[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
FEDERAL POWER MARKETING
ADMINISTRATION BORROWING
AUTHORITY: DEFINING SUCCESS
=======================================================================
OVERSIGHT HEARING
before the
SUBCOMMITTEE ON WATER AND POWER
of the
COMMITTEE ON NATURAL RESOURCES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
Tuesday, March 10, 2009
__________
Serial No. 111-9
__________
Printed for the use of the Committee on Natural Resources
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COMMITTEE ON NATURAL RESOURCES
NICK J. RAHALL, II, West Virginia, Chairman
DOC HASTINGS, Washington, Ranking Republican Member
Dale E. Kildee, Michigan Don Young, Alaska
Eni F.H. Faleomavaega, American Elton Gallegly, California
Samoa John J. Duncan, Jr., Tennessee
Neil Abercrombie, Hawaii Jeff Flake, Arizona
Frank Pallone, Jr., New Jersey Henry E. Brown, Jr., South
Grace F. Napolitano, California Carolina
Rush D. Holt, New Jersey Cathy McMorris Rodgers, Washington
Raul M. Grijalva, Arizona Louie Gohmert, Texas
Madeleine Z. Bordallo, Guam Rob Bishop, Utah
Jim Costa, California Bill Shuster, Pennsylvania
Dan Boren, Oklahoma Doug Lamborn, Colorado
Gregorio Sablan, Northern Marianas Adrian Smith, Nebraska
Martin T. Heinrich, New Mexico Robert J. Wittman, Virginia
George Miller, California Paul C. Broun, Georgia
Edward J. Markey, Massachusetts John Fleming, Louisiana
Peter A. DeFazio, Oregon Mike Coffman, Colorado
Maurice D. Hinchey, New York Jason Chaffetz, Utah
Donna M. Christensen, Virgin Cynthia M. Lummis, Wyoming
Islands Tom McClintock, California
Diana DeGette, Colorado Bill Cassidy, Louisiana
Ron Kind, Wisconsin
Lois Capps, California
Jay Inslee, Washington
Joe Baca, California
Stephanie Herseth Sandlin, South
Dakota
John P. Sarbanes, Maryland
Carol Shea-Porter, New Hampshire
Niki Tsongas, Massachusetts
Frank Kratovil, Jr., Maryland
Pedro R. Pierluisi, Puerto Rico
James H. Zoia, Chief of Staff
Rick Healy, Chief Counsel
Todd Young, Republican Chief of Staff
Lisa Pittman, Republican Chief Counsel
------
SUBCOMMITTEE ON WATER AND POWER
GRACE F. NAPOLITANO, California, Chairwoman
CATHY McMORRIS RODGERS, Washington, Ranking Republican Member
George Miller, California Adrian Smith, Nebraska
Raul M. Grijalva, Arizona Mike Coffman, Colorado
Jim Costa, California Tom McClintock, California
Peter A. DeFazio, Oregon Doc Hastings, Washington, ex
Jay Inslee, Washington officio
Joe Baca, California
Nick J. Rahall, II, West Virginia,
ex officio
------
CONTENTS
----------
Page
Hearing held on Tuesday, March 10, 2009.......................... 1
Statement of Members:
Coffman, Hon. Mike, a Representative in Congress from the
State of Colorado.......................................... 9
Grijalva, Hon. Raul M., a Representative in Congress from the
State of Arizona, Prepared statement of.................... 74
Hastings, Hon. Doc, a Representative in Congress from the
State of Washington........................................ 5
Prepared statement of.................................... 7
McMorris Rodgers, Hon. Cathy, a Representative in Congress
from the State of Washington............................... 4
Prepared statement of.................................... 4
Napolitano, Hon. Grace F., a Representative in Congress from
the State of California.................................... 3
Prepared statement of.................................... 3
Smith, Hon. Adrian, a Representative in Congress from the
State of Nebraska.......................................... 7
Prepared statement of.................................... 8
Statement of Witnesses:
Corwin, R. Scott, Executive Director, Public Power Council,
Portland, Oregon........................................... 37
Prepared statement of.................................... 39
Crowley, Chris, President, Columbia Energy Partners, LLC,
Vancouver, Washington...................................... 41
Prepared statement of.................................... 42
Response to questions submitted for the record........... 47
Ellenbecker, Steve, Energy Policy Advisor to Wyoming,
Governor Dave Freudenthal, Cheyenne, Wyoming............... 29
Prepared statement of.................................... 30
James, Leslie, Executive Director, Colorado River Energy
Distributors Association (CREDA), Tempe, Arizona........... 33
Prepared statement of.................................... 34
CREDA Membership List.................................... 37
Meeks, Timothy J., Administrator, Western Area Power
Administration, U.S. Department of Energy, Lakewood,
Colorado................................................... 10
Prepared statement of.................................... 11
Response to questions submitted for the record........... 15
Rahill, Edward M., Senior Vice President of Finance and CFO,
ITC Holdings, Transmission Company, Novi, Michigan......... 48
Prepared statement of.................................... 49
Wright, Stephen J., Administrator, Bonneville Power
Administration, U.S. Department of Energy, Portland, Oregon 20
Prepared statement of.................................... 22
Response to questions submitted for the record........... 25
Additional materials supplied:
American Public Power Association, Statement submitted for
the record................................................. 73
OVERSIGHT HEARING ON ``FEDERAL POWER MARKETING ADMINISTRATION BORROWING
AUTHORITY: DEFINING SUCCESS.''
----------
Tuesday, March 10, 2009
U.S. House of Representatives
Subcommittee on Water and Power
Committee on Natural Resources
Washington, D.C.
----------
The Subcommittee met, pursuant to call, at 2:30 p.m., in
Room 1324, Longworth House Office Building, Hon. Grace
Napolitano [Chairwoman of the Subcommittee] presiding.
Present: Representatives Napolitano, Miller, Grijalva,
Costa, DeFazio, Baca, McMorris Rodgers, Smith, Coffman,
McClintock, and Hastings.
Mrs. Napolitano. Good afternoon, ladies and gentlemen.
This meeting of the Subcommittee on Water and Power will
come to order.
The purpose of today's meeting is to hold an oversight
hearing on the Federal Power Marketing Administration borrowing
authority, and defining its success as a prelude to stimulus
action affecting Bonneville and WAPA.
I do ask unanimous consent that any Members of Congress who
come and want to join the dais be allowed to sit on the dais
and participate in the Subcommittee proceedings today.
Without objection, so ordered.
Before we begin this hearing, I would first like to mention
that this is the first meeting of the Subcommittee on Water and
Power of the 111th Congress. I consider it to be a very great
privilege to serve as the Chairwoman of the Subcommittee; and I
am very, very pleased to welcome back as the Ranking Member of
the Subcommittee, my colleague, Congresswoman Cathy McMorris
Rodgers of Spokane, Washington, who has been a very great
pleasure to work with.
As we begin to work on the Subcommittee for the 111th
Congress, rest assured I will try to do my best to administer
the Subcommittee with a fairness and with a respect for every
Member; and I expect the same respect in return. I have an open
door policy; and all of you are welcome to contact me in my
office or Amelia Jenkins, the Subcommittee Director, the
Majority Staff Director at any time. And this applies to both
sides of the aisle, my colleagues. We will listen to anybody
who has a water problem. That has always been what we consider
essential for this Subcommittee.
While there will be times when we may have partisan
differences, the Subcommittee shall be handled on a nonpartisan
basis and has been for a number of years. I intend to work with
all who wish to help solve water problems and expand renewable
energy in the West, and we can only accomplish this if we set
aside our partisan differences.
Allow me to briefly introduce my Democratic Members.
I would like to first start off with Congressman Jim Costa
of Fresno, California. Jim and I served together in the
California State Legislature in the 1990s, and his knowledge of
California water issues is very comprehensive, and is now in
his third term on the Subcommittee.
Welcome back, Jim.
I would like to recognize Congressman Joe Baca from Rialto
in San Bernardino County in California. Welcome back, Joe. He's
the Chair of the House Subcommittee on Department Operations,
Oversight, Nutrition, and Forestry on the full Agriculture
Committee. I know he is especially concerned with protecting
groundwater supplies from perchloric contamination, and it will
continue to be a priority for our Subcommittee.
I would also like to welcome our new colleague on the
Subcommittee. He is serving on my Subcommittee, and I have
added my name to his Subcommittee. It is Raul Grijalva from
Tucson, Arizona. He is the Chairman of the Subcommittee on
National Parks, Forests, and Public Lands, and I gladly joined
his Subcommittee. He has been a tireless devotee to
conservation efforts during his time in Congress, from working
to protect the public lands to encouraging water conservation
through recycling programs. He is interested in the Colorado
River issues, which will continue to be one of the focal points
of the Subcommittee.
I will do the statements after, Cathy, if you will
introduce your Members.
Mrs. McMorris Rodgers. Thank you, Madam Chairman.
I am glad to be back as the Ranking Member on this
Subcommittee. I have enjoyed working with you on a variety of
issues over the last term and look forward to working with you
this Congress.
Yes, I would definitely like to introduce the Members of
the Subcommittee on Water and Power, but let me first start by
introducing the new Ranking Member for the Natural Resources
Committee, Doc Hastings, who is my neighbor in Washington
State, my neighbor to the east, and has been a mentor to me
since I arrived in Congress. We have worked together on a
variety of issues, and I am really pleased to see him in this
leadership role for resources.
Next, we have Representative Adrian Smith from Nebraska's
Third Congressional District, which includes 68 counties in the
western part of the State. He served with distinction on this
Subcommittee in his first term, and we are pleased to have him
back for his second term.
Representative Mike Coffman comes to us from Aurora,
Colorado. We served on the Armed Services Committee together,
and I am pleased to now have you on this Subcommittee.
And, with that, I will turn it back to the Chairwoman.
Mrs. Napolitano. Thank you.
After my opening statement, I will recognize all of the
Members of the Subcommittee for any statement they may have.
Any Member who desires to be heard will be heard.
Additional material may be submitted for the record by
witnesses, Members, or any interested party. The record will be
kept open for 10 business days following today's hearing.
The 5-minute rule with our timer will be enforced.
``Green'' means go, ``yellow'' near the end, and ``stop'' means
if you don't, I will.
STATEMENT OF THE HON. GRACE F. NAPOLITANO, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mrs. Napolitano. I am very pleased to continue to address
power issues at this, our first meeting of the Subcommittee.
Renewable energy generation through the West is a very critical
topic for all of us. We all understand that for generation to
meet ever-growing market demand, we need to assist in the
development of additional transmission infrastructure.
Last year, I visited the Western Area Power Administration
and was able to get a much-needed perspective on that grid from
the air and in talking to some of the folks on the ground. It
is a totally impressive system, serving 15 States total.
I was also fortunate to visit a control center to get a
firsthand view of the rooms where transmission is managed and
how the system is operated. And it is something to behold, to
see those lights and the transmission power lines indicating
how it is managed, how it is set up for transmission by putting
in orders for what is going to be needed.
Senator Reid was the champion of the provisions in the
American Recovery and Reinvestment Act of 2009 that provided
expanded financial tools for the Bonneville Power
Administration and Western Area Power Administration. We did
not have the opportunity to fully vet these provisions, and I
am hopeful this hearing will provide both Bonneville and WAPA
the opportunity to hear from various interests and then clarify
how they intend to move forward.
[The prepared statement of Mrs. Napolitano follows:]
Statement of The Honorable Grace F. Napolitano, Chairwoman,
Subcommittee on Water and Power
I am pleased to continue to address power issues at this, our first
meeting of the Subcommittee. Renewable energy generation throughout the
West is a very critical topic. We all understand that in order for
generation to meet ever-growing market demand, we need transmission
infrastructure.
Last year I visited Western Area Power Administration and was able
to get a much-needed perspective of that grid from the air. It is an
impressive system, serving 15 states in total. I also was fortunate to
visit a control center to get a first-hand view of the rooms where
transmission is managed, and how the system is operated.
Senator Reid was the champion of provisions in the American
Recovery and Reinvestment Act of 2009 that provide expanded financial
tools for Bonneville Power Administration and Western Area Power
Administration. As part of a larger package, we did not have the
opportunity to fully vet these provisions. I am hopeful this hearing
today will provide both Bonneville and Western the opportunity to hear
from various interests and then clarify how they intend to move
forward.
With that said, I am pleased to now yield to my friend and
colleague, Ranking Member Congresswoman Cathy McMorris Rodgers, for the
introduction of her MOCs and her statement.
______
Mrs. Napolitano. I am pleased now to yield to my friend and
colleague, Ranking Member Cathy McMorris Rodgers, for her
statement.
STATEMENT OF THE HON. CATHY McMORRIS RODGERS, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF WASHINGTON
Mrs. McMorris Rodgers. Thank you, Madam Chairwoman.
Today, we are going to be talking about the need for
transmission lines. Most everyone agrees we need more
transmission. But there are still a lot of questions as to who
will build it, how it will be built, and who ends up paying for
it. These might seem like simple questions, but nothing is
simple in the electric industry.
Back home in the Pacific Northwest, the Bonneville Power
Administration continues to have a positive impact on the
region. BPA's energy sales constitute 40 percent of the market,
and three-quarters of the transmission lines belong to the
agency. Even though costs are higher due to a number of
factors, BPA's ratepayers continue to enjoy the benefits of a
hydropower-based system.
We are here today to discuss BPA's borrowing authority and
the new WAPA borrowing authority. BPA's borrowing authority has
been around since 1974. It can be used for building
transmission for all sources of energy, fish and wildlife
mitigation, and conservation.
We look forward to hearing from the Administrator, Steven
Wright, and the Executive Director of the Public Power Council,
Scott Corwin, on how the agency will carry out its access to
new funding.
Some in Congress recently chose to give the Western Area
Power Administration a brand-new borrowing authority. There are
some similarities between BPA and WAPA, as we will hear today.
There are also some differences, and I am aware there are some
concerns over WAPA's new borrowing authority, and setting up a
process to resolve those concerns is one reason why we are
having the hearing. We have some of the best and brightest here
to enlighten us. I applaud my colleague, Mr. Smith, for asking
for this hearing.
Madam Chairwoman, I look forward to working with you on
these issues.
Mrs. Napolitano. Thank you.
[The prepared statement of Mrs. McMorris Rodgers follows:]
Statement of The Honorable Cathy McMorris Rodgers, Ranking Member,
Subcommittee on Water and Power
Thank you, Chairwoman Napolitano. I'm glad to be back as Ranking
Member of the Water and Power Subcommittee. We've worked well together
in the past to solve problems and I once again look forward to working
with you this Congress.
Like you, I would like to introduce my fellow Subcommittee
Members--but first let me introduce to you our new Ranking Member of
the full House Natural Resources Committee, Mr. Doc Hastings. Doc is my
neighbor in eastern Washington where we've worked closely together
since I came to Congress. Doc has been a mentor and I'm thankful to
have his leadership on the Committee.
Next we have Representative Adrian Smith from Nebraska's Third
Congressional District, which includes 68 counties in the western part
of the State. Adrian served with distinction on the Subcommittee in the
last Congress and I look forward to having him aboard for another
Congress.
Representative Mike Coffman is a new Member and comes to us from
Aurora, Colorado. Mike Represents Colorado's 6th Congressional
District. Mike and I also serve together on the House Armed Services
Committee. Next we have Representative Tom McClintock from northern
California 4th district. I'm grateful that Tom's on this Subcommittee
since so many of our issues involve California water. Madam Chairwoman,
I am confident we have a good team put together and we all look forward
to working with you this Congress.
We gather to talk about the need to build more transmission lines.
Most everyone agrees that we need more transmission but there are still
many questions as to who will build it, how it will be built, and who
ends up paying for it. These seem like simple questions, but nothing is
simple in the electricity industry.
Back home in the Pacific Northwest, the Bonneville Power
Administration continues to have a positive impact on the region--BPA's
energy sales constitute 40% of the market and three-quarters of the
transmission lines belong to the agency. Even though costs are higher
due to a number of factors, BPA's ratepayers continue to enjoy the
benefits of a hydropower-based system
We're here today to discuss BPA's borrowing authority and the new
WAPA borrowing authority. BPA's borrowing authority has been around
since 1974 and can be used for building transmission for all sources of
energy, fish and wildlife mitigation, and conservation. We look forward
to hearing from Bonneville's Administrator, Steve Wright, and the
Executive Director of the Public Power Council, Scott Corwin, on how
the agency will carry out its access to new funding.
Some in Congress chose to give the Western Area Power
Administration a brand new borrowing authority. There are indeed many
similarities between BPA and WAPA and, as we will hear today, there are
significant differences. I'm aware that there are some concerns over
WAPA's new borrowing authority and setting up a process to resolve
those concerns is one reason for this hearing. We have some of the best
and brightest here today to enlighten us and work in a productive way.
I applaud my colleague, Adrian Smith, for asking for this hearing.
Madame Chairwoman, I look forward to another two years working with
on this Subcommittee.
______
Mrs. Napolitano. I would like to welcome to our
Subcommittee Congressman Peter DeFazio from Springfield,
Oregon, representing the southwest portion of that State.
Congressman DeFazio is currently the Chair of the
Transportation Committee's Subcommittee on Highways and
Transit, and he is truly dedicated to transportation and
environment issues. In his more than two decades in this House,
he has been an advocate for land and wildlife in the Pacific
Northwest as well as for the expansion of renewable energy; and
we also want to welcome him to the Subcommittee.
Mrs. McMorris Rodgers. Madam Chairwoman, I am pleased to
introduce Tom McClintock from California's Fourth Congressional
District; and I am really pleased that he has joined this
Subcommittee. As we all know, there is a variety of water
issues especially important to California, and I know he will
bring an important perspective as we address them.
Mrs. Napolitano. We have no statements on our side. Do you
have some?
STATEMENT OF THE HON. DOC HASTINGS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF WASHINGTON
Mr. Hastings. Thank you, Madam Chairwoman.
I am especially pleased to be here today as the Water and
Power Subcommittee has a profound and direct impact on my
constituents in central Washington.
Water is at the heart of our economy and our way of life.
The Bureau of Reclamation's Columbia Basin and Yakima Projects
turned what used to be a desert into some of the most
productive farmland in the world. They serve as a major
economic force in central and eastern Washington and also feed
millions in domestic and international food markets.
In addition, the Federal Columbia River power system and
its flagship dam, the Grand Cooley Dam, which I might add is a
Bureau of Reclamation dam, provides clean, renewable and
emissions-free hydropower to millions throughout the Pacific
Northwest.
The historical value of these projects is proven to many,
but they are under a constant assault due to age, litigation,
and regulatory schemes. For example, the Snake River Dam
continues to be a target, yet it is illogical to talk about
removing these dams when they provide the Nation's free
hydropower and help boosts other energy renewables.
Certainly, the President's recently released budget
proposed an undefined and extensive global climate change cap-
and-trade system that could very well punish Northwest rate
payers for using carbon-free hydropower and giving carbon
credits to those in fossil-burning regions.
Today's hearing examines the growing need for transmission
in the West. In the Pacific Northwest, the Bonneville Power
Administration has 75 percent of the transmission assets. The
agency now has expanding borrowing authority--which, of course,
is the subject of this hearing--to integrate more wind
generation, some of which will be sold to California rate
payers. As we all know, there have been serious wind
integration issues in the region.
As part of this discussion, I would like to hear whether
BPA might have to reduce its lower-cost hydropower generation
to accommodate the more expensive wind energy that may be used
within the region or shipped to California. Whether the wind
energy gets delivered to customers in or out of the region, it
could force an uneconomic BPA business decision, possibly to
the detriment of Northwest rate payers.
Similar cost concerns apply to the current customers of the
Western Area Power Administration, who would face higher
electricity costs if the agency fails to be transparent and
allocates costs accordingly to the new borrowing authority.
As both the Chairwoman and the Ranking Member have said,
there are differences with the expanding borrowing authority as
in relation between WAPA and BPA, and I have to tell you that I
have serious concerns from reading what that authority is to
WAPA. Some have tried to tie BPA's proven, effective use of
borrowing authority to WAPA's new authority, but this really is
like comparing apples to oranges, starting with the fact that
Northwest rate payers repay every debt with interest, versus a
new WAPA provision that allows similar debts be forgiven or
potentially forgiven and paid for by all American taxpayers.
So, simply put, that provision puts an unnecessary cloud over
the whole Federal program.
So, Madam Chairman, I am pleased that we are having this
hearing today. I look forward to the testimony of all of the
parties as we move forward, because we clearly do have to make
sure that we can move our electricity around to keep our ever-
growing economy ever growing.
With that, I yield back.
[The prepared statement of Mr. Hastings follows:]
Statement of The Honorable Doc Hastings, Ranking Member,
Committee on Natural Resources
Thank you, Chairwoman Napolitano and Ranking Member McMorris
Rodgers. I'm especially pleased to be here today, as the Water and
Power Subcommittee has a profound and direct impact on constituents in
my Central Washington district. Water is at the heart of our economy
and way of life.
The Bureau of Reclamation's Columbia Basin and Yakima projects
turned the desert into some of the most productive farm land in the
world. They serve as a major economic force in Central and Eastern
Washington and also feed millions in domestic and international food
markets. In addition, the Federal Columbia River Power System and its
flagship dam, Grand Coulee, provide clean, renewable and emissions-free
hydropower to millions throughout the Pacific Northwest.
The historical value of these projects is proven to many, but they
are under constant assault due to age, litigation and regulatory
schemes. The Snake River dams continue to be a target, yet it's
illogical to talk about removing these dams when they provide
emissions-free hydropower and help bolster other renewable energies.
Similarly, the President's recently released budget proposes an
undefined and expensive global climate change cap-and-trade scheme that
could very well punish Northwest ratepayers for using carbon-free
hydropower and giving carbon credits to those in fossil-burning
regions.
Today's hearing examines the growing need for transmission in the
West. In the Pacific Northwest, the Bonneville Power Administration has
75% of the transmission assets. The agency now has expanded borrowing
authority--the subject of this hearing--to integrate more wind
generation, some of which will be sold to California ratepayers. As we
all know, there have been serious wind integration issues in the
region. As part of this discussion, I want to hear whether BPA might
have to reduce its lower cost hydropower generation to accommodate more
expensive wind energy that may be used in the region or California.
Whether the wind energy gets delivered to customers in or out of the
region, it could force an uneconomic BPA business decision--possibly to
the detriment of Northwest ratepayers.
Similar cost concerns apply to the current customers of the Western
Area Power Administration, who could face higher electricity costs if
the agency fails to be transparent and allocate costs accordingly with
its new borrowing authority. I have been strongly supportive of
expanding borrowing authority for BPA, but I have serious concerns
about WAPA's newly granted authority. Some have tried to tie BPA's
proven, effective use of borrowing authority with WAPA's new authority.
This is an apples-to-oranges comparison, starting with the fact that
Northwest ratepayers repay every debt with interest versus the new WAPA
provision that allow similar debts to be forgiven and paid for by all
American taxpayers. Simply put, that provision puts an unnecessary
cloud over the entire federal power program.
In addition, it is highly unlikely that this new WAPA borrowing
authority will have a profound stimulus effect on the economy when it
takes many years just to plan major transmission lines. I fear that
WAPA's new borrowing authority may create more problems than solutions,
but hopefully this hearing will help sort through some of these
concerns. I look forward to hearing testimony on these issues.
Madam Chairwoman and Ranking Member McMorris Rodgers, I look
forward to participating actively with you on this and many other
hearings. Thank you.
______
Mrs. Napolitano. And now we have Mr. Smith.
STATEMENT OF THE HON. ADRIAN SMITH, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF NEBRASKA
Mr. Smith. Thank you, Madam Chairwoman, Ranking Member
McMorris Rodgers, for holding this hearing.
I also want to welcome audience members here today from the
Midwest Electric Consumers Organization, an organization
representing thousands of rate payers in western Nebraska. I
certainly appreciate you being here.
My reason for requesting this hearing is rather simple. Our
Nation needs more electricity transmission to meet the growing
demands for all sources of electricity, including abundant wind
resources in my home State of Nebraska. However, as I hope to
learn today, there are a growing number of questions about the
most effective way to build new transmission. One such method
is the new borrowing authority for the Western Area Power
Administration, or WAPA.
As Members of the Water and Power Subcommittee, we ought to
ensure this new borrowing authority will not stifle private-
sector transmission and lead to loan defaults, which ultimately
are laid to rest on the backs of American taxpayers.
In addition, WAPA's traditional mission and its customers
cannot be forgotten or superseded by this new program; and I
personally appreciate the value of WAPA's historical mission,
as my grandfather worked in the Federal power program.
The plain States have great potential for wind generation,
yet transmission is necessary to bring that power to population
centers elsewhere, And that transmission will mainly be built
on private land in Nebraska. Under its new authority, WAPA can
use Federal eminent domain to build new transmission lines over
private property.
Throughout my time in the Nebraska Unicameral and now here
in the U.S. Congress, I have been a strong defender of
landowners' rights and ensuring farmers, ranchers and others
are treated fairly.
Finally, as the graph by the witness table shows, private
investment in transmission far outweighs Federal efforts. As we
do move forward, it is very important for private investments
to continue to play a leading role in new transmission and not
be hindered by WAPA's new program.
We have many witnesses here, one of whom is Joel Bladow
from Tri-State Generation and Transmission Association, a
wholesale power utility with six members in western Nebraska.
With the witnesses we have before us, I hope we can begin
to answer my questions and together solve potential issues.
Today will hopefully be the first step toward many of a
successful program. To that end, I would urge WAPA to convene a
task force of its customers, private utilities and investors in
the renewables industry as a way of making sure this program
meets success through cooperation.
[The prepared statement of Mr. Smith follows:]
Statement of The Honorable Adrian Smith, a Representative in Congress
from the State of Nebraska
Let me begin by thanking Chairwoman Napolitano and Ranking Member
McMorris Rodgers for holding this hearing. I also want to welcome
audience members of the Mid-West Electric Consumers Association, an
organization representing thousands of public power ratepayers in
western Nebraska. I appreciate you being here.
My reason for requesting this hearing is simple: our nation needs
more electricity transmission to meet growing demand for all sources of
electricity, including abundant wind resources in my home state of
Nebraska. However, as I hope to learn today, there are a growing number
of questions about the most effective way to build new transmission.
