[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
SPENDING, PRIORITIES & MISSIONS OF THE BONNEVILLE POWER
ADMINISTRATION, WESTERN AREA POWER ADMINISTRATION, SOUTHWESTERN POWER
ADMINISTRATION & SOUTHEASTERN POWER ADMINISTRATION
=======================================================================
OVERSIGHT HEARING
before the
SUBCOMMITTEE ON WATER AND POWER
of the
COMMITTEE ON NATURAL RESOURCES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
__________
Tuesday, March 15, 2011
__________
Serial No. 112-10
__________
Printed for the use of the Committee on Natural Resources
Available via the World Wide Web: http://www.fdsys.gov
or
Committee address: http://naturalresources.house.gov
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COMMITTEE ON NATURAL RESOURCES
DOC HASTINGS, WA, Chairman
EDWARD J. MARKEY, MA, Ranking Democrat Member
Don Young, AK Dale E. Kildee, MI
John J. Duncan, Jr., TN Peter A. DeFazio, OR
Louie Gohmert, TX Eni F.H. Faleomavaega, AS
Rob Bishop, UT Frank Pallone, Jr., NJ
Doug Lamborn, CO Grace F. Napolitano, CA
Robert J. Wittman, VA Rush D. Holt, NJ
Paul C. Broun, GA Raul M. Grijalva, AZ
John Fleming, LA Madeleine Z. Bordallo, GU
Mike Coffman, CO Jim Costa, CA
Tom McClintock, CA Dan Boren, OK
Glenn Thompson, PA Gregorio Kilili Camacho Sablan,
Jeff Denham, CA CNMI
Dan Benishek, MI Martin Heinrich, NM
David Rivera, FL Ben Ray Lujan, NM
Jeff Duncan, SC John P. Sarbanes, MD
Scott R. Tipton, CO Betty Sutton, OH
Paul A. Gosar, AZ Niki Tsongas, MA
Raul R. Labrador, ID Pedro R. Pierluisi, PR
Kristi L. Noem, SD John Garamendi, CA
Steve Southerland II, FL Colleen W. Hanabusa, HI
Bill Flores, TX Vacancy
Andy Harris, MD
Jeffrey M. Landry, LA
Charles J. ``Chuck'' Fleischmann,
TN
Jon Runyan, NJ
Bill Johnson, OH
Todd Young, Chief of Staff
Lisa Pittman, Chief Counsel
Jeffrey Duncan, Democrat Staff Director
Rick Healy, Democrat Chief Counsel
------
SUBCOMMITTEE ON WATER AND POWER
TOM McCLINTOCK, CA, Chairman
GRACE F. NAPOLITANO, CA, Ranking Democrat Member
Louie Gohmert, TX Raul M. Grijalva, AZ
Jeff Denham, CA Jim Costa, CA
Scott R. Tipton, CO Ben Ray Lujan, NM
Paul A. Gosar, AZ John Garamendi, CA
Raul R. Labrador, ID Edward J. Markey, MA, ex officio
Kristi L. Noem, SD
Doc Hastings, WA, ex officio
------
CONTENTS
----------
Page
Hearing held on Tuesday, March 15, 2011.......................... 1
Statement of Members:
Hastings, Hon. Doc, a Representative in Congress from the
State of Washington........................................ 6
Prepared statement of.................................... 7
McClintock, Hon. Tom, a Representative in Congress from the
State of California........................................ 1
Prepared statement of.................................... 3
Napolitano, Hon. Grace F., a Representative in Congress from
the State of California.................................... 4
Prepared statement of.................................... 5
Statement of Witnesses:
Legg, Kenneth E., Administrator, Southeastern Power
Administration, U.S. Department of Energy, Elberton,
Georgia.................................................... 25
Prepared statement of.................................... 27
Meeks, Timothy J., Administrator, Western Area Power
Administration, U.S. Department of Energy, Lakewood,
Colorado................................................... 16
Prepared statement of.................................... 17
Worthington, Jon C., Administrator, Southwestern Power
Administration, U.S. Department of Energy, Tulsa, Oklahoma. 20
Prepared statement of.................................... 22
Wright, Stephen J., Administrator, Bonneville Power
Administration, U.S. Department of Energy, Portland, Oregon 8
Prepared statement of.................................... 10
OVERSIGHT HEARING TITLED ``EXAMINING THE SPENDING, PRIORITIES AND
MISSIONS OF THE BONNEVILLE POWER ADMINISTRATION, THE WESTERN AREA POWER
ADMINISTRATION, THE SOUTHWESTERN POWER ADMINISTRATION AND THE
SOUTHEASTERN POWER ADMINISTRATION.''
----------
Tuesday, March 15, 2011
U.S. House of Representatives
Subcommittee on Water and Power
Committee on Natural Resources
Washington, D.C.
----------
The Subcommittee met, pursuant to call, at 10:00 a.m. in
Room 1324, Longworth House Office Building, Hon. Tom McClintock
[Chairman of the Subcommittee] presiding.
Present: Representatives McClintock, Gohmert, Denham,
Tipton, Gosar, Labrador, Noem, Hastings, Napolitano, Costa,
Grijalva, Lujan, Garamendi, and Markey.
Also present: Representatives DeFazio and Inslee.
STATEMENT OF HON. TOM McCLINTOCK, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF CALIFORNIA
Mr. McClintock. The Subcommittee on Water and Power will
come to order. The Chair notes the presence of a quorum which
under Committee Rule 3 is two Members. Luckily.
The Water and Power Subcommittee meets today to examine the
spending, priorities, and the missions of the Bonneville Power
Administration, the Western Area Power Administration, the
Southwestern Power Administration, and the Southeastern Power
Administration. We also meet under the mandate of House
Resolution 72 to identify regulatory impediments to job
creation.
As we begin, I would ask unanimous consent that the
gentleman from Oregon, Mr. DeFazio, and the gentleman from
Washington, Mr. Inslee, be allowed to sit with the Subcommittee
and participate in the hearing. Hearing no objection, so
ordered.
We will begin with five-minute opening statements by the
Chairman and Ranking Member, and with that we will start the
clock.
As I said, today we are hearing from the four Federal Power
Marketing Administrations that administer our hydroelectricity.
When we reviewed these administrations last year, I said that I
wanted to know how much more is being added to our electricity
bills from over-regulation, water use restrictions, and
mandated use of so-called alternative energy sources, and what
they were doing to reverse these restrictions and costs.
I also said that I wanted to know what plans were underway
to increase our hydroelectric resources. I hope that we will
get clear and accurate answers today on these critical points.
We should remember that in the 1940s, the cheap and
abundant hydroelectricity generated in the West's Federal dams
played a major role in producing the armaments and food needed
to defeat our enemies in World War II. In the post-war years,
it laid the foundation for the explosive economic growth and
prosperity of the western United States. Federal hydropower
projects and the transmission lines delivering the power
continue to serve their purpose today. But there is one major
difference. The objective of providing abundance has been
replaced by a mentality of rationing shortages and imposing
wildly expensive mandates.
Litigation, regulation, Federal judges turned river
masters, and mission creep are reducing project output and
slamming consumers when our economy can least afford it. At a
time when we should be empowering communities and employers to
create jobs, I am concerned that these policies are adding
greatly to our economic distress.
For example, three out of ten ratepayer dollars in the
Pacific Northwest, literally 30 percent of your electricity
bill, is now being spent on restoring salmon habitats--over
$800 million taken from ratepayers annually--while we ignore
the role that fish hatcheries play in producing and supporting
abundant salmon populations at a fraction of the cost.
The Federal Government has deliberately foregone a third of
the hydropower production, roughly 1,000 megawatts, at Glen
Canyon Dam in the name of saving the humpback chub. We have now
discovered that this policy actually increases the predator
populations that feed on the chub, and yet instead of admitting
our mistakes and changing our policy, this Administration seems
intent on doubling down on them.
Meanwhile, in the afflicted Central Valley of California,
Central Valley Power customers are fleeced by restoration taxes
that inflate their electricity prices to the breaking point.
All of these policies make electricity more expensive, and
by imposing fees on hydropower or by deliberately restricting
it for pet causes of the environmental Left, this government is
forcing consumers to buy ever-more expensive replacement power.
The effort by the Environmental Protection Agency to radically
restrict carbon dioxide will vastly exacerbate this burden. And
I would also add that the Western Area Power Administration's
quest to incorporate wildly expensive solar and wind power,
combined with its new borrowing authority, threatens to erode
the beneficiary-based principal. Under the agency's new
borrowing authority, any defaulted loans with balances could be
heaped on taxpayers.
Instead of deliberately bypassing water away from
hydroelectric turbines, decreasing storage capacity in the name
of saving endangered fish, and mandating extremely expensive
and inherently unreliable generation into the grid, we need to
restore as our objective the development and maintenance of
abundant, affordable, and reliable power supplies for those who
actually pay the bills.
A government that confuses rationing with abundance or that
mistakes ideological sophistry with sound resource management
condemns itself to increasingly painful shortages and
continuing economic distress. The Power Marketing
Administrations before us today hold the key to restoring a new
era of abundance and prosperity if they choose to do so. Or
they can plunge us into a new Dark Age of rationing, shortages,
prohibitively expensive water and power, and a dying economy.
I hope today to discover how much more power they are
providing today than when they appeared before the Subcommittee
last year, and at what cost, what they have done to reduce
prices for their consumers over the past year, and what they
have done to relieve taxpayers from bearing costs that ought to
be paid by the beneficiaries of their projects. I would like to
know what cost-benefit analysis they used to evaluate their
commitment of resources, and I would like to know what plans
they have to further increase supply, decrease costs, and
achieve financial independence in the future.
And with that, I yield back and recognize the Ranking
Member, the gentlelady from California, Mrs. Napolitano, for
five minutes.
[The prepared statement of Chairman McClintock follows:]
Statement of The Honorable Tom McClintock, Chairman,
Subcommittee on Water and Power
Today the subcommittee hears from the four federal power marketing
administrations that administer our hydroelectricity.
When we reviewed these administrations last year, I said that I
wanted to know how much more is being added to our electricity bills
from over-regulation, water use restrictions and mandated use of so-
called alternative energy sources and what they were doing to reverse
these restrictions and costs. I also said that I wanted to know what
plans are underway to increase our hydro-electric resources.
I hope that we will get clear and accurate answers today on these
critical points.
We should remember that in the 1940s, the cheap and abundant
hydroelectricity generated in the west's federal dams played a major
role in producing the armaments and food needed to defeat our enemies
in World War II. And in the post-war years, it laid the foundation for
the explosive economic growth and prosperity of the western United
States.
Federal hydropower projects and the transmission lines delivering
the power continue to serve their purpose today. But, there's one major
difference: the objective of providing abundance has been replaced by a
mentality of rationing shortages and imposing wildly expensive
mandates. Litigation, regulation, federal judges turned river-masters,
and mission creep are reducing project output and slamming consumers
when our economy can least afford it.
At a time when we should be empowering communities and employers to
create jobs, I am concerned that these policies are adding greatly to
our economic distress.
For example:
3 out of 10 ratepayer dollars in the Pacific
Northwest are now spent on restoring salmon habitats--over $800
million taken from ratepayers annually--while we ignore the
role that fish hatcheries play in producing and supporting
abundant salmon populations at a fraction of the cost.
The federal government has deliberately foregone a
third of the hydropower production--or 1,000 megawatts--at Glen
Canyon Dam in the name of saving the humpback chub. We have now
discovered that this policy actually increases the predator
populations that feed on the chub, and yet instead of admitting
our mistakes and changing our policy, this administration seems
intent on doubling down on them.
Meanwhile, in the afflicted Central Valley of
California, Central Valley Project power customers are fleeced
by restoration taxes that inflate their electricity prices to
the breaking point.
All of these policies make electricity more expensive. By imposing
fees on hydropower or by deliberately restricting it for pet causes of
the environmental Left, this government is forcing consumers to buy
ever more expensive replacement power. The effort by the Environmental
Protection Agency to radically restrict carbon dioxide will vastly
exacerbate this burden.
I might also add that the Western Area Power Administration's quest
to incorporate wildly expensive solar and wind power--combined with its
new borrowing authority--threatens to erode the ``beneficiary pays''
principle. Under the agency's new borrowing authority, any defaulted
loans with balances could be heaped on taxpayers.
