKEWOOD, Colo.—Western Area Power Administration announced today a proposal to establish a contract-based sub-control area in California beginning in 2005.

        In its proposed decision, Western said it will begin discussions with both the California Independent System Operator and Sacramento Municipal Utility District on forming a contract-based sub-control area with either the ISO or SMUD. As a sub-control area, Western would continue to operate and maintain its transmission system, assure the delivery of Federal power to its customers by providing scheduling and portfolio management services and coordinate operation of the Federal hydropower generators owned by the U.S. Bureau of Reclamation.

        “This option is practical and preserves Western’s ability to respond flexibly to ongoing changes in the electric utility industry,” said Sierra Nevada Regional Manager Jim Keselburg.

        Since 1967, Western’s Sierra Nevada Region has operated as a separate, but integrated, subsystem of the Pacific Gas and Electric Company system under an integration contract.  That contract expires on January 1, 2005, so Western began evaluating other alternatives earlier this year.

        Alternatives considered by Western included forming a new control area, becoming a Participating Transmission Owner of the CAISO and becoming a Metered Sub-System within the CAISO. Western received several suggestions during a public process that it consider a contract-based sub-control area alternative.

        Western intends to discuss the feasibility of this option with both the ISO and SMUD and collect additional data.  If a contract-based arrangement makes business sense with either the ISO or SMUD, Western will then move forward to implement this decision.

        The complexity and uncertainty of implementing a new marketing plan caused Western to conclude it is not prudent to try to implement the marketing plan and form a control area simultaneously.  To reduce business risk and uncertainty, Western plans to operate its Federal transmission facilities within the boundaries of an existing control area.

        Under Western’s 2004 Power Marketing Plan, Western will need to make significant operating changes beginning Jan. 1, 2005. Services such as firming energy and ancillary services, previously provided by PG&E, will be either self-provided or purchased on the market.  Under the PG&E integration contract, PG&E provides these services and bills Western monthly.

        Beginning in 2005, Western and its customers will be exposed directly to real-time changes in the market.  Previously, Western and its customers settled with PG&E monthly, after the fact.  This change represents a significant departure from Western’s current business practices and requires a substantial increase in work to carry out Western’s post-2004 marketing program.

        The Federal Register notice announcing Western’s proposed decision is posted on the Web at http://www.wapa.gov/newsroom/mcfed2003.htm.

        Comments will be taken until January 2, 2004. Send comments via e-mail (tcarter@wapa.gov), fax (916-985-6438) or mail (114 Parkshore Drive, Folsom, CA  95630 to:  Tom Carter, Power Operations manager.

        After reviewing the comments, Western will issue a final decision.

        Western's Sierra Nevada Region markets and transmits power from the Central Valley Project to preference customers in Northern and Central California.