One such method is the new borrowing authority for the Western Area
Power Administration, or WAPA. As members of the Water and Power
Subcommittee, we ought to ensure this new borrowing authority will not
stifle private sector transmission and lead to loan defaults, which
ultimately are laid on the backs of American taxpayers. In addition,
WAPA's traditional mission and its customers cannot be forgotten or
superseded by this new program--and I personally understand the value
of WAPA's historical mission as my grandfather worked in the federal
power program.
The Plains States have great potential for wind generation, yet
transmission is necessary to bring that power to population centers
elsewhere. And that transmission will mainly be built on private land
in Nebraska. Under its new authority, WAPA can use federal eminent
domain to build new transmission lines over private property.
Throughout my time in the Nebraska Unicameral and now in the U.S.
Congress, I have been a strong defender of landowner rights and
ensuring farmers, ranchers and others are treated fairly.
Finally, as the graph by the witness table shows, private
investment in transmission far outweighs federal efforts. As we move
forward, it is very important for private investments to continue to
play a leading role in new transmission and not be hindered by WAPA's
new program.
We have many witnesses here, one of which is Joel Bladow from Tri-
State Generation and Transmission Association, a wholesale power
utility with six members in western Nebraska. With the witnesses we
have before us, I hope we can begin to answer many questions and
together resolve potential issues. Today will hopefully be a first step
of many towards a successful program. To that end, I would urge WAPA to
convene a task force of its customers, private utilities and investors
and the renewable industry as a way of making sure this program meets
success through cooperation. Thank you.
______
Mrs. Napolitano. Now we will hear from Mr. Coffman.
STATEMENT OF THE HON. MIKE COFFMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF COLORADO
Mr. Coffman. Thank you, Madam Chairman and Ranking Member,
for holding this hearing today. And welcome to our witnesses.
I would like to extend a special hello to our witnesses
from the State of Colorado. It is always a pleasure to see
fellow Coloradans here in Washington, D.C.
As our Nation works to meet our growing energy needs,
investing in our transmission infrastructure is of great
importance. The government can play a role in this, but it is
important that it does not alienate consumers or hinder private
industry investment.
Thank you.
Mrs. Napolitano. We will proceed to hear from our
witnesses. We have one panel, and the witnesses will be
introduced before they testify. After we hear from the panel,
we will open it for questions from our Members.
All of your submitted prepared statements will be entered
into the record, and all witnesses are asked to kindly
summarize the high points of your testimony because we will
have it to read. In fact, most of us have already read it. And
please limit your remarks to 5 minutes.
Again, the timer is before you; and we will enforce the
rule, unless there is something really key that we want to hear
on.
The rule also applies to all questioning, a total of 5
minutes for questions, including responses, which also applies
to our Members. If there are any additional questions, we may
have a second round, if time permits.
For our panel, we have Timothy Meeks, Administrator of
Western Area Power Administration; Steve Wright, Administrator
of Bonneville Power Administration; Steve Ellenbecker, Energy
Policy Advisor to Wyoming Governor Dave Freudenthal; Leslie
James, Executive Director of the Colorado River Energy
Distributors Association; Scott Corwin, Executive Director of
the Public Power Council; Chris Crowley, President of Columbia
Energy Partners, LLC; and Edward M. Rahill, Vice President of
Finance, CFO of ITC Holdings, Transmission Company.
Welcome to our panel.
We will proceed with Mr. Meeks. You are on, sir.
Before you start, and Doc Hastings, to your point in regard
to the debt forgiveness, the Ranking Member and I, we have been
talking. We need to work with you on that, because I am with
you on that.
STATEMENT OF TIMOTHY MEEKS, ADMINISTRATOR, WESTERN AREA POWER
ADMINISTRATION, LAKEWOOD, COLORADO
Mr. Meeks. My name is Timothy Meeks, Administrator of the
Western Area Power Administration. I would like to thank you
all for inviting me here today to hear your concerns and the
concerns of your constituents as far as Western's new authority
to build transmission under the American Recovery and
Reinvestment Act. I understand the huge responsibility that has
been given to Western under this provision, and we do not take
it lightly.
Basically, though, we are not a stranger to responsibility
when it comes to building transmission, though. We own and
operate 17,000 miles of high voltage transmission. We have
partnered with public and private entities, many of those who
are sitting in this room today. I do believe that, if this is
executed properly, that we do have a role to play in building
new transmission in the western United States to help
facilitate the delivery of renewable energy.
The key balance that we must strike, obviously, is, one, as
it was mentioned, our primary, first and foremost mission is
delivering low-cost Federal hydropower to our preference
customers; and we have to ensure that there is a wall between
the people who benefit under the new authority and the people
who have benefited under our traditional authority. We are
taking steps that are necessary to ensure that there is a
separation between these two programs so that those who do
benefit from each program pay for their fair share of that
program.
As I have mentioned, we believe in order for this authority
to be maximized to its fullest extent we must partner with
other entities. $3.25 billion is a lot of money. But when it
comes to the needed transmission in the western United States,
it is just a drop in the bucket. So, in order for us to
maximize that authority, we have to seek partnership with other
entities, public and private entities; and, as stated, the law
requires that I certify that these projects are economically
viable. In order to do that, there must be a consensus, a
ground swell of support for these projects that we undertake.
We have a Federal Register notice out soliciting input or
statements of interest for individuals interested in building
new transmission under this authority.
Prior to this authority, we have been contacted numerous
times throughout our existence of how can Western help, how can
Western help build new transmission that is needed in the
United States; and up until this authority we have had a
limited ability to respond. So, I do believe there is a role
for us to play.
Visibility. We do have another Federal Register notice, as
required by law to have a public process that solicits input
for the authority, on how to set up policies and procedures on
this new program. So, we are seeking comments from all
interested parties as to the many questions that come with this
new authority.
But, remember, we do have a proven track record. About 4 or
5 years ago, we entered into a public-private partnership in
California to build the Path 15 Project. That project has been
a constrained path that was known for 20 years but was never
built until we were able to pull it together with the help of
the private sector. That constrained path caused blackouts in
the early 2000s in California. And so, with our ability to
partner with others, we were able to accomplish this needed
link under budget and under schedule. From the time we began
construction, we completed the project, turned it on in 10
months.
That is proven success that we are able to bring to the
table.
And, yes, this is a new authority for us. We did not have
borrowing authority before; and we--as I said before, we do not
take it lightly. I welcome the comments from all of you and the
questions.
And with that, Madam Chairwoman, I am happy to answer any
questions you may have.
[The prepared statement of Mr. Meeks follows:]
Statement of Timothy J. Meeks, Administrator, Western Area Power
Administration, U.S. Department of Energy
I am Timothy J. Meeks, Administrator of the Western Area Power
Administration (Western). This is my testimony for the March 10
oversight hearing on ``Federal Power Marketing Administration Borrowing
Authority: Defining Success.''
Good afternoon and thank you, Madame Chairwoman and Subcommittee
members. It's a privilege to update you on the actions Western is
taking right now to deliver the results envisioned under Section 402 of
the American Recovery and Reinvestment Act of 2009 (Recovery Act).
Section 402 grants borrowing authority to Western, which is a
tremendous milestone--a solid step toward energy independence. I am
honored that Congress and the Obama Administration called upon Western
to help address the clear need for new transmission in the West.
Today, I will talk about how Western is moving forward
expeditiously, yet with due diligence, to carry out the law's intent
because the demand for transmission infrastructure is immediate. I will
describe how we will wisely invest funds to create and preserve jobs
for workers to develop and build projects that lead to the delivery of
clean, renewable, home-grown energy to consumers across the West,
promoting economic stability and energy security for our Nation as a
whole. I want to emphasize that we will implement Section 402 as
intended; and, at the same time, honor our commitment to continue
providing excellent service to our existing customers and fully execute
our power marketing mission.
Continuing commitment to traditional customers--our core mission
Western delivers--not only power and energy--but results. Our long-
standing core mission was, is and will continue to be, the marketing
and reliable delivery of more than 10,000 megawatts of power annually--
primarily clean, renewable hydropower generated at Federally-owned
dams. This power is sold according to preferences established in
Federal Reclamation Law at the lowest cost consistent with sound
business principles.
Together with our customers, we have brought comfort and security
to people from small and large communities alike--Native American
reservations, universities, military bases and hospitals--through
today's Federal hydropower marketing program, which has thrived for
more than 100 years. We have decades of experience and well-established
partnerships with both public and private entities in providing
affordable, reliable, renewable and clean Federal hydropower to our
customers who serve millions of consumers across 15 western and central
states. We have built those partnerships by working through challenges
and change together. We envision partnerships having an even greater
role with this new authority.
Section 402 does not replace and is not intended to compromise
Western's current mission; it grants new responsibility to support a
critical need for transmission infrastructure to facilitate delivery of
renewable energy to market. We will meet the challenges of implementing
Section 402 and deliver results without sacrificing our core mission
and our high standards of providing quality service to existing
customers.
Our marketing mission and programs should improve and get even
stronger as we move forward. With this new authority, the critical role
of the Federal hydropower program has received more national attention.
Increased attention will bring the value of Federal hydropower into
clearer focus and demonstrate what we can do to meet the renewable
energy goals of Congress and the Administration.
Today's Federal transmission infrastructure
Western delivers Federal hydropower over an integrated 17,000-
circuit mile, high-voltage transmission system--an electrical Federal
highway--that spans a 1.3 million square-mile service area. This system
was primarily developed to deliver Federal hydropower to preference
customers. While our role as transmission owner and provider is
critical to the delivery of Federal power, the role we play in
transmission is integral to our Nation's interconnected electrical grid
and helps ensure the reliable and secure delivery of our Nation's power
supply. Our customers, the industry and others look to Western as a
partner in initiatives to increase transmission capacity and
reliability, to eliminate congestion points and to respond to
additional requests for interconnection onto the grid.
In these types of collaborations, we are known for bringing many
parties with differing interests together to solve difficult
transmission issues across our service territory. In addition, we
openly work with landowners, local and state agencies, interest groups
and others in balancing competing interests and minimizing impacts
resulting from transmission projects while protecting the resources of
the landscapes across the West.
Our management of Path 15, 84 miles of new 500-kV transmission line
to alleviate a 20-year old major bottleneck in California, is an
example of how we deliver results. We placed 246 lattice towers and 98
steel poles to support 756 miles of conductor and 168 miles of overhead
ground wire in just 10 months, ahead of schedule and under budget. I
commit to you that--to the best of our abilities--we'll deliver results
like this again, and then again.
Facilitating renewables to market: transmission under the Recovery Act
We view Section 402 of the Recovery Act, which grants Western $3.25
billion in borrowing authority, as another opportunity for Western to
show Congress, the Administration and industry what we can do to
deliver on the promise of energy independence. With this authority,
Western can borrow funds from the Treasury to finance, facilitate,
plan, construct, operate and maintain or study the construction of new
or upgraded transmission lines and related facilities, with at least
one terminus in Western's service area. The goal is building new
transmission to deliver or facilitate the delivery of power generated
by renewable energy resources to meet growing demand for power and to
create jobs in the process.
The law calls for each project funded under this authority to be
repaid separately and distinctly from Western's other power and
transmission facilities and from other projects funded using borrowing
authority. This safeguard assures that costs are properly allocated to
entities that benefit from each project funded by Section 402 authority
and protects existing projects and customers. Last week, we initiated
the public processes, required by the law, to seek requests for
interest in identifying potential projects and to develop policies and
practices to implement this authority.
For each project in which Western participates under this
authority, I must certify, before committing any funds, that:
the project is in the public interest,
the project won't adversely affect system reliability,
operations or other statutory obligations; and,
it is reasonable to expect that the project proceeds will
be adequate to repay the loan.
Borrowing Authority--``lining up jobs and projects''
Use of this authority will be pivotal in addressing two of the
major energy challenges we now face in the West--the need for
additional transmission infrastructure and integration of renewables
onto the grid. While it is evident that new transmission is urgently
needed, getting ``lines in the air'' has not occurred to any
significant degree in the past decade. We know that there are entities
interested in working with us to deliver renewables. For example, our
November 2008 Federal Register notice, seeking partners interested in
contributing up to $100 million in third-party funding to develop a
transmission project under section 1222 of the Energy Policy Act of
2005, generated considerable interest. Five parties responded with 13
proposals to build transmission for renewables.
Parties interested in developing renewable resources have
consistently come to Western seeking transmission services. However,
until passage of the Recovery Act, Western lacked sufficient funding
and authority to meet these requests. It's been a vicious circle--a
lack of funding has been the weak link in building transmission and the
lack of transmission has been the weak link in the development of
renewable generating resources. Using this borrowing authority, we will
link renewables to transmission and workers to green jobs. Again, we
will deliver results.
Linking renewables to transmission
Based upon the level of developer interest and how well our service
territory overlays areas with renewable energy potential and
transmission needs, we know projects are out there that are ready to
go. Private entities and Western's power customers are looking to us as
partners to help meet transmission demands for renewables.
For example, there are 78 active requests for transmission
interconnections for wind pending in Western's interconnection request
queue--representing a total of 18,800 megawatts of wind to add to the
grid. Each of these requests represents a wind farm with an average 200
megawatts each. In addition, several major transmission projects to
deliver renewable resources to market are in various stages of planning
and development.
Our service area fits well into the energy picture of the West.
First, we conduct business in the heart of our Nation's renewable
energy potential. Nine of the 10 windiest states and the best
geothermal and solar potential in the Nation are in our geographic
footprint. Second, some areas in our service territory (as outlined in
the DOE's 2006 National Electric Transmission Congestion Study) are
considered critically congested and need to be addressed immediately,
are congestion areas of concern where a congestion problem exists or
may be emerging, or are conditionally congested areas where future
congestion would result if large amounts of new generation were to be
developed without simultaneous development of associated transmission.
The latter category includes the Montana-Wyoming and Dakotas-Minnesota
areas in our service territory. In addition, one of the national
interest electric transmission corridors is in our marketing area.
Third, about three-fourths of the Western Interconnection's congested
transmission paths are in our service territory, pointing to the need
for upgrades. Many of these congested paths are in areas rich in
renewable resource potential.
Stimulating the Economy
To meet transmission demands means that we will need the expertise
of engineers, project managers, construction workers, environmental
specialists, economists and equipment manufacturers--meaning an
infusion of new jobs into the industry and dollars into the economy.
The level of borrowing authority in Section 402 will equal about three
decades worth of Western's current construction program. In addition to
contract awards to the commercial sector for government-furnished
equipment needed to build each project, Western contracts out much of
the environmental work associated with our projects and 100 percent of
actual construction, which is the majority of project costs.
In the short term, we envision private sector jobs being created by
injecting dollars into the economy to get projects started that haven't
had the critical mass to move forward to date. Jobs will be created by
the demand for workers to perform environmental work, acquire land and
conduct preliminary field work for construction. In addition, there
will be large contract awards for long-lead-time equipment purchases.
Depending on the projects we receive from the statements of
interest and their state of readiness, we are striving for ``lines in
the air'' for renewables in about 18 months to two years, which will
contribute to the Administration's goal for energy independence and a
green economy.
Principles, practices and policies designed for results and benefits
The demand for transmission infrastructure is enormous. While the
$3.25 billion in borrowing authority is a substantial boost to our
ability to meet transmission demands, it will not close the gap between
what exists today and tomorrow's demands. Therefore, one of Western's
implementation objectives is to encourage non-Federal participation in
order to leverage this new authority.
Western does not have a vested interest in any particular solution.
Therefore, we can serve as a neutral facilitator, assuring that
projects that best accomplish the intent of the law will rise to the
surface. Any projects constructed using this authority will be
considered separately from procedures and requirements for arranging
for transmission service or interconnection under Western's existing
open access transmission tariff.
Western has designed and proposed a set of principles to serve as
overarching guidance and a series of policies and practices to produce
tangible results and concrete quantifiable benefits, the cost of which
will be paid by those who use the facilities. The overall goal is to
implement a program that fully meets the intent of the law and the
Administration's promise of accountability and transparency.
We will provide opportunity for participation in projects by other
entities, use revenues from project beneficiaries as the only source of
repayment of all associated project costs, and maintain controls to
ensure project repayment is treated separately from Western's other
projects, including other projects developed with this authority. All
selected projects, including upgrades to Western's existing
transmission lines, must meet the requirement that there is a
reasonable likelihood that it will generate enough transmission service
revenue to repay the principal investment, all operating costs and the
accrued interest.
Progress Report--moving at a high speed
Program Development
To expedite the process of developing this new program, Western has
issued two Federal Register notices (FRN) simultaneously, one
soliciting interest in projects and the other defining the program.
The first FRN, Notice of Availability of Request for Interest,
published on March 4, seeks interest from entities in identifying
proposed projects. Responses for initial consideration are due April 3.
Also on March 4, Western published the Notice of Proposed Program
and Request for Public Comment, which lays out the rules of the road--
how the authority will be implemented. This began a public process with
a 30-day public comment period. A public meeting, also available via
webcast, is set for March 23. We expect to obtain third-party input to
help us develop policies and procedures to effectively and efficiently
implement this new authority. Western will analyze the comments
received and make any necessary revisions to its proposed program
principles, policies and practices.
Financial Management and Program Funding
Western is modifying its business systems in order to track and
manage the projects and funding mechanisms under this new authority
separate from our other projects. Discussion is underway with the
Treasury on the terms and conditions under which Western will obtain
loans to fund transmission projects under this authority. We are
consulting with the Bonneville Power Administration on its use of and
experience with borrowing authority.
Transmission Infrastructure Program
A new and separate function, Transmission Infrastructure Program,
charged with implementing this new authority, has been formed. Its
manager reports directly to me and it will initially be a small group.
If growth in staff is required, it will occur at a measured pace. The
staff includes a program manager, project manager, transmission
planning engineer, public utilities specialist, industry economist and
administrative assistant. A small team of existing staff was assigned
to develop the program while the process of permanently filling
necessary positions takes place.
Delivering on the promise of sustainability and clean energy
As a hydropower and transmission service provider, Western has
learned to effectively respond to changes in the power industry. We
have learned how to better meet our customers' needs by adapting and
changing how we do business. Western is an essential part of the
electric utility industry with important roles to play today and
tomorrow.
Today, with the support of Congress, the Administration, our
customers and industry partners, we now have borrowing authority--a
mechanism to contribute even more as a Federal agency, to play a more
significant role in our Nation's energy solutions and in our Nation's
energy future. We will report our progress, pledge accountability to
the Treasury, our customers and the taxpayers, and will move as quickly
as possible to do our part for economic recovery and energy
independence. This is an exciting time for our industry, and we
appreciate your trust and confidence in us to help build the electrical
grid of tomorrow while continuing to fulfill our core mission.
Thank you, Madame Chairwoman. I would be pleased to answer any
questions that you or the Subcommittee members may have.
______
Response to questions submitted for the record by Timothy J. Meeks,
Administrator, Western Area Power Administration, U.S. Department of
Energy
QUESTION FROM REPRESENTATIVE GRIJALVA
Q1. Is Western limiting itself to the projects in the queue, which was
formed before Western was given a specific charter to pursue
new renewable energy sources?
Answer 1. The Recovery Act requires Western to seek Requests for
Interest from entities interested in identifying potential projects
through one or more notices published in the Federal Register. The
program proposes to consider projects that may be constructed pursuant
to its authority under section 402 of the Recovery Act separately from
procedures and requirements for arranging for transmission service or
interconnection under Western's Open Access Transmission Tariff.
Therefore, the proposed program would not limit itself to projects in
the interconnection request queue.
Q2. What precautions is Western taking to ensure that these
investments do not expand carbon-heavy coal-fired generation?
Answer 2. Western is still in the process of developing its
Transmission Infrastructure Program (TIP), but Western is clearly
required by the Recovery Act to construct, finance, facilitate, plan,
operate, maintain, or study construction of new or upgraded electric
power transmission lines and related facilities that ``support delivery
of power generated by renewable energy resources.'' Western intends to
fully comply with the intent of this requirement in evaluating projects
and established this as a criterion in Western's Federal Register
notice on the TIP.
Q3. Is WAPA doing everything possible to work with other entities in
the transmission infrastructure building business to avoid
needless duplication of lines with the attendant added damage
to natural resources?
Answer 3. Western is involved in many regional and sub-regional
transmission planning groups to work with transmission entities in
coordinating numerous proposed transmission additions in an effort to
avoid duplication of lines. Western is a member of the WestConnect
transmission planning group which provides an annual 10-year regional
transmission plan that coordinates all transmission plans across the
WestConnect planning area. Western also participates in the Mid-
continent Area Power Pool (MAPP) west Reliability Organization (MRO)
Transmission Planning Subcommittee (TPSC) which facilitates the
development of a biennial coordinated transmission plan for all
transmission facilities in the MAPP region.
QUESTION FROM REPRESENTATIVE INSLEE
Q1. Please provide a list of ongoing multi-stakeholder regional
transmission planning efforts that are focused on the
construction of new or upgraded transmission infrastructure
within your service area. Please describe which of these
planning efforts in qwhich you are currently engaged and/or
working to help facilitate the construction of new or upgraded
transmission infrastructure, particularly transmission
infrastructure that is designed to deliver or facilitate the
delivery of power generated by renewable resources.
Answer 1. Within the Western Interconnection, the Western
Electricity Coordinating Council (WECC) has a specific Regional
Planning Process within its Procedures for Regional Planning Project
Review and Rating Transmission Facilities document.
Within the Eastern Interconnection, Western participates in the
Mid-Continent Area Power Pool (MAPP) Transmission Planning Subcommittee
(TPSC) and other transmission planning groups.
Following are some of the ongoing multi-stakeholder regional
transmission planning efforts within Western's service area:
Wyoming Colorado Intertie (WCI)--800 MW increase in TOT3
by construction of a new 345-kV line from southeastern Wyoming to
northeastern Colorado. There are specifically 585 MW of wind resources
signed up to acquire long-term agreements on the WCI. Western is
involved in this project which has recently gone through the WECC
Regional Planning Process.
Joint Coordinated System Plan (JCSP)--Western
participates in the JCSP through the MAPP TPSC which facilitates the
coordination for the MAPP members.
Green Power Express--Developer ITC intends to use the
Midwest Independent Transmission System Operator (MISO) regional
planning process. Western is not a member of MISO; we are exploring our
options to participate in the MISO process.
American Electric Power (AEP) 765-kV Transmission--At
this time, Western is not involved in the planning process.
Regional Generation Outlet Study (RGOS)--At this time,
Western is not involved in the planning process since it started as a
MISO related study. However, due to its impact to the Upper Midwest
Transmission Development Initiatives, Western intends to begin
participation in this process.
Upper Midwest Transmission Development Initiative
(UMTDI)--Western has been involved in this Initiative from its
creations. Western has members on both the Planning Working Group and
the Cost Allocation Working Group. The Planning Working Group has been
relying on the MISO RGOS and Western intends to become involved in this
MISO study.
Eastern Wind Integration and Transmission Study--At this
time, Western is not involved in the planning process.
Q2. How is the Obama Administration's stated climate and renewable
energy policy goals factored into your planning and public
review processes for providing new electric transmission to
facilitate the increased use of renewable energy resources. Are
you considering any scenarios in which there would be a price
associated with carbon dioxide emissions from fossil-powered
electricity sources and the U.S. achieves a 15 percent
greenhouse gas emissions reduction below currently levels by
2020? If so, what carbon prices are assumed under such
scenarios? Are you considering scenarios in which U.S.
utilities generate 25 percent of their electricity from
renewable sources by the year 2025?
Answer 2. Section 402 of the Recovery Act authorizes Western to
construct, finance, facilitate, plan, operate, maintain, or study
construction of new or upgraded electric power transmission lines and
related facilities that ``support delivery of power generated by
renewable energy resources.'' Western is currently conducting a public
process to develop its Transmission Infrastructure Program (TIP).
Western has not included consideration of carbon dioxide emission
prices in its proposed TIP. Western encourages the public to comment on
this and other issues related to the TIP.
Q3. Could you describe in greater detail how WAPA intends to use its
borrowing authority to partner with the private sector?
Answer 3. Western outlined its proposed program for the
Transmission Infrastructure Program, which is the vehicle Western will
use to implement borrowing authority in a Federal Register notice
published March 4, 2009 (74 FR 9391). One of Western's objectives in
implementing this program is to encourage nonfederal participation so
as to leverage Western's borrowing authority. One of the proposed
program principles states that ``Western will ensure the program
provides an opportunity for participation of other entities in
constructing, financing, owning, facilitating, planning, operating,
maintaining or studying construction of new or upgraded electric power
transmission lines under this authority by seeking requests from
entities interested in identifying potential projects through one or
more notices published in the Federal Register.''
Western is currently conducting a public process on its proposed
program with comments due April 3. Concurrent with this public process,
Western is also seeking interest from any entity or entities interested
in identifying a proposed transmission project, primarily in Western's
service area, and/or desiring to participate with Western and possibly
others by constructing, financing, owning, operating or maintaining
transmission facilities or acquiring transmission rights or entering
into long-term transmission service agreements on that project (74 FR
9391). These statements are also due April 3.
Western has a long history of partnering with other entities in
developing transmission across our 15-state service territory. Each
project has had different mixes of participants that assume a variety
of roles and responsibilities, based on the specifics of that project.
Western expects to continue this business model in implementing the
Transmission Infrastructure Program. However, because the proposed
program is still in development and Western has not yet identified
specific projects and participants, it would be premature to speculate
on the specific roles and responsibilities that partners, including
Western, would likely assume.
QUESTION FROM REPRESENTATIVE SMITH
Q1. You said in your testimony that in response to WAPA's November
2008 Federal Register notice seeking partners interested in
contributing up to $100 million in third-party funding to
develop a transmission project under section 1222 of the Energy
Policy Act of 2005, five parties responded with 13 proposals to
build transmission for renewables.
a. Are you moving forward to build any of these proposed projects?
b. If so, which ones?
c. If not, why not?
Answer 1. In February 2009, after completing an initial screening
of the responses, Western contacted each of the parties that provided
an initial response with a request for additional information, in order
to complete an initial assessment of project viability and readiness
for construction. Four of the five entities responded to this request
by the March 18 deadline. Western is now examining this data and will
provide a report to the Secretary of Energy later this spring. All of
the entities responding to both Western's initial and subsequent data
requests noted that specific details they provided should be held as
business confidential, so specific entity or project identification is
not included here. Western will not move forward to complete further
analysis on the project(s) proposed by the entity that did not respond
to the second data request.