Instead of deliberately bypassing water away from hydropower
turbines, decreasing storage capacity in the name of saving endangered
fish and mandating wildly expensive and inherently unreliable
generation into the grid, we need to restore as our objective the
development and maintenance of abundant, affordable and reliable water
and power supplies for those who actually pay the bills.
A government that confuses rationing with abundance or that
mistakes ideological sophistry with sound resource management condemns
itself to increasingly painful shortages and economic distress.
The power marketing administrations before us today hold a key to
restoring a new era of abundance and prosperity if they choose to do
so. Or they can plunge us into a new dark era of rationing, shortages,
prohibitively expensive water and power and a dying economy.
I hope today to discover how much more power they are providing
today than they were when they appeared before the subcommittee last
year--and at what cost; what they have done to reduce prices for their
consumers over the past year; and what they have done to relieve
taxpayers from bearing costs that ought to be paid by the beneficiaries
of their projects. I would like to know what cost/benefit analysis they
use to evaluate their commitment of resources. And I would like to know
what plans they have to further increase supply, decrease costs, and
achieve financial independence in the future.
______
STATEMENT OF HON. GRACE NAPOLITANO, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mrs. Napolitano. Thank you, Mr. Chairman. And first of all,
welcome to all of you, the four of the PMAs' Administrators,
for coming to Washington to brief us and bring information to
us, updating Congress on the most important issues that each of
your agencies face. I know I have toured two. Hopefully I will
make it to the other two sometime in the future, because I have
learned from actually seeing and touring and asking the
questions that are necessary.
Each of our four PMAs are unique in terms of geographic
location, your customer base, the amount of infrastructure it
owns, and your mission. PMA Administrators' testimonies today
will help shed light on those differences and remind us that
some of the challenges you face are universal. These challenges
include water shortages caused by climate change and drought,
how drought affects how we generate the power--I say ``we'';
you--and the amount of hydropower available to customers. Aging
infrastructure--one of the biggest issues that I find is going
to be an increasingly growing issues, and I am sure it is to
you.
I am very interested in learning how your capital costs
help to continue to rehabilitate our generation resources if we
are to maintain an historic power production levels and how
these costs would check up at the end of the year. And, yes,
hydroelectricity is the cheapest power there is, and I am sure
customers would be a little concerned if you raised them
outside of the realm of reason, but I think that we need to
start recouping some of the costs that are inherent than you
have already.
I am very concerned about bark beetle infestation and how
the problem affects your infrastructure and transmission line.
I hope to hear if there is any research and development on how
to keep it in check or help defeat it. We are also continuing
our strong support for wind and renewables. However, we
understand we have to find solutions to some of the operational
changes of integrating these resources.
Pacific Northwest is fortunate that it depends on
hydropower, but also wind resources and is exceeding demand,
causing its own challenges. We need to continue to find out how
we can help in Congress, as we understand it and you brief us,
how we can help in those areas.
I do know that the Northwest delegation is actively looking
at solutions to support this development of renewals while
protecting the hydropower resources and the operational
integrity of the BPA grid. I would like to offer any help in
facilitating a solution in this discussion since California
depends on renewables generated in the Northwest region. These
challenges cause us to look in the future and understand that
we will have to do more with less.
In reading some of the testimony, I find that some of you
are finding yourselves with diminishing personnel because of
age, retirement age, and that you are hoping to be able to
bring in individuals who are interested in working in that
particular area. And I look forward to hearing how you are
attempting to do that, besides your job fairs, via internships
and other things that we may be able to put some of our
youngsters--get their interest in it.
Look forward to hearing from each one of you on how your
respective agency plans to confront tomorrow's challenges using
the funding outlined within the budget request. And thank you
again for being here and for making us aware of where we need
to be. And with that, I yield back.
[The prepared statement of Mrs. Napolitano follows:]
Statement of The Honorable Grace F. Napolitano, a Representative
in Congress from the State of California
Thank you to all four of the PMA Administrators for making the trip
to Washington today to update the Congress on the most important issues
each of your agencies face. Welcome.
Each of our four PMAs is unique in terms of geographic location,
customer base, the amount of infrastructure it owns, and their
missions.
PMA Administrators' testimonies today help shed light on those
differences. They also remind us that some of the challenges our PMAs
face are universal.
These challenges include water shortages caused by climate change
and drought. How drought affects how we generate our power and the
amount of hydropower available to customers.
Aging infrastructure is also an increasingly growing issue. I'm
interested in learning about how your capital costs help to
rehabilitate our generation resources if we are to maintain historic
power production levels--and how those costs check up at the end of the
year.
I'm very concerned about the bark beetle infestation an how this
problem affects our infrastructure, our transmission lines.
We are continuing our strong support for wind and renewables, but
understand that we have to find solutions to some of the operational
challenges of integrating these resources. The Pacific NW is fortunate
in that it depends on hydropower but also has wind resources. Right now
in the Northwest power supply is exceeding demand, causing its own
challenges.
I know that the NW delegation is actively looking at solutions to
support the development of renewables while protecting their hydropower
resources and the operational integrity of the BPA grid. I would like
to offer any help in facilitating a solution to this discussion since
California depends on renewables generated in the NW region.
These challenges cause us to look to the future and understand that
we will have to do more with less.
I look forward to hearing from each PMA Administrator on how their
respective agency plans to confront tomorrow's challenges using the
funding outlined in its budget request.
______
Mr. McClintock. The Chair now recognizes the Chairman of
the Natural Resources Committee, the gentleman from Washington,
Mr. Hastings.
STATEMENT OF HON. DOC HASTINGS, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF WASHINGTON
Mr. Hastings. Thank you very much, Mr. Chairman, and thank
you for the courtesy. I am pleased to be here today, especially
since the agencies under the Water and Power Subcommittee have
a profound and direct impact on my constituents in my Central
Washington district.
Two of the largest Federal irrigation projects in the West
and the Grand Coulee Dam, the flagship of the Federal Columbia
River Power System, are all in my district. Together they serve
as the heart of Central Washington's economy and way of life.
Today's hearing on the Power and Marketing Administration
is an important endeavor since Congress has the duty to conduct
oversight on these agencies. While ratepayers typically recover
all of the cost of these agencies, Congress should focus on
what Federal matters impact the electricity rates to assess
whether their rates are fair and the lowest possible cost. For
example, at least 30 percent of the rates of those served by
the Bonneville Power Administration are related to endangered
fish costs that have been subject to almost a decade of
litigation.
Despite these expenditures and the fact that fishery
returns are at the highest levels, some still seek to remove
the four dams on the lower Snake River in the name of salmon
protection. Removal will do very little to help the salmon. In
fact, it will drive up energy costs and destroy jobs. It will
increase the carbon footprint in the region and eliminate a
major backup source for wind integration. Snake River Dam
removal, I will say, Mr. Chairman, will not happen on my watch,
as long as I am the Chairman of this Committee.
On wind integration, we will hear later today from
Bonneville Power Administrator Steve Wright about how wind
integration presents a lot of challenges for the region. When
much of the wind resource is destined for California, we need
to ensure that our ratepayers in the Pacific Northwest are not
negatively impacted, and that our endangered fish recovery
efforts are not compromised by wind exports. If the
beneficiaries are Californians, then these beneficiaries should
pay.
I also want to make sure that the Western Area Power
Administration adheres to the ``beneficiary pays'' principle as
it implements its new borrowing authority. This new authority
became law without any congressional hearings or markups.
Oversight, therefore, is clearly needed. I am told that some of
the agency's core customers are very concerned about this new
mission, that this new mission could negatively impact them,
and that there hasn't been adequate transparency to resolve
their concerns on recently proposed transmission lines. As we
all know, there is a potential taxpayer bailout of this new
authority as well.
So, in conclusion, I look forward to working with the
Subcommittee Chairman, Mr. McClintock, and the Ranking Member,
Mrs. Napolitano, both Californians I might add, on these and
other issues for the next two years. And thank you, and I yield
back.
[The prepared statement of Mr. Hastings follows:]
Statement of The Honorable Doc Hastings, Chairman,
Committee on Natural Resources
I'm pleased to be here today, especially since the agencies under
the Water and Power Subcommittee have a profound and direct impact on
constituents in my central Washington district. Two of the largest
federal irrigation projects in the West and the Grand Coulee Dam, the
flagship of the Federal Columbia River Power System, are in my
district. Together, they serve as the heart of central Washington's
economy and way of life.
Today's hearing on the Power Marketing Administrations is an
important endeavor since Congress has a duty to conduct oversight on
these agencies. While ratepayers typically recover all of the costs of
these agencies, Congress should focus on what federal matters impact
electricity rates to assess whether the rates are fair and the lowest
cost possible.
For example, at least 30% of the rates of those served by the
Bonneville Power Administration are related to endangered fish costs
that have been subject to almost a decade of litigation. Despite these
expenditures and the fact that fish returns are at high levels, some
still seek to remove four dams on the Lower Snake River in the name of
salmon protection. Removal would do very little to help the salmon,
drive up energy costs and destroy jobs, increase the carbon footprint
of the region and eliminate a major backup source for wind integration.
Snake River dam removal will not happen on my watch.
I mentioned wind integration because we will hear later today from
Bonneville's Administrator, Steve Wright, about how wind integration
presents a lot of challenges for the region. When much of the wind
resource is destined for California, we need to ensure that our
ratepayers in the Pacific Northwest are not negatively impacted and
that our endangered fish recovery efforts are not compromised by wind
exports. If the beneficiaries are Californians, then those
beneficiaries should pay.
I also want to make sure that the Western Area Power Administration
adheres to the ``beneficiaries pays'' principle as it implements its
new borrowing authority. This new authority became law without any
congressional hearings or markups. Oversight is clearly needed. I'm
told that some of the agency's core customers are very concerned that
this new mission could negatively impact them and that there hasn't
been adequate transparency to resolve their concerns on recently
proposed transmission lines. As we all know, there is a potential
taxpayer bailout in this new authority as well.
In conclusion, I appreciate being here for this important hearing
and I look forward to working with Subcommittee Chairman McClintock and
Ranking Member Napolitano--both from California--on these and other
issues in the next two years.
______
Mr. McClintock. It is customary on this Subcommittee to
recognize any other Members who wish to make opening statements
to do so. And in keeping with the Natural Resources Committee
precedent, I will recognize Members present when the
Subcommittee came to order, alternating between majority and
minority. And Mr. Gosar, I believe, is next. Mr. Tipton, do
you--OK. Well, good.
Then we will move on to witnesses today. We are pleased to
be joined by Mr. Steve Wright, Administrator of the Bonneville
Power Administration; Mr. Timothy Meeks, Administrator of the
Western Area Power Administration; and Mr. John Worthington,
Administrator of the Southwestern Power Administration; and Mr.
Kenneth Legg, Administrator of the Southeastern Power
Administration.
Your written testimony will appear in full in the hearing
record, so I would ask that you keep your oral statement to
five minutes, as outlined in our invitation letter to you and
under Committee Rule 4[a]. I also want to explain how our
timing lights work. When you begin to speak, our clerk will
start the timer, and a green light will appear. After four
minutes, a yellow light will appear, and at that time, you
should begin concluding your statement. At five minutes, the
red light will come on. You can complete your statement, but I
would ask that you conclude at that point.
Before I recognize Mr. Wright, I would note that he
recently celebrated 30 years of service in the Bonneville Power
Administration. Congratulations, and I now recognize him to
testify for five minutes. All witness statements will be
submitted for the hearing record.
STATEMENT OF MR. STEVE WRIGHT, ADMINISTRATOR, BONNEVILLE POWER
ADMINISTRATION, PORTLAND, OREGON
Mr. Wright. Thank you very much, Mr. Chairman, Mrs.
Napolitano, Members of the Subcommittee. My name is Steve
Wright, and I am the Administrator of the Bonneville Power
Administration. My testimony provides a summary of the last
year, as well as a look at the challenges coming at us.
First, a quick reminder that BPA receives no annual
appropriations. We cover all of our costs through the sale of
power and transmission services. We have limited access to
capital that must be repaid at the U.S. Treasury's cost of
money.
2010 was a challenging but productive year. The downturn in
the economy, combined with another below-average water year,
resulted in not achieving our revenue targets and losing money
for the second year in a row. Fortunately, our conservative
fiscal policies in previous years resulted in building
financial reserves designed to carry us through just such
circumstances.
