APPA calls for DOE to start anew on any proposals to change PMAs

The Department of Energy’s handling of Secretary Steven Chu’s proposal for changing the federal power marketing administrations has been “a confusing and secretive process that could be described as, at best, poorly organized, and, at worst, misleading and misinformed,” American Public Power Association (APPA) said. “Given the course of the proceedings up until now, we find it hard to believe that DOE is genuinely seeking customer input, or that it does not have a predetermined policy agenda it wishes to pursue, regardless of the views of the customers or the actual facts on the ground,” APPA said in Aug. 17 comments on workshops held by DOE and the Western Area Power Administration on Chu’s March 16 memorandum proposing significant changes to PMA operations.

The department should step back and start this process anew, APPA recommended. First, DOE should examine, in conjunction with WAPA and its customers, where needs exist within WAPA’s system. APPA said. Then, it should allow WAPA to work with its customers to articulate clear goals and plans to address those needs, “without saddling WAPA customers with excess costs.” This process should be led by WAPA and engage the primary PMA customers, who are the primary stakeholders, APPA said. DOE also must comply with legal and rulemaking processes, such as those required by the Administrative Procedure Act.

Any new actions taken by the PMAs “must be in accordance with the standard established in Section 5 of the Flood Control Act of 1944, which provides that sales of wholesale electric power to PMA customers are to be made ‘at the lowest possible rates to consumers consistent with sound business practices,’” APPA said.

“DOE has consistently shifted its rationale for its proposed changes to the PMAs,” the association said. While the department “has used words such as ‘collaboration’ and ‘transparency’ to describe its intentions for the PMA-change process, APPA believes this process has been full of changing justifications.”

The agency’s approach to the workshops “left the strong impression with the PMA customers that these regional meetings were more form than substance, intended as a ‘check the box’ exercise,” and demonstrated that DOE intended to move forward with or without the cooperation of PMA customers, APPA said.

DOE’s portrayal of WAPA’s grid as being in disrepair is “a distraction from any actual evaluation of transmission improvements that might in fact be needed, and raises questions about DOE’s understanding of WAPA’s infrastructure,” APPA said. Using selected statistics to mischaracterize the grid “raises additional concerns that the intent of DOE is to drive to predetermined policy outcomes, regardless of the facts ‘on the ground,’” the association said.

As to Secretary Chu’s forgone conclusion that an energy imbalance market in the West will capture untapped efficiencies, there are significant uncertainties regarding the benefits and costs of an energy imbalance market, APPA said. Those uncertainties “indicate the need to proceed very cautiously on this measure, and to carefully evaluate other alternative methods to integrate variable energy resources.”

APPA voiced concern about Chu’s directive to the PMAs to create rate structures that incentivize programs for energy efficiency and demand response, the integration of variable resources, and preparation for electric vehicle deployment. That could “artificially and inappropriately raise the cost of providing federal hydro power to preference customers, resulting in wholesale and retail rate increases,” APPA said. “This proposal could well mean that PMA customers would be subsidizing wind development and energy efficiency and demand response programs, whether or not they receive any benefits from these programs.” Also, energy efficiency, demand response and electric vehicle integration are primarily retail issues, not wholesale issues.

While Chu apparently seeks to mandate use of programs authorizing third-party financing of transmission projects, PMA customers could potentially be required to take on the costs of system-wide transmission upgrades not needed to serve them, APPA said.

Some broad goals laid out in the March 16 memorandum are admirable, APPA said. “This process by which they have been announced and initiated, however, has been characterized by DOE’s apparent unwillingness even to acknowledge, much less evaluate and incorporate, the accomplishments of WAPA and other PMAs in these areas,” the association said. “Similarly, DOE seems to have paid little more than lip service to the PMAs’ statutory obligations to their customers, and the costs and need for these directives.”

Reprinted with permission. By Robert Varela, Editorial Director, Public Power Weekly, APPA

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