Finally, one of the respondents suggested that the new borrowing
authority granted to Western under the Recovery Act might be a better
fit for the respondent's business model, and that they would also be
responding to Western's March 4 Request for Interest Federal Register
notice.
Q2a. You also said in your testimony that there are 78 active requests
for transmission interconnections for wind pending in Western's
interconnection request queue--representing a total of 18,800
megawatts of wind.
How many requests for the interconnection of renewable generation has
WAPA granted in the past three years? Please provide number of
projects and megawatts of transmission capacity requested.
Answer 2a. Twelve installations with 259.5 MW of wind capacity have
been installed in the past three years.
Q2b. You also said in your testimony that there are 78 active requests
for transmission interconnections for wind pending in Western's
interconnection request queue-- representing a total of 18,800
megawatts of wind.
What is WAPA doing to reduce this interconnection queue?
Answer 2b. Western has assembled a team to develop proposals for
revising Western's queue processing to address backlogs in its queues,
which is a similar issue experienced by other transmission providers
including the regional transmission organizations. This team identified
a number of initial short term and long term proposals to address
issues that Western has faced in processing requests in its generation
interconnection queues. These proposals include stricter requirements
to ensure that necessary environmental studies are completed on a
timely basis by the interconnection customer, review of Western's
resources to attempt to more rigorously meet its obligations in
processing generation interconnection requests, including the use of
additional outside resources to expedite completion of required
studies. The longer-term proposals include more significant tariff
changes to attempt to reduce the large number of speculative requests
creating backlogs in Western's queues, including more stringent
requirements on the interconnection customer (e.g. deposits,
milestones, and limitations on suspension abilities) and also
streamlined processing changes (e.g., ``first ready-first served'')
similar to some elements of the queue reforms incorporated recently by
regional transmission organizations. Western is in the process of
evaluating and implementing the proposals.
Q2c. You also said in your testimony that there are 78 active requests
for transmission interconnections for wind pending in Western's
interconnection request queue--representing a total of 18,800
megawatts of wind.
What would be the cost of building the transmission necessary to
accommodate all these interconnection requests?
Answer 2c. Multiple requests for a certain points of
interconnection exist in the queue. Until transmission planning studies
are further refined, the costs to accommodate all of the
interconnection requests are not known.Question from Representative
SMITH
Q3. You indicate that WAPA is, ``Striving for ``lines in the air'' for
renewables in about 18 months to two years.'' What does that
mean in terms of when you will select the projects to build?
Answer 3. Western will use the information gathered from its
initial solicitation for potential projects and participants to
identify projects on which construction can be started in the very near
future. While it's difficult to predict with any certainty which
projects or partners will be identified, and therefore difficult to
predict the roles and responsibilities that are envisioned for
participants, Western expects to be able to identify potential projects
within 90 days of completing the public processes and to complete
negotiations for participation soon thereafter.Question from
Representative SMITH
Q4a. You testified that, ``Western has designed and proposed a set of
principles to serve as overarching guidance and a series of
policies and practices to produce tangible results and concrete
quantifiable benefits, the cost of which will be paid by those
who use the facilities.'' I understand that you published these
principles, policies and practices in the Federal Register on
March 4.
One of your principles states that Western will ensure that each
transmission project approved for funds ``[h]as the necessary
capabilities to provide generation-related ancillary
services.'' What are these ``necessary capabilities'' and how
would a transmission company or a renewable generation
developer be able to meet this requirement?
Answer 4a. Section 402 of the Recovery Act contains four separate
references related to ancillary services. Western interprets these
references as requiring any new transmission projects to be financially
responsible for necessary ancillary services, and further, that these
new projects may not turn to Western's existing Reclamation projects to
provide uncompensated ancillary services.
Section 1.2 of the Federal Energy Regulatory Commission's pro forma
open access transmission tariff defines Ancillary Services as ``[t]hose
services that are necessary to support the transmission of capacity and
energy from resources to loads while maintaining reliable operation of
the Transmission Provider's Transmission System in accordance with Good
Utility Practice.''
Q4b. You testified that, ``Western has designed and proposed a set of
principles to serve as overarching guidance and a series of
policies and practices to produce tangible results and concrete
quantifiable benefits, the cost of which will be paid by those
who use the facilities.'' I understand that you published these
principles, policies and practices in the Federal Register on
March 4.
Would rates for transmission service over projects approved by WAPA
for use of its new stimulus funding authority be subject to
FERC regulation? If not, how would the rates for such projects
be determined?
Answer 4b. As noted above, one of Western's objectives is to
encourage nonfederal participation to leverage Western's borrowing
authority. Depending upon the roles and responsibilities agreed to by
the parties, the transmission rates charged by another entity may be
subject to FERC rate jurisdiction. This will need to be determined on a
case-by-case basis.
It is expected that the transmission projects will be subject to
FERC electric reliability rules.
Western's transmission rate setting process is described in the
Federal Register notice for Western's Transmission Infrastructure
Program. ``[t]ransmission rates for transmission capacity Western owns
or controls will be developed in a public process following the
applicable requirements outlined in 10 CFR 903 and set by the
Administrator as specified in relevant DOE orders.
Q4c. You testified that, ``Western has designed and proposed a set of
principles to serve as overarching guidance and a series of
policies and practices to produce tangible results and concrete
quantifiable benefits, the cost of which will be paid by those
who use the facilities.'' I understand that you published these
principles, policies and practices in the Federal Register on
March 4.
What are the, ``concrete, quantifiable benefits'' you will use in
evaluating projects? What value will you attribute to
interconnecting renewable generation?
Answer 4c. Section 402 of the Recovery Act gives three primary
requirements for evaluation. For each project in which Western
``participates pursuant to this section, the Administrator shall
certify...that...(A) the project is in the public interest; ``(B) the
project will not adversely impact system reliability or operations, or
other statutory obligations; and ``(C) it is reasonable to expect that
the proceeds from the project shall be adequate to make repayment of
the loan.'' In addition to these primary requirements, Section 402
contains other specific items of direction in evaluating projects; for
example, as related to ancillary services. In its Federal Register
notice on the Transmission Infrastructure Program (TIP), Western
developed a series of principles to guide the TIP and also evaluation.
The notice opened a public comment process on the TIP and Western
expects to receive comments on the specifics of the evaluation process.
The final evaluation criteria will be established following the closure
of the public process.Question from Representative SMITH
Q4d. You testified that, ``Western has designed and proposed a set of
principles to serve as overarching guidance and a series of
policies and practices to produce tangible results and concrete
quantifiable benefits, the cost of which will be paid by those
who use the facilities.'' I understand that you published these
principles, policies and practices in the Federal Register on
March 4.
How will you determine ``those who use the facilities?'' Does this
mean that transmission built to interconnect renewable
generation will be paid for entirely by the renewable
generator, by the customers that purchase that generation, by
any customer who might benefit, now or in the future, from the
transmission built to accommodate renewable generation? All of
these?
Answer 4d. ``All of these'' or better perhaps, ``all, or any of
these'' is probably the best answer that can be given at this time.
Section 402 of the Recovery Act clearly requires, for repayment
purposes, Western to treat each project funded with Treasury borrowings
as separate and distinct from all other Western transmission facilities
and that proceeds from use of each project are to be used to repay the
Treasury. Therefore, the obligation of repayment of a transmission
projects funded by the Treasury falls generally on two groups--
generation and load. This obligation can be allocated in any number of
ways. Section 402 of the Recovery does not set out any particular model
for repayment except that the costs of a project shall not be charged
to users of Western's facilities constructed prior to the Recovery Act.
Western expects the Statements of Interest it receives in response
to its Request for Interest will propose a wide variety of repayment
methodologies.
Q5a. Finally, you say in your testimony that, ``several major
transmission projects to deliver renewable resources to market
are in various stages of planning and development.''
What is WAPA's role with respect to these projects?
Answer 5a. Western is currently seeking interest from any entity or
entities interested in identifying a proposed transmission line
project, primarily in Western's service area, and/or desiring to
participate with Western and possibly others by financing, constructing
or owning facilities or acquiring transmission rights or entering into
long-term transmission service agreements on that project (74 FR 9391).
Since Western has not yet identified specific projects, Western's role
in these projects is not known at this time.
Q5b. Finally, you say in your testimony that, ``several major
transmission projects to deliver renewable resources to market
are in various stages of planning and development.''
Is WAPA willing to enter into joint ownership of transmission projects
to leverage the funding authority that it has been given, or
will WAPA participate in constructing only transmission that it
will own?
Answer 5b. One of Western's objectives in implementing the
Transmission Infrastructure Program is to encourage non-Federal
participation so as to leverage Western's borrowing authority.
Therefore, Western would consider entering into joint ventures for the
development of transmission projects to meet this objective to the
extent allowed under Western's legal authorities.
Q5c. Finally, you say in your testimony that, ``several major
transmission projects to deliver renewable resources to market
are in various stages of planning and development.''
Is WAPA willing to partner with transmission project developers, or is
WAPA only willing to work with renewable energy developers in
the development of transmission?
Answer 5c. Entities referred to in the Federal Register notice (74
FR 9391) include transmission project developers and renewable energy
developers.
______
Mrs. Napolitano. We will move on to Mr. Steve Wright.
STATEMENT OF STEVE WRIGHT, ADMINISTRATOR, BONNEVILLE POWER
ADMINISTRATION, PORTLAND, OREGON
Mr. Wright. Madam Chairman, Members of the Subcommittee,
thank you for the opportunity to appear here today.
Bonneville Power Administration is a self-financed Federal
agency. We are not for profit. We market power and transmission
in the Pacific Northwest. We became self-financed in 1974. We
have received no appropriations since that time. All of our
expenses are covered by the revenues generated from selling
power and transmission services.
But any business, particularly one in the electric utility
industry, has to have access to capital. The 1974 Act gave BPA
the ability to borrow from the United States Treasury without
getting further appropriations.
Bonneville is statutorily authorized to borrow for four
purposes: to build and maintain transmission within the Pacific
Northwest, to invest in maintenance and upgrades of the low-
cost Federal hydroelectric assets in the Northwest, to invest
in fish and wildlife restoration activities that mitigate for
damage caused by Federal hydroelectric system, and to invest in
cost-effective energy efficiency measures.
To date, Bonneville has borrowed over $8 billion using that
authority and has repaid over $6 billion, three-quarters of the
amount, with interest, which fully covers Treasury's cost.
Because our customers pay our costs, Bonneville is
committed to increasing transparency regarding its budgets.
Last year, we began sharing 10-year capital budget forecasts.
These forecasts project increases for all four of the
statutorily authorized categories.
There was fairly broad support for the planned capital
spending within the Northwest. Essentially, these projects are
lower cost than are available for the utilities.
Simultaneously, in developing these budgets, Bonneville was
developing a financial plan, and in that plan we displayed that
using the capital expenditure forecast we were on a path to
exceed our statutory borrowing authority of the $4.45 billion
somewhere in the time frame of 2012 to 2016. So, that clearly
was not a sustainable path. We can't run out of capital and
maintain the system.
In essence, this means that Bonneville could not have
proceeded to fully implement the plan; and the result would
have been higher rates, reduced reliability, and a less-healthy
environment.
Now, in particular, I will highlight the transmission
program, because I know it is of interest to this Subcommittee.
Bonneville has used the FERC Open Access Transmission
Tariff to guide offering transmission in an open and
nondiscriminatory manner. The FERC rules provide a first-come,
first-served prioritization and requires that requesters of
transmission pay for any necessary studies, including NEPA
analysis. Most observers would agree that that process was
generally not leading to either efficient or expedited
transmission expansion due to its approach of sending
transmission requests one by one.
Bonneville initiated a new process, with FERC's blessing,
that jointly study requests of all requesters who commit to pay
for service if it is offered by Bonneville. Since the requests
are studied in clusters, Bonneville is working jointly with its
customers, agree to pay for the necessary studies and pass the
costs along and its transmission rates, different from the way
the things have been set up under the FERC tariff.
Now, that process has proven to be extremely successful in
the Northwest. Separating out transmission requests that were
really ready to go, was able to identify 6,500 megawatts,
three-quarters of which are wind. It is providing a more
efficient study process that allows us to offer 1,700 megawatts
of transmission without building anything at all.
We have been able to develop a transmission build-out plan
to serve the remaining 4,700 megawatts of request; and,
following that, we have defined costs and rate impacts of
implementing that build-out plan. Then, using that, we have
been able to determine through a public process the interest
particularly of transmission customers that will be responsible
for the costs that Bonneville will incur proceeding with their
interest in proceeding with those specified transmission
projects.
The result is that Bonneville is in a position to proceed
with a substantial transmission construction program, expanding
wind power access to the market that is defined by market
requests and consistent with the desires of the customers who
will pay for it. But this effort, along with the rest of our
capital program, likely could not be fully implemented without
an increase in our borrowing authority.
That was the picture we were looking at last summer and
fall. And then, from my perspective, a miracle occurred. The
$3.25 billion included in the American Recovery and
Reinvestment Act means Bonneville will not have to leave
valuable projects on the cutting room floor.
I am grateful to this Subcommittee and in particular to the
Northwest Members who pushed and prodded to accomplish this
change in the law. My commitment to you is we will use the new
authority wisely. We will remain committed to using an internal
asset management process that thoroughly evaluates with rigor
all of the uses of capital across our agency. We will provide
transparency such that the public will have the opportunity to
understand our investments before they become fixed costs. We
will structure out business at a rate such that BPA will
continue its exemplary record of repaying the U.S. Treasury, as
we have done for the last 25 years in a row.
Madam Chairwoman, I am open to any questions this
Subcommittee may have.
[The prepared statement of Mr. Wright follows:]
Statement of Stephen J. Wright, Administrator,
Bonneville Power Administration, U.S. Department of Energy
Thank you Madame Chair.
My name is Steve Wright, and I am the Administrator of the
Bonneville Power Administration (BPA) which is headquartered in
Portland, Oregon. I appreciate the opportunity to describe the
significance of the $3.25 billion in additional Treasury borrowing
authority provided BPA by the American Reinvestment and Recovery Act
(ARRA) and how BPA plans and executes capital investments for its
mission to serve the Pacific Northwest region.
Created by Congress in 1937, BPA markets at wholesale the electric
power generated from 31 Federal dams, one non-Federal nuclear power
plant and several small non-Federal power plants. BPA serves about one-
third of the electric power used in the Pacific Northwest and its over
15,000 circuit miles of transmission lines provide about three-quarters
of the high voltage transmission in the region.
Introduction: BPA makes the best use of its Treasury borrowing to meet
regional environmental and energy efficiency goals.
The ARRA raised the ceiling on the borrowing that BPA conducts
under the Federal Columbia River Transmission System Act of 1974
(Transmission System Act) by $3.25 billion. Prior to 1974, BPA received
annual appropriations for all of its expenditures and the revenues BPA
raised through its rates were deposited in the General Fund of the
Treasury. BPA has always been required to set its rates to cover all of
its costs, so this was essentially a zero-sum arrangement. Recognizing
this, and seeking to increase the efficiency of government and enable
BPA to enter into multi-year commitments with its business partners in
the Pacific Northwest electric power system, Congress provided BPA with
``self-financing'' authority in 1974 establishing a separate fund in
Treasury--the Bonneville Fund--that BPA manages. Into the Bonneville
Fund go BPA's revenues, and from it BPA pays all of its costs,
eliminating the need for Congress to provide annual appropriations of
taxpayer funds. The Transmission System Act also authorized BPA to
borrow from Treasury, at Treasury's current cost of money plus an
amount to be comparable to prevailing electric utility market
determined borrowing costs, for its capital expenditures. BPA fully
repays these loans with interest at market rates. There is no subsidy
to BPA. BPA's borrowing authority has been increased several times
since 1974 to now total $7.7 billion which I will describe in more
detail.
BPA is authorized to use its borrowing authority for multiple
purposes; including to expand and upgrade its transmission system,
including the facilitation of new renewable electricity resources while
keeping electricity rates as low as possible; energy efficiency; and to
meet its obligations under the Pacific Northwest Electric Power
Planning and Conservation Act of 1980 (Northwest Power Act). The
obligations under the Northwest Power Act include significant capital
investments for fish and wildlife. Today, Bonneville's transmission,
power and environmental programs are being called upon by the Pacific
Northwest region and, in fact, much of the West Coast, to provide the
backbone for supplying new renewable electric resources to reduce
greenhouse gas emissions and to continue to restore the sustainability
of Columbia Basin fish and wildlife.
The capital financing required to meet these demands is significant
as we look over the next two decades. BPA conducts extensive planning
with public review for its capital program and manages the wisest
allocation of its Treasury borrowing authority after weighing other
alternatives to meet its needs. Last year BPA made its 25th consecutive
annual Treasury payment in full and on schedule. BPA believes that its
use of Treasury borrowing authority is a good deal for U.S. taxpayers.
BPA plans for its capital spending needs carefully.
As I have mentioned, the current drivers of BPA's capital spending
needs come from regional goals for clean electricity and environmental
restoration and the need to maintain and upgrade an aging transmission
and power system. BPA forecasts its capital spending with thoroughly
transparent analysis, including regular public reviews with its
customers, implementation partners and other interested parties in the
Pacific Northwest. BPA initiated its most recent proposed capital
spending review last summer.
BPA has had considerable success in meeting some of the demands for
its services through innovative non-capital means. Last year BPA
conducted a first-of-its-kind Network Open Season to sort out a
complicated queue of service requests from customers seeking access to
BPA's transmission system. Many of these requests were for delivery of
wind-generated electricity that has exploded in development in the
Northwest. Constraints on the transmission system at critical transfer
points prevented BPA from providing service without upgrade and
expansion of the grid.
BPA's Network Open Season obtained financial commitments and signed
service agreements that allowed BPA to conduct system engineering
studies to determine what service could be provided from the existing
capacity of the transmission system. We found that we could provide
service for 1,780 megawatts of new service without major construction,
simply by withdrawing from the queue those not ready to commit to
taking service. Just last week, we also began offering Conditional Firm
transmission service to more of the service requests we processed in
the Network Open Season. Conditional Firm service provides service with
the potential for a small amount of interruption if transmission
becomes congested, and it is a product that has appeal for some of our
customers, including wind generators. We are currently making offers of
approximately another 1,200 megawatts of service, and expect to make
additional offers of Conditional Firm service on an interim basis in
the future.
After these system engineering studies we conducted financial
analysis of the construction costs for the remaining service requests
we evaluated in the Network Open Season. We are preparing to offer
transmission service with four new transmission lines and one system
upgrade for 3,700 megawatts, almost 2,800 of which will come from
renewable, non-carbon-emitting generation. Three of these projects are
about to undergo environmental analyses; but one is shovel-ready, the
environmental review having been completed in 2002. That project is a
500-kilovolt transmission line from McNary Dam to John Day Dam along
the Columbia River in Washington and Oregon.
With the added assurance of the additional borrowing authority
Congress has just provided, we feel confident we can move forward with
these projects, and last week we announced that we will begin
construction this spring on the 79-mile, McNary-John Day line. We
estimate that construction of this roughly $340 million line will
create about 700 jobs at its peak. It will deliver more than 700
megawatts of wind energy across BPA's transmission system.
I am pleased with this approach that allowed BPA to find ways to
first meet new service requests without needing to borrow for new
construction and then make cost-effective decisions on the projects
that do need to be built.
It is important to note the planning processes for other proposed
capital spending initiatives. Last year, BPA signed historic 10-year
agreements with five Columbia Basin Indian tribes and two states. The
agreements set a course of action for restoration of salmon and
steelhead listed for protection under the Endangered Species Act and
other populations important to these partners. The parties agree that
these commitments meet BPA's obligations, and those of the U.S. Army
Corps of Engineers (Corps) and the Bureau of Reclamation, under the
Endangered Species Act and the Northwest Power Act. The agreements
specify implementation of a sequence of scientifically-reviewed fish
and wildlife projects, including investments that will bring BPA's
capital spending for its fish and wildlife obligations to $50 million a
year.
BPA also has completed asset management studies of needed capital
upgrades and replacements for its aging transmission system and the
needs for the aging Federal hydro generation, which BPA finances
through direct-funding agreements with the Corps and Bureau of
Reclamation. We have a prioritized sequence of projects that are needed
to maintain the quality and reliability of the Northwest power system
and to optimize the output of this significant source of non-carbon-
emitting electrical generation. BPA's rates cover all of the costs of
Corps and Bureau power facilities and operations in the Pacific
Northwest.
We review all of these schedules with regional stakeholders prior
to our rate cases. We conduct public workshops that present and
thoroughly discuss our costs and our proposed capital spending. The
initial public process preceding our 2010-2011 rate case was initiated
last summer. We intend to conduct these public processes every two
years.
We also completed a new Financial Plan for the agency that defines
strategies and policies for guiding how BPA will manage risk and the
variability of electricity markets and water years. Importantly, the
Financial Plan describes how we will continue to manage to ensure that
we meet our Treasury repayment requirements. As a follow-on to the
Financial Plan we are scheduling further discussions with our customers
and regional parties to refine our strategies for our access to
capital.
BPA's capital investments help accomplish its mission to serve the
Pacific Northwest.
The demand for our service to meet regional greenhouse gas
reduction and environmental goals continues to increase. BPA's
transmission system is a major component of the Western Interconnection
which extends from Mexico to Canada and supports long distance transfer
of electricity, including increasing amounts of renewable electricity.
The growing volumes of renewable power help to meet expanding state
goals for greenhouse gas reduction.
In the Pacific Northwest, the new renewable electricity resource is
wind. Just two years ago BPA and the Northwest Power and Conservation
Council completed an Action Plan that confirmed that adding 6,000
megawatts of wind generation in the Northwest by 2020 is technically
feasible but assumed that about half of that would be located where BPA
supplies transmission. Instead, wind generation is rapidly
concentrating in BPA's system and we believe 6,000 megawatts of wind
could be attached to our system by 2013.
We're advantaged by a Federal hydrosystem that is a major source of
carbon-free electricity for the Pacific Northwest. It is now being
called upon to back up the intermittent supply of wind and, especially
with fish constraints, is reaching the limits of its ability to meet
that need. BPA continues to work with the region to meet the wind
integration challenges and adequate access to capital is a key
component to modernizing the system for that capability.
BPA also helps the region meet its clean energy goals through its
ability to capitalize major investments in energy efficiency. BPA
currently budgets about $40 million for annual capital investments in
energy efficiency. And, as I have previously mentioned, there is a
significant capital component to BPA's commitments under the Columbia
Basin Fish Accords.
The ARRA's addition of borrowing authority is a significant addition to
BPA's capital resources.
BPA's Treasury borrowing authority originated in the 1974
Transmission System Act when Congress made BPA self-financed and
accorded BPA $1.25 billion in Treasury borrowing authority to finance
capital investments in the transmission system. This was subsequently
expanded to include all BPA functions under the Northwest Power Act.
In the Northwest Power Act, Congress initially authorized an
additional $1.25 billion in Treasury borrowing authority for
conservation and renewable resource loans and grants. This borrowing
authority was then provided in the Energy and Water Development
Appropriations Act of 1982. A further $1.25 billion of Treasury
borrowing authority was made available to BPA in Energy and Water
Development Appropriations Act of 1984, for all of BPA's capital
requirements.
In the 2003 Energy and Water Development Appropriations Act,
Congress increased BPA's Treasury borrowing authority by another $700
million for BPA's general capital requirements. Before passage of the
ARRA, then, BPA's total Treasury borrowing ceiling was at $4.45
million.
Before passage of the ARRA, BPA projected that it would exhaust its
capital resources some time between 2013 and 2016, depending on
financial market conditions. BPA estimates that the additional $3.25
billion could potentially extend its ability to meet its capital needs,
including the initiation of the transmission system expansions I
described earlier, for about another ten years, depending on capitol
spending.
Treasury borrowing authority is a good deal for U.S. taxpayers.
All BPA costs, including repayments to the U.S. Treasury, are paid
from the revenues BPA earns from selling Federal power and transmission
services. As a self-financed agency, BPA receives no annual
appropriations and is able to fund capital program expenditures through
its Treasury borrowing in a business-like way. BPA repays the borrowing
at interest rates slightly above Treasury's costs.
BPA's Treasury borrowing authority is a revolving fund, replenished
as BPA repays the principal on its borrowing. Since 1978, BPA has
borrowed a total of $8.42 billion and repaid $6.17 billion--nearly
three quarters of all it has borrowed from Treasury. For 25 years, BPA
has made its annual payment to the U.S. Treasury in full and on time.
In 2008, it repaid Treasury $963 million in principal, interest, and
other payments.
Throughout its 72 year history, BPA has repaid Federal investments
within the period prescribed by law. This history is strong evidence of
BPA's financial stability, since the payments have been made through
good, bad and truly terrible times, including the West Coast energy
crisis of 2000-2001. BPA maintains very high credit ratings of AA- by
Standard and Poors and Aaa by Moody's. Recently on March 4, 2009, Fitch
Ratings upgraded BPA's rating from AA- to AA positive outlook based on
BPA's significant financial management control and risk mitigation
tools. Overall these ratings reflect the importance of maintaining
sound BPA financial management. Such ratings allow BPA to conduct its
financial business at lower cost.
BPA is grateful for a long and collaborative relationship with the
Treasury Department that has allowed BPA to soundly and effectively
manage the assets of the BPA fund.
This concludes my testimony, Madame Chair, and I welcome any
questions from the Subcommittee.
______
Response to questions submitted for the record by Stephen J. Wright,
Administrator, Bonneville Power Administration, U.S. Department of
Energy
QUESTION FROM REPRESENTATIVE INSLEE
Q1. Please provide a list of ongoing multi-stakeholder regional
transmission planning efforts that are focused on the
construction of new or upgraded transmission infrastructure
within your service area. Please describe which of these
planning efforts in which you are currently engaged and/or
working to help facilitate the construction of new or upgraded
transmission infrastructure, particularly transmission
infrastructure that is designed to deliver or facilitate the
delivery of power generated by renewable resources.