In 2010, BPA made its full scheduled $864 million repayment
to the Federal investment. This marks the 27th straight year
that BPA has made the full scheduled payment. BPA also
registered substantial progammatic success. Working with our
public power customers over 90 average megawatts of energy
efficiency was acquired, a substantial increase from previous
years.
We completed the decade-long refurbishment of the historic
Bonneville Dam first power house, part of a comprehensive
effort to assure we are investing to get maximum cost
effective, renewable hydropower from our system. The
interconnections of wind power to BPA's transmission now
exceeds 3,400 megawatts, effectively accomplishing the
regionally established 2020 goal set just four years ago a
decade ahead of schedule.
There are many reasons behind that wind power explosion,
but one of the most significant is BPA's nationally innovative
policies to get financial commitments in advance, allowing more
transmission to be offered and built. Our first major
construction project utilizing American Recovery and
Reinvestment Act borrowing authority, The McNary-John Day line,
is ahead of schedule and under budget.
We are also witnessing dramatic increases in returning
adult Columbia Basin salmon and steelhead listed as threatened
and endangered. While humility demands that we recognize the
contribution of good ocean conditions, where these fish spend
the majority of their lives, our extensive research,
monitoring, and evaluation program tells us that the
substantial investment Northwest ratepayers are making is
resulting in increased survival through the hydro system
corridor.
There are in fact more successes to celebrate, but I want
to take time to describe six key issues likely to come to the
attention of the Subcommittee in the coming year. First, we
will expand our efforts to support the acquisition of energy
efficiency by our customers. Energy efficiency is by far the
least cost, most environmentally benign resource. It deserves
our priority attention over all other resources.
Second, the rapid pace of wind development, most of which
is being exported outside of our control area, has created a
new set of challenges. For example, development is concentrated
in a small geographic area, exacerbating the peaks and troughs
of wind generation. The flexibility available from the hydro
system to manage the variable output of wind power and maintain
reliability is nearing exhaustion.
Wind generation also tends to accentuate the periodic over-
supply of electricity, particularly in the spring. Increasing
injections of wind energy without mitigation may extend this
challenge. We are pursuing a lessons-learned effort to help
address these issues. We believe these challenges can be met,
but it should be recognized we are likely to encounter
difficult choices that must be made.
Our values as we confront these choices are encouraging
renewable resource development while assuring reliability is
maintained and assuring that any cost of wind power is paid by
the purchasers and sellers.
Third, we are in the process of resetting rates. We are
seeking to assure adequate investment in a valuable but aging
hydro system, assuring a probability of repaying the U.S.
Treasury while keeping rates as low as possible, recognizing
the state of the economy.
Fourth, we are awaiting an extremely important Federal
District Court decision regarding a joint Federal, three State,
and six tribe plan for salmon restoration. This Subcommittee
has followed this issue for more than a decade. A decision
supporting the plan would solidify a remarkably successful
collaboration that is producing results on the ground and avoid
a reset button that would likely result in uncertainty, if not
turmoil.
Fifth, the Columbia River treaty with Canada is nearing
deadlines for decisions about its future post-2024. One would
be hard-pressed to find a more successful trans-international
boundary river basin agreement. Important questions, though,
must be addressed, including flood control protection, the
treatment of power production at U.S. facilities enabled by the
treaty, and many ecosystem protection and economic issues that
were not part of the original treaty consideration.
Sixth and finally, there has been a long-running debate and
litigation around a program BPA is mandated to operate,
designed to create greater rate parity for residential and
small farm consumers in the Northwest. The parties have worked
hard to resolve their differences. We applaud them for their
effort and are considering the merits of their agreement in a
rate case setting, and commend it for your consideration.
Mr. Chairman, this concludes my testimony. I look forward
to your questions.
[The prepared statement of Mr. Wright follows:]
Statement of Stephen J. Wright, Administrator,
Bonneville Power Administration, U.S. Department of Energy
Mr. Chairman and Members of the Subcommittee, I appreciate the
opportunity to testify here today. My name is Steve Wright. I am the
Administrator of the Bonneville Power Administration (Bonneville). I am
pleased to be here today to discuss the President's Fiscal Year (FY)
2012 Budget as it relates to Bonneville.
In my testimony today, I will share with the Committee Bonneville's
significant successes over the past year, how we are addressing the
considerable challenges we are facing, and an overview of the FY 2012
budget.
BONNEVILLE'S RECENT SUCCESSES
FY 2010 was challenging, yet productive for Bonneville. Like almost
every institution and business in the nation, Bonneville is facing the
realities of the current economic hardships. But Bonneville has been
more than up to the challenge of managing through difficult economic
times while making important progress in areas that advance both
national and regional energy goals.
In the Pacific Northwest, poor economic conditions have been
exacerbated by successive years of low snowpack. Snowpack fuels our
hydro-powered system. With last year's January--July runoff at only 79
percent of the 30-year average, we had little surplus power to sell.
Surplus sales normally represent about one-fifth of our revenues. As a
result, we fell far short of our start-of-year revenue goals.
Despite these challenges, Bonneville has retained its fundamental
financial strength and stability. The same financial discipline and
management principles that enabled us to recover from the West Coast
energy crisis of 2000-2001 are ensuring that we can manage the current
environment, while continuing to make substantial investments in the
region's transmission, generation, energy efficiency, and fish and
wildlife restoration efforts.
As the Committee knows, Bonneville ratepayers repay the debt on the
Federal investment in the Federal Columbia River Power System (FCRPS).
In FY 2010, Bonneville made its full scheduled payment of $864 million
to the U.S. Treasury, including $38.5 million in advanced amortization.
This payment marks the 27th year in a row that Bonneville has made a
full, on time payment to the Treasury. Bonneville finances its
approximate $4.6 billion annual cost of operations and investments
primarily using power and transmission revenues and borrowing from the
U.S. Treasury at interest rates comparable to the rates prevailing in
the market for similar bonds issued by Government corporations.
As stewards of the FCRPS, Bonneville also has a mandate to mitigate
the impacts on fish and wildlife of Federal hydropower development and
operations on the Columbia River and its tributaries. On that front, it
has been a very successful year. While ocean conditions clearly play a
big role in the survival of fish, there is strong evidence that our
efforts are contributing to the increasingly robust salmon populations.
After years of investing in improvements to make our hydroelectric
projects and habitat safer for fish, we are seeing remarkable results.
Some salmon runs are returning in numbers that haven't been seen since
the 1950s. Last year, more Snake River fall Chinook returned above
Lower Granite Dam than we have seen since the dam was built in 1975.
FY 2010 also saw wind power continue to flourish in the Pacific
Northwest. As the owner of about 75 percent of the high voltage
transmission in the region, nearly 3,400 megawatts of wind capacity is
currently integrated into Bonneville's system, an amount that could
double in the next few years. Major transmission infrastructure
projects accompany this continuing expansion. We are well into
construction of the West of McNary Group I Transmission Project (also
known as McNary-John Day) which was the first of Bonneville's American
Recovery and Reinvestment Act (ARRA) projects to break ground.
We are grateful to the Congress and the President for a substantial
increase in our existing borrowing authority as part of ARRA. We have
developed asset management plans for our major categories of capital
assets (transmission, hydro system infrastructure, fish and wildlife,
and conservation) and have identified cost-effective investments that
exceed our current total borrowing authority. This means we will need
to continue to follow rigorous capital review process to assure we
approve only the most cost-effective uses of our borrowing authority.
Bonneville captured almost 90 average megawatts of energy
efficiency in FY 2010, easily exceeding its portion of the Northwest
Power and Conservation Council's conservation target. The energy
efficiency team was recognized as a leader in the field with multiple
awards, including three Energy Management Awards from the Department of
Energy and two regional Environmental Protection Agency Awards.
KEY CHALLENGES
The coming years will see fundamental changes in the Pacific
Northwest power system. Growing demand and increased wind power
development are combining to put new strains on our transmission and
power systems. Bonneville is working closely with customers and
stakeholders throughout the West and looking for opportunities to meet
these new demands.
Energy Efficiency--The Northwest's Priority Resource
The Pacific Northwest has long been a national leader in energy
efficiency and Bonneville has been an integral part of this successful
effort. Bonneville is significantly increasing investment in the years
to come which will support the Administration's goals of enhancing the
economy, increasing energy independence, and promoting clean energy
(Attachment A).
In FY 2010, the Northwest Power and Conservation Council issued its
Sixth Power Plan. The plan identifies energy efficiency as the least
cost resource and envisions that almost 60 percent of the Pacific
Northwest's new demand for electricity over the next five years and 85
percent of load growth over the next 20 years could be met cost
effectively with energy efficiency. This nearly doubles targets from
the previous plan. Bonneville agrees with this plan and will work in
partnership with public power to achieve public power's share of that
goal. Bonneville budgets reflect increasing investment to achieve the
higher megawatt targets.
Bonneville is also supporting two major demonstration initiatives
supporting a smarter grid--the Pacific Northwest Smart Grid
Demonstration Project and the Western Interconnection Synchrophasor
Program. We are exploring how different smart grid technologies can
benefit Bonneville's customers through cost containment and improved
reliability. Smart grid technologies hold great potential to improve
transmission reliability and reduce the need for new transmission
infrastructure and power resources, although much work remains to be
done to prove the business case.
Wind--Success Breeds Challenges
By the end of 2010, Bonneville had connected nearly 3,400 megawatts
of wind generation to its transmission system (Attachment B). What is
remarkable about this milestone is that only four years ago, a regional
wind integration task force thought that 3,000 megawatts of wind
connection to the Bonneville system was a reasonable target to be
accomplished by 2020. We hit that target a decade sooner. We now have
commitments in our interconnection queue that could increase that total
generating capacity in Bonneville's Balancing Authority Area to 10,000
megawatts by 2017 (Attachment C).
It is important to note that most of this wind resource is being
developed for use elsewhere. More than 80 percent of the wind on
Bonneville's system is meant to serve renewable electricity demand
outside Bonneville's Balancing Authority Area. We estimate that over
half is under contract to serve California utilities. Bonneville's
ability to connect such significant amounts of renewable generation is
a major contribution to renewable energy development West-wide.
This rapid pace of wind development leads us to believe there is a
need for a ``lessons learned'' discussion with the region. We intend to
work with regional stakeholders to review our operating experiences and
the challenges we can expect to face as a result of further accelerated
wind power development in the Pacific Northwest.
Bonneville is seeking to simultaneously encourage renewable
resource development, maintain reliability, protect fish and wildlife,
and assure that the costs of wind power are paid by wind purchasers and
sellers. We believe success at achieving these goals is necessary to
continue the expansion of renewable resources.
Some of the challenges we are currently experiencing include:
1. Wind development has concentrated in a small geographic
area east of the Columbia River Gorge where transmission
service is available and in close proximity to California
interties. This concentration magnifies the peaks and troughs
of wind generation.
2. Wind generation tends to accentuate the periodic oversupply
of energy in the spring.
3. Bonneville's transmission system has limited ability to
move all of this generation out of the region.
4. Bonneville has embarked on major transmission projects
within the region to improve service for all transmission
transactions, including wind generation, but due to flexibility
we have offered we do not always know the ultimate destination
of wind electricity and this uncertainty is increasingly
affecting our ability to plan for reliable transmission
service.
5. The Federal hydro system has worked well to back up wind
generation's high variability. The dams can ramp generation up
when wind generation falls off and back down when wind
generation comes back up. We have worked successfully for the
last several years on new tools to stretch the reserve
capabilities of the hydro system but we are nearing the limits
of those capabilities.
If wind generation in our system is to triple in the next six
years, we need to engage the region to expand the integration strategy.
Rates -Managing for Short and Long-Term
Bonneville is currently engaged in processes to re-set rates for
sales of power and transmission and is following an extensive public
process to review and make changes to Bonneville's budget. Almost all
Transmission customers have agreed in principle to a settlement of
rates for FY 2012-2013.
On the Power side, this is the first time we will be implementing
rates under our new contracts, which include tiered rates. Bonneville
is proposing an 8.5 percent wholesale power rate increase primarily
driven by the need for investment in the non-CO2 emitting,
low cost hydropower assets that create substantial value for the
region. We are committed to establishing rates that will maintain at
least a 95 percent Treasury Payment Probability while also seeking to
keep rates as low as possible reflecting the stress the regional
economy is experiencing.
