DROUGHT IN THE WEST
Western Area Power Administration’s service territory covers many multipurpose water projects in 15 states, where our more than 17,000-circuit-mile transmission system carries electricity from 57 hydropower plants with a combined installed capacity of 10,504 megawatts. As may be expected the precipitation across this vast territory can vary widely. While favorable hydrology conditions may result in increased generation for some areas, others may be facing drought. (See the U.S. Drought Monitor site for more detail.) This can possibly impact customer rates.
Several large WAPA projects have experienced severe and enduring drought since 2000. WAPA’s regions are working with customers and the generating agencies to alleviate the impact of drought and preserve the value of federal hydropower. Learn more about these regional efforts at the below webpages:
- Colorado River Storage Project power marketing
- Desert Southwest drought mitigation options
- Sierra Nevada power marketing
WAPA COLLABORATES WITH CUSTOMERS ON DROUGHT IMPACTS
In Spring 2022, WAPA and Reclamation partnered with the National Center for Environmental Conflict Resolution, a program of the Morris K. Udall and Stewart L. Udall Foundation, to establish a dialogue with customers in WAPA’s Colorado River Storage Project and Desert Southwest regions. The initiative examines the drought’s impacts on power and captures customer concerns and ideas regarding the shortage, specifically in the Colorado River Basin. The Expertise provided by the Udall Foundation’s National Center allows WAPA to focus on a longer-term approach to mitigating drought conditions and collecting customer feedback more comprehensively.
Several large WAPA projects have experienced severe and enduring drought since 2000. WAPA’s regions are working with customers and the generating agencies to alleviate the impact of drought and preserve the value of federal hydropower. The National Center conducted a Situation Assessment by interviewing a diverse mix of power customers in Summer and Fall of 2022. The Situation Assessment was followed by a series of dialogue sessions in November 2022 and January 2023.
Learn more about these regional efforts at the below webpages:
- Summary Report: Drought & Energy Dialogue Virtual Session, November 2022
- Summary Report: Drought & Energy Dialogue Virtual Session, January 2023
- Situation Assessment Report: Power Customer Perspectives on Drought and Energy
IMPACT ON POWER RATES
During drought years, WAPA may see higher expenses to cover increased power purchases due to generation limitations. As the drought lowers generation, WAPA purchases more power to meet its firm power commitments to customers. As the water systems recover and refill the reservoirs, WAPA anticipates having more hydropower to market. Even through the drought, WAPA customers continue to cover all of its operating costs, including purchase power, through firm power rates, except where WAPA has contract arrangements in place to make purchases on a pass-through cost basis. Using flexible provisions in our power sales contracts, WAPA can adjust power rates through a public process to deal with changes in the environment. For instance, better-than-expected hydrology conditions can result in a reduction of rates due to modification of a “drought adder,” which is sometimes added to rates in anticipation of low water years.
HOW DOES LESS HYDROPOWER AFFECT CURRENT WAPA CONTRACTS?
Commitments for firm power in current contracts remain firm for the life of the contract. However, due to changes in hydrology or river operations during the contract term, contracts containing resource commitments that are extended under the Energy Planning and Management Program can be modified to change the amount of power delivered after WAPA completes a public process and provides five years’ notice.
REPAYMENT TO TREASURY
Although WAPA must repay all the investment and operating costs of the power facilities, short-term decreases in power sales would not necessarily negatively impact future repayment obligations to the U.S. Treasury. Each year, WAPA prepares a power repayment study for each rate-setting system. We analyze current power rates to determine if they will provide enough revenue to cover all costs, including future repayment obligations. WAPA’s power repayment studies forecast cycles of above and below average water as that information becomes available to derive the power rate. Surplus sales accelerate repayment, while deficits are capitalized at a current interest rate. If the study projects that rates will under-collect the required revenue, WAPA begins a public process to adjust its rates accordingly.
PURCHASE POWER AND DROUGHT
Purchase power is power that WAPA buys from other suppliers to meet the demands of customer contracts. This may occur when poor water conditions or operational constraints result in lower-than-expected generation. In the case of drought conditions, WAPA may purchase power to ensure that customers receive the amount of power determined by their contracts. Learn more about purchase power and the ongoing drought in the West at the Purchase Power and Wheeling program webpage.
Last modified on November 3rd, 2023