Answer 1. Currently there are ten new multi-stakeholder regional
transmission projects, with multiple components, proposed for the
Pacific Northwest. All project sponsors are committed to an open and
transparent planning process. The list of projects, with sponsors name
listed in parenthesis, is as follows:
1. West of McNary Reinforcement (Bonneville Power Administration)
2. I-5 Corridor Reinforcement (Bonneville Power Administration)
3. Energy Gateway (PacifiCorp)
4. Canada-Northwest-California (British Columbia Transmission
Corporation and Pacific Gas & Electric)
5. Boardman-Hemingway (Idaho Power)
6. Northern Lights (TransCanada)
7. Southern Crossing (Portland General Electric)
8. Montana-Alberta Tie Line (MATL, Calgary-based energy
transmission company)
9. Juan de Fuca (SeaBreeze)
10. West Coast Cable (SeaBreeze)
Several of the projects originate, connect or terminate in
northeast Oregon (Figure 1). These projects will help facilitate the
delivery of power generated by renewable resources (wind and new hydro)
in British Columbia, Alberta, Oregon, Washington, and Wyoming to other
parts of the Western Interconnection.
Figure 1: Transmission Projects Being Planned: 2010--2015 follows:
[GRAPHIC] [TIFF OMITTED] 47991.007
.epsBPA is part of the Transmission Coordination Work Group (TCWG),
which was formed to aid the project sponsors with coordinating the
planning studies and project communications. The TCWG is a large work
group with parties having different interests and objectives. This
group will help project sponsors meet the Western Energy Coordinating
Council's (WECC) path rating requirements.
Besides being actively engaged in the TCWG process, BPA also has
held its own public process for its projects identified above as part
of BPA's 2008 Network Open Season (NOS). BPA's 2008 NOS resulted in
6,410 MW requests for new long-term firm transmission service. Almost
three-quarters of those requests are associated with wind generation,
reflecting the region's momentum toward rapid development of renewable
resources and the need to comply with state Renewable Portfolio
Standards (RPS). BPA also completed its WECC Regional Planning Project
Review process for the West of McNary and I-5 Corridor projects through
ColumbiaGrid, a sub-regional transmission planning entity.
These processes are designed to be open and transparent, and to
meet FERC's requirements under Order 890.
Q2. How is the Obama Administration's stated climate and renewable
energy policy goals factored into your planning and public
review processes for supporting energy efficiency and new
electric transmission to facilitate the increased use of
renewable energy resources? Are you considering any scenarios
in which there would be a price associated with carbon dioxide
emissions from fossil-powered electricity sources and the U.S.
achieves a 15 percent greenhouse gas emissions reduction below
currently levels by 2020? If so, what carbon prices are assumed
under such scenarios? Are you considering scenarios in which
U.S. utilities generate 25 percent of their electricity from
renewable sources by the year 2025?
Answer 2.
Renewable Energy:
Many of BPA's utility customers in the Northwest are already
subject to state renewable portfolio standards of up to 25 percent by
the year 2025. For that reason BPA is already engaged in understanding
how we can support the climate and renewable energy goals of the
Administration. We are, for example, engaged in a public resource
program planning process wherein BPA is examining how it can use
existing resources and support new renewables to help our customers
meet their growing loads and their RPS requirements. It is our
customers themselves who will be subject to the RPS requirement and
will decide whether to purchase any renewables (beyond their current
allocation of BPA's hydro resource) from BPA.
BPA also supports renewables development through its transmission
construction program which will allow BPA's customers, as well other
regional entities, better access to wind generation. BPA recently
announced its decision to move forward with four transmission projects
and one network upgrade that will provide transmission service to more
than 2800 megawatts of wind generation. BPA's cross-agency Wind
Integration Team is actively exploring what the agency can do to
eliminate barriers to the wind development that will be needed for the
regional utilities to meet RPS requirements.
Finally, it bears mentioning that the Federal Columbia River Power
System (FCRPS) system that is the source of BPA's power supply is
virtually entirely carbon-free as it consists of hydro and nuclear
resources. Furthermore, BPA has integrated more wind than any other
control area, on a percentage basis of peak load, in the nation.
Climate Policy/Prices
When it comes to power and energy efficiency planning, BPA is
statutorily obliged to look to the recommendations of the Northwest
Power and Conservation Council (Council) and the 20 year regional power
plans it develops. The Council is currently developing its 6th Power
Plan and is examining the effect of a range of carbon prices on the
optimal mix of future regional resource additions.
Consistent with the Council's Plan, BPA is also examining an
average of carbon prices in its resource planning process, called the
Resource Program. The Council is preliminarily using a range with
central tendencies from $8 per ton in 2012 to $47 per ton in 2029.
The Council uses these carbon prices and probabilities as one of
the many determinants of its designation of cost effective energy
efficiency supply. BPA sets its efficiency targets and budgets based on
the Council's estimate of cost-effective regional supply of energy
efficiency.
For its transmission planning, BPA has and will continue to
incorporate carbon prices in estimating regional benefits of proposed
transmission construction projects. For its 2008 Network Open Season
economic benefits study, a range of carbon prices were assumed from $20
to $50 per ton.
Q3. In your testimony, you stated that BPA currently budgets $40
million for annual capital investments in energy efficiency. In
light of the stated climate and renewable energy policy goals
of the Obama Administration (see previous question), do you
have any plans to increase that annual expenditure?
Answer 3. The $40 million dollar capital projection is an estimate
of capital spending that might be required for BPA to meet the program
demand of our public power customer utilities in the region. The vast
majority of the energy efficiency being achieved currently is being
delivered by self-funding of utilities or the expense based funding
offered through the BPA Conservation Rate Credit (CRC).
BPA's capital funding is available for those utilities who wish to
acquire additional conservation beyond that achieved through self-
funding or the CRC. For example, last year BPA set a regional target of
52 average megawatts (aMW) of energy efficiency based on the cost
effective energy efficiency available in the region, and exceeded that
target by obtaining 75 aMW. To achieve that, BPA only used $8 million
of capital funding. Thus, having budgeted $40 million in 2009 will
allow BPA to meet any additional demands for funding that go beyond
current planned energy efficiency program activities.
Q4. Your testimony referred to the NW Wind Integration Plan, in which
Northwest regional stakeholders agreed to 16 action items that
would facilitate the integration of 6,000 MW of wind energy in
the region. As you know, that plan was issued in March, 2007.
BPA's commitment to help achieve several of these action items
was reiterated in the BPA Wind Integration Rate Settlement
Agreement. It is critical for BPA to implement these action
items to facilitate the reliable integration of renewable
energy projects. As of today, I understand that most of these
action items have not yet been completed. Could you please
explain how BPA intends to move forward with these action items
in the near future? How many of these items can we expect to be
completed this year? Please explain how can your expanded
borrowing authority may be used to help achieve these action
items more expeditiously.
Answer 4. In 2007, BPA, the Northwest Power and Conservation
Council and other interested organizations completed an Action Plan
that confirmed that adding 6,000 megawatts of wind generation in the
Northwest by 2020 is technically feasible. The action plan recommends
16 actions the region should take to accommodate this level of wind
development. The plan called for the formulation of a Northwest Wind
Integration Forum to facilitate implementation of the action plan. The
unexpected speed of wind's actual development has put a priority on
resolving the technical issues the region identified.
In the two years since completion of the Northwest Wind Integration
Action Plan, BPA and other entities in the region together have made
considerable progress on the Action Plan items:
Through the Pacific Northwest Resource Adequacy Forum,
the region analyzed the capacity value of NW wind resources.
In the current 2010-2011 power and transmission services
rate case, BPA refined its study methodology and estimates of wind
integration costs.
The region funded development of a higher resolution wind
data set for Northwest wind resources.
The Resource Adequacy Forum convened NW regulators to
discuss regulatory barriers to greater use of conditional firm
transmission service.
BPA implemented a re-dispatch pilot project and is in the
process of making offers totaling 1200 MW of Conditional Firm
Transmission Service. This re-dispatch project used non-Federal and
Federal generation to relieve congestion.
BPA developed and implemented its first Network Open
Season which may result in a billion dollars of new transmission
investment and beginning of construction of the McNary-John Day 500
kilovolt line, which will enable at least 700 MW of new wind generation
and strengthen linkages to other renewable resource areas in Idaho and
Montana. The added assurance of the additional Treasury Borrowing
Authority gave us the confidence to move forward with this project and
initiate planning and design for three others. In the process, we
developed a new financing model for regional utilities to use.
BPA is actively engaged in planning studies with Montana
and other Northwest Parties on the Colstrip expansion which is geared
towards tapping wind resources in Montana.
BPA has joined a number of other Northwest utilities in
implementing the Area Control Error Diversity Interchange, with the
purpose of facilitating integration into the transmission system of
more intermittent renewable resources.
BPA, ColumbiaGrid, NTTG, and WestConnect--subregional
transmission planning--entities--have initiated the Joint Initiative,
which is addressing dynamic scheduling and intra-hour schedule changes
to further facilitate renewable generation integration. BPA is now
marshalling internal resources to help move this further towards
implementation.
BPA completed its WECC Regional Planning Project Review
process for the West of McNary and I-5 Corridor projects through
ColumbiaGrid, a sub-regional transmission planning entity.
Finally, the Council is working hard to factor in the
many different dimensions of the wind integration question into its 6th
Power Plan.
It is important to understand that the action items developed for
the Wind Integration Action plan were developed by a broad group of
regional participants. Most of these efforts require ongoing
improvements and enhancements and therefore do not neatly fit into
categories of being finished by particular date. As the above points
demonstrate, BPA has made good progress on those items it can implement
in its own system, and is working with the region as it moves forward
on a number of the other action items. Completing all of the tasks in
the Action Plan requires the continued cooperation with other regional
transmission planning entities and system operators. BPA is looking to
the joint Wind Integration Study Team (WIST) convened by ColumbiaGrid
and NTTG to follow-up on the planning methodology recommendations of
the Wind Integration Action Plan and to propose a study of the
potential system constraints to greater use of dynamic scheduling. The
WIST is also reviewing the remaining technical study recommendations of
the Action Plan.
In addition to the actions defined in the Action Plan, BPA launched
an internal Wind integration Team to tackle the grid operation,
business practice, and institutional arrangements needed to make the
most of the wind resource. Among other actions, this team is
implementing following tasks that were defined in last year's wind
integration rate case settlement: 1. Refine estimates of reserve
requirements for wind balancing; 2. assess FCRPS capacity and
flexibility to supply wind balancing; 3. define the criteria and
process for procuring generation inputs for wind balancing from non-
Federal entities; and, 4. clarify accountability and responsibility for
wind generation forecasting and scheduling accuracy.
______
Mrs. Napolitano. Mr. Steve Ellenbecker, sir.
STATEMENT OF STEVE ELLENBECKER, ENERGY POLICY ADVISOR, WYOMING,
OFFICE OF THE GOVERNOR, CHEYENNE, WYOMING
Mr. Ellenbecker. Madam Chairwoman and distinguished
Subcommittee Members, I am Steve Ellenbecker, Energy Policy
Advisor to Governor Freudenthal in Wyoming.
Governor Freudenthal has asked me to appear on his behalf
to thank Congress for extending the Western Area Power
Administration additional borrowing authority under the
American Recovery and Reinvestment Act. I will explain the
reasons that that is in the public interest, not only in the
intermountain west but across the western U.S. And the rest of
the service area served by Western Area Power Administration.
This is all about Wyoming's wind resource in terms of our
interest in this proceeding. Wyoming has a truly prolific wind
resource, but it is entirely dependent upon a major build-out
of the interstate transmission backbone if it is to be
delivered to load centers across the country.
Wyoming is home to more than two-thirds of the Class 7 wind
resource in the United States. Wyoming is home to more than
half of the Class 6 wind resource in the United States, and it
is home to more of the Class 5, 6, and 7 composite wind
resource than the other Western States combined in the western
interconnect. We have an opportunity to be part of the solution
to a national energy policy that focuses heavily on renewable
energy and climate change initiatives.
There are seven high-voltage transmission projects planned
to originate in Wyoming at this time. They are a combination of
load-serving entity and merchant project facilities. Together,
they could have the capacity to move 10,000 to 18,000 megawatts
of new electric energy in major metropolitan areas. Each of
them is focused on Wyoming wind at its core.
Several economic studies have shown that Wyoming wind can
be delivered to major metropolitan areas at economic prices
and, in some cases, at a lower cost than other available
renewable energy resources.
We have our own concerns in Wyoming about protecting our
natural resources as well, even in the face of the economic
opportunity tied to development. Governor Freudenthal believes
it is in Wyoming's interest to minimize the number of
transmission corridors that will be needed for those projects
while maximizing the flow of electrons. This speaks to the
opportunities and the need for larger projects within a
corridor for partnership, and that is really where we come to
this proceeding reaching out to Western Area Power
Administration in partnership.
I have mentioned seven projects sponsored by private
industry. There is an opportunity, as Wyoming sees it, in each
and every instance for there to be a partnership role, an
opportunity, with Western. We see this as a critical link, just
as critical as the grids are linked as they are operated
between public and private entities.
It has already been mentioned by the committee that there
is an important understanding that must be had related to cost
allocation. I agree with you completely. It is a critical
matter that we get the cost allocation sorted out
appropriately. It just may be that some of this development of
the national backbone grid that is under consideration now by
Congress is so important that it merits being spread across all
consumers as a matter of public interest in this country and
national security and to address climate change and to allow
for the development of renewable energy resources.
We see our partnership here with Western. Western should
not view the stimulus money as just a resource to meet the
backlog of deferred investments to its system needed to provide
service to its existing customers. Wyoming envisions an
opportunity here through the Federal stimulus funding to
develop a strengthened public-private partnership with Western
in support of high-voltage transmission systems. Western is in
a key position to help ensure that the projects are right-
sized, that they are maximized, that they are built to deliver
as much renewable energy as possible to major load centers.
We believe that it is appropriate that Western States and
the Federal Government share the goal of fostering
collaboration among transmission developers to achieve the
maximum transmission capacity with the least possible number of
lines and thus minimizing the number of required corridors. It
would be inappropriate for these actions to be borne on the
backs of the consumers of Western unless and to the extent that
they are direct beneficiaries of the associated projects.
Thank you for this opportunity.
[The prepared statement of Mr. Ellenbecker follows:]
Statement of Steve Ellenbecker, Energy Policy Advisor to Wyoming
Governor Dave Freudenthal; Wyoming Infrastructure Authority--Director
of Governmental & External Relations
Introduction
Chairwoman, and distinguished members of the Subcommittee, thank
you for this opportunity to provide testimony. I am here on behalf of
Governor Freudenthal to thank the Congress for enacting legislation
that provides the Western Area Power Administration (Western) with
$3.25 billion in borrowing authority under the American Recovery and
Reinvestment Act of 2009 (ARRA). Moreover, to urge that this authority
be used to assist in the construction and modernization of electric
transmission facilities that are necessary to deliver renewable energy
resources that meet our Nation's global climate goals in an
environmentally responsible manner.
In recent years, I have had occasion to represent Wyoming and
Western States in a wide range of public policy venues involving the
energy and electricity industries. These include the representation of
Governor Freudenthal in support of his recent tenure as Chairman of the
Western Governors Association (WGA) as well as leadership roles in the
Rocky Mountain Transmission Study (RMATS), the Committee on Regional
Electric Power Cooperation (CREPC), the Frontier Transmission Line
feasibility study, WGA's Clean and Diversified Energy Advisory
Committee (CDEAC), and most recently, WGA's Western Renewable Energy
Zone Initiative (WREZ). I also served as the Chairman of the Wyoming
Public Service Commission, the state utility regulatory agency.
Wyoming in Context
Wyoming is the largest energy exporting state in the U.S. We
produce in excess of 10% of the Nation's energy supplies. Wyoming is
the largest producer of coal, the 3rd largest producer of natural gas
and the largest producer of uranium. The vast majority of our energy
resources are exported as commodities, and converted into value-added
usable energy forms in distant markets. Our wind energy resource is
just as prolific, but must be converted to usable electric energy on
site, entirely dependent on a new interstate transmission backbone
system to move this vast and emission free energy resource to the
markets where it can be utilized.
According to National Renewable Energy Lab data, Wyoming is home to
more than two-thirds of the Class 7 developable wind resource in the U.
S., and over one-half of the developable Class 6 wind resource. Wyoming
has more developable Class 5, 6 and 7 wind resource than all the other
western states combined. These potential resources have a capacity
factor in excess of 40%.
While it's true that Wyoming has a vested interest in an
environmentally compatible new high voltage transmission network, it
should be equally true that the U.S. has a societal and national energy
policy interest in the same grid, if we are to meet the collective
renewable energy targets set by individual states and now envisioned in
emerging federal energy policy.
Six high voltage transmission projects originating in Wyoming are
in various stages of development. Together, they could have the
capacity to move 8,500 ``16,000 MW of new electric energy resources to
load centers. Each of them is focused around wind energy in Wyoming at
their core.
Several economic studies have shown that Wyoming Wind can be
delivered to Arizona Colorado, Utah, Nevada, Idaho and California at a
competitive price and in most cases at the lowest price of any other
renewable energy. The ARRA specifically directs the Western Area Power
Administration (WAPA) to support remote solar and wind generation
projects. Since the transmission grid in the west is essentially at
capacity, new transmission would pave the way for remote abundant,
economically developable wind generation from Wyoming to satisfy the
renewable energy demands that are growing across much of the West.
To protect natural resource values in our state, Governor
Freudenthal believes it is in Wyoming's interest to minimize the number
of transmission corridors that will be needed for these projects while
maximizing the flow of electrons. This leads to an optimum use of
corridor and line capacity.
The Governor also believes it is necessary to reevaluate the
regulatory process for approving transmission in western states. The
current model is too cumbersome and time-consuming. In the Governor's
opinion, it is unsatisfactory to many of the landowners affected by
transmission construction. It favors protection of resources on public
lands to the detriment of private lands. There shouldn't be a
difference. As currently implemented, the regulatory process lacks
``teeth'' to address and balance private land concerns. Governor
Freudenthal believes it is time to consider a streamlined, regulatory
model for transmission similar to that presently employed by FERC to
approve natural gas pipelines. Landowners should not have their
concerns unaddressed simply because the issue is associated with
private lands.
Past Constraints on the Western Area Power Administration
Western has struggled for several years without sufficient funds or
borrowing authority to do much beyond maintaining its spider web of
transmission lines that cross much of the West and Midwest. Many of
these lines date from the Depression Era and were installed to deliver
power from Federal hydroelectric plants to rural electric customers and
municipalities. After decades of under funding, Western is now
positioned to help tap some of the nation's best renewable resources to
meet the needs of its existing customers and the needs of the nation,
by helping to provide a transmission outlet for high quality renewable
energy resources begging to be developed in the Rocky Mountain,
Southwest and Great Plains states.
Western's long-standing financial limitations have largely left it
by the wayside in the expansion and modernization of the nation's
transmission grid. While it has been a valuable partner to the utility
industry by providing operating services for many of the industry's
transmission lines, including several in Wyoming, it has not been a
viable partner in grid expansion or modernization. Armed with financial
resources from the stimulus package, Western is now positioned to play
a leadership role in joining with other transmission companies to
upgrade and expand the backbone transmission systems that are critical
in order to connect remotely-located renewable resources with load
centers.
New Era for Western and Private-Public Partnership
Western should not view the stimulus money as just a resource to
meet the backlog of deferred incremental transmission upgrades to its
system needed to provide service to its existing customers. The
stimulus package enables Western to partner with the sponsors of major
proposed high voltage, long distance transmission projects within its
footprint. These transmission projects are designed to deliver to major
metropolitan areas the nation's highest quality wind resources (and
therefore most efficient for the ratepayers and taxpayers), which are
located in the Rocky Mountain and Great Plains states, and the highest
quality solar resources located in the Southwest.
As part of a comprehensive national energy strategy, Western must
also have a responsibility to invest in transmission to meet national
renewable energy and climate goals. Governor Freudenthal believes the
role of the Federal Government is to stimulate private sector
investment in transmission facilities, not to be the replacement for
such investments. The Federal Government should be available as a
partner to supplement and/or help finance the incremental cost of
transmission that the private sector is either unable to provide or to
obtain State regulatory commission approval to include in rates.
Wyoming envisions an opportunity through the federal stimulus
funding to develop a strengthened public-private partnership with
Western in support of high voltage transmission projects. Western is in
a key position to help ensure that projects are ``right sized'', that
is, built with a minimum of natural resource conflicts and a maximum of
renewable energy transfer capacity. We believe that it is appropriate
that western states and the federal government share the goal of
fostering collaboration among transmission developers to achieve the
maximum transmission capacity with the least possible number of lines,
and thus minimizing the number of required corridors.
In the West, we have an unprecedented number of proposed major
transmission projects. Not all of these projects will get built.
Unfortunately, under a business-as-usual approach, the lines that do
get built will be undersized and inadequate to meet the nation's long-
term demand for low carbon generation. As a result, the nation and
electricity consumers will not benefit from the huge economies of scale
in transmission construction. Equally important, building undersized
lines to areas rich in renewable resources today will lead to future
proposals for more lines to those same areas, creating an unnecessary
increase in natural resource conflicts. Even in the wide-open spaces of
the West we cannot afford to squander the limited number of potential
transmission corridors by building undersized lines to rich renewable
resource areas.
Only the federal government is positioned to pay to right-size
transmission to renewable areas. By doing so, a public-private
partnership can be formed around increasing the societal value of major
transmission projects. To this end, Western (and the Bonneville Power
Administration) should seek opportunities to partner with major
proposed transmission projects. Western (and BPA) should specifically
use the stimulus authority to:
Buy capacity on major proposed transmission projects that
will enable the project sponsor to increase and/or appropriately
``size'' its proposed line to renewable resource rich areas; and
Pay the incremental cost to preserve the option to
increase transfer capacity in a new transmission corridor to an area of
large renewable resources. For example, Western could pay the
incremental cost of the larger capacity transmission towers needed to
accommodate additional conductors on the same towers in the future.
This investment will capture the economies of scale in transmission
construction, limit the proliferation of transmission corridors, and
provide load-serving utilities an option to quickly access more
renewable generation when demand increases.
Leverage the deployment of private dollars by creating
the mechanism whereby private companies will acquire the transfer
capacity preserved above, then repay Western so that the original
investment is recovered. Properly executed, these dollars will be
recycled to the next project with similar leverage to attract private
investment to build out the grid.
There are several situations in Wyoming where this example would
apply including the Wyoming-Colorado Intertie project (under
development by the Wyoming Infrastructure Authority, Trans-Elect, and
Western), PacifiCorp's Gateway projects, Anschutz's TransWest Express
project, TransCanada's Zephyr project, and the High Plains Express
project (an unprecedented collaboration of 7 utilities including
Western, three state transmission authorities, and Trans-Elect).
Equally compelling examples exist throughout the Rocky Mountain West
and the Upper Great Plains states.
The WGA's WREZ Initiative is a West-wide stakeholder effort to
consider the benefits of multi-state transmission lines to tap the
West's most prolific renewable resources areas including wind, solar,
geothermal, biomass, and small hydro. We anticipate that WREZ will show
that a West-wide expansion of transmission, much of it located within
Western's footprint, will help to fully develop markets for renewables,
reduce customer costs, and reduce the nation's dependence on carbon-
emitting resources.
Conclusion
In closing, I would leave you with three points to consider:
Through its role in marketing hydroelectric power and the
new transmission borrowing authority in the stimulus package, Western
is strategically positioned to make a significant contribution to the
nation's renewable energy and climate goal; and
Adequately sized transmission to access the nation's best
renewable resources is less likely to be developed without the
financial participation of Western.
Making investments in a manner to leverage Western
resources to attract private sector dollars will accelerate the
construction of a more robust grid.
With careful, but expeditious action in the Executive Branch and
with Congressional oversight, the new borrowing authority granted to
Federal Power Marketing Administrations will create jobs and contribute
to meeting the nation's long-term renewable energy and climate goals.
Thank you for this opportunity to provide testimony.
______
Mrs. Napolitano. We will proceed to Ms. James.
I would like to indicate that Leslie has a plane to catch,
so if you have any questions, direct it to her so she can then
meet her flight.
She is Executive Director of Colorado River Energy
Distributors Association, accompanied by Joel Bladow, Senior
Vice President of Tri-State Generation and Transmission
Association, Inc., of Westminster, Colorado. Thank you for
being with us.
STATEMENT OF LESLIE JAMES, EXECUTIVE DIRECTOR, COLORADO RIVER
ENERGY DISTRIBUTORS ASSOCIATION, TEMPE, ARIZONA, ACCOMPANIED BY
JOEL BLADOW, SENIOR VICE PRESIDENT, TRANSMISSION OF TRI-STATE
GENERATION AND TRANSMISSION ASSOCIATION, INC., WESTMINSTER,
COLORADO
Ms. James. Thank you very much, Madam Chairwoman.
I am Leslie James, Executive Director of CREDA. I will
shorthand it here. I am pleased to have been asked to speak
with you today regarding Western's borrowing authority
provision contained in H.R. 1, the American Recovery and
Reinvestment Act.
CREDA is a nonprofit organization representing consumer-
owned electric utility systems that contracts for the delivery
of Federal hydropower over the Federal transmission system of
the Western Area Power Administration.
CREDA members are all nonprofit organizations serving over
four million electric consumers in the six Western States of
Arizona, Colorado, Nevada, New Mexico, Utah, and Wyoming. CREDA
members include political subdivisions, electric cooperatives,
State agencies, municipalities and tribal utilities. CREDA
members are also members of the American Public Power
Association and the National Rural Cooperative Association.
Western's customers have identified three general issues
associated with this broad new authority:
First, the importance of transparency and accountability.
Policies, procedures, and rate setting need to ensure a very
clear firewall between this program and the existing projects
and customers. The customers have a long history of working
with Western to ensure that these renewable resources provide
benefits to millions of end-use customers. The 1992 memorandum
of agreement between CREDA, the Bureau of Reclamation, and
Western, for instance, could be a good model going forward to
ensure transparency and accountability between the agency and
the power customers.
Second, the issue of cost allocation. Historically, as
transmission and generation interconnections are planned, the
issue of who pays for what is always present. Western must
establish clear pricing and cost allocation policies adopted
early in the program so that the customers, the renewable
developers, and the taxpayers know the associated costs and
benefits attributed to a new project. We applaud the provisions
in Section 402 that set up this expectation.
Last, electric reliability is key. It is imperative that
Western's planning and participation in these new facilities
and systems be open to participation by others, including CREDA
members, in order to minimize the impact on the environment,
the cost of to local consumers, and local siding conflicts.
CREDA believes that this new borrowing authority that
Congress has granted Western creates an opportunity to ensure
integration of additional renewable resources and the
development of required infrastructure. As implementation
proceeds, we are confident that Western will work closely with
the present customers to establish clear criteria on how the
cost allocations will be treated.