Residential Exchange--Addressing a Regional Controversy
Representatives of consumer owned and investor owned utilities
across the region have worked hard in response to our request that they
attempt to settle on Residential Exchange Program costs and benefits
for the next 17 years. Disputes and litigation have plagued the Program
since its inception. Together they have reached a proposed settlement
that will now be considered by the utilities for adoption. We applaud
their efforts and are considering the merits of their proposal in a
formal rate setting process. We are under ex parte rules for both this
and the power and transmission rate setting processes.
Protecting ESA Listed Fish
After more than a decade of litigation, we are awaiting an imminent
ruling on biological opinions protecting threatened and endangered fish
in the Columbia River Basin. A Federal plan has been introduced in the
Federal District Court of Oregon under Judge James Redden. This plan
responds to Judge Redden's request for funding commitments that ensure
the improvements are reasonably certain to occur. Consistent with the
Court's request for collaboration, the Federal plan is the product of
extensive regional collaboration resulting in support from three states
and seven Indian Tribes. The National Oceanic and Atmospheric
Administration performed a review of the plan, which also included
review by independent biologists. The independent review confirmed that
the underlying science of the plan was sound.
Bonneville believes the region is at a fundamental fork in the road
with respect to salmonid restoration. The Federal plan is well
positioned to succeed. The Federal plan addresses the whole salmonid
life cycle: habitat, hydro, hatcheries and harvest, while the
plaintiffs' plan focuses only on hydro projects. The Federal plan has
unprecedented state and tribal support. It is the product of regional
collaboration and supported by the best science available. The data
shows that surface passage and spill has improved fish survival,
habitat restoration provides healthy rivers for returning fish to
spawn, and returns are improving. Moreover, the Federal plan also
creates a substantial number of jobs. Bonneville believes that it's
time to let the plan work.
Part of implementing the plan includes beginning construction in FY
2012 on three significant fish projects. These projects are listed in
the Proposed Appropriations (Expenditure Authority) Language of
Bonneville's Congressional Budget submission pursuant to Public Laws
93-454 and 96-501. The projects are consistent with the 2008 Biological
Opinion and the 2008 Columbia Basin Fish Accords. The projects
exemplify the commitment by tribes, states, and Bonneville to work
collaboratively towards achieving specific biological objectives and
meeting salmon recovery requirements.
Columbia River Treaty--Important Decisions are Coming
The Columbia River Treaty (CRT) is a marvel of international
cooperation enabling a wide range of related benefits that affect
British Columbia and the Pacific Northwest (Attachment D). Signed in
1961 and ratified in 1964, the CRT is known throughout the world as one
of the best and most successful examples of a transboundary water
Treaty. The Treaty includes a unilateral right for either country to
terminate beginning in 2024 provided 10 years' notice is provided. The
U.S. Entity for the CRT, through Bonneville and the Army Corps of
Engineers, has initiated the process to discuss with the region's state
governments and tribes, as well as other stakeholders, issues related
to the continuation of the CRT. The CRT was designed to provide flood
control and hydropower benefits in both countries, but we understand
that values in the region have changed in the last 50 years and issues
need to be considered that were not part of the debate 50 years ago.
The U.S. Entity is establishing management structures to engage fellow
Federal agencies, regional sovereigns and non-sovereign stakeholders in
order to develop a recommendation to be provided to the State
Department in fall 2013.
FY 2012 BUDGET OVERVIEW
Bonneville is in sound financial condition and is well positioned
for the future. Bonneville's FY 2012 budget proposes estimated accrued
expenditures of $3,195 million for operating expenses, $52 million for
Projects Funded in Advance, and $937 million for capital investments.
Bonneville's commitment to fish and wildlife mitigation and
enhancement is exemplified in its substantial direct program budget of
$300 million, capital and expense.
Bonneville's FY 2012 budget is a business based budget that
strongly supports Department of Energy priorities and goals.
Even with the ARRA providing a sizable increase in Bonneville's
authority to borrow from the Treasury, the agency will continue to face
capital funding challenges as the pace of capital spending increases to
meet the infrastructure and energy efficiency needs of the region. We
continue to seek opportunities for alternative funding sources with
third parties. Table BP-5 in Bonneville's FY 2012 Congressional Budget
submission provides increased transparency regarding potential
Bonneville third-party financing activity, which is estimated at about
$203 million during the FY 2010 through FY 2016 period. This use of
third-party financing pushes out the point in time where capital
spending plans are estimated to exhaust Treasury borrowing authority.
Please see Attachment E for budget data based on current services
for FYs 2010 through 2012.
CONCLUSION
That concludes my prepared remarks Mr. Chairman. I am excited by
the role Bonneville is playing to achieve regional and national goals
for clean and reliable electricity supplies while managing the
operation in a fiscally prudent manner. I would be happy to respond to
any questions from the Committee.
[GRAPHIC] [TIFF OMITTED] T5177.001
[GRAPHIC] [TIFF OMITTED] T5177.002
Attachment C
[GRAPHIC] [TIFF OMITTED] T5177.003
[GRAPHIC] [TIFF OMITTED] T5177.004
Attachment E
The accompanying notes are an integral part of this table.
\1\ BPA finances its operations with a business-type budget under
the Government Corporation Control Act, 31 U.S.C 9101-10, on the basis
of the self-financing authority provided by the Federal Columbia River
Transmission Act of 1974 (Transmission Act) (Public Law 93-454) and the
U.S. Treasury borrowing authority provided by the Transmission Act, the
Pacific Northwest Electric Power Planning and Conservation Act (Pacific
Northwest Power Act) (Public Law 96-501) for energy conservation,
renewable energy resources, capital fish facilities, and other
purposes, the American Recovery and Reinvestment Act of 2009 (Public
Law 111-5), and other legislation. Authority to borrow from the U.S.
Treasury is available to the BPA on a permanent, indefinite basis. The
amount of U.S. Treasury borrowing outstanding at any time cannot exceed
$7.70 billion. BPA finances its approximate $4.6 billion annual cost of
operations and investments primarily using power and transmission
revenues and borrowing from the U.S. Treasury at rates comparable to
borrowings at open market rates for similar issues.
\2\ BPA includes updated operating year budget estimates in each
Congressional Budget submission. Updated BPA FY 2011 operating year
estimates are included in the FY 2012 Congressional Budget.
\3\ This budget has been prepared in accordance with the Budget
Enforcement Act (BEA) of 1990. Under the BEA all RPA budget estimates
are treated as mandatory and are not subject to the discretionary caps
included in the BEA. These estimates support activities which are
legally separate from discretionary activities and accounts. Thus, any
changes to BPA estimates cannot be used to affect any other budget
categories which have their own legal dollar caps. Because BPA operates
within existing legislative authority, BPA is not subject to BEA ``pay-
as-you-go'' test regarding its revision of current-law funding
estimates.
\4\ Original estimates reflect BPA's FY 2011 Congressional Budget
Submission. Revised estimates, consistent with BPA's annual near-term
funding review process, provide notification to the Administration and
Congress of updated capital and expense funding levels for FY 2011.
\5\ Includes infrastructure investments designed to address the
long-term needs of the Northwest and to reflect significant changes
affecting BPA's power and transmission markets.
\6\ Power Services includes Fish & Wildlife. Residential Exchange
Program, Planning Council, Conservation & Energy Efficiency and
Associated Project Costs which have been shown separately for display
purposes.
\7\ This FY 2012 budget includes capital and expense estimates
based on preliminary IPR forecasted data for FYs 2011-2016.
\8\ PFIA for Transmission Services paid by customers. The
cumulative amount of actual advance amortization payments as of the end
of FY 2010 is $2,574 million. Refer to 16 USC Chapters 12B, 12G, 12H,
and BPA's other organic laws, including P.L. 100-371, Title III. Sec.
300, 102 Stat. 869, July 18, 1988 regarding BPA's ability to obligate
funds.
______
Mr. McClintock. I now recognize Mr. Timothy Meeks,
Administrator of the Western Area Power Administration, to
testify for five minutes.
STATEMENT OF MR. TIMOTHY MEEKS, ADMINISTRATOR, WESTERN AREA
POWER ADMINISTRATION, LAKEWOOD, COLORADO
Mr. Meeks. Thank you, Mr. Chairman, Congresswoman
Napolitano. I am glad to be here today to answer any questions
you may have in regards to what the Western Area Power
Administration has done and where we are headed in the future.
But first, I would like to remind the Committee of who we
are. We are a Power Marketing Administration that covers 15
western United States. We are responsible for 17,000 miles of
transmission. We market from 56 Federally owned dams in 15
States. We market 10,000 megawatts of clean, renewable energy.
Ultimately, this energy goes to over 25 million consumers in
the western United States.
We recover our costs with interest and meet our repayment
obligations to the Treasury. We have a proud history. I am
proud of our employees and what we have done, given the
resources that we have been provided. Over our history, we have
a proud tradition of building such projects as Bears Ears-
Bonanza, the California-Oregon Transmission Project, and most
recently the Path 15 Upgrade Project. Many of these projects
were groundbreaking, and the fact that we worked with third
parties outside of the government.
I am proud of our tradition of working with our customers.
We present to our customers every year our 10-year plan. This
10-year plan shows transparency of what we are doing. It is a
working collaboration for our asset management program. In
other words, we work with our customers to show them what
projects that we are doing in the future and why they are
value-added, and we reach consensus and move forward based on
that.
We have put together groundbreaking--what I call a budget
council within our PMA customer group. Never before have our
customers from various regions all across the 15 western United
States got together to look at our budget and to help us meet
the future resource needs that we will have. So I am proud of
that fact.
As a result of that fact, only a small fraction of our
operating budget--we operate over a billion dollar program, and
that is not counting the borrowing authority. Only $96 million
in appropriations, net appropriations, is our request. So that
comes from other sources, and that source is our customers.
They represent 84 percent of our construction, rehabilitation,
and replacement program. So that equates to $93 million that we
get directly from them. So obviously, they believe in what we
are doing.
We are meeting our reliability standards, as set forth by
the NERC, WEEC, FERC, MRO. We are also meeting our safety
standards. We are substantially lower as far as our safety
incidents as compared to like industry.
Over last year, we had our open access transmission tariff
substantially approved by FERC. There are a few minor things
that we have to submit, but for all practical purposes, that
was approved in December. We are continuing to work with others
on new transmission projects, utilizing our borrowing authority
as well as our traditional means of projects. And we adhere to
the construct of beneficiary pays.
Our costs associated with each program is separated out, as
we do with our marketing projects, and those that benefit pay
for it; those that don't, don't. We are working with our sister
agencies on the precious hydro resource that the Chairman
mentioned. We understand there is a balance that must be
struck. And obviously, we support hydropower, and we believe in
it, and we market it to the most value that we are able to do
so. And that comes from conversations with the Corps, with the
Bureau, and maximizing the value of that product.
In short, I believe that we are doing an outstanding job to
be good stewards of the Federal resources that we have been
provided, and I am happy to answer any questions you may have
today. Thank you, Mr. Chairman.
[The prepared statement of Mr. Meeks follows:]
Statement of Timothy J. Meeks, Administrator, Western Area Power
Administration, U.S. Department of Energy
Thank you, Chairman McClintock and members of the Subcommittee. My
name is Timothy Meeks. I am the Administrator of the Western Area Power
Administration (Western), and I'm proud to be here today to represent
Western and to tell you about who we are, and our role in delivering
clean, renewable power to the western United States.
Who we are and what we do
On December 21, 1977, high gas prices and a concern over reliable
energy supplies led Congress to create the Department of Energy,
including the Western Area Power Administration--a new agency to market
and deliver Federal hydropower within a 15-state region of the central
and western United States. More than three decades later, our mission
of delivering clean, renewable energy continues to be crucial in
meeting today's energy demands. Federal hydropower has been critical in
providing reliable electricity to light homes and drive industry in
small towns and large communities, and on Tribal lands and military
bases.
As one of four power marketing administrations within the U.S.
Department of Energy, we market hydropower generated at 56 multi-use
Federal water projects operated by the Bureau of Reclamation, U.S. Army
Corps of Engineers and the International Boundary and Water Commission.