It is also important that Federal-nonFederal partnerships
develop and evolve. This will ensure that nonFederal funding is
used to leverage the Federal investment and to minimize the
local citing, environmental, and cost impacts associated with
these new facilities.
Western customers have a long history of partnering with
the agency, and we stand ready to be fully involved as the
program unfolds and as Western meets the challenges it faces to
succeed with this new authority while also ensuring that there
are no adverse impacts to the existing project's rates and
reliability.
Thank you again very much, and I will entertain any
questions.
[The prepared statement of Ms. James follows:]
Statement of Leslie James, Executive Director,
Colorado River Energy Distributors Association (CREDA)
Madam Chairwoman, members of the Subcommittee, I am Leslie James,
Executive Director of the Colorado River Energy Distributors
Association (CREDA). I am pleased to have been asked to talk with you
today regarding the Western Area Power Administration's Borrowing
Authority provisions contained in H.R. 1, the American Recovery and
Reinvestment Act (ARRA).
CREDA is a non-profit organization representing consumer-owned
electric systems that contract for the delivery of federal hydropower
over the federal transmission system of the Western Area Power
Administration (WAPA) from the Colorado River Storage Project (CRSP).
CREDA members are all non-profit organizations, serving over four
million electric consumers in the six western states of Arizona,
Colorado, Nevada, New Mexico, Utah and Wyoming. CREDA members include
political subdivisions, electric cooperatives, state agencies,
municipalities and tribal utilities. CREDA members are members of the
American Public Power Association (APPA), as well as the National Rural
Electric Cooperative Association (NRECA). CREDA members (listing
attached) purchase over 85 percent of the CRSP hydropower generation.
WESTERN AREA POWER ADMINISTRATION (WAPA) AND ITS CUSTOMERS
WAPA is one of the four federal Power Marketing Administrations
(PMAs) and it markets at wholesale over 10,000 MW of federal hydropower
generated by the Bureau of Reclamation and Army Corps of Engineers
facilities in a 15-state region, utilizing 17,000 miles of transmission
facilities. WAPA's wholesale customers in turn provide electricity to
approximately 50 million end-use customers. In accordance with federal
law, WAPA rates are set at the levels needed to recover the costs of
the initial federal investment (plus interest) in the hydropower and
transmission facilities. WAPA annually reviews its project rates to
ensure full-cost recovery. None of the costs are borne by taxpayers. If
a deficit is projected, rates are adjusted to eliminate any deficit.
There are no profits involved in the sale of this power from WAPA to
its customers, or in the sale of this power by the customers to their
end-use customers. Power rates also help to cover the costs of other
activities authorized by these multipurpose projects such as
navigation, flood control, water supply, environmental programs, and
recreation.
The federal resources were established under a multitude of
authorizing legislative initiatives. WAPA markets the federal resources
through 10 separate ``projects'', including but not limited to the
CRSP, the Boulder Canyon Project, the Central Valley Project, the
Parker-Davis Project, and the Pick-Sloan Missouri Basin Project. WAPA
markets the federal hydropower resources in the following states:
Arizona, California, Colorado, Iowa, Kansas, Minnesota, Montana, North
Dakota, Nebraska, New Mexico, Nevada, South Dakota, Texas, Utah and
Wyoming.
II. KEY ISSUES
WAPA customer concerns with the provisions contained in Section 402
of the ARRA may be categorized into three general areas:
First, accountability and transparency. WAPA's customers have been
ensuring repayment of the federal investment for over 50 years, by
entering into long-term contracts to purchase the hydropower generation
and transmission resources and by paying all of the federal investment
in generation and transmission facilities (with interest), all power-
related operation and maintenance costs, and associated environmental
costs. Each project's resources are marketed in accordance with
individual marketing plans and contracts; ratemaking, accounting and
repayment obligations and timetables are also different for each
project. For example, the repayment obligation in the CRSP includes
repayment by power customers of over 95% of the cost of the irrigation
features--the costs that are determined to be beyond the irrigators'
``ability to pay.''
WAPA customers want to ensure that WAPA's original, core mission of
delivering reliable, cost-based renewable hydropower resources remains
intact. This new, congressionally authorized borrowing authority will
stretch WAPA's human resources to the limit. It is important that WAPA
and the preference customers work together to assure that resource
conflicts are identified and mitigated. The customers have a long
history of working with WAPA to ensure these critical energy resources
provide benefits to millions of end-use customers. For example, since
1992, CREDA members, WAPA and the Bureau of Reclamation have
participated in a joint review of agency work programs to better
understand the agencies' critical needs, and provide funding support
when needed. This process has afforded the customers the ability to
understand, comment on, and provide input on programs, capital
investments, and operational issues facing the agencies. The
transparency and accountability that the joint review provides has been
proven to be an important aspect of agency/customer relationships.
In addition, the customers, as U.S. taxpayers, strongly support
transparency and accountability in the implementation of all aspects of
the stimulus legislation, including the new WAPA borrowing authority
program. The customers applaud the provisions in the WAPA provisions
that require development of policies and procedures through a public
process, to ensure the existing project rates are not increased through
implementation of this program and that customers understand the
criteria that will be applied to recruit, select and implement
transmission projects.
A second issue that may prove to be quite a challenge for the
customers and WAPA going forward is that of cost allocation. Due to the
integrated nature of the U.S. bulk transmission system, there will be
circumstances requiring upgrades to the existing transmission
facilities in order to interconnect new transmission facilities
necessary to transmit renewable resources. There should be clear
pricing and cost allocation policies adopted early in the program to
ensure that the customers, the renewable developers, and taxpayers know
the costs and benefits associated with a particular project. For
example, if the facilities required are necessary solely for the
transmission of new renewable resources, all costs (including
associated overheads, operation, maintenance and rehabilitation) should
be borne by the new project. If, however, the underlying project
requires upgrades and there is a clear and direct benefit to the core
mission of delivering federal hydropower to existing customers, then
some cost-sharing may be appropriate.
A third area could be generally categorized as electric
reliability. This includes ensuring the current transmission system is
not negatively impacted from a reliability or load-serving standpoint
by implementation of the new borrowing authority. The federal
transmission system was designed and constructed to transmit renewable
federal hydropower resources from the powerplants to load centers. WAPA
does not have ``load growth'' responsibilities (i.e., providing
additional power as demand increases over time). As loads have grown
since the construction of the federal system, the customers, who DO
have load-serving responsibilities have either built additional
transmission facilities or contracted for transmission service with
local transmission provider(s) to provide reliable electric service to
their end-use customers. Because the transmission system, by its
nature, is an integrated system, it is imperative that new transmission
projects provide for public/private partnerships and joint use
opportunities to ensure that customers are able to meet load growth
reliably. Without joint participation, new lines could be constructed
with no provisions to serve the local customers, resulting in the need
to build additional facilities. It is imperative that planning and
participation in these new WAPA constructed facilities and systems be
open to participation by others also in order to minimize the impact on
the environment, costs to local consumers, and local siting impacts.
III. IMPLEMENTATION PROCESS
The key to WAPA's successfully implementing the new authority is its
development of a process that identifies the issues, and then
establishes the criteria that will be used so all parties--
public power customers, renewable developers, and the taxpayers
understand the benefits and costs associated with proposed
projects. To that end there are two program areas that
immediately come to mind and must be clearly defined:
Cost Allocation Criteria: Presently NO criteria exist
concerning how cost allocations will be determined between the existing
federal system and the facilities that will be constructed under the
new authority. WAPA must work closely with its customers to establish
clear criteria on how the cost allocations will be treated. This will
prevent significant problems and potential litigation as projects are
constructed and repayment responsibilities established. In CREDA's
case, not getting it right could mean unnecessary electricity cost
increases to the over four million end-use customers my members serve.
Partnerships: It is important that proposed projects
under this authority include the opportunity for local, load-serving
utilities to participate in the new facilities to serve local customer
needs. The project proposal and selection process needs to be well
defined so that local utilities will understand the time-lines and can
evaluate the economics of participating as a partner with WAPA in the
new facilities. This will also ensure that non-federal funding is used
to leverage the federal investment, and to minimize the local siting,
environmental, and cost impacts associated with the new facilities.
There will undoubtedly be other issues raised as WAPA's public
process is conducted and it is important that adequate time be
allocated to fully explore this complex topic.
IV. CONCLUSION
The new borrowing authority afforded WAPA creates an opportunity to
ensure integration of renewable resources and the development of
required infrastructure. WAPA customers have a long history of
partnering with the agency and look forward to working with WAPA to
make sure the critical role the federal system presently has is not
compromised as WAPA meets the challenges it faces to succeed with this
new authority.
______
COLORADO RIVER ENERGY DISTRIBUTORS ASSOCIATION (CREDA) MEMBERSHIP
ARIZONA
Arizona Municipal Power Users Association
Arizona Power Authority
Arizona Power Pooling Association
Irrigation and Electrical Districts Association of Arizona, Inc.
Navajo Tribal Utility Authority (also New Mexico, Utah)
Salt River Project
COLORADO
Colorado Springs Utilities
Intermountain Rural Electric Association
Platte River Power Authority
Tri -State Generation & Transmission Cooperative (also Nebraska,
Wyoming and New Mexico)
Yampa Valley Electric Association, Inc.
NEVADA
Colorado River Commission of Nevada
Silver State Power Association
NEW MEXICO
Farmington Electric Utility System
Los Alamos County
City of Truth or Consequences
UTAH
City of Provo
City of St. George
South Utah Valley Electric Service District
Utah Associated Municipal Power Systems
Utah Municipal Power Agency
WYOMING
Wyoming Municipal Power Agency
______
Mrs. McMorris Rodgers. [presiding.] Next, Scott Corwin,
Public Power Council, based in Portland, Oregon.
STATEMENT OF SCOTT CORWIN, EXECUTIVE DIRECTOR, PUBLIC POWER
COUNCIL, PORTLAND, OREGON
Mr. Corwin. Good afternoon, Madam Chairwoman, Ranking
Member. My name is Scott Corwin. I thank you for inviting me
today.
PPC is a trade association representing the consumer-owned
utilities of the Pacific Northwest with statutory rights to the
power marketed by the Bonneville Power Administration. Our
members have service territories in portions of seven Western
States. They are also members of the American Public Power
Association and the National Electric Cooperative Association.
Because our members are consumer-owned and answer directly
to their rate payers, they are very sensitive to the rates they
pay for wholesale power and transmission of electricity and
thus to the levels of debt that are a portion of those rates.
By law, funds borrowed from Treasury by BPA are paid back by
its customers with interest. Nevertheless, we have been strong
supporters of the $3-1/4 billion in additional borrowing
authorities for BPA; and we believe that will meet key
infrastructure needs, create jobs, and help integrate new
sources of integration. And we appreciate Congress' steps in
that direction, especially Members of the Northwest delegation.
An important source of our support for that borrowing
authority was this unique 35-year history that we have in this
region with this arrangement with BPA. In fact, the
Transmission System Act of 1974 states right within it that BPA
should pursue its obligations at the lowest possible rates to
consumers and consistent with sound business principles. So,
PPC is grateful that Congress took a direction here where the
actual language stayed with that current legal framework and
with that 35-year history.
We also supported this because we see key need for
electricity infrastructure in the West, especially with respect
to the need to maintain reliability of the electricity grid,
especially in our region where generation sources tend to be
located very far from the load centers.
In addition, the authority complements BPA's role as the
leader in integrating new sources of renewable generation
capacity, especially wind power. It also further enables their
historic investments in conservation, overhauling the existing
generation assets, and fish and wildlife mitigation.
But the amounts borrowed are repaid with interest through
revenues collected mostly from consumer-owned utilities. So, a
key point for us is this distinction between borrowing or
financing and the actual payment or cost recovery. It is one
thing to raise a credit limit. It is quite another to ensure
that the credit gets used very well and that there is someone
standing there to pay it back throughout time.
Having just signed new 20-year power contracts with BPA,
our members spend a lot of time and effort in the capital
planning processes. They are run to determine the appropriate
types and the location of investments for transmission and for
the other statutory purposes that BPA uses its step for.
Our goal has been to have significant impact up front so
that we are not merely arguing in the rate cases later over the
allocation of costs that have already been incurred. With major
infrastructure projects costing in the hundreds of millions of
dollars each, BPA will continue to need to be very prudent in
its expenditures. These projects must make both economic and
engineering sense, because transmission projects, by their
nature, have large costs in common with the level of risk.
Customers on the hook for repaying BPA's debt will need to
continue to have that assurance that appropriate reviews remain
in place so they will not be left holding the bag for
investments that don't pencil out or whose economics change
over time with evolving technologies and markets.
For the most part, these capital planning and budgeting
tools that have been in place at Bonneville have served the
region and its customers well; and, recently, PPC has asked
Bonneville to provide even more detail on its transmission
capital programs: What is needed? What is planned? What is the
status of projects in the pipeline? And they agreed to engage
us even more and to provide additional information on a
quarterly basis, and we appreciate that step.
We will stay involved as we move forward to implement this
authority, and we appreciate the efforts of all of those
involved who have created this tool.
Thank you very much. I appreciate the opportunity to
testify today.
[The prepared statement of Mr. Corwin follows:]
Statement of R. Scott Corwin, Executive Director,
Public Power Council
Good afternoon, Chairwoman Napolitano, Ranking Member McMorris
Rodgers, and Members of the Subcommittee. My name is Scott Corwin. I am
the Executive Director of the Public Power Council. I thank you for the
opportunity to testify today on this important topic.
The Public Power Council (PPC) is a trade association representing
the consumer-owned utilities of the Pacific Northwest with statutory
rights to purchase power that is generated by the Federal Columbia
River Power System and marketed by the Bonneville Power Administration
(BPA). Member utilities have service territories in portions of seven
western states and serve over 41% of the electricity consumers in the
region.
These utilities, some of the largest and some of the smallest in
the Northwest, are committed to preserving the value of the Columbia
River system in terms of its clean and reliable electricity for
consumers. Because the utility members of PPC are owned by and answer
directly to their ratepayers, they are very sensitive to the rates they
pay for wholesale power and transmission of electricity and to the
levels of debt service that are a portion of those rates.
The Public Power Council has been a strong supporter of the $3.25
billion in additional BPA borrowing authority provided in the American
Reinvestment and Recovery Act. When the idea came up last fall that
borrowing authority could be extended as part of the economic stimulus
package, we took it under very careful consideration. Before supporting
the idea, we sent information to our membership and raised it on the
meeting agenda before our 21 member Executive Committee to make sure
that there was consensus.
Funds borrowed from Treasury by BPA are paid back by its customers
with interest. So, decisions to support additional borrowing are taken
very seriously by the customers. There were several aspects to the
decision that bolstered support, including:
There was a pre-existing construct for BPA borrowing
authority under the Federal Columbia River Transmission System Act
(that spells out the use and repayment of borrowed funds) that has
worked well in the past to benefit the region.
Customers have access to rigorous processes under the
current construct to help ensure that capital spending is justified and
ratepayer dollars are spent responsibly.
While there is a strong public purpose focus, the law
requires BPA to act in a business like manner and recover costs as
appropriate.
Without the additional borrowing authority, the array of
infrastructure needs already identified--even for basic system
reliability and maintenance--would have pushed BPA's authority to its
limit in the near future.
There will continue to be growing needs to facilitate new
sources of generation in the region, especially renewable resources
such as wind and geothermal.
System stability and the economy of the region would
benefit if work on these infrastructure projects moved more rapidly
than it otherwise could.
We appreciate the steps taken on this issue by Congress generally,
and by members of the Northwest delegation in particular. Added
borrowing authority for BPA presents a helpful combination of advancing
key infrastructure needs, promoting job creation, facilitating
alternative sources of energy, and insuring actual return of the
dollars with interest to the U.S. Treasury.
The Case for Additional Borrowing Authority for BPA
PPC is grateful that Congress chose to work within the current
legal framework for BPA borrowing authority and not impose new
requirements or limitations. With this in mind, PPC chose to support
the proposed additional borrowing authority for the following reasons.
First, despite the existing extensive BPA transmission system that
enables movement of wholesale power from 31 carbon-free federal dams,
one nuclear plant and other nonfederal hydroelectric and wind
facilities, there is a critical need for electricity infrastructure in
the West, especially with respect to capability needed to maintain
reliability of the electrical grid. We have faced bottlenecks for years
as population and electricity loads have out-grown an out-dated system.
It was only a matter of time before this caught up with us.
Second, enhancements to the electricity transmission system are
required in order to add new sources of generation. BPA has been the
leader in facilitating major additions to the region's renewable
generation capacity from sources such as wind power. In light of the
ever growing demand, accessing additional generation resources and
moving electricity freely throughout the region becomes increasingly
important.
Third, in addition to transmission facilities, other key
infrastructure pieces that fall within BPA's existing statutory
responsibility and are in need of funding include investments in energy
conservation, refurbishment of existing generation assets at the
federal projects, and fish and wildlife mitigation projects. These
investments will help the region meet its environmental and power
supply needs, and maintain the federal hydro-electric system's
capabilities to serve loads.
Fourth, projects enabled with this authority have multiple economic
benefits. For example, a single project like the John Day--McNary 500
kV transmission line calls for vast materials and supplies along with
hundreds of jobs associated with the necessary engineering and
construction. In addition to new construction activity, this
infrastructure provides economic benefit by ensuring a clean, low-cost,
and reliable electricity supply to millions of residents and businesses
in our region.
Fifth, as noted above, any amounts borrowed from the U.S. Treasury
by BPA are repaid with interest through revenues collected from
electricity sales, mostly to consumer-owned utilities around the
Northwest. So, aside from all of the benefits listed above, taxpayers
receive a solid return on investment from a financial standpoint.
Ensuring Accountability and Defining Success
In representing those who will repay the cost of debt taken on by
BPA, the customer view of this issue makes an important distinction
between borrowing/financing and actual payment or cost recovery. BPA
has an excellent record of payment on its obligations to the Treasury
because of the cautious approach taken in the rate cases that set the
amounts added to power and transmission rates. As the customers paying
those rates, our members spend a lot of time and effort in the capital
planning processes run by BPA to determine appropriate types and
locations of investments for transmission and for the other statutory
purposes.
In addition, customers are very active in the BPA budgeting
processes. We have worked hard over the years to try to improve the
timing and level of detail around information relating to BPA's
budgets. Our goal has been to have significant input at the front end
of these processes, so that we are not merely arguing in rate cases
over the allocation of costs already incurred. Currently, an evolution
of the budget process for BPA called the Integrated Business Review is
further refining how and when customers get information on key spending
decisions.
While $3.25 billion is a lot of financing capability, major
infrastructure projects cost in the hundreds of millions of dollars
each. Therefore demand for these funds will continue to be high, and
BPA will continue to need to be very prudent in its expenditures. It is
critical that proposed projects pass rigorous review and that they make
both economic and engineering sense. Transmission projects with large
costs also come with a level of risk. Customers on the hook for
repaying BPA's debt will need continued assurance that the appropriate
reviews remain in place so that they will not be left holding the bag
on investments that do not pencil out. This is an especially important
point in light of the current economic situation facing the end users
of electricity who pay the bills.
For the most part, the capital planning and budgeting tools in
place at BPA have served the region well in order to maintain an
effective and reliable electricity system. At PPC, we intend to stay
engaged as the region moves forward to implement use of this additional
borrowing authority in a manner that will best benefit the citizens of
the Northwest. Again, we appreciate the efforts of all of those
involved who added this key element for the region's economic benefit.
Thank you for the opportunity to testify today. I am pleased to
answer any questions, and look forward to working with you on these
issues in the future.
______
Mrs. McMorris Rodgers. Next is Chris Crowley, President of
Columbia Energy Partners.
STATEMENT OF CHRIS CROWLEY, PRESIDENT, COLUMBIA ENERGY
PARTNERS, LLC, VANCOUVER, WASHINGTON
Mr. Crowley. Thank you very much.
My name is Chris Crowley, and I am the President of
Columbia Energy Partners. Our company is an independent
developer of renewable energy projects, primarily wind power
and mostly located within the Bonneville service territory.
We developed a 200-megawatt wind energy project in
Arlington, Oregon, which is now interconnected to the market
via BPA. We are also a major participant in Bonneville's recent
network open season, which will be the focus of these remarks.
We have some 1,800 megawatts of renewable energy in
developments which we feel can play a vital role in bringing
resource and geographic diversity to the Bonneville system and
the regions's energy supply.
The increase in BPA's borrowing authority under the
American Recovery and Reinvestment Act is an important step in
the overall plan to distribute much-needed capital investments
in our country and build a vibrant, green economy. BPA's role
in this effort harkens back to the 1930s when BPA's and its
sister agencies, the Corps of Engineers and the Bureau of
Reclamation, built the Columbia Snake hydro system and the
region's transmission grid. BPA was a major player in
dramatically changing the energy landscape and the economy of
the Pacific Northwest at the time.
Another historic moment is upon us now, and BPA can and
should once again play a history making role in that effort.
Recently, we feel BPA showed that it can balance competing
interests successfully in its network open season. Our
company's direct experience in that process provides a good
example for how BPA addressed some challenges and can address
others better in the future.
In 2008, Bonneville launched a program to offer the
customers an opportunity to articulate their service needs,
signed precedent transmission service agreements and get
service similar to the natural gas pipeline business model.
A little color I can add to that process is that our
company, like others, stepped up and signed a stack of
precedent transmission service agreements about four inches
thick to participate in that process. We paid cash deposits of
$2 million and supplied letters of credit to back our PTSA's
with $12.4 million. For a company of our size, that was a huge
commitment, but we knew that the network open season was a pay-
to-play system, and we wanted to play.
Part of what we brought to the table in the network open
season was a complex of wind energy projects outside of the
constraints of Bonneville's system around the Columbia River
Gorge with the winter peaking resource profile of the gorge
area. These diverse resources have attributes that BPA's
administrator recognized when he testified before the Senate
last summer. He said in part that sites that are at some
distance from the Columbia River gorge would add value if the
wind regime is different. Overall, the power system would seem
a much more constant production which would be better able to
meet consumer demands. To take advantage of these
opportunities, it may reduce costs and enhance reliability to
build transmission facilities to the more remote regions of the
Northwest to capture their higher value and diversity.
Under its tariff, BPA opted to study system impacts from
these new projects in clusters. Our projects were in a remote
portion of BPA's footprint, which made developing a plan of
service for them challenging.
In the interest of time, I will just say briefly that our
projects did not advance in the process because of cost and
complexity. However, we do hope that they are in a more
collaborative problem-solving mode in the next network open
season; and with increased borrowing authority we can work with
Bonneville to achieve a result that works for both BPA and
brings our diverse wind projects into the mix.
So, looking ahead, in order to make the best use of BPA's
borrowing authority, we believe that BPA must more efficiently
engage with their private-sector customers in the early stages
of analysis and planning. It is often challenging for any
government agency to move on private-sector time frames, and we
understand that, but the ambitious goal set by Congress and the
Obama Administration deserves no less.
We would like to see that BPA looks through to the local
service providers that connect to the BPA network. Our projects
will actually interconnect to a local co-op and then go out
over BPA. Bonneville needs to provide guidance and leadership
in that effort to help get the best results. Bonneville should
also clear out its interconnection queue, as well as the
transmission queue, in the next network open season, we hope.
And, last, and this is an important point with any regional
transmission agency, they should make every effort to optimize
existing transmission rights of way and permitting work already
done, such as the National Energy Corridors Act, part of the
Energy Act of 2005. Bonneville needs clear direction from this
Committee and the Obama Administration that we are in a new day
of aggressively moving forward with these efforts.
I want to be clear that we applaud Congress' work on the
stimulus bill and the increase in BPA's borrowing authority,
and we urge the Committee to stay active in their oversight and
effective deployment of these efforts with WAPA and BPA and
their partners in the public and private sector.
Mrs. McMorris Rodgers. Thank you.
[The prepared statement of Mr. Crowley follows:]
Statement of Chris Crowley, President, Columbia Energy Partners LLC
`` Inaction is not an option that is acceptable to me and it's
certainly not acceptable to the American people--not on energy,
not on the economy, and not at this critical moment.''
--President Obama, U.S. Department of Energy, Feb. 5, 2009
Introduction
Good afternoon, my name is Chris Crowley, President of Columbia
Energy Partners LLC (CEP). Our company is an independent developer of
renewable energy projects, primarily wind power, mostly located within
the Bonneville Power Administration's service territory. We have been
in this business since 2000, which makes me a veteran and provides some
experience I hope will be of interest to the Committee.
Thank you for the opportunity to address the Water and Power
Subcommittee today regarding the recent increase in the Bonneville
Power Administration's (BPA) borrowing authority under the American
Recovery and Reinvestment Act (Stimulus Bill). This aspect of the
Stimulus Bill is an extremely important part of the overall plan to
efficiently and transparently distribute much needed capital
investments in our economy to build a vibrant ``green economy.''
Channeling public capital investment through the BPA toward real energy
projects will provide the ``capital lubrication'' the economy needs to
attract private sector investment and jump start the ``green economy.''
BPA's role today is analogous to its role in 1937 when it was first
formed to market the power from the system of hydroelectric dams and
associated electric transmission built through a partnership between
BPA and its sister agencies, the Corps of Engineers and Bureau of
Reclamation. BPA was a major player in significantly changing the
energy landscape in the Pacific Northwest at that time. Since then, BPA
has effectively deployed public capital to further build out both the
Federal Columbia River Power System (FCRPS) and Federal Columbia River
Transmission System (FCRTS) meeting Pacific Northwest energy needs and
strengthening our economy.
A similarly historic moment is upon us now, but today's situation
is also different on several levels. BPA has had the ability to deploy
capital in the past, but the need is greater than ever today. Because
the need is so great, Congress was wise to increase BPA's borrowing
authority dramatically so the Administration can put more money to
work. However, with the increased borrowing authority, BPA's actions
will also be scrutinized more closely and, so, the question will be,
``how will such capital be deployed and for what purposes?'' There are
three key drivers in our economy to be balanced with BPA's public goals
which are:
1. building energy diversity and independence through renewable
energy development and ``green economy'' initiatives,
2. injecting public investment into the economy to ``unfreeze''
our capital markets and leverage public and private investment in
energy infrastructure, and
3. creating American jobs through productive public-private
partnerships.
BPA's borrowing authority has been expanded; however, BPA has many
interests to balance and many stakeholders to listen to who are
concerned about where BPA invests its capital and how it does so.