Together, these plants are capable of delivering approximately 10,000
megawatts of power. Western does not market this power as a single
power system. Rather, Western takes the power generated by each
Federally-authorized, multi-purpose water project, and markets it
within the region served by that water project. As a result, Western
has 10 power systems, each with its own marketing plan and rates.
To deliver this power to our customers, Western owns, operates and
maintains more than 17,000 miles of high-voltage transmission line and
about 300 substations throughout our 1.3 million square-mile service
territory.
Our permanent full-time staff of about 1,400 employees works around
the clock, maintaining the interconnected transmission system and
ensuring that energy supply instantaneously matches energy demand to
ensure power keeps moving through the system and electricity ultimately
reaches homes and businesses throughout our marketing area.
As an essential part of our mission to deliver Federal hydropower,
Western has a long history of constructing transmission lines. Western
has played important roles in the construction of such major
transmission facilities as the California-Oregon Transmission Project,
the Mead-Phoenix Transmission Line, and the Path 15 Transmission
Upgrade, among many others. Recognizing this capability, Congress
amended the Hoover Power Plant Act of 1984 in 2009 to give Western
borrowing authority to construct new or upgraded transmission
facilities that would deliver, or facilitate the delivery of, renewable
energy.
How we conduct business--cost-based rates and the beneficiary pays
principle
We sell our Federal hydropower according to Federal reclamation
law, which requires our power be sold at the lowest possible rates to
consumers consistent with sound business principles. This means we sell
our firm power at rates designed to recover all the costs of providing
this power. This includes not only our own costs, but also the costs of
Federal generating agencies that are attributable to power generation.
Operating expenses and capital investments are both repaid, the latter
with interest. All the costs associated with the generation and
transmission of electricity are paid by Western's customers, with
essentially none of those costs borne by Federal taxpayers. In fact, in
certain instances Congress has directed that power users pay non-power
costs of multi-purpose Federal water projects that other project
beneficiaries, such as irrigators, are unable to repay. In these cases,
our power customers provide a subsidy to other project beneficiaries.
We operate in a business-like manner and we believe strongly in the
principle that ``the beneficiary pays.'' By this, we mean those
entities that benefit from the use of these Federal resources should
pay for the use of those resources. We design our rates so each power
system pays only for its own costs. By law, we will ensure that
transmission facilities built with our borrowing authority pay for
themselves without relying on revenues from our core-mission projects.
Relationship with customers
Since our inception as an agency, we have worked to establish
valuable partnerships with our customers to deliver affordable,
reliable, renewable and clean Federal hydropower. We work diligently
with our partners to ensure that our rates remain as low as possible.
For example, in Western's Folsom, California, office, Western has
implemented the Base Resource Displacement Program, resulting in
avoiding significant transactional costs associated with delivering
power between balancing authorities. Since its inception in June 2009
and through December 31, 2010, the Base Resource Displacement Program
has resulted in over $3.5 million in cost savings.
Importance of cost control and cost control efforts
We have a strong culture of cost awareness and control throughout
Western. It makes good business sense, and our customers expect it. Our
rates are set through public processes for each project, ensuring
involvement and transparency in the development of rates and
understanding of the need for rate increases, when they occur. We meet
regularly with our customers to review our capital improvement plans to
ensure that we are concentrating our efforts on projects that meet
recognized needs.
Western scrutinizes its expenses to minimize impacts to our core
business units and to keep rates as low as possible. Western has a
strong program to affirmatively practice cost containment via position
management and looking for opportunities to streamline and improve
business processes in both our administrative and core business lines.
We are reviewing and moving forward to maximize value from our
procurement actions. Given the twin requirement of acquiring supplies
and services in a cost effective manner while achieving agency targeted
socio-economic goals, Western's procurement community has used a number
of different acquisition authorities and cost-avoidance strategies to
ensure best value procurement buys. In the area of administrative
support contracts, Western has aggressively moved to use performance-
based contracts to reduce costs by reducing the number of contractor
employees and increasing accountability and responsibility for
performance on the part of the individual contractor.
In addition, Western has undertaken a series of initiatives to
identify and implement activities which reduce the cost of performing
its core business. For example, Western's Operations Consolidation
Project (OCP) is merging the operations of two regions into one,
improving business efficiencies and reducing the overall cost of
complying with mandatory industry-wide reliability standards.
Consolidating the operations of two regions will also eliminate the
need to support redundant backup alternative control centers, enable
the use of a single computerized power control system, and optimizes
transmission planning and administration of the Open Access
Transmission Tariff over a larger geographic footprint. Western also
has a program to consolidate and standardize Information Technology
applications such as the Power Billing System to eliminate
redundancies, avoid duplication, and reduce administrative support
costs. Coupled with this initiative are ad hoc programmatic initiatives
to automate to the extent practicable, manual processes which are
unduly complex and burdensome.
Western continues to work collaboratively with our generation
partners to maximize hydropower operations to the extent practicable to
ensure that customers continue to receive their hydropower allocations
in a timely, reliable, and cost-effective manner.
However, there are a number of factors that are exerting upward
pressure on our rates, most of which are out of Western's control. Some
of the factors that have caused Western's costs to increase include:
increased environmental regulatory compliance costs,
which have had the net effect of increasing expenses, while
reducing the quantity and reliability of the hydropower product
the need to replace aging generation and/or
transmission-related infrastructure
the higher cost associated with operating and
maintaining aging generation and/or transmission-related
infrastructure until it can be replaced
the cost associated with ensuring ongoing compliance
with industry-wide mandatory reliability standards (including
critical infrastructure protection assets)
the impact that drought has had on the available net
hydropower generation in recent years.
Western's role in transmission
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.
Demand for transmission capacity has been on the rise over the past
several years. Renewable generation such as wind power, which is
typically located in remote areas away from load centers, is increasing
dramatically. Western's service territory encompasses nine of the 10
windiest states in the Nation, and developers are increasingly looking
to our transmission system as the vehicle to move renewable generation
to market.
However, a recent FERC study \1\ indicates the current transmission
system, nationwide, is nearing its capacity to accept new generation.
Analyses point to key transmission constraints where reinforcements
would allow lower-cost resources to flow toward higher-cost load areas.
In addition, our transmission system is aging. It has become clear that
additional transmission will be required to ensure a reliable supply of
clean energy into the future.
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\1\ Use of Frequency Response Metrics to Assess the Planning and
Operating Requirements for Reliable Integration of Variable Renewable
Generation, Lawrence Berkeley National Laboratory, December 2010
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Borrowing authority begins to provide solutions
Through the 2009 amendment to the Hoover Power Act of 1984, Western
now has the authority to borrow from the Treasury to construct and/or
upgrade transmission lines to help deliver renewable resources to
market.
Western moved forward diligently to establish our Transmission
Infrastructure Program (TIP) that implements this new borrowing
authority. In less than nine months, we formalized our agreement to
finance development and construction of the Montana-Alberta Tie Limited
Transmission Project, or MATL, the first project financed with our new
authority.
MATL is a 230-kilovolt, 214-mile transmission line that will run
from a substation near Great Falls, Montana, to one near Lethbridge,
Alberta, and allow energy flow in both directions. Northern Montana and
southern Alberta are home to some of the best wind energy sources in
North America. The MATL line will enable the development of new wind-
energy projects by linking this renewable and emission-free source of
power to consumers across North America. Construction is now underway,
and we expect the line to be in service by January 2012.
With MATL and other TIP projects under consideration, we strive to
maintain flexibility in our approach as we use our borrowing authority
to maximize use of the authority while keeping costs at a minimum.
Three models--financier, customer partnership and public-private
partnership--allow us to select the right tool for the job.
The concept of ``beneficiary pays'' remains a cornerstone of our
Transmission Infrastructure Program. Each project funded under this
authority will 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 and protects
existing projects and customers. This fits well with our existing
business practices and principles, so we are able to use our normal
business systems and tools, as appropriate, to track and report cost
and performance information.
Western's Budget request
We can't do any of this without resources, including Congress's
support and the support of our customers. We plan to continue using
collections from the sale of power and transmission to offset the
appropriation for our annual expenses, keeping our net appropriations
down and providing greater planning certainty for the annual expense
portion of our program. Our FY 2012 Construction, Rehabilitation,
Operation and Maintenance (CROM) Appropriation Account request totals
$863 million, of which only $96 million (11 percent) would be funded by
appropriations. This appropriation request of $96 million is down $13
million from FY 2010.
Much of Western's 17,000 miles of integrated high-voltage
transmission infrastructure was constructed in the 1950s and 60s, with
an anticipated useful lifespan of 50 years. The $96 million of
appropriations requested will fund high priority capital rehabilitation
and maintenance replacements and improvements across our 15-state
service area. In addition, we are working with our customers to obtain
$93 million in customer funding to keep the power system properly
maintained and to address additional high priority capital
rehabilitation needs in FY 2012. It's important to note that we can't
use our new borrowing authority to replace or upgrade our existing
transmission facilities unless it facilitates delivery of power from
new renewable generation sources.
Purchase Power and Wheeling is another large component of our
annual budget that does not require any appropriations. FY 2012
expenses for Purchase Power and Wheeling are estimated at $472 million.
The program is down slightly from the prior year reflecting improving
hydro conditions in the Pick-Sloan Missouri Basin after many years of
drought.
As we look to the future
I'm proud of the role Western is playing to provide clean,
renewable power to the West at the lowest possible cost, and I'm
excited about the progress we've made in enhancing our transmission
system to meet our customers' needs and to begin to realize the promise
of renewable energy. Working together with our customers, we repay our
expenses with interest, ensuring that the beneficiary pays and keeping
costs down through sound business and project management practices to
be good stewards of the public's resources.
We appreciate your continued support and confidence, and together
with the support of the Administration, our customers and industry
partners, we will continue to move as quickly as possible to do our
part for economic recovery and energy independence as we build the
electrical grid of tomorrow while continuing to fulfill our core
mission.
Thank you, Mr. Chairman. I would be pleased to answer any questions
that you or the Subcommittee members may have.
______
Mr. McClintock. Thank you, Mr. Meeks. I now recognize Mr.
John Worthington, Administrator of the Southwestern Power
Administration, for five minutes.
STATEMENT OF MR. JON C. WORTHINGTON, ADMINISTRATOR,
SOUTHWESTERN POWER ADMINISTRATION, TULSA, OKLAHOMA
Mr. Worthington. Thank you, Mr. Chairman, Congresswoman
Napolitano, and Members of the Subcommittee. I am Jon
Worthington, Administrator of Southwestern Power
Administration. I appreciate this opportunity to share with you
today how Southwestern continues to focus on accountability,
reliability, and cost-effectiveness as we approach our 68th
year of marketing and delivering Federal hydropower.
We have effective means of keeping the downward pressure on
our rates through our partnerships with our agencies and our
customers. We have partnered with the U.S. Army Corps of
Engineers to take over maintenance of their switch yards. This
allows for staffing uses of both Southwestern and the Corps. It
keeps training costs down and inventories low. It calls for a
standardization of high voltage electrical equipment.
Perhaps the most successful partnership we currently enjoy
is the arrangement among Southwestern, our customers, and the
Corps, which allows our customers to fund major replacement
work at the Corps generating facilities. Since 1999, our
customers have provided the Corps with nearly a quarter of a
billion dollars in critical funding of capitalized items to
keep the hydropower's turbine spinning and the power flowing.
This arrangement is cost effective in many multiple ways.
First, the generation asset remains available so we don't
have to purchase replacement power. Second, money is spent only
on what the stakeholders deem as prudent and necessary, with
average expenditures now exceeding 40 million per year. Third,
it is money that is not coming from Federal appropriations. And
finally, this established funding process provides for better
long-term planning of major equipment replacements at the core
hydroelectric facilities.
This results in an even more efficient Federal hydropower
system in our region, and it will continue to create jobs as
the aging plants undergo more replacement work.
Southwestern and its customers remain committed to funding
this critical work. We believe that investment in the
generating plants, the transmission facilities that make up
Southwestern's hydropower system, is essential in keeping
assets available and fully capable of producing and delivering
power in our region.
On the Federal transmission system, we have upgraded
components and incorporated new technologies that reduce energy
losses and enable a greater use of the Federal transmission
assets.
Our budget includes funding to replace approximately 35
miles of conductor and components on Southwestern's high
voltage transmission system. These upgrades are already
accounted for in our existing rates, which cover the cost of
replacing the equipment over its expected life.
As you know, our accountability to Congress, our customers,
and the American people is largely accomplished through
budgeteering such as this one and our ratemaking process. To
date, Southwestern has repaid approximately 65 percent of the
1.3 billion in capital assets attributable to Federal power in
our region.
We are also constantly looking for ways to increase
efficiencies. For example, Southwestern continues to evaluate
existing resources to determine if they can be used more
efficiently as old initiatives give way to new ones. An example
of this occurred recently when Southwestern restructured
staffing resources to address compliance with the mandatory
requirements of the North American Electric Reliability
Corporation.
No matter how conscientious we are, though, nature
sometimes has other plans for us. Unlike my home state of Idaho
that has large reservoirs and runoff from snow pack, the
Southwestern system is 100 percent reliant on annual rainfall.
Fortunately, in 2010, we did not incur any major dry spells,
and inflows were even above normal. this resulted in
Southwestern marketing 7.6 billion kilowatt hours of energy,
with revenues of 202 million from the sale of energy capacity
and transmission services.
Based on our 2010 generation, Southwestern's hydropower
saved 12.8 billion barrels of oil--million barrels of oil,
pardon me--and prevented emissions of 6.6 tons of greenhouse
gases. But regardless of how much we save or how much water we
have to work with, we couldn't do it without the right people.
I truly believe that Southwestern's most important asset is our
people.
Mr. Chairman, this concludes my testimony. I would be glad
to answer any questions that you or the Committee may have.
[The prepared statement of Mr. Worthington follows:]
Statement of Jon C. Worthington, Administrator,
Southwestern Power Administration, U.S. Department of Energy
Mr. Chairman and members of the Subcommittee, thank you for the
opportunity to share with you today the highlights of the President's
Fiscal Year 2012 budget request for the Southwestern Power
Administration (Southwestern).
Southwestern markets and delivers clean, efficient, and reliable
energy to the Nation. As our budget request shows, we are focused on
continuing this important mission even as we seek to tighten our belts
along with the rest of the country so that present and future
generations will continue to have the hope of a brighter future.
SOUTHWESTERN PROFILE
As one of four Power Marketing Administrations in the United
States, Southwestern markets hydroelectric power in Arkansas, Kansas,
Louisiana, Missouri, Oklahoma, and Texas from 24 U.S. Army Corps of
Engineers (Corps) multipurpose dams with a generating capacity of
approximately 2,174 megawatts (MW).
By law, Southwestern's power is marketed and delivered primarily to
public bodies and rural electric cooperatives. Southwestern has over
one hundred such customers, and these entities ultimately serve another
nine million end-use customers.
Southwestern operates and maintains 1,380 miles of high-voltage
transmission lines, 25 substations and switching stations, and a
communications system that includes microwave, VHF radio, and digital
fiber optic components. Staff members work from offices located in
Gore, Oklahoma; Jonesboro, Arkansas; Springfield, Missouri; and Tulsa,
Oklahoma. Around-the-clock power scheduling and dispatching are
conducted by staff in the Springfield Operations Center.
RATES AND COST RECOVERY
I am proud to say that, at Southwestern, we have always been and
will continue to be cost-conscious. We have to be cost-conscious,
because the power we market is cost-based, so, when expenses go up, our
power rates quickly follow. To make sure that we are recovering the
cost of marketing and delivering power, every year, Southwestern
conducts Power Repayment Studies (PRS) for each of the three rate
systems in our marketing area: the Integrated System, the Robert D.
Willis Hydropower Project, and the Sam Rayburn Dam.
In each annual PRS, Southwestern studies the projected and actual
costs of operating and maintaining the generation and transmission
facilities to make sure that sufficient revenues are being collected to
repay these costs, plus the principal and interest on the Federal
investment. We do this by working within our own agency to accurately
capture our current expenses and to assess and plan for future
replacement of transmission assets. We also work with the U.S. Army
Corps of Engineers (Corps) to fully recover current and future
hydropower expenses, which by law we are required to repay, at the
hydroelectric generating plants from which we market power.
SYSTEM CONDITIONS AND PURCHASED POWER
No matter how conscientious we are though, nature sometimes has
other plans for us. Unlike the Pacific Northwest, where there are large
reservoirs with runoff from snowpack, Southwestern's system is 100
percent dependent on rainfall, with very limited reservoir storage. As
a result, extended spells of dry weather can sometimes force us to
purchase power to meet our contractual obligations. In planning for
purchases, we strive to work with Congress, the Administration, and our
customers to avoid increases in Federal spending and prevent severe
rate impacts to our customers by using the various funding mechanisms
we have in place. To this end, Southwestern's customers have already
pre-funded \1\ a significant portion of the estimated cost of
Southwestern sustaining its contractual obligations during a major
drought.
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\1\ Southwestern has an internal accounting mechanism which takes
into account and defers surplus receipts collected for purchased power
expenses that did not occur. This is in accordance with Financial
Accounting Standard Number 71.
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Fortunately, in FY 2010 we did not encounter any major dry spells,
and inflows were even above normal. While audited numbers are still
being finalized, pre-audit numbers place the quantity of energy
marketed in FY 2010 as 7.6 billion kWh, with revenues of $202.3 million
from the sale of energy, capacity, and transmission services. On
average, Southwestern markets 5.6 billion kWh of energy annually with
revenues of $182.5 million. To date, Southwestern has repaid
approximately 65 percent of the $1.3 billion in capital investments
attributable to Federal power within our region.
As a renewable resource, the hydropower marketed by Southwestern
saves a considerable amount of fuel that would otherwise have to be
obtained from other sources, usually hydrocarbon-based. For example, in
FY 2010, based on actual generation, Southwestern's hydropower saved
12.8 million barrels of oil and prevented emissions of 6.6 million tons
of greenhouse gases. \2\
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\2\ Emission savings computed using 1998-2007 data from U.S. Energy
Information Administration (EIA), assuming a 50/50 Coal/Natural Gas Mix
as representative of replacement energy for hydropower in
Southwestern's area. Fuel savings based on thermal conversion factors
from EIA's Annual Energy Review-2009.
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INVESTMENT IN THE FUTURE
Investment in the aging facilities that make up Southwestern's
Federal hydropower system is critical in keeping the generation and
transmission assets available and fully capable of producing and
delivering power to our region. Our goal is to keep these Federal
assets intact while minimizing any Congressional appropriations
necessary for capitalized replacements.
Generation
A significant funding mechanism for the maintenance of the Corps
generation assets is the Jonesboro Memorandum of Agreement (MOA), which
allows our customers to fund major replacement work at the
hydroelectric plants. Signed in 1999, the Jonesboro MOA between
Southwestern, the Corps, and City Water and Light Plant of the City of
Jonesboro, Arkansas, has provided nearly a quarter of a billion dollars
in critical funding of capitalized items to keep the turbines spinning
and the power flowing. Perhaps more importantly, decisions as to which
projects will be funded are made with all of the stakeholders at the
table--the Corps as the owner of the generation assets, Southwestern as
the marketer of power, and Southwestern's customers as the ones who buy
the power and, ultimately, bear the responsibility of repayment. This
mechanism also assures that Southwestern's power will remain marketable
by funding what the stakeholders deem as prudent and necessary. To this
end, the average funding provided by Southwestern's customers through
Jonesboro is now over $40 million annually. This is $40 million that is
not funded by Congressional appropriations, but, of course, is
permitted with the authority and oversight of Congress.
We believe this established funding process provides for better
planning, will result in an even more efficient Federal hydropower
system in our region, and will continue to create jobs as more of the
aging plants undergo major replacement work. Southwestern and its
customers remain committed to this effort.
Transmission
Like the generation assets, Southwestern's 1,380 miles of
transmission line and 25 substations are also experiencing the effects
of age. Failure of these facilities would not only impact the delivery
of power to Southwestern's customers, but would also ultimately impact
the transmission systems of neighboring utilities and their customers
within our region.
To make sure this doesn't happen, Southwestern continuously
inspects its transmission equipment and evaluates the risk of failure
based on its current condition, age, and life expectancy. We put this
knowledge to work by prioritizing investment in critical transmission
components, such as poles, conductor, transformers, protective relays,
and other equipment.
REGIONAL RELIABILITY
As an integral part of our region's power delivery infrastructure,
Southwestern participates in regional planning initiatives conducted by
Southwest Power Pool (SPP), the Regional Transmission Organization
(RTO) in our area. Through special contractual arrangements with SPP
consistent with the requirements of Section 1232 of the Energy Policy
Act of 2005 (EPACT), Southwestern has completed upgrades on the Federal
transmission system that were identified by SPP while maintaining our
statutory responsibilities as a Federal agency. Currently, we are
exploring ways we may be able to more fully partner with SPP and other
utilities in the region so that our Nation's transmission system will
be more robust, reliable, and efficient.
COMPLIANCE WITH NERC STANDARDS
Consistent with Section 2111 of EPACT, and to do its part in
ensuring the reliability of the bulk electric system, Southwestern
complies with the standards of the North American Electric Reliability
Corporation (NERC). According to industry reports, in 2008, there were
approximately 60 mandatory NERC reliability standards. Today, there are
102. Southwestern has, in the past year, reorganized staff to manage
this growing number of mandatory standards and assure a continued
culture of compliance.
Right-of-Way Clearing
Inadequate Right-of-Way (ROW) clearing has been cited as a major
reason for blackouts and brownouts across the country, including the
Northeast Blackout of 2003. To address this, NERC's vegetation
management standard requires transmission owners to regularly patrol
and clear their lines. In response, Southwestern has increased our ROW
clearing efforts. In FY 2010, we cleared or contracted to clear nearly
700 of our 1,380 miles of transmission line, as opposed to previous
years in which our clearing averaged between 400-500 miles. Regardless
of the number of miles we clear, we are able to accomplish the work
through the use of alternative financing, which, again, does not
require Congressional appropriations.
Physical and Cyber Security
As with ROW clearing, NERC has defined critical security standards
which protect the integrity of our Nation's power grid. To comply with
these standards, we've continued to make improvements to our facilities
and increased the use of video monitoring at our sites. We also
implemented new cyber encryption techniques to prevent the loss of
personally identifiable information and to strengthen our password
protection scheme. As new requirements and responsibilities emerge, we
will continue to dedicate resources to maintain cyber and physical
security.
WORKFORCE PLANNING
I truly believe that Southwestern's most important asset is our
people. But the fact of the matter is that a great number of these
people will be eligible for retirement soon. In fact, approximately 25
percent of Southwestern's workforce could walk out the door next year
if they chose to do so.
To address this, Southwestern has instituted several programs, in
accordance with the President's hiring reform initiatives, to ensure
that we have sufficient resources to meet the challenges of the future.
For example, we have increased our use of student and veterans programs
and attended job fairs at local universities specifically geared toward
persons with disabilities so that we can aggressively recruit and fill
the many technical positions that will become vacant in the next few
years.
We are also able to address the resource and skills gaps that we
identify through our regular analyses through our support services
contracts for information technology and administrative services. As
pressure mounts to reduce staff positions, these contracts have become
more and more critical in assuring that Southwestern has adequate and
appropriate staff on board to accomplish our mission. The contracts
have the added benefit of supporting Native-American owned businesses
in the region and providing good jobs to local residents.
[GRAPHIC] [TIFF OMITTED] T5177.006
BUDGET HIGHLIGHTS
Southwestern's budget request reflects a 9 percent decrease in
appropriations; however, Southwestern's overall program makes use of
alternative financing and offsetting collections for annual expenses.
Both the use of alternative financing and the authority to use
offsetting collections for annual expenses are essential in enabling
Southwestern to operate a reliable Federal power system, produce power
at the lowest cost-based rates possible consistent with sound business
principles, repay the American taxpayers, provide economic benefits to
the region, and ensure that our Nation receives as much clean,
renewable, and domestically produced power and energy as possible.
Mr. Chairman, this concludes my testimony. I would be pleased to
address any questions that you or the Members of the Subcommittee may
have.
______
Mr. McClintock. Thank you very much, Mr. Worthington. I now
recognize Mr. Kenneth Legg, Administrator of the Southeastern
Power Administration, for five minutes.
STATEMENT OF MR. KENNETH LEGG, ADMINISTRATOR, SOUTHEASTERN
POWER ADMINISTRATION, ELBERTON, GEORGIA
Mr. Legg. Mr. Chairman, Mrs. Napolitano, and Subcommittee
Members, I am Kenneth Legg, Administrator of the Southeastern
Power Administration. I appreciate this opportunity to
represent Southeastern and to provide for you today the
highlights of the Fiscal Year 2012 budget request for the
Southeastern Power Administration.
The mission of Southeastern is to market and deliver at
wholesale Federal hydroelectric power at the lowest possible
cost consistent with sound business principles to public bodies
and cooperatives. With a staff of 44 full-time employees,
Southeastern markets power produced at 22 multiple-purpose
projects, and operated and maintained by the U.S. Army Corps of
Engineers, which are separated into four marketing systems
serving an eleven-State area.
Southeastern does not own or operate any transmission
facilities, but delivers contracted Federal power through
transmission lines and substations owned and operated by
others. Rate schedules are formulated to repay all of
Southeastern's costs, as well as all Corps of Engineers costs
allocated to power.
In Fiscal Year 2010, Southeastern sold approximately 7,714
gigawatt hours of energy to 491 wholesale customers, with
revenues totaling approximately $246 million. Southeastern
supports the Department of Energy's strategic goals. This is
accomplished through two sub-programs--Purchased Power and
Wheeling and Program Direction--supported by appropriations
offset by Federal power receipts and alternative financing
arrangements.
In keeping with this strategic goal, Southeastern performs
its mission in a manner that promotes maintaining and upgrading
our region's Federal energy infrastructure. The Southeastern
Federal power system contributes program benefits by reducing
carbon emissions from fossil fueled energy sources through
production and marketing of hydroelectric power, which adds no
carbon to the environment.
Southeastern' string flow generation of 7,217 gigawatt
hours in Fiscal Year 2010 offset fossil fuel resources and
reduced overall CO2 emissions by 5.1 million metric
tons. Southeastern supports the Administration's and the
Department of Energy's clean energy targets by promoting
residential, commercial, and industrial energy efficiency, as
well as development of wind, solar, and biomass technologies
when they are economically feasible.
Southeastern works with DOE's Energy Efficiency and
Renewable Energy Programs to ensure that municipal and
cooperative utilities in the Southeast benefit from the Federal
services and technologies.
Southeastern will continue to work with the Corps of
Engineers on the Wolf Creek and Center Hill safety issues.
Cumberland River Basin operations have been severely impacted
by the restrictions necessary due to dam safety concerns at
both Wolf Creek and Center Hill projects. Restricted operations
are expected to remain in place for several more years.
Southeastern will continue an interim operations strategy until
we can resume normal operations.
Southeastern maintains a cooperative working relationship
with its customers and the Corps of Engineers in both the South
Atlantic and Great Lakes and Ohio River divisions. Financial
and operations issues are discussed regularly among members of
the Southeastern Federal Power Alliance and Team Cumberland.
Both groups meet on a biannual basis.
Southeastern is committed to maintaining open
communications with its customers and with the Corps of
Engineers. Southeastern's Fiscal Year 2012 budget requests a
net appropriation of zero dollars. It provides $8.4 million for
program direction expenses, which are completely offset by
collections for these annual expenses, and $114.9 million for
purchase power and Wheeling costs, which are entirely financed
with offsetting collections and net billing.
Southeastern relies on existing transmission providers to
transmit Federal power to its customers at a cost of $38.5
million, and Southeastern will purchase $76.4 million in
replacement power and energy and pump storage energy.
The use of offsetting collections and net billings enables
Southeastern to operate more like a business by allowing
Southeastern's revenues to pay for purchase power and
transmission costs rather than relying upon appropriations.
There are no new program starts included in Southeastern's
Fiscal year 2012 budget request.
Mr. Chairman, this concludes my presentation, and if you or
any other Subcommittee Members have questions, I would be
pleased to answer them.
[The prepared statement of Mr. Legg follows:]
Statement of Kenneth E. Legg, Administrator,
Southeastern Power Administration, U.S. Department of Energy
Mister Chairman and members of the Subcommittee, I am Kenneth Legg,
Administrator of the Southeastern Power Administration (Southeastern).
I appreciate this opportunity to represent Southeastern and to provide
for you today the highlights of the Fiscal Year 2012 Budget Request for
the Southeastern Power Administration.
PROFILE OF SOUTHEASTERN POWER ADMINISTRATION
The mission of Southeastern is to market and deliver at wholesale
Federal hydroelectric power at the lowest possible cost, consistent
with sound business principles, to public bodies and cooperatives in
accordance with Section 5 of the Flood Control Act of 1944 (16 U.S.C.
825s).
With a staff of 44 full-time employees, Southeastern markets power
produced at 22 multiple-purpose projects, operated and maintained by
the U. S. Army Corps of Engineers (Corps of Engineers), which are
separated into four marketing systems serving an 11--state area. These
systems are integrated hydraulically, financially, and electrically;
and have separate rate and repayment schedules.
Southeastern coordinates the operation of the projects using
customers' load schedules and the North American Electric Reliability
Corporation's control area criteria, while complying with Corps of
Engineers' operational and environmental requirements.
Southeastern does not own or operate any transmission facilities,
but delivers contracted Federal power through transmission lines and
substations owned and operated by others. Southeastern compensates
these transmission providers using the revenue from electrical power
sales.
Rate schedules are formulated to repay all of Southeastern's costs,
as well as all Corps of Engineers' costs allocated to power. Rate
schedules are designed to recover, on an annual basis, operation and
maintenance expenses, purchased power and transmission expenses, and
expensed interest. Rate schedules also include the costs of capital
investments that are recovered over a reasonable number of years.
PROGRAM ACCOMPLISHMENTS
In FY 2010, Southeastern sold approximately 7,714 gigawatt-hours of
energy to 491 wholesale customers, with revenues totaling approximately
$246 million dollars. Southeastern supports the Department of Energy's
strategic goals. This is accomplished through two sub-programs
(Purchased Power and Wheeling, and Program Direction) supported by
appropriations offset by Federal power receipts and alternative
financing arrangements. Alternative funding sources include net billing
\1\ and bill crediting. In keeping with this strategic goal,
Southeastern performs its mission in a manner that promotes maintaining
and upgrading our region's Federal energy infrastructure. These efforts
help to ensure reliable and efficient delivery of Federal power, which
is an integral part of the Nation's electric energy supply.
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\1\ Southeastern's authority to use net billing and bill crediting
is inherent in the authority provided by the Flood Control Act of 1944,
and has been affirmed by the Comptroller General. Honorable Secretary
of the Interior B-125.127 (February 4, 1956) available at WL 3064
(Comp. Gen.).
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Southeastern has an active succession management plan that is
reviewed on an ongoing basis. The succession plan addresses the need of
replacing several members of Southeastern's management team and other
critical staff, and recruiting highly-skilled technical personnel in
the near future.
CLEAN ENERGY AND ENERGY CONSERVATION
The Southeastern Federal Power System contributes program benefits
by reducing carbon emissions from fossil-fueled energy sources through
production and marketing of hydroelectric power, which adds no carbon
to the environment. Southeastern's stream-flow generation of 7,217 GWH
in FY 2010 offset fossil fuel resources and reduced overall
CO2 emissions by 5.1 million metric tons \2\.
---------------------------------------------------------------------------
\2\ http://www.epa.gov/cleanenergy/energy-resources/calculator.html
---------------------------------------------------------------------------
Southeastern supports the Administration's and the Department of
Energy's clean energy targets by promoting residential, commercial, and
industrial energy efficiency, as well as development of wind, solar,
and biomass technologies when they are economically feasible.
Southeastern works with DOE's Energy Efficiency and Renewable Energy
programs to ensure that municipal and cooperative utilities in the
southeast benefit from Federal services and technologies.
PROGRAM GOALS
Cumberland River System
Southeastern will continue to work with the Corps of Engineers on
the Wolf Creek and Center Hill safety issues. Cumberland River Basin
operations have been severely impacted by the restrictions necessary
due to dam safety concerns at both Wolf Creek and Center Hill projects.
Restricted operations are expected to remain in place for several more
years. Southeastern will continue an interim operations strategy until
we can resume normal operations.
Wolf Creek Project
The Wolf Creek Dam Safety issue will continue to be a major concern
for the remainder of fiscal year 2011 and 2012. Last year Cumberland
System River Basin power generation was severely impacted by the
operational restrictions determined to be necessary as a result of dam
safety concerns at the project. On January 22, 2007, the Corps of
Engineers lowered the lake elevation of the Wolf Creek Project to 680
feet to reduce the risk to human life, health, property, and severe
economic loss in the region. This decision came in response to numerous
studies, conducted by dam safety experts, which concluded that Wolf
Creek Dam was at high risk of failure. We expect that the 680 foot
operating level will continue in place until ongoing remedial efforts
at the project show a reduced risk of failure. In early FY 2009, the
Corps of Engineers completed the first line of grouting at the project
in an effort to fill all the cavities and voids under the foundation,
which are providing paths for seepage. Work is currently under way on
the installation of the cutoff wall through the project's earthen
embankment.
The decrease in the lake elevation of the Wolf Creek Project has
resulted in a significant reduction in the quantity of water stored in
the Cumberland System. Due to the large volume of system storage
normally provided by the Wolf Creek Project, virtually all in-lake and
in-stream purposes throughout the entire Cumberland River System have
been dramatically impacted, either by the reduced storage or the
corresponding reduction in flows. In-stream flows and the operation of
all hydroelectric projects in the basin are directly or indirectly
impacted by the lack of system storage and the altered river basin
operational criteria, which call for a relatively constant elevation in
lake level at Wolf Creek Dam to be maintained. Consequently, dramatic
impacts are being experienced by stakeholders throughout the river
basin, including marina operators, recreation-related businesses,
environmental purposes, navigation, municipal and industrial water
supply, and power generating facilities. The impact to Southeastern's
hydropower program is significant. The 216 municipalities and
cooperatives located in the states of Tennessee, Kentucky, Georgia,
Illinois, Mississippi, Alabama, and North Carolina that normally
receive Cumberland System generation as a dependable peaking resource
have been forced to replace this generation with costly alternative
sources of power. At the onset of the altered river operation for the
Cumberland System, Southeastern implemented an interim marketing
strategy for system generation in order to provide a method of
equitably sharing any remaining system generation benefits among all of
Southeastern's customers. This revised operation for the Cumberland
System provides benefits to each customer on an ``as available'' basis,
as power is made available by the Corps of Engineers. Southeastern will
continue this method of operating until it can once again resume a more
normal operation.
Center Hill Project
Center Hill Dam is located on the Caney Fork River in DeKalb
County, Tennessee, approximately 30 miles upstream from the river's
confluence with the Cumberland River. Construction on the project was
completed in 1951, and it is operated for flood control, hydropower
production, recreation, navigation, water supply, and water quality.
Since the 1960s, the Center Hill Project has experienced serious
seepage problems as a result of the Karst limestone features which
comprise the project's foundation.
Through the years, the foundation features have allowed water to
seep under the dam, eroding material and creating voids and cavities in
the abutments. The uncontrolled seepage of water has caused muddy
downstream flows and the formation of large sinkholes in the left
abutment. All previous attempts at remedying the foundation conditions
through grouting have been ineffective, since previous methods did not
meet current grouting standards.
Based on the findings of the External Peer Review Panel for Dam
Safety, the situation at the Center Hill Project was classified as
Corps of Engineers' Class I designation (Urgent and Compelling) under
the Corps of Engineers' Dam Safety Action Classification System. The
Panel recommended an immediate lowering of the reservoir elevation at
the Center Hill Project. As a result, the Corps of Engineers
implemented a revised operating plan for the Center Hill Project which
will maintain a lower reservoir level to relieve pressure and stress on
the foundation. The range of operation for the project will be from a
low elevation of 620 feet to a high elevation of 630 feet during the
year. The Panel recommended a comprehensive grouting program and
installation of a cutoff wall as soon as possible. The work is
tentatively scheduled to be completed by 2014. Southeastern continues
to work with the Corps of Engineers as they implement their operational
plan for the Center Hill Project.
Compliance Requirements
In order to maintain compliance with North American Electric
Reliability Corporation and the SERC Reliability Corporation
reliability standards, Southeastern will ensure that its power system
operators are recertified as necessary so that available power can be
delivered to the transmission system for the benefit of Southeastern's
customers.
SOUTHEASTERN'S RELATIONSHIP WITH ITS CUSTOMERS AND THE CORPS
Southeastern maintains a cooperative working relationship with its
customers and the Corps of Engineers in both the South Atlantic, and
Great Lakes and Ohio River Divisions. Financial and operations issues
are discussed regularly among members of the Southeastern Federal Power
Alliance and Team Cumberland. The Alliance was established in 1991 and
includes representatives from Southeastern, the Corps of Engineers,
South Atlantic Division, and Southeastern's preference customers
located in the Georgia-Alabama-South Carolina, Kerr-Philpott, and Jim
Woodruff Systems. Team Cumberland was formed in 1992 and includes
representatives from Southeastern, the Corps of Engineers, Great Lakes
and Ohio River Division, and Southeastern's preference customers
located in the Cumberland System. Both groups meet on a biannual basis.
Southeastern is committed to maintaining open communications with its
customers and the Corps of Engineers.
2012 BUDGET REQUEST
Southeastern's FY 2012 budget requests a net appropriation of $0
(Attachment 1). It provides $8.4 million for Program Direction
expenses, which are completely offset by collections for these annual
expenses, and $114.9 million for Purchase Power and Wheeling costs,
which are entirely financed with offsetting collections and net
billing. Southeastern relies on existing transmission providers to
transmit Federal power to its customers at a cost of $38.5 million, and
Southeastern will purchase $76.4 million in replacement power and
pumped storage energy. The use of offsetting collections and net
billing enables Southeastern to operate more like a business by
allowing Southeastern's revenues to pay for purchase power and
transmission costs rather than relying upon appropriations. There are
no new program starts included in Southeastern's Fiscal Year 2012
budget request.
Mister Chairman, this concludes my presentation of Southeastern's
Fiscal Year 2012 budget request and program status. If you or any of
the Subcommittee members have questions, I will be pleased to answer
them.
[GRAPHIC] [TIFF OMITTED] T5177.007
Mr. McClintock. Well, thank you very much. And as a matter
of fact, we do. Let me begin just by asking for some very brief
answers from each of you. If you don't know, just let us know,
but please get us that information. I would like to know for
each of the administrations how much have you increased
electricity generation over the past year?
Mr. Wright. I would say that we have a very modest increase
because we had an ongoing refurbishment program going on, and
we completed some projects. I would like to provide that for
the record.
Mr. Meeks. Over the past year, I would say none. But I
would like to double check with my staff and provide it for the
record if it is something different.
Mr. Worthington. I am pleased to say that the Stockton
Plant was put back in service this year, so that was 50
megawatts that is now back in service. The Ozark and Webber
Falls Hydro Projects will be back--one of their units will be
back in service any day now. And so each of those units would
be 25 megawatts.
Mr. Legg. In our service area, a number of generators have
also been restored to operation that had either failed or were
out for refurbishment. That is the bulk of the increase we have
seen. The Southeast is operating under drought conditions.
Hopefully, we are going to go into this season with adequate
water to make it through the summer.
Mr. McClintock. Thank you. Could we also get population
increase figures from each of your service areas? Again a
critical question is whether we are meeting growing demands for
power. And, of course, you guys are a big part of that. The
next question I would have, again just a brief answer, how much
of your cost increased or decreased over this past year per
megawatt hour?
Mr. Wright. In the last year, our costs have not increased.
Our rates are set every two years, and we are in the midst of a
ratesetting process right now. On the transmission side, we
have reached a settlement agreement, and we will be keeping our
transmission rates constant for the next rate period. On the
power side, we have proposed an 8-1/2 rate increase.
Mr. Meeks. We are coming out of 10, 11 years of drought. So
basically, much of our costs have been, I would say, out of our
control; and in the fact that we have had to purchase as much
as 500--more than 500 percent of normal to meet our contractual
obligations. So as far as the actual things within our control,
I feel that we are doing a great job of holding our costs down.
As far as things out of our control, as far as drought and
water supply, there has been increase.
Just by way of example----
Mr. McClintock. I am going to have to cut you off right
there.
Mr. Meeks. OK.
Mr. McClintock. But thank you. Mr. Worthington?
Mr. Worthington. Thank you, sir. Southwestern did its power
repayment study this year, and it showed a .9 percent increase
in our--would be needed. We defer that. Anything less than 2
percent rate increase we defer. So our expenses have increased
by approximately .9 percent.
Mr. McClintock. Mr. Legg?
Mr. Legg. In Southeastern's area, we have four marketing
systems. Two of those saw rate increases, one of 10 percent,
one of 15 percent. This is due in combination, drought
conditions, and also one of our projects, the Richard B.
Russell, we received final cost allocation, and that investment
was added.
Mr. McClintock. How much hydropower has been lost directly
or indirectly because of environmental regulations, would you
say, over the past 10 years, and what sources have replaced it,
and at what cost? Mr. Wright?
Mr. Wright. I couldn't say for the last 10 years. Over the
last 20 years, I know that we have reduced the output of the
Federal hydropower system by about 1,000 average megawatts as a
result of protections that have been in place to help restore
threatened and endangered salmon and steelhead.
Mr. McClintock. Mr. Meeks?
Mr. Meeks. I know out of the Glen Canyon Dam we lost a
third of the generation, roughly around 400 megawatts of
capacity, back in '97.
Mr. McClintock. Mr. Worthington?
Mr. Worthington. I am not certain of the amount of capacity
that has been lost. Southwestern pays approximately--or their
voided cost is about less than a million dollars for the three
endangered species that we work with.
Mr. McClintock. And Mr. Legg.
Mr. Legg. For our region, the only reductions we have seen
have been in energy, and that has been as a result of required
operational changes to meet some of the threatened and
endangered species conditions during drought. Our revenue
impact has been minimal.
Mr. McClintock. Thank you. I now recognize the Ranking
Member, Mrs. Napolitano.
Mrs. Napolitano. Thank you, Mr. Chair. And I would like to
take just a slight different vein on questioning. Our Ranking
Member for the full Committee couldn't be here, so I am going
to ask one of the questions that he wanted to bring before you.
The Columbia generating station is one of 31 reactors in
the United States that share the same reactor design as the one
in the Fukushima Daiichi Power Plant. BPA is responsible for
power at the station. What is the role and emergency planning
in the case of a catastrophic disaster like a dam breach? Would
Bonneville be able to restore or replace power through
alternate resources in adequate time, and how safe would that
be?
Mr. Wright. Well, let me just take a second and describe
the relationship that we have. Energy Northwest is the operator
of the Columbia generating station, and we have, under what are
called the net billing agreements, an arrangement where we pay
all of the costs of the facility and receive all of the output
from the facility but the management is actually run by the
organization Energy Northwest.
So in that situation, we would be responsible for making up
the lost power supply. If there is power supply not provided,
then we would be making sure the reliability is maintained,
purchasing power in the open market in order to be able to
substitute for it.
I did have a conversation with Mark Reddemann, who is the
CEO for Energy Northwest, last night, just to make sure that I
understood from him what would happen in the case of an
earthquake in that region. And, of course, the plant is on the
Hanford Reservation. It is a long way from the ocean. We are
not really worried so much about a tsunami, but the risk would
be potentially from upstream, as the loss of Grand Coulee or
Chief Joseph Dam.
That plant was built with the expectation of that
possibility, and is built on high enough ground that at least
the Energy Northwest folks believe that it would be able to
continue operation, even if there was a loss of Grand Coulee
and Chief Joseph.
Mrs. Napolitano. Thank you. And to all Administrators, not
to answer today, but for the record and for you to please reply
in writing, there are approximately 50 nuclear reactor sites in
the four Power Marketing Administration service areas. How are
the PMAs involved in backup power emergency planning matters.
That is for the record, if you would not mind.
And now I will go on to Mr. Meeks and Mr. Worthington. How
do your requests for capital cost appropriations solve the
issue of aging infrastructure critical to us, and how are the
projects prioritized so changes will help the system as a
whole?
Mr. Meeks. As I stated in my opening remarks, we do work
with our customers ten years out. So we use asset management
principles. So that is looking at the age of the
infrastructure, the likelihood of failure, and things such as
that. We are----
Mrs. Napolitano. Are you saying then that you are pretty
much upgrading as you go on your infrastructure, so it is not
really a big problem in the foreseeable future?
Mr. Meeks. I would say that as has been noted, resources
are tight, and we have to prioritize what we upgrade and
replace in some form or fashion. Our customers provide a
significant chunk of that resource, but they are stretched. And
so there is a limit to how much money they can provide because
they have their own infrastructure they have to upgrade.
So in short, to move on to my counterpart, we are working
with our customers to help maximize the resources.
Mrs. Napolitano. Mr. Worthington, time is running out.
Mr. Worthington. Thank you. With our budget request, we are
now looking at replacing 35 miles of line each consecutive year
going forward for the foreseeable future. A number of our
transmission lines were built in the '40s, and they are old,
and they need to be rebuilt and reconducted. We are also
looking at purchasing new transformers. A large transformer is
approximately 1.3 million each. Again----
Mrs. Napolitano. So you are continuing to replace.
Mr. Worthington. Yes.
Mrs. Napolitano. I am sorry. I am running out of time. But
what does a PMA do if there is not sufficient funding for these
capital costs?
Mr. Worthington. We defer that to a later time, or we defer
that capital investment. We can also go to our customers and
ask for the funding from the customers, and they can choose to
fund that or not.
Mr. Meeks. If there is a failure, we do have access to the
emergency fund that allows us to do immediate action on
something that is critical to the system.
Mr. Worthington. We also have access to the emergency fund.
Mrs. Napolitano. The other two, the same?
Mr. Wright. So we put in place a hydro and transmission
asset management program a couple of years ago. We are working
through the standard way you would look at risk management.
What is the probability of event times the consequence of the
event, and then we direct our resources to the places that
create the greatest value for our customers.
Mrs. Napolitano. Thank you.
Mr. McClintock. Thank you. Mr. Tipton.
Mr. Tipton. Thank you, Mr. Chairman and Ranking Member. Mr.
Meeks, we come out of the same part of the world. Welcome to
this Committee. I am out of Colorado as well. Can you give me
an idea, when is the next planned flood for the Glen Canyon
Dam, artificial flood?
Mr. Meeks. There is a debate or talk about whether that is
the appropriate thing to do. I know it is a substantial concern
to our customers. I know there is a debate on how much it would
cost as far as that flow testing. We estimate that it would
cost the power customers $30 million.
Mr. Tipton. Around $30 million. So this means that
basically the Aspinall Unit is critical, though, really in
meeting a lot of the peak demands, particularly in our part of
the world. Is that a fair assessment?
Mr. Meeks. Yes, sir. Glen Canyon Dam provides 80 percent of
the baseload for our Salt Lake City area integrated projects.
But Aspinall provides 40 percent of the load following
capability within that area. In other words, if you look at
Glen Canyon as the base resource, you look at Aspinall as very
critical to following the loads and helping shape that. So it
is an important project.
Mr. Tipton. Great. You know, when we are doing this, what
is the ultimate cost really to the consumer? What are the
people paying in terms of increased rates?
Mr. Meeks. Again, the example I used was $30 million. When
you look at the estimate on the Aspinall Units for the stuff
that is doing, if you look on average, it doesn't look
significant. It looks like 600,000 a year on average, which I
don't want to pay it. But it varies wildly on a year to year,
so it is kind of a deceiving number. So it does end up going to
the ratepayer.
Mr. Tipton. Right. Can you give me an idea--in your written
testimony, you had commented that regulations are increasing
your costs, and the second side of that is when we are talking
about some false floods and that, you aren't going to be
receiving income at that point. How much of regulatory costs--I
didn't hear that when the original question was brought by the
Chairman. How much is that increasing rates?
Mr. Meeks. A lot of what we are facing isn't so much what
has been done. It is what is proposed to be done. In other
words, you mentioned the high flow testing. Again, I use the 30
million. You look at stuff that has been done in the past, the
other testing, where it adds up to somewhere around $10
million. What you are looking at in the future is some
significant increase. When you look at other parts of our
system, you look at