A key example of BPA balancing such interests successfully was in
its recent Network Open Season. In that process, BPA managed to balance
public and private interests to create a framework to finance and
construct new transmission in spite of many challenges, including a
changing load and resource topography, more complicated system
operations and increased coordination with other electric systems
across many states and systems. The recent Network Open Season (NOS)
process provides an excellent model and platform for BPA and others to
act in public-private partnerships, balance diverse interests with
unique project attributes and implement creative and productive
solutions.
A Unique Opportunity for BPA in Harney County, Oregon
Our company--and our direct experience with BPA in the recent
Network Open Season--provides a good example for how new challenges
have been and can be addressed by BPA. BPA has efficiently integrated
1500 MW of wind energy resources in a region east of Portland, Oregon
known as the Columbia Gorge or ``Gorge.'' The Gorge wind regime is
primarily a spring-summer resource, which coincides with BPA's high
hydroelectric production and ``fish flush'' time frame, creating
challenges for reliable management of BPA's power system.
BPA Administrator Steve Wright has expressed interest in connecting
wind resources to the grid which may be at some distance from the Gorge
and that have a wind regime different from the Gorge. BPA believes that
such new wind resources, which have not been exploited to date, would
help to balance the Gorge wind resource area, provide more constant
production and add efficiencies to the operation of its power system
matching consumer demand more optimally. In order to take advantage of
these higher value opportunities and diverse opportunities,
transmission facilities must be built to reach the more remote regions
of the Northwest. It is recognized that the higher cost of building
transmission to these remote regions could be offset by the value of
the diverse wind regime and enhanced reliability.
We are in complete agreement with BPA on connecting diverse and
remote wind resources to their grid and will be a key partner with BPA
in this regard. On that point, CEP is developing a 600 MW wind energy
complex composed of six separate projects in southeastern Oregon. CEP
has a proven track record of developing wind resources and moving its
power to market. There are several unique aspects of our wind project
complex which make CEP an ideal partner for BPA to deploy public funds,
including:
1. a ``winter-peaking'' wind regime, which is the exact inverse of
the Gorge wind production profile;
2. the ability to optimize existing transmission and add
significant new transmission, and
3. to bring public and private investment to hard hit rural
communities where unemployment hovers at 20% and non-ranch jobs--
outside the government sector--are almost non-existent.
In order to optimally integrate renewables into any electric grid,
the unique attributes of each project's wind regime, location,
interconnection and transmission service plan must be factored into the
plan to finance and develop the project. The interaction between a wind
project's production of energy on a variable basis and the transmission
grid must be analyzed to capture all of the specific benefits and
impacts.
How to Put BPA's Stimulus Bill Funds to Work and Ensure Proper
Oversight
It sometimes seems as if everyone is in agreement on the need to
fund infrastructure to facilitate development of new, renewable energy
projects, but people are in a quandary over how to get it done. The
broad agreement that we need new infrastructure must be refreshing for
the members of this hearing panel, including the BPA and the Western
Area Power Administration (WAPA). President Obama has certainly made it
a highlight of his economic platform, and Congress acted decisively, as
the increased BPA borrowing authority in the Stimulus Bill makes clear.
During the 2008 presidential campaign, Candidate McCain also spoke
glowingly of his desire to boost investment in the renewable energy
sector. Even when Congress was in Republican control, the 2005 Energy
Act mandated development of ``energy corridors'' for transmission to
bring new renewable energy resources to market. In addition, the
Western Governors Association is being very proactive and is making
``renewable energy zones'' with transmission solutions a top priority.
And yet, now that it is time for the rubber to meet the road, there
are many views on how to get us to the next level in connecting
renewable resources to the grid but not much clear direction. So, now
is the time to focus our leadership, support and oversight efforts to
remove barriers in some key areas, including:
1. The time and risk involved in permitting new transmission
projects, which adds significantly to the cost and is a strong
disincentive for private parties to attempt it;
2. The de-facto veto power of ``green mail'' groups adept in suing
federal agencies, which places undue pressure on transmission providers
to seek routes over private lands;
3. Decades-old agreements on existing shared transmission systems,
such as the Southern Intertie in our area, with unclear impacts on
planning for new projects; and
4. Challenges to planning across interconnected energy markets and
systems to address seams issues and optimize joint and larger-scale
solutions.
Bonneville, to its credit, has overcome these obstacles with some
notable success. In 2008, Bonneville launched a ``Network Open Season''
or NOS to offer customers the opportunity to articulate their service
needs, sign Precedent Transmission Service Agreements (PTSA) and get
service, similar to the natural gas pipeline business model. Since
BPA's Administrator Steve Wright is also here today to testify, I will
let him detail the response to the Network Open Season. The ``color'' I
can add to that is that our company, like others, stepped up and signed
a stack of PTSAs four inches thick to participate in the process. We
paid cash deposits of $2 million and supplied letters of credit to back
our PTSAs worth $12.4 million. For a company our size, that was a huge
commitment, but we understood that the NOS was a ``pay to play'' system
and we wanted to play.
According to BPA's accounting of the Network Open Season response,
our company's participation in the process was significant. Our
transmission service requests accounted for:
3.5% of customer participation (1 of 29 companies);
18% of total PTSAs signed;
12% of total MW participation (800 MW);
16% of total wind transmission service requests;
14% of total LC (security) required for signed PTSAs
($12.4M of $90M);
CEP was on the longer end of the contract term curve (30
years).
Under its Tariff, BPA opted to study system impacts from the new
projects to its system as large scalable batches, or ``clusters,'' of
transmission service requests. When the ``cluster studies'' were
announced, our service requests were identified as the ``Harney County
Reinforcement Project,'' in a remote portion of BPA's footprint, which
made developing a Plan of Service challenging. However, with 50% of our
energy production coming in the winter months and the stated interest
in bringing new renewable energy resources to market from diverse
areas, our projects were certainly of interest. We believe the
diversity attributes our projects offer make them a natural fit, given
the initiatives in the West, including renewable energy zones, BPA's
expanded borrowing authority and the strong direction from Congress and
the Administration to use such borrowing authority in a public-private
manner to site and build new transmission infrastructure to reach new
energy areas bringing diversity and efficiencies to the transmission
grid.
Going forward--CEP Encourages Congressional Oversight and for BPA to
Act under a Public-Private Framework to Efficiently Deploy
Capital
We encourage BPA to apply our experience in the next Network Open
Season as well as for other regional transmission service providers
hoping to mirror--and improve on--BPA's important first effort. In
order to make the best use of BPA's new borrowing authority, we believe
the BPA must be more efficiently engaged with the private entities who
are their customers. It is often challenging for any government agency
to move on private-sector timeframes, but the ambitious goals set by
Congress and the Obama Administration demand no less.
It is not only the BPA who must interact more closely with the
private sector. The authority vested in public agencies with control
over permitting and siting of energy projects, including the
transmission lines to get the output to market, must be more action
oriented, work on shorter time lines and coordinate more closely with
private entities with the know-how to get the job done.
Again, our projects offer a relevant example. We have obtained a
land use permit to build a 100 MW wind project in southeastern Oregon,
but the county where our project is located is 77% publicly-owned land.
There is simply no way to interconnect our project to the local
electric coop without crossing federally-owned land. Period. In fact,
our project requires an easement of less than 200 acres, in a county
with 6.5 million acres of publicly-owned land, but to obtain an EIS
permit for that short distance will take 2-5 years before legal
challenges are exhausted. Surely, regulations must be changed so that
such simple easements can be granted at the local level on an
administrative basis, not appealed endlessly to the 9th Circuit and
beyond, to kill projects.
In a similar vein, our project will eventually require an upgrade
of an existing line through some 50 miles of mostly BLM-owned land.
Where there is already a transmission line and the new line can be
constructed in the same footprint, within one county (or state), that,
too, should be something the local staff can do administratively or at
least with a more reasonable period of review. We will not succeed in
building a ``green economy'' if some we do not balance self-styled
``green'' advocates exploitation of the permit and appeals process to
effectively kill good projects.
These points need to be taken into account in the efforts underway
in various public and private forums to fund infrastructure to
facilitate development of new, renewable energy projects.
We want to encourage Congress to actively encourage BPA to
capitalize on the work which has been done in the 2005 Energy Act,
which mandated development of ``energy corridors'' for transmission to
bring new renewable energy resources to market. The Western Governors
Association has made ``renewable energy zones'' a priority and so
Congress and BPA can and should act decisively to coordinate work plans
for immediate action.
We want to encourage closer coordination and action between public
and private interests to achieve results for taxpayers and shareholders
alike. We believe that BPA's role should be broader than just building
infrastructure that benefits its existing customers. Transmission
planning must be performed on a true ``one-utility'' basis, with proper
oversight, controls and balanced public-private interaction to optimize
the existing system and build new facilities. BPA must take a very
active role in that effort, with support from Congress, to invest
alongside private interests and to be the catalyst to provide
investment when the balance is not always in true parity between public
and private interests.
BPA is strongly encouraged to utilize its creativeness and flexible
oversight structure to allocate public funds and lead funding of
infrastructure, even if private capital has to catch up. BPA's
borrowing authority and capabilities must be allocated to all projects
alike. BPA is encouraged to pursue joint venture investment options
available with varying percentages of lower cost public dollars used to
augment higher cost private dollars. BPA is encouraged to fully reform
both transmission service and interconnection-wide processes as it has
done in its recent Network Open Season and along the lines that the
Federal Energy Regulatory Commission (FERC) has promoted in other parts
of the country.
Going forward, we hope that BPA and this Subcommittee work closely
with its partners in the private sector on multiple fronts to bring new
renewable energy sources into the grid and the market. Some of the
overarching areas in which CEP wants to encourage further collaboration
are:
1. Customized solutions to all funding and transmission project
needs;
2. Transmission planning processes that plan for the holistic
needs of the transmission grid and coordinate across multiple high and
low voltage transmission provider systems;
3. Reformation of the interconnection and transmission service
processes via more liberal use and implementation of open season
process; and
4. Optimize the existing and future government environmental and
permitting work to create ``energy corridors'' with derivative benefits
on adjacent transmission rights of way.
First and foremost, and in more detail in line with the overarching
goals above, Bonneville should continue and increase their efforts to
engage private sector customers in the early stages of analysis and
planning. In order for that kind of collaboration to work, BPA must
increase information sharing and transparency with its customers, so
that customers can understand the basis for decisions, respond with
suggestions and criticisms, and work together towards solutions. In our
view, that means focused attention to unique customer needs factored
into the transmission planning process.
Second, Bonneville now has the expanded borrowing authority to
revisit its calculation of the costs of projects and have the added
experience to calculate the benefits to be factored into its rate
making process. This is a key point for this committee: that
Bonneville's long (and understandable) focus on protecting rate payers
can now be balanced with private capital as well as this new and
welcomed financial muscle. I hope the committee will make plain to
Bonneville and any other agency, such as WAPA, who takes such federal
funds that taking these dollars also means taking on the responsibility
to do full due diligence on all project benefit and cost calculations
on an equal basis for new and long standing projects. As the
Administrator said last summer to the U.S. Senate, benefits such as
regional and resource diversity should absolutely be weighed, in my
view, all the more heavily now that the additional federal dollars have
been added.
Third, our projects, like many others, will interconnect with a
local service provider and then go onto the BPA network. We can point
to many projects (planned and operating) in Oregon and Washington in
the same situation. In these instances, Bonneville should provide both
guidance and leadership to work with the local provider and the
customer to achieve optimal solutions for all parties.
Fourth, while BPA did indeed clear out a great deal of ``dead
wood'' in its transmission service queue, it left its interconnection
queue intact. Effectively, that meant that presumably less than viable
projects that did not ``pay to play,'' still preserved their
interconnection rights without proof of project viability, despite
avowed policies that separate those two functions. Interconnection
should also figure in future Network Open Seasons. A lesson for both
BPA and WAPA may be taken from California to test project viability as
part of the interconnection and transmission process. An added level of
due diligence should be added to the expanded borrowing authority for
both BPA and WAPA to ``test'' project viability to ensure capital and
human resources are used wisely.
Fifth, BPA and any other regional transmission agency should make
every effort to optimize existing transmission rights of way and
permitting work already done, such as the Energy Corridors established
as part of the Energy Act of 2005. BPA needs clear direction from this
committee and the Obama Administration that we are in a new day of
aggressively moving forward with these efforts, not defaulting to the
same old approach in planning for and permitting vitally-important
transmission infrastructure.
In closing, I want to be very clear that we applaud Congress' work
on the Stimulus Bill, increasing BPA's borrowing authority and BPA's
first Network Open Season and look forward to working with them in
their efforts to reform and provide oversight to get to productive
results for the American people ensuring energy supply diversity and
independence. BPA has shown leadership and a willingness to think
outside the box that bodes well for a dramatic increase in activity in
the next few years, particularly when coupled with its expanded
borrowing authority.
I thank the Committee for the opportunity to share these thoughts
and experiences with you. I urge you to stay actively involved in the
oversight and effective deployment of these new resources to help usher
in a new era of economic prosperity spurred by our friends at the BPA
and WAPA and their partners in the public and private sectors.
______
Response to questions submitted for the record by Chris Crowley,
President, Columbia Energy Partners, LLC
Questions submitted by Chairwoman Grace Napolitano
Question 1: How would additional oversight of BPA help improve the
grid?
Answer 1: Currently, oversight of BPA is formally split between the
U.S. Congress and the U.S. Department of Energy with informal /
voluntary oversight by the Federal Energy Regulatory Commission (FERC)
on specific issues BPA feels it is willing to subject itself to FERC
oversight and jurisdiction. Under each oversight relationship, each
decision is a negotiation without clear and defined recourse avenues
for interested parties. It is Columbia Energy Partner's (CEP) belief
that having a single authority as the final stop or arbiter on BPA
issues would be beneficial to streamline and make decision making more
effective for BPA and its constituents and power and transmission
customers, alike. In addition, appealing decisions to a single
authority with jurisdiction over BPA issues, similar to FERC or state
public utility commissions over investor-owned utilities, is essential
to the decision making, implementation and appeal process to ensure the
grid is improved and efficiently expanded for all willing and capable
participants.
While BPA does largely a good job in managing its affairs and being
balanced in many of its decisions, it is primarily subject to
political, constituent and key customer influences when making business
decisions. The nature of BPA's business, recognizing the demographics
of its constituent and customer base and organic statutes, means that
decisions will likely never be divorced from such influences. However,
BPA's footprint has changed dramatically with expanded and more diverse
generation and transmission market entrants. Such change requires that
BPA's governance structure be changed to balance BPA's statutory and
non statutory obligations and obligations. For example, BPA must be
required to explore a range of potential solutions in its transmission
planning and cost allocation processes to connect all resources to the
grid at various voltage levels on a reasonable cost and schedule basis
providing the right fit for each customer and the BPA grid.
In CEP's opinion, there are several options for the best oversight
authority. The simplest oversight authority would be to pull all the
Power Marketing Agencies under FERC. Another option would be a joint
Congressional and U.S. DOE committee composed of a representative
handful of Senators, Representatives and a U.S. DOE representative with
authority to make decisions over BPA issues. A third option for an
oversight authority would be a regional oversight body with
representatives appointed by the governors of the same states that the
Northwest Power Planning and Conservation Council covers with authority
over BPA issues. Each of these oversight authority options would have
final decision making authority to properly balance the diverse and
changing set of power and transmission-related interests within BPA's
footprint. As noted above, such oversight structure would have final
decisionmaking authority on BPA issues similar to FERC or state public
utility commissions have over investor-owned utilities.
Changing BPA's underlying statutory authority and oversight
structure to facilitate all viable and beneficial projects will create
a more robust, efficient and open access grid preventing any potential
discrimination. This will promote a larger amount of renewable energy
resources to be provided access to the grid and drive America's energy
portfolio diversity and independence. Any subsequent ``Cap & Trade''
legislation effects on the economic dispatch of the energy supply mix
or ``resource stack'' would be muted through a more robust transmission
grid to provide unfettered and open access for a more diverse set of
energy resources than we currently enjoy. Concerns, whether real or
not, of increased volatility in the power markets due to such
legislation would be met through our robust energy and transmission
system.
Question 2: How could the federal government do more to encourage the
development of renewable energy resources?
Answer 2: The simplest answer is to institute a permanent national
renewable portfolio standard (RPS) at a high enough percentage level to
ensure promotion of renewable energy development and to enact
legislation as contemplated in the Reid-Bingaman-Dorgan draft energy
bills which clear the barriers in front of renewable energy development
related to transmission planning, cost allocation and pricing and
permitting / siting issues. Until RPS and transmission legislation is
enacted, Congress must direct all governmental agencies to clear the
hurdles and provide solutions for connecting renewables to the grid
within commercially and environmentally reasonable parameters and on
timelines to support President Obama's energy agenda.
The U.S. Government must communicate to all entities interested in
connecting renewables to the grid, with special emphasis to
environmental groups opposing projects, that barriers and opposition
will be met with clear solutions and deadlines that will move projects
ahead on President Obama's three (3) year timeline to increase
renewables in the United States. This assumes renewable projects have
credible plans that have been vetted within clear, defined and
reasonable parameters.
______
Mrs. McMorris Rodgers. Next is Edward Rahill, Vice
President of Finance, CFO of ITC Holdings, Transmission
Company, based in Novi, Michigan.
STATEMENT OF EDWARD M. RAHILL, VICE PRESIDENT OF FINANCE, CFO
OF ITC HOLDINGS, TRANSMISSION COMPANY, NOVI, MICHIGAN
Mr. Rahill. Madam Chairwoman, Ranking Member of the
Subcommittee, and Members of the Subcommittee, I am Ed Rahill.
I am Senior Vice President of Finance and Chief Financial
Officer of ITC Holdings.
ITC is the Nation's largest independent transmission
company. We operate in five States and own approximately 15,000
circuit miles of transmission. ITC has no corporate affiliation
with any generation owner, marketer or distributor of
electricity. Our sole business is to provide energy services to
our customers. I appreciate the opportunity to be invited here
to testify today.
I have two primary points to make.
The first, investor-owned utilities like ITC have been
making significant investments in the transmission system in
recent years. Second, the Power Marketing Administrations have
a valuable opportunity to use the new borrowing authorities
provided to them by Congress to engage in partnerships with
third parties that are willing to leverage private investments
to ensure a most efficient expenditure of limited taxpayer
dollars.
With respect to investment levels, please refer to the
chart on my left. As you can see from this chart, U.S.
shareholder and owned utilities invested between 2004 and 2007
nearly $7.8 billion transmission investments compared to $700
million spent by all Federal utilities combined of which 75 to
100 million was invested by WAPA.
As the information provided by Edison Electrical Institute
shows, shareholder-owned utilities have built far more
transmission facilities than Federal entities have in that
period. I should be willing to say that over that period ITC
has invested over $1 billion of that transmission.
The increase of borrowing authority granted to WAPA and BPA
is intended to facilitate the construction of more transmission
and delivered power generation from renewable resources which
have often been located in remote locations far from population
centers where the power is needed.
ITC supports this objective and is already working to make
this issue a reality. In 2008, ITC interconnected 810 megawatts
of new wind generation, representing roughly 10 percent of all
the wind generation connected that year. We are actually
working on products today to connect renewable-rich resources
in the areas of the upper Midwest to customer loads.
ITC's projects are under way in Kansas to interconnect
renewable generation and to prove for liability. And, recently,
ITC announced the Green Power Express, a 3,000-mile state-of-
the-art 765 kv super highway that, when fully developed, will
transmit up to 12,000 megawatts and other wind energy from
North Dakota, South Dakota, Minnesota, Iowa to load centers in
the Midwest region and the mid-Atlantic States.
If I can draw your attention to a map, you can see the
proposed Green Power Express in bright green in the upper left-
hand corner along with other existing high-voltage plants that
are in existence today.
The Green Power Express is a $10 to $12 billion project.
Yet, even with the current economic environment, ITC has not
found access to debt or equity markets to be difficult. I have
attached in my testimony a letter from Credit Suisse Securities
LLC informing ITC that it believes we have the financing
necessary to finance all of the projects as we currently
described.
ITC believes that its transmission-only business model
combined with regulatory certainty affords, by its regulatory
operating series, plays a critical role enabling our access to
capital markets and facilitating the ability of ITC and its
regulated operating facilities to achieve the main issue of
maintaining investment-grade ratings.
Accordingly, ITC believes that financing is not the problem
that needs to be overcome in order to build transmission and to
connect to renewable resources. Rather, planning, citing, and
costs for allocation issues present far larger obstacles.
In closing, ITC, the Nation's only independent transmission
company, is eager to work with WAPA and other PMAs to settle
the electric transmission challenges facing our country today.
Thank you for the opportunity to testify.
Mrs. Napolitano. [presiding.] Thank you.
[The prepared statement of Mr. Rahill follows:]
Statement of Edward M. Rahill, Senior Vice President of Finance
and CFO, ITC Holdings
Chairwoman Napolitano, Ranking Member McMorris Rodgers, Members of
the Subcommittee, I am Ed Rahill, Senior Vice President of Finance and
Chief Financial Officer of ITC Holdings Corp. (``ITC''). ITC is the
nation's largest independent transmission company, with transmission
facilities in five states. ITC's transmission services an area
comprised of nearly 80,000 square miles with 13 million people. Since
its formation in 2003, ITC has invested over $1 billion in transmission
improvements. ITC has no corporate affiliation with any generation
owner, marketer or distributor of electricity. Our sole business is
providing transmission services to our customers.
I appreciate being invited to testify before you today regarding
the increased borrowing authority recently provided the Bonneville
Power Administration (``BPA'') and the Western Area Power
Administration (``WAPA'') and our willingness to participate with the
PMAs in the construction of new transmission facilities to enable the
transmission of wind and other renewable generation to load centers.
ITC is enthusiastic about the prospect of partnering with the PMAs to
build the transmission needed to meet this nation's energy goals.
H.R. 1, the American Recovery and Reinvestment Act (``ARRA'')
recently enacted by Congress and signed into law contains two PMA
borrowing authority provisions that will affect expansion of
transmission infrastructure, especially in the West. Section 401 of
ARRA provides $3.25 billion in additional borrowing authority for the
BPA; Section 402 provides a similar amount, $3.25 billion, in new
borrowing authority for the WAPA. The legislation also would permit
WAPA to allow other entities to participate in the financing,
construction and ownership of projects. Under the legislation, WAPA is
required to seek Requests for Interest from entities interested in
identifying potential projects. I am pleased to note that WAPA has
already begun this process by publishing a Notice of Availability of
Request for Interest in the March 4, 2009 Federal Register.
The increased borrowing authority granted WAPA and BPA is intended
to facilitate the construction of more transmission to deliver power
generated from renewable resources, which often are located in remote
locations far from population centers where the power is needed. ITC
supports this objective and is already working to make it a reality. We
are actively working on projects today to connect renewable rich
resource areas in the upper Midwest to customer load centers. We have
projects underway in Kansas to connect renewable generation and improve
reliability and recently, ITC announced the Green Power Express, a
3,000-mile, state-of-the-art 765-kV green power ``superhighway'' that,
when fully developed, will transmit up to 12,000 MW of wind and other
energy from North Dakota, South Dakota, Minnesota and Iowa to load
centers in the Midwest region as well as in the Mid-Atlantic region.
The Green Power Express will not only facilitate the development of
wind resources but it also will help improve reliability and
significantly reduce transmission congestion. Attached to my testimony
is a map depicting the proposed project.
ITC responded to a solicitation of interest for potential partners
on transmission projects issued by WAPA last November and we remain
very interested in working with WAPA to develop and construct
transmission to support renewable generation. Despite the current and
recent turmoil in the credit markets, ITC and its subsidiaries have
been successful in every debt and equity financing related to ongoing
operating company investments and acquisitions since ITC was founded in
2003. Even in the current environment, ITC has not found access to the
debt or equity markets to be difficult. As attachment 2 to my testimony
indicates, we are confident in our ability to finance the Green Power
Express. ITC believes that its transmission-only business model and the
regulatory construct in place at its regulated operating subsidiaries
enable transmission investment by providing the regulatory certainty
necessary to access capital markets and allowing ITC and its regulated
operating subsidiaries to achieve and maintain investment grade credit
ratings. Financing new transmission is not the problem that needs to be
overcome in order to build transmission to provide greater market
access for renewable resources. Rather, planning, siting and cost
allocation are the real obstacles to building this transmission.
As you will note in attachment 3 to my testimony, shareholder-owned
utility transmission investment has been steadily increasing since
1999. ITC and other members of the Edison Electric Institute (``EEI'')
are planning to invest more than $30 billion in transmission facilities
in the three-year period from 2008 and 2010.
We are dedicated to expanding and strengthening transmission
infrastructure. U.S. shareholder-owned electric utilities in 2007 spent
nearly $7.8 billion on transmission investments, compared to
approximately $700 million spent by all federal utilities combined, of
which approximately $75 to $100 million was invested by WAPA. Indeed,
in recent years, shareholder-owned utilities have built far more
transmission facilities than federal entities, as shown in attachment
4.
Despite the fact that BPA and WAPA each received an additional
$3.25 billion in borrowing authority in the ARRA, this amount of money
will not be enough to build all the transmission that is needed to link
remotely located renewable resources with load centers, particularly
within the WAPA service territory. Accordingly, ITC is advocating that
the PMAs use this federal funding to leverage private sector financing
and private expertise to maximize results. Federal transmission policy
should support--not supplant--development of interstate transmission
facilities through private enterprise, which has the construction and
financial capability to build interstate transmission facilities for
which siting approvals and permits can be obtained. Through creative
partnerships with private transmission companies that have the
expertise and financial capability to build and finance high voltage
transmission lines, WAPA and BPA will be able to leverage the funding
provided and move us closer to the day when we have a robust, reliable,
high voltage grid connecting renewable rich resource areas with high
population centers.
To ensure the most efficient expenditure of limited taxpayer
dollars, Congress should encourage WAPA to target its spending under
the new ARRA borrowing authority on transmission projects that, but for
this new funding, would not likely be constructed in a timely manner
and to encourage WAPA and BPA to enter into partnerships to develop
needed facilities.
Specifically, we suggest WAPA should certify before committing
funds to any project that: (1) no other entity is willing to
participate in the financing, construction or ownership of the project
in a timely manner; and (2) the project does not interfere with or
duplicate an existing project being constructed by another transmission
owner or operator.
Legislative precedent exists for imposing similar preconditions on
federal utility transmission projects to avoid duplication or
preemption of private-sector infrastructure investment. The Energy
Policy Act of 2005 contains language designed to avoid duplication of
functions of existing or proposed transmission facilities by certain
joint transmission projects in which WAPA was authorized to participate
(Sec. 1222 of EPAct 2005).
In addition, any transmission expansion projects that WAPA plans
under its new borrowing authority should be consistent with ongoing
Western Electricity Coordinating Council (``WECC'') planning processes,
which identify a number of projects already being developed or on the
way.
Notwithstanding the private-sector transmission investment numbers
outlined in the charts attached, building interstate transmission lines
continues to be challenging due to the need to obtain approvals from
every state that a transmission line traverses. Building interstate
lines, especially in the West, is further complicated by the difficulty
of obtaining authority to build across federal lands. In addition to
providing incremental borrowing authority for federal utility
transmission construction, Congress should also address important
siting and cost allocation issues that are frustrating the planning and
construction of transmission lines. Congress should strengthen Federal
Energy Regulatory Commission (``FERC'') siting authority for interstate
transmission lines and transfer to FERC the lead agency authority for
permitting projects that cross federal lands.
Thank you again for the opportunity to testify before the
Subcommittee on this important issue.
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.eps__
Mrs. Napolitano. We will move on to the questioning portion
of this meeting.
As I said before, Ms. James, I believe you have a flight to
catch. We will go straight to Mr. Coffman.
Mr. Coffman. Thank you, Madam Chairman.
To Mr. Meeks and Ms. James, Western's historic mission has
been to serve approximately 700 of its wholesale customers. It
is my understanding that the relationship between the agency
and its customers has been good, but I see in testimony that
customers are concerned that they could end up subsidizing
construction carried out under this new borrowing authority.
Mr. Meeks, can you assure the customers that they won't
subsidize something they won't benefit from? And I would like
Ms. James to follow that up from a customer perspective.
Mr. Meeks. Thank you very much.
Western is no stranger to allocating their costs. Western
currently has 10 rate-setting projects as we speak without even
this new authority. So, we have the ability to separate the
cost for one project to another. And I mean system projects,
not just a transmission project. So, we have that capability
today.
In the stimulus, we were given $10 million in
nonreimbursable start-up money in order to protect our
preference customers from paying for something that they do not
benefit from. The law is clear that we are to allocate the
costs to the projects that we build under this, and we will do
so.
Ms. James. As I stated, I have every confidence that
Western will comply with the law. I think that the issue is
going to be that the devil will be in the details in working
out in advance these cost allocation policies and procedures,
and I would expect that Western would be undertaking this
through their recent Federal Register notice that was
published. It is a fairly short fuse for comments. It is a 30-
day comment period.
I would also expect that there would need to be a lot of
follow-up discussion following the formal close of comments on
that Federal Register notice and possibly even development of
some type of a customer Western--I hate the use the word ``task
force''--but some type of a working group that would help
ensure the customers that the cost allocations are being done
appropriately.
And, again, we have no doubt that they will be, but I think
it is very complex in today's arena with the existing projects.
This just adds another level of complexity.
Mr. Coffman. Let me follow that up with Mr. Meeks.
It seems that this will require constant and consistent
communication about how this new program will be carried out.
Is there any opposition to Western setting up a task force or
group of folks to ensure a dialogue?
Mr. Meeks. I am not prepared to commit to that. I am
prepared to commit to communication as we do today. We are in
an open Federal Register notice process that helps. Where we
are asking for comments on all parties involved on how we set
up our policies and procedures, and any suggestion of that
would be considered as parts of the process.
Currently today, as you have mentioned sir, that we have
outstanding relationships with our customers, good
relationships, if you will. And that is being done without a
standing committee today. And so the reason I think why it is
able to be done is because we do believe in visibility. And we
do provide the data and everything necessary to our customers
so we can have a dialogue back and forth without having a
formal standing committee on this new authority on our existing
authority.
Mr. Coffman. Thank you, Mr. Meeks. And I would certainly go
on record to encourage you to set up that task force with those
folks to encourage transparency and dialogue. Madame Chair, I
yield the balance of my time.
Mrs. Napolitano. Thank you Mr. Coffman. Mr. Grijalva.
Mr. Grijalva. Thank you very much, Madam Chair.
Ms. James, you mentioned wanting to preserve WAPA's core
mission of the distribution of hydroelectric power. Let me ask
the question, won't your customers need extra power that it
will be able to get from new providers or renewable energy by
increasing that transmission capacity. I think the two factors
population and energy demand and use will continue to grow in
the west and our region of the country. So, don't you see that
some point that that increased capacity for renewables will be
part and parcel of the overall mission of WAPA.
Ms. James. Yes, I certainly do. In fact, my numbers are all
the individual customers or contractors with Western
individually. None of them are served solely by the Federal
hydropower all of them have a broad mix of resources. And
certainly they are all engaging in and encouraging the addition
of renewable resources. To that end, no doubt some of the
existing backbone transmission system facilities are going to
need upgrades and need additional capacity in order to
interconnect these renewable sources. We understand that and
that is why I said that the devil will be in the details in
ensuring that where there is a benefit to the existing system,
that the beneficiaries pay their fair share of those costs.
Mr. Grijalva. And on that point, I think the point that you
reiterated on my colleague's question, I understand that the
utilities that you represent there is a concern that there will
be asked to subsidize infrastructure that WAPA will build for
these new providers. I think our concern has to be the greater
public good and public interest here. And I think the stimulus
bill expands WAPA's core mission beyond hydropower to all
possible sources of renewable energy.
It's not hard to foresee where WAPA's mandate to provide
transmission capacity for new sources will conflict with I
think the basic desire you spoke of that has been mentioned
today to keep customer rates as low as possible. But there has
been a precedent. I think fish recovery programs at WAPA
participated in my home State in the upper Colorado, the Swan
River in the past sets a precedent for the involvement of WAPA
and the rate payers in a greater good project. And so would you
care to comment about that precedent?
Ms. James. Yes, I would. And again, we do believe there is
a greater good. And where there is a greater good, possibly
then that would be where the taxpayers would be insuring
repayment of those provisions. I think that is probably what
Congress had in mind when they included the debt forgiveness
potential or the debt forgiveness provision in the stimulus.
You know, I think there is a role for the taxpayers, there
is a role for the renewable developers, and then there is a
role for the existing projects and customers. And those roles
just need to be sorted out appropriately.
Mr. Grijalva. And you don't see it as an either or?
Ms. James. No, I do not.
Mr. Grijalva. Thank you, Madam Chair. I yield back.
Mrs. Napolitano. Ms. James, how would or could a rating or
expanding the great compromise its reliability?
Ms. James. It is pretty complicated. I think that that
would depend on the type of resource, where it is cited, where
it is interconnecting into the grid, and what the current
operating restrictions on the grid are.
You know, electrons don't flow like you would like to see
them on a map. Electrons, however, across the grid. So, Western
is very actively involved in the various planning
organizations, the reliability councils. And that role needs to
expand I believe in this new authority. In fact, it needs to be
even a stronger role to ensure that the existing operations are
not impaired. I think they can coexist, but it is way beyond my
pay scale to be able to explain some of the reliability issues
that these planning engineers face as they are planning the
transmission facilities.
Mrs. Napolitano. How do you propose to partner with WAPA to
help identify and mitigate the potential resource conflicts you
mentioned in your testimony.
Ms. James. I think we will be thinking about that. As Tim
mentioned, the Federal Register notice is out and it would be
appropriate for us to comment through that process to come up
with some suggestions on how we can partner. I mentioned we
call it the memoranda of agreement that we have had in place
since 1992 at these agencies. That agreement has precluded
frankly any rate litigation that we have had in our region
because it allows the customers and the agencies to work
collaborative, as Scott mentioned, before decisions are finally
made and through the planning process so that the customers are
involved and are aware what is going in up front and before
final decisions are made. So, we will be working with other
customer groups and develop some comments to the Federal
Register notice.
Mrs. Napolitano. Thank you for sticking with us this long.
Ms. James. Thank you very much.
Mrs. Napolitano. Now we move to our regular order of
questioning.
I wanted to recognize Mr. DeFazio because he has to leave.
Mr. DeFazio, do you have questions, sir?
Mr. DeFazio. Thank you, Madam Chair. To Administrator
Wright, in your testimony when you are talking about the
network open season process, it would be expected to be the
largest driver of the increased capital program. Can you sort
of explain that? Does that mean we have sort of a net or a
market based investment program, that is where people are
anticipating development they will bid, or they will bid higher
in your network open season process. And therefore, you then
change the priorities to accommodate that area rather than sort
of a more traditional planning process of transmission
enhancement? Do you get that?
Mr. Wright. I think so. So, network open season was trying
to take--we had a huge number of requests in our transmission
cube.
Mr. DeFazio. How many, how much?
Mr. Wright. I think we were over 20,000 megawatts, and we
only had 20,000 megawatts of load in the northwest, so it is
pretty clear that we had requested or exceeded the amount that
would actually be sold.
Mr. DeFazio. So, this is like the old days when I can't
remember the organization used to solicit every utility in the
northwest to give its projected load requirements. And then one
city would think they were getting this big new plant and the
city next door would think they were getting it, and it both
added in and in the end that is what drove us toward--you might
remember. What was that group that added things up that way?
And there was no elasticity but go ahead. So, you similarly
have 20,000 megawatts of request, which is an impossible number
in the region.
Mr. Wright. I think, the valuable thing about the network
open season is that it separated the wheat from the chaff, and
did so in the fashion that Mr. Crowley described.
Mr. DeFazio. Because people have to put up something to
bid.
Mr. Wright. They had to put money on the table. And that I
allowed us to move from the large number of transmission
requests, the 6,400 megawatts. Once we were dealing with the
6,400 megawatts, we could develop a plan of service and say,
here is what it would take in order to be able to satisfy that
amount of request. And then go back out to the region and say,
OK, the folks who are going to pay for this are you willing to
have us incur this kind of cost and embed it in our
transmission rates. That public process gave us the opportunity
not to just hear what the purchasers, that the folks who were
interested in selling the resources, but also the buyers were
interested in with the people who were serving loads.
Mr. DeFazio. What is the risk to establish rate payers, are
those who are bidding on this going to carry the incremental
cost of them accessing the system and also carry the cost for
balancing their loads or are we unloading some of that onto the
region for power which may be destined outside the region under
contract?
Mr. Wright. If I could, I would like to separate that into
two questions. On the transmission side, we think that we have
identified what the costs are of building the transmission and
there will be some rate increases associated with this cost,
more than the embedded transmission system. But our customers
have said these look like worthwhile investments, and it
creates more options for them because transmission is a
relatively low cost or low portion of the total cost delivered
power bill. It is worth it to them to make those investments in
transmission.
The second piece of your question.
Mr. DeFazio. But there are benefits beyond just say one
developer and their contract.
Mr. Wright. That's right.
Mr. DeFazio. Because there are stability benefits for the
system, et cetera.
Mr. Wright. That's right, reliability. Plus if you are a
customer you would like to have options in terms of where you
can go to purchase resources, and it ultimately will lead to a
lower price.
The second part of your question is the balancing services
which, when you operate a transmission system, you are
responsible for making sure that loads and researches balance
in real time within the hour. And if you have an intermittent
resource-like wind that is moving up and down frequently in an
unpredictable fashion, then you have to provide the backup
services to make sure you maintain reliability. That means you
have to have generation available and there are costs
associated with that.
This has been one of the most perplexing and difficult
parts of this problem of the explosion of wind in the northwest
is trying to make sure that we identify the cost effective
solutions to provide balancing services and then the more
difficult part is the cost allocation to make sure that the
right people are paying in an equitable fashion.
Mr. DeFazio. And you do that through rate case?
Mr. Wright. Through rate case. So this year, 2009, for the
first time, we charge a wind integration charge. And it is an
issue in our 2010, 2011 rates which are in the midst of and I
need to say we are in the next party process right now, so
there is limit in terms of how much I can discuss.
Mr. DeFazio. Well, we can talk about 2009. And did 2009
make the system whole or was the system still carrying some
burden from those who were generating?
Mr. Wright. We have not done an after the fact evaluation.
Mr. DeFazio. OK. It seems like a prudent thing to do.
Mr. Wright. So, what we have been doing is a lot of
evaluation of where the costs are going for 2010 and 2011. Our
proposal for 2010 and 2011 is a substantial increase in cost
recovery. Now that is in part because we have a lot more wind
in our system this year. It is incredible the amount of wind
coming into our system month by month, so a lot more wind.
Mr. DeFazio. Right. And I assume as you add wind you have
less flexibility and fewer options to balance that load.
Mr. Wright. Yes. And there basically is a cost curve. The
first megawatts of integrating wind are relatively inexpensive,
and as you add more megawatts of wind you move up a cost curve.
Mr. DeFazio. Thank you. My time seems to have expired.
Thank you, Madam Chair.
Mrs. Napolitano. Ms. McMorris Rodgers.
Mrs. McMorris Rodgers. I have a question for Mr. Meeks and
this is to give me a better sense as to the time line that you
envision as far as when you will be able to make some things
happen, because this borrowing authority was included in the
stimulus bill, as we all know it is touted as a job creation
bill. And yet it is my understanding that it takes at least 4
to 6 years to begin construction on a major power line. And it
is my understanding that you are still developing policies to
carry out the new program and solicit comments on new
transmission lines or upgrades to existing ones.
And then you will have to get work through the
environmental impact statements and other regulations before
you begin construction. So, I just wanted to ask if you could
give me a sense as to how much of the 3.25 billion will be used
and where and how many jobs it will create in the next 2 years?
Mr. Meeks. It was good up until the last of the questions
there. Basically as you know, the law requires us to go through
this public process. And we are in the balancing the need to
expedite to get the stimulus authority out there, as well as
doing it right. And so what we're waiting to get back is what
projects are people interested in us participating in. I do
know that there are various projects with various states of
readiness that people have contacted us in some form or fashion
who have an interest in us participating with them.
Now you have laid out appropriately that transmission lines
from inception to completion do run the gamut of time, there is
a long lead time on that. But for example, if we receive a
project where the WAPA work has been done or they are looking
for partnership in the financing which is allowed by law, then
we can turn it over quickly. If we receive projects that are at
its beginning stage. The thing about Western is we would turn
money over in the form of land acquisition, environmental
contracting work that would be done that we would contract out
in preparation for these projects, geology work, surveying type
work. So, there are various types and various degrees of the
type of jobs that will be created under this new authority.
But again to say how much when and where, I cannot do that
until the Federal Register process is closed and I am able to
see who has responded to this.
Mrs. McMorris Rodgers. I understand Majority Leader Reid
has a new bill that is giving more responsibilities in the
marketplace. I just wondered if you might comment on your
thoughts to adding another mission. And if Mr. Bladow is here
to answer that.
Mr. Meeks. Basically my initial comments are we have a lot
on our plate. My concern is insuring that what I call our core
mission, that is the term we use for the Federal power program,
the existing preference customers, that that is funded
appropriately so that our existing infrastructure that we have
today is kept up and running and in good repair. So, I have a
concern about that to make sure that is, so we can continue to
deliver low cost power to the consumers in the west.
With that said, we have a new program placed upon us. And
again, that is one that does allow flexibility so we can have
resource to implement this program, but believe me, we are a
busy organization and we are not seeking anything necessarily
else to do so----
Mr. Bladow. From our perspective as a large customer of
Western Area Power Administrations and actually co-owner on
many projects, additional authority. Again, Mr. Meeks, I think,
addressed the issue of the concern of how much can an
organization absorb and still keep the lights on with over
17,000 miles of lines and dealing with lot of rural areas and a
lot of the infrastructure is older. So, a concern we have is we
can have the resources to continue the partnerships we have
done in the past, jointly owned, jointly operated, jointly
maintained. Kind of the responses that's needed to serve our
real constituents in a lot of cases that we very much rely in
Western to maintain their and us to maintain our system to make
sure they have reliable service, so that would be a concern of
ours is too much too fast.
Mrs. McMorris Rodgers. Thank you.
Mrs. Napolitano. Thank you, ma'am. Mr. Grijalva.
Mr. Grijalva. Thank you very much, Madam Chair.
Mr. Meeks, what has Western done given the new borrowing
authority that is in the package that talks about
transformative investments in renewable energy, what has been
done to ensure that there will be specific transmission lines
planned for, designed and cited to serve this renewable energy
source and not just use the borrowing authority to supplement
the existing general grid system? Are there precautions that
are involved or how have you it set up? I know there is some
ambiguity in the language and we can talk about that back and
forth, but let's presume that I am right.
Mr. Meeks. All right, sir.
Basically, the law is ambiguous, as you have stated, and
its delivery or facilitating the delivery of renewable energy.
And that to me is one of the million-dollar questions that we
have to answer. That is one of the things that I am looking for
input in this Federal Register process as to at what part is it
living up to that portion of the law?
If we partner with someone, does that mean the whole line
is subject to this, does it mean that only the Federal share is
subject to this? Does it mean what portion of the Federal share
is required of this? And on top of that, oh, by the way, you
have to ensure that it is economically viable. And so these are
the things that we have to struggle with, as you have pointed
out, that we ensure we meet the spirit and intent of the law.
Mr. Grijalva. One more question if I may. I have been
concerned about the energy corridors that were designated under
the authority of the Energy Policy Act. Many of them, in my
opinion, were designed without regard to issues of tribal
sovereignty, ecologically sensitive protective public lands or
a potential location of renewable energy sources. Would you and
Western support a redrawing of some of these corridors to
address the shortcomings that I just talked of that were done
in the past?
Mr. Meeks. I would leave that to the wisdom of Congress,
but I understand your concern. I understand that that is what
you see in many of the proposed legislation--the citing and
planning of transmission--and connecting the renewable
resources to load. And that is why I believe that Congress gave
us this authority. If you look at our transmission system, we
cross 15 western United States. Nine out of the 10 windiest
States reside in Western Area Power Administration's footprint.
So, there was a reason why we were chosen to do this. And as
far as we do have certain authorities that allow us to bill
transmission that may be attractive to entities looking to
build renewable resources, and that is why I believe we were
given this authority.
Mr. Grijalva. Thank you. Mr. Wright, your colleague next to
you was asked by the Ranking Member about the impacts of the
recovery package on job creation and projects. Mr. Wright, how
does that translate for BPA? How many projects, job creation,
do you have a response to that?
Mr. Wright. So, we don't have a total at this point,
because we also are trying to determine how we will best use
the authority. We have initiated one transmission project, that
is the McNary-John Day Project. We are using our existing
borrowing authority to do that, but it would have been
questionable as to whether we could have proceeded with that
had we not had the new borrowing authority. That project we
expect to produce about 700 jobs over the course of the next 3-
1/2 years.
Mr. Grijalva. Mr. Ellenbecker, my last question, has the
State of Wyoming made projections on its wind and other
renewable energy industry growth? And if you have done that,
when will the lack of transmission lines become a limiting
factor in marketing renewable energy that Wyoming has? Do the
think the current state of transmission infrastructure is
discouraging or limiting the full development of wind energy
that otherwise could be happening right now?
Mr. Ellenbecker. The transmission grid that is used to
export power out of Wyoming today is already at near capacity.
There is already a major impediment for renewable energy growth
in Wyoming via the existing grid. The existing grid is far
short of supporting any new major projects. All the projects I
described in my written testimony and in my summary testimony
are needed in some combination, one or more of those to enable
another major wind project built to be built with an exit path
out of Wyoming.
So, the circumstance is already dire. Here we are with a
tremendous wind source opportunity to complement the other
renewable resources being considered in the country. And by
Western Governors in the Western renewable energy zone
initiative, for example, a vast identification of resources,
they are all in need, and acutely in Wyoming as well of new
transmission projects to enable their development.
Mr. Grijalva. Thank you. Madam Chair, I have other
questions, but I will submit those in writing to the Committee
staff so they can get them to the witness.
Mrs. Napolitano. We may have another round because I know
Mr. Smith----
Mr. Grijalva. I might be departing.
Mrs. Napolitano. Well, then we well take those into the
record.
Mr. Grijalva. Thank you.
Mrs. Napolitano. Mr. Smith.
Mr. Smith. Thank you, Madam Chairwoman. Mr. Ellenbecker, I
know in your testimony you talked about when it comes to
eminent domain and private land versus public land, you pointed
out that there is favorite protection of resources on public
lands compared to private lands, especially in light of the
transmission citing process. How do you think the approval
process on Federal lands could maybe be streamlined I guess?
Mr. Ellenbecker. The Federal agencies all need to look in
the same direction in terms of achieving a common objective,
starting with national energy policy. From there down agencies
need to realign their efficiency and effectiveness to achieve
those national goals. That is why Governor Freudenthal believes
that we have to reform the permitting and citing process as a
country and to enable the major projects in the west to be
developed effectively. And furthermore, if we are going to
build projects similar to that testified to by ITC, the green
power express or other projects closer to home for me in the
west. If we are going to build a new backbone of extra high
voltage grid in the country, it is such a daunting task that it
implies I believe strongly that it can only be accomplished
through a much more effective and efficient permitting and
citing process.
And I hope that is responsive. It is meant to be that it
points toward a refinement and reforming the process, perhaps
toward a model that has been proven to be effective for major
interstate gas pipelines through the FERC. It seems to, in a
much shorter time frame, a year, year and a half, deal with the
difficult tasks related to permitting and citing. I don't mean
to imply this isn't a huge issue, it certainly is. There are
risks around our ability to build a new backbone, to promote
the development of huge amounts of resources otherwise
available if we don't find a more effective way to permit and
cite the facilities.
Mr. Smith. Mr. Meeks, if you wouldn't mind responding how
WAPA would work with landowners to ensure that their rights are
protected and certainly adequate compensation would also be
offered and I guess a smooth process you can probably
appreciate it is a rather controversial.
Mr. Meeks. Sure, absolutely. Western is a good neighbor, we
try our very best to be a good neighbor. In the right of
condemnation that I believe you are pointing to we rarely
condemn land, we condemn land about 3 percent of the time. And
some of those condemnations are friendly condemnations. We do
offer fair market value for the rights of way that we obtain.
As I mentioned I used path 15 project earlier where we went
through an orchard and what we did was we redesigned the
structure that went through the orchard to have a smaller
footprint than a normal tower. Basically a larger footprint
allows less towers longer spans and therefore you create less
towers and it is less expensive. But because of this situation,
we felt the added cost was worth the benefit to us and the
landowners. So, that is an example of how we tried to work with
the landowner. We don't come in with a big hammer and say, give
me your land or anything like that. We do try to provide market
value.
Mr. Smith. You said about 3 percent of the time?
Mr. Meeks. Yes, sir.
Mr. Smith. I certainly don't question that. I was wondering
if you might have background information for the record on the
incidence of condemnation authority on private lands.
Mr. Meeks. Sure.
Mr. Smith. Thank you very much. Thank you, Madam
Chairwoman.
Mrs. Napolitano. Doc Hastings.
Mr. Hastings. Thank you, Madam Chairwoman. And this hearing
is about transmission, specifically it was in the stimulus
package, but inherent in all of this or I should say implicit
in all of this is the type of energy that we are going to be
transmitting and the conversation, of course, has been around
green energy.
For the record let me say that I am one that believes we
should have as diverse an energy portfolio as we possibly can.
Having said that let me qualify it by saying I think the best
way to do it is to incentivize it rather than mandate it or
subsidize it. So, that is the challenge you all face who are in
that business.
Let me ask Mr. Wright and Mr. Corwin again in the northwest
because that is what I am familiar with, we all know that
renewable energies like wind and solar we wouldn't have any
energy today here in Washington D.C., obviously because the sun
is not shining. I haven't been outside, but there is not much
wind. So, we wouldn't have much going on here today if we got
our energy there.
So, what you have to have is a base resource. And we are
lucky in the northwest because our base resource is hydro and
nuclear specifically. I guess my question specifically because
I alluded to this in my opening question, where would we be in
the northwest if we didn't have the Lower Snake River Dams to
supplement the intermitted wind which is predominant in the
northwest? Mr. Wright or Mr. Corwin, either one.
Mr. Wright. Well, the Snake River Dams and the entire
Federal home river hydropower system were absolutely essential
to maintaining reliability. If you had an all wind system, you
wouldn't be able to maintain reliability, it is that simple.
Just because of the intermittent and random nature of the wind
resource.
This is one of the great things that we are learning as we
have the explosion of wind power in our system, how does it
actually operate? It operates differently than we would have
thought a couple years ago. We are trying to best figure out
what resources we need in order to be able to handle all this
wind. We actually are now reaching a point where the hydropower
system is not big enough to handle the fluctuation of the wind
power in our balancing authority. So, our challenge in addition
to maintaining the existing output of the hydropower system is
what resources will we need to add going forward in order to
make sure that we do have reliable electrical power system.
Mr. Corwin. Congressman Hastings, I would agree with that
assessment, just the four Snake projects are about 3,300
megawatts of capacity, about 1,200 average megawatts. And
indeed all of the dams, and the one nuclear plant in the
northwest right now, we are bumping up against the limits of
the capacity needed on the Federal system. It is a concern to
the customers. It is a critical issue in integrating wind and
other resources that are more intermittent as you pointed out.
And it is not just as the conversation was discussed earlier it
is not just a rate issue at that point, how do you allocate the
cost. It is an issue of where does the extra capacity come from
for the base load or to balance the intermittent resources, and
that is one the region needs to work through aggressively over
the next couple of years.
Mr. Hastings. Implicit also in that is the talk about the
concept of cap and trade, huge concept, I know it is in the
President's budget. So, I would like to ask all of you to
comment on cap and trade and specifically how it would effect
the operations that you have. I know my time is running out
here, but I would like to ask all of you just to give me a
brief summary of how cap and trade would effect your operation?
Mr. Meeks, start with you and go down the line.
Mr. Meeks. For us, as you know, our mission is different in
the fact that we are not a load serving entity and that we are
a transmission provider, we do serve wholesale, we market
wholesale. So, I know it is an issue of concern to my customer
group that they are worried about it, but I do not want to
speak toward that at this point in time. I'll let Steve or some
of the other ones with more expertise speak on that.
Mr. Wright. Well, the Federal Columbia Power System starts
out with a natural advantage. It is 90 percent hydro and one
nuclear plant system. We are a non-CO2 emitting
system, so the cap and trade proposals as it directly impacts
our current operations would be minimal. I think the critical
question going forward is we have set up a new regime with our
customers where they are responsible for load growth, but we
will provide the services to the extent that they want them,
and to the extent they turn to us for those low growth services
and we were purchasing resources then we would have to have the
availability of being able to offset whatever carbon costs are
associated with those new resources. So, it becomes part of the
cost of the new resource. I think that will probably be the key
place that we will be engaging in.
Mr. Hastings. Let me get off on a bit of a tangent, when
you have to purchase power, for whatever reason like, for
example, when we had the spill in August, which you know my
position on that, but when you buy power it is generally carbon
power; is that correct?
Mr. Wright. That is a really interesting question that we
are struggling to deal with. Electrons are not carbon coated.
There is no way to tell whether an electron you purchased is
directly from a carbon resource unless you buy from a
particular identified generating resource, and I think it is
one of the great challenges going forward. This has come up a
lot in discussions about the western climate initiative. To the
extent that we have balancing purchases, how will we track them
back to the source and be able to identify whether they have
carbon? And, if so, what offsets will we need to come up with?
Today, we don't have a system that will do that.
Mr. Hastings. So, that could lead to another follow-on
question. But why don't you briefly if you all would give my--
--
Mr. Ellenbecker. One of the things I have admired about the
Committee's questions is your concern for customer costs. As
you know, huge changes are coming to the electric utility
industry related to climate change implications. I would urge
you to continue your focus on the implications in terms of what
are the consequence in terms of costs for consumers on actions
being considered. And with that maintaining the reliability of
the grid.
Your great question about how can all of this work with
intermittent resources and there have to be additional
resources in play to make it all work to keep these lights on
in Washington, D.C. Or anywhere else in the country in terms of
major parts of the grid. So, your focus, in a sense, is the
right place--unless now it is complicated as it is going to be
extended to the climate change debate.
Mr. Bladow. Yes, Tri-State operates a system over almost
over four States, we have 44 members. As Administrator Wright
pointed out, when wind being integrated into the system they
have a different perspective today than they had a couple years
ago. I couldn't tell you we have a real clue what cap and trade
system with kind of a market based costing system how that
would impact our generation dispatch. We can put numbers on it,
assume a carbon cost, but when you get down to actually
dispatching what resources are up, how is the wind blowing,
what is the market price on Wall Street, I think it would be
very difficult to gauge that in any accuracy. I think you will
jump into it and your models may all blow up when you find out
what reality and what people are doing.
I know from a customer perspective what we would prefer if
you put some kind of carbon cost on there is some type of tax
base system where you know the cost and you can factor that
into what you are doing.
Mr. Hastings. I am way over my time here. I apologize for
that. Can I?
Mr. DeFazio. You can have another round Doc, let me ask
some questions.
Mr. Hastings. That is fine. I appreciate that, I do have to
go.
Mrs. Napolitano. Yes, Peter, go ahead.
Mr. DeFazio. Thank you, Madam Chair. Along that line I
guess in the last gentleman who spoke pointed to a problem with
the cap and trade system which is predictability. And the way I
describe it to people is cap and trade as envisioned would
instead of having a carbon tax set by the government would set
a variable carbon tax set by hedge funds on Wall Street. That
is probably not--given what happened with the high tech bubble
and what happened with the financial bubble, we could look
forward to the next new bubble, which would be the carbon
bubble. A few people get rich, the rest of the people get
screwed and then that one falls down and we go on to something
else. I have been the pretty lone voice speaking against this
from the side who does believe we have to deal very
aggressively with our carbon emissions, but I now see some
people, other like minded people are raising questions about
this obsession with a market based tax.
Let's go back to the subject at hand. Anybody can address
this, but I want to know as a developer comes along they have a
place with a lot of wind, they want to build the wind
development there. It requires obviously investment, there is a
certain price involved with that, although I guess the price
has been coming down a little bit. And then we have access a
transmission. And in building the transmission and in
particular, you were addressing this question from the
perspective of Wyoming, I guess, do we take into account a
serious analysis of least cost planning? That is, it may be, in
some cases, rather than transmitting power a long way to a
certain area that is renewable, yes, but has a cost of, say,
$0.10 delivered or $0.09 with transmission costs and generation
costs versus what cost effective conservation you could capture
in that area to avoid the need for the transmission? Are we
taking that into account or are we saying just because it
renewable we are going to build and serve it.
Mr. Ellenbecker. In a competitive market, you are
absolutely correct in what is referred to commonly as an
integrated resource planning strategy, considering all
resources, including conservation efficiency, demand side
management to reduce power use. And in the spectrum of supply
side resources. Resources should, as has been hinted at by some
committee members, continue to compete with each other in the
mix and at the same time, that can be compatible with more
aggressive renewable energy goals as a country since
renewables, non hydro renewables still contribute such a small
proportion of our power supply in the country. But they still
should be measured against alternatives, the full spectrum of
alternatives and costs. The Western renewable energy's own
initiative of the Western Governors, but those cover the
western interconnect is analyzing delivered costs. And as it
relates to transmission, Congressman, delivered costs of power
to urban load centers compared to closer proximity and other
resource options, and rightly so, as I believe you suggest
should be in an appropriate marketplace.
Mr. DeFazio. Is a comprehensive analysis of the western
region being done that will sort of assess?
Mr. Ellenbecker. I don't believe it has been done. It needs
to be done, and I believe in early stages of groups, the
Western Electric coordinating council is starting to focus on
scenarios of how much CO2 reduction at what price,
how much renewable energy can we build into the grid, at what
price. So, it is in the early stages of work by the Western
Governors' initiative in cooperation with a group called the
Western Electric Industry Leaders Group. The work is too early
stage, but at least we are starting, I believe, to look in the
appropriate direction to get it done. It is far from a finished
project, but it several is one that needs to be accomplished.
Mr. DeFazio. Anybody else on that real quick before my time
runs out?
Mr. Wright. I would say I think the Northwest Power and
Conservation Council is looking at that question as part of
their 6 power plan, and that is an appropriate forum to have
this discussion.
Mr. Bladow. I would just add, part of the challenges
without the rules of carbon what are they going to be is
somewhat difficult. You can make certain assumptions, but is
your model accurate because you really don't know the rules of
game. I think that is slowing down some of these efforts.
Mr. DeFazio. Thank you. Thank you, Madam Chair.
Mrs. Napolitano. Thank you, Mr. DeFazio, now it is my turn.
To Mr. Meeks and Mr. Wright, how are you working together
or are you working together to translate BPA's success, its
borrowing authority to WAPA?
Mr. Meeks. I believe we are working good together. Actually
our staffs have been talking at various levels as far as the
arrangements that they have with Treasury trying to learn from
that model. Steve and his senior staff was gracious enough to
host me and a couple of my senior staff last week as we went
over how they conduct business at utilizing their borrowing
authority as was stated we are different in some ways, but
bottom line is that I thank Steve for sharing his knowledge on
this use of authority and we do hope to translate the lessons
learned from them.
Mr. Wright. I think Tim said it well. We are working
together.
Mrs. Napolitano. Great.
To Mr. Ellenbecker, we appreciate your testimony today and
would like to thank Governor Freudenthal for his leadership in
the Bush renewable energy resources, but what is the view of
the Western Governor's Association on this grid issue?
Mr. Ellenbecker. The Western Governors Association has
recently communicated with Congress and with the new
Administration in terms of supporting the dire need to build a
true transmission grid that is a sufficient backbone to enable
the development of the Western renewable energy zone
initiative. The underlying renewable resources, not just wind
which has received so much attention today, but all is
importantly, solar, geothermal, the full spectrum of renewable
resources.
That project, that initiative has a grand vision, which
will fail unless it is accompanied by as grand a vision
successfully implemented on new interstate transmission. These
are all remote resources as you know. They have to be converted
into an electric energy form on site to be usable by consumers,
it is much different.
There is no option but the transmission grid, can there be
closer to load center renewable opportunities? Of course.
Should they be developed? Of course. In some cases they will be
the least cost openings. Should we stop there and avoid places
like Wyoming where we have some of the world's richest wind
resource in terms of its potential and capacity factor? We
shouldn't stop there and avoid that if we truly have a national
commitment to develop as much renewable resource as the grid
can reliably handle. So, the WGA is supportive of the renewable
energy development--and insistent upon it only succeeding with
a rebuild of the grid.
Mrs. Napolitano. And you did mention sufficient backbone. I
would tend to agree with that because if you are not able to
have sufficient capacity to be able to transfer that and you
are right, there is more than just wind. Look at biomass and
solar and the other forms of energy.
The question brings up, I know Mr. T. Boone Pickens made a
presentation to one of our caucuses not too long ago about the
west part of the central belt that he was planning on
rebuilding a huge infrastructure of wind energy. And my
question at the time to him was whose going to pay for that
infrastructure. Have you heard anything on what is going to
happen? Because if somebody is thinking of setting up wind
farms from the bottom of the State to the top and the west part
of the central part of the country, is anything being taken
into consideration of what he's planning on doing or has he
been in touch with you to let you know that he's planning on
doing that?
Mr. Ellenbecker. This question implies, it goes right to
the heart of who is going to pay. A massive investment that
approaches so many billions of dollars to achieve its objective
has to include a determination of who are the project
developers, are they load serving entities or are they merchant
power providers that have contracts with load serving entities,
therefore would induce customers. If so it should be those
consumers who pay the cost of the project.
Is it part of a national interest backbone development that
supports the reliability of an entire interconnection, whether
it be the eastern interconnect or the Western interconnect. If
so, it may be appropriate to devise a new cost allocation and
cost recovery mechanism tied to all the work being done in
Congress now and early stages on how are we going to get this
permitted and sited. Who will do the interconnection wide
planning?
I believe, Chairwoman it goes to those questions of if we
are moving toward interconnection wide planning, certainly
larger regional scale planning, it implies we have to develop
cost recovery mechanisms yet to be developed where there are
not regional transmission organizations yet to be developed,
like in the west where public private partnership has to work
together and investor owned and public utilities. And merchant
project developers and load serving entity developers together,
all inclusive to sort out--it is achievable because these
companies have been allocating costs to consumers through cost
allocation principals for a long, long time. I was blessed with
a 15-year career as a State utility regulator. They know the
business, will this be more complicated than what they are
accustomed to? Yes, can they accomplish it? Yes, but we are not
there yet.
Mrs. Napolitano. You are very, very right on point with my
assessment that the taxpayer would probably end up paying for
that infrastructure tie and that to me is not acceptable.
Mr. Crowley, do you believe that BPA's barring authority
will help to expand the private sector growth in the renewable
energy area?
Mr. Crowley. Yes, Madam Chairwoman, I do believe that will.
I think that when BPA goes into the next round of the network
open season, I think there will be an opportunity to sit down
with the people who have been looking at the cluster studies
and figure out a way to leverage the private investment that
the long-term service contracts will drive. And so I believe
that when BPA looks back to the resources of their customers to
do these enhancements of the system, that they will see they
have the ability to do more transmission building than they
currently are doing.
It is a matter also of for so long they needed to do so
many things, so the things that are getting taken care of in
the first round of the network open season it is absolutely
logical and appropriate that they do that. We are hoping they
will be able to expand their horizons and look at other things
again with the borrowing authority to bring on a second tier of
projects.
Mrs. Napolitano. Thank you, I certainly hope that as we
move forward in the job correction and your contracting and
subcontracting that you pay close attention to assisting
minorities, especially Native Americans that do need that
economy. Mr. Smith.
Mr. Smith. I just thought I might allow anyone else to
respond to Mr. Hastings' question regarding the impact of a cap
and trade proposal? Anyone else?
Mr. Corwin. Sure, I guess we could head on down the line
here. Again, Scott Corwin, Public Power Council. For us any
carbon regulatory scenario that would come in the bottom line
issue is cost to the end consumer, and so we go in to any of
those proposals wanting to make sure the consumer is protected.
The issue with markets that Congressman DeFazio mentioned
has been one we have raised for a long time in the Western
interconnection we had an experience with markets several years
ago that we are not properly regulated and cost consumers a
whole lot at that time.
Having said that we come within a relatively clean
portfolio in the northwest. We have members with carbon to
start with, but we have more members that are concerned about
how they meet their load growth in the future, and because of
some of the issues we were just talking about of firming
intermittent resources, even though we have a big emphasis on
renewable energy in the northwest to meet load growth, you
still have to balance that power out and the most natural
resource right now looks like gas-based generation, and so you
are going to have additional carbon exposure. So, we want to
make sure, as we meet our loads, we are not hit with additional
costs that hit the consumer.
Mr. Smith. Right. So, the bottom line is cost to consumer?
Mr. Corwin. Yes, absolutely.
Mr. Smith. Mr. Crowley.
Mr. Crowley. You are out of my pay grade here, Congressman.
I am a lowly developer and we just try to make economical
projects that fit into the markets.
Mr. Smith. OK. Speak from a consumer standpoint then.
Mr. Crowley. From a consumer standpoint, sir, I think it is
fair to say, however, that there is pretty unanimous view that
there has to be something done to address the issues of global
warming and the challenges that we all face there.
So, Congressman Hastings, I think was asked earlier about
where the costs or added costs for renewable energy might be
accounted for and whether you do that on the backs of the
direct rate payers or you look at a more of a national model.
My limited understanding of this effort is that it might be a
way to broaden the costs over a wider base nationally, as
opposed to looking at individual consumers like Scott's members
or something like that. And maybe in that way, it might be more
equitable to look at it. However, how you administer that, sir,
is not something I can comment on.
Mr. Smith. Would there be concern, however, that some
volatility would be added to the whole market on top of what I
would characterize as highly volume until already?
Mr. Crowley. Again, not my area, I apologize. I don't mean
to be evasive, but it truly is not my area.
Mr. Smith. OK. Anyone else?
Mr. Rahill. If I may, from ITC's perspective, because I
just wanted to have the distinction in the sense there is a
little bit of what Mr. Meeks said, from our perspective under
our FERC charter, we are not allowed to participate in any or
owning any marketing of energy at all, we are strictly a
transportation company. So, from our company's perspective, we
would not have a direct impact that we would notice at all.
From a public policy perspective, we do have ramifications, and
would I echo some of the comments made here by that. I just
want to make the distinction ITC is strictly in the
transportation of energy business, so that is a distinction.
We did have an observation that I just would bring to the
Committee's attention is that if we do focus in on developing
the most energy intensive wind areas in the country, in this
case, green powered express focusing on the North and South
Dakota, and I think Wyoming may have the same situation, we
find the total cost of that energy actually economically
displaces a significant part of hydrocarbon-based generation so
that you would have a mitigating effect on the cost of cap and
trade to customers which will be real because you have to pay
for something, but optimization of your transmission grid to
access the most energy intensive wind zones in the country
should have theoretically a mitigating effect.
We employ the Battle Group to do that work for us. I think
that study is available. So, that is the only other comment I
would have from an observation perspective.
Mr. Smith. Thank you. I yield back.
Mrs. Napolitano. Thank you, sir. Mr. Meeks, how does WAPA
intend use it its borrowing authority to partner with the
private sector?
Mr. Meeks. Thank you, as was mentioned, as I said in the
early on that 3.25 billion is a lot of money. But again, as Mr.
Grijalva has pointed out the one transmission line was, I
believe, 12 billion for one transmission line. It is a big one
and it is high voltage and high capacity. So, in order for us
to make the best use of the authority given to us, we have to
partner with other entities. And again, as I said, as we
balance the need to get money out there to create jobs with the
long-term maturity of this program I would like to see
obviously on this front initial asking of projects against the
goal would be shovel ready, renewable resource, intensive and
economic, economically sound, electrical reliability.
Those are things we know we have to have on the initial
round. As the program matures, what I would like to see is the
coalition of several entities together. And we will see it
hopefully as we get the responses back where we can see some
synergies being created by like projects, and that again goes
to maximizing the resources, not only ours, but the resources
of the country limiting corridors and things that were being
brought up. I believe, again, using Steve and Bonneville as a
model with the open season and what they did and the ability to
again build synergy and design a system per the needs that are
out there. That is an efficient way to do things. And as we
mature in this program we will be able to get there.
Mrs. Napolitano. Thank you for that. Mr. Corwin, does BPA's
collaboration with the stakeholders help to keep power rates
low and to ensure repayment of the borrowed funds?
Mr. Corwin. It helps. Yes, Madam Chairwoman, it helps to
keep rates lower than they otherwise would be. We have had a
good collaboration and a lot of information back and forth
between the Agency and its customers, it has been increasing
all the time. And I think its going to be enhanced even more in
light of this current authority. And so I am hopeful about
that. We do have a rate increase coming at us in the next year,
and that is for various other reasons, but it puts an
exclamation on the need for customers to be able to review
these costs that they are going to be accountable for in the
future.
Mrs. Napolitano. Thank you. Mr. Meeks, how nearly or
broadly will WAPA define its new authority?
Mr. Meeks. You said how broadly?
Mrs. Napolitano. How narrowly or broadly?
Mr. Meeks. Right. Again, that is something, as I stated,
that the big questions are, you know, at what point is it
facilitating the delivery of renewable energy. That is
something I am looking for direction through this Federal
process, the Federal Register notice and obtaining input from
all the various entities that are interested in this program.
Mrs. Napolitano. Please let us know if this Subcommittee
can be of any assistance.
If there are no further questions, this concludes the
Subcommittee's oversight hearing on the Federal Power Marketing
Administration Borrowing Authority: Defining Success.
I would like to thank all of the witnesses for being so
generous with your time and holding with us and also for
appearing before the Subcommittee and testifying today. Your
testimony and expertise have been very enlightening and very
helpful, and your answers to your questions have been an
additional insight into the workings of our authority and how
this new stimulus is going to be able to help us address some
of the concerns that we have had. And, later, we may end up
having another hearing with regard to climate change and how it
is going to affect your ability to do hydropower.
Under Committee Rule 4(h), please submit any additional
material for the record within the next 10 business days. The
cooperation of all the witnesses in replying promptly to any
questions submitted to you in writing will be very greatly
appreciated.
And I would like to add that Mr. Jay Inslee, Congressman
Inslee, was supposed to be here. Somehow his schedule was
unable to permit him to do so.
There will be questions for the record, and they will be
submitted--I am not sure to whom--and some material will be
submitted.
And, without any further ado, this meeting is now
adjourned. Thank you.
[Whereupon, at 4:32 p.m., the Subcommittee was adjourned.]
[Additional material submitted for the record follows:]
[A statement submitted for the record by the American
Public Power Association follows:]
Statement submitted for the record by the
American Public Power Association
The American Public Power Association (APPA) is the national
service organization representing the interests of the nation's more
than 2,000 state and community-owned electric utilities that serve over
45 million Americans. These utilities include state public power
agencies, municipal electric utilities, and special utility districts
that provide electricity and other services to some of the nation's
largest cities such as Los Angeles, Seattle, San Antonio, and
Jacksonville, as well as some of its smallest towns. The vast majority
of these public power systems serve small and medium-sized communities,
in 49 states, all but Hawaii. In fact, 70 percent of publicly-owned
electric utilities are located in communities with populations of
10,000 people or less.
APPA's membership not only own hydropower facilities, but also
purchase and receive power from others in the industry who own/operate
these facilities, including the federal Power Marketing Administrations
(PMAs). Public power systems own approximately 10.1% of the total
installed electric utility generating capacity in the United States.
Hydroelectric projects comprise nearly 19% of public power's total
generating capacity. However, in addition to their own hydropower
facilities, approximately 580 public power systems in 33 states
purchase all or some of their power supply from one of the four PMAs.
The PMAs provide millions of Americans served by public power and rural
cooperative electric systems with cost-based hydroelectric power
produced at federal dams operated by the United States Army Corps of
Engineers and the Bureau of Reclamation. The PMAs market federally-
generated hydropower to not-for-profit entities, including public power
systems and rural electric cooperatives, at rates set to cover all of
the costs of generating and transmitting the electricity as well as
repayment with interest of the federal investment in these hydropower
projects.
APPA's concerns with implementing Section 402 of the American
Recovery and Reinvestment Act (ARRA) relating to Western Area Power
Administration's (WAPA) new borrowing authority are identical to those
expressed in the testimony presented today by Colorado River Energy
Distributors Association (CREDA), which also represents members of
APPA. The crux of our concern is that, as WAPA implements this new
authority, its core mission of providing clean, renewable, reliable,
cost-based federal hydropower is maintained. One of the ways that this
can be achieved is through the continuation of an open dialogue between
WAPA and its existing customers. This can also be achieved through the
public process envisioned by the new authority, whereby WAPA customers
will be able to comment on WAPA's new role, the proper allocation of
resources to achieve the goals laid out by Congress, and the procedures
to be implemented by WAPA to balance its new role with its core
mission, including clear guidance on cost allocation. Finally, the
underlying mandate of load-serving electric utilities, including public
power utilities, is to ``keep the lights on.'' As WAPA implements its
new authority, therefore, it must constantly consider any ramifications
that the use of intermittent resources might have on the reliability of
the transmission system it operates and take the appropriate steps to
mitigate any potential reliability concerns that occur.
APPA's members have been leaders in the development of non-
hydropower renewable resources, and will undoubtedly seek to partner
with WAPA as it uses this new authority to access those resources. We
also urge WAPA to consider those partnership opportunities as they
arise.
______
[A statement submitted for the record by Mr. Grijalva
follows:]
Statement of The Honorable Raul M. Grijalva, a Representative in
Congress from the State of Arizona
Thank you, Madame Chairwoman, for holding this hearing today on the
power marketing administrations and renewable energy in the West.
This hearing is scheduled at an opportune time. With the recent
passage of the American Recovery and Reinvestment Act of 2009 we can
look to the power marketing administrations to play a critical role in
increasing our country's supply of clean, renewable power and helping
our economy recover. The bill provides power marketing administrations
Bonneville Power Administration (BPA) and the Western Area Power
Administration (WAPA) with $3.25 billion each in new borrowing
authority to be used to upgrade or construct transmission to help
increase the development of renewable energy resources. This
expenditure of federal funds will help the country reduce greenhouse
gas emissions, thereby protecting the global climate and ecosystems,
create jobs, and decrease our dependence on fossil fuels.
In coming years, large sums will be spent to build transmission
infrastructure in energy corridors designated by the Department of
Energy under the Energy Policy Act of 2005. Unfortunately, many of
these corridors were designated without regard to tribal sovereignty,
ecologically sensitive protected public lands, or access to regions of
abundant renewable natural resources. This process needs to be
revisited so that the specific mandate to increase the development of
renewable energy sources contained in the stimulus provisions for BPA
and WAPA will be fulfilled, and fulfilled in a manner respectful to one
of our greatest national treasures, our public lands.
The energy corridors designated by DOE in December have the
following major problems, which must be addressed:
Failure to support renewable energy development and
transmission--The designated corridors do not prioritize supporting
renewable energy development, even though many western states,
counties, and other groups have made commitments to developing
additional renewable energy production through Renewable Portfolio
Standards and other efforts. For instance, the Western Governors'
Association's (WGA) Western Renewable Energy Zones (WREZ) project is
aimed at utilizing those areas in the West with vast renewable
resources to expedite the development and delivery of clean and
renewable energy. The goal of the WREZ is to generate: 1) reliable
information for use by decision-makers that supports the cost-effective
and environmentally sensitive development of renewable energy in
specified zones, and 2) conceptual transmission plans for delivering
that energy to load centers within the Western Interconnection. The WGA
has continued to advocate for incorporation of this information into
federal planning and draft zones are already available for use in
improving the designation of West-wide Energy Corridors;
The analysis of environmental impacts is limited to
individual, separated segments on federal lands--the agencies have
refused to analyze or even acknowledge the inevitable impacts to both
federal and non-federal lands once the ``dots and dashes'' on maps of
the current designations are connected (or to show the likely path of
these corridors), which also limits their ability to develop ways to
reduce or avoid impacts;
Failure to avoid public lands with important conservation
values and sensitive wildlife habitat--Places such as Grand Staircase
Escalante National Monument, Snake River-Birds of Prey National
Conservation Area, and the Desert and Sevilleta National Wildlife
Refuges are crossed by corridors, and a large corridor (miles wide) was
designated immediately adjacent to Arches National Park and the town of
Moab, Utah, placing improper stresses on the values and experience of
these places;
Inadequate consultation with state, local and tribal
governments--the outreach and opportunities for input were very
limited, so that important information on local plans and priorities
were not incorporated; and
Failure to consult on impacts to threatened and
endangered species--despite an official request from the National
Marine Fisheries Service, the agencies have not engaged in the
consultation required under the Endangered Species Act.
I have stressed that meeting the requirements and goals of the
Energy Policy Act of 2005, while also protecting America's treasured
public lands, should not be mutually exclusive. As a model example, the
Renewable Energy Transmission Initiative (RETI) convened by the State
of California identified, with the input of all relevant stakeholder
groups, siting for low-conflict corridors and renewable energy plants
that can potentially provide 74,300 GWh/yr of green energy, more than
enough to meet the state's needs. By including environmental
stakeholders in the planning process, California has greatly reduced
the likelihood of conflict and litigation, an outcome that all parties
would prefer to avoid.
Finally, I would like to provide my observations on the contrasting
attitudes of BPA and WAPA. BPA and their customers are excited about
the opportunities the additional borrowing authority brings them. The
customers of BPA are seemingly forward-looking and are willing to bear
some additional expense now to receive the inevitable benefits of
building for the future. In stark contrast, it appears that WAPA would
prefer not to even get the extra money, and its customers' main concern
seems to be avoiding even the tiniest additional cost. However, WAPA is
a Federal agency, and it is the obligation of the Federal government to
act in the public interest. In fact, in the past, WAPA and its
customers have borne part of the cost of projects enacted for the
greater good. For instance, P.L. 106-392, Upper Colorado and San Juan
River Basins Endangered Fish Recovery Programs, required WAPA to pay up
to $17 million for fish recovery programs. WAPA likes to think of its
``core mission'' as providing hydroelectric power from existing sources
to its existing customers, but the economic recovery act specifically
expands WAPA's mandate. Even WAPA's existing customers are going to
need new sources of energy as the population of some areas in the West
may come close to doubling their 2000 levels by 2050.
Again, I appreciate the subcommittee holding this hearing to bring
much needed attention to the role the power marketing administrations
play in energy production and development. I look forward to continuing
to work with my colleagues on the subcommittee and in Congress on the
issues of transmission siting and renewable energy development as our
country addresses global warming and economic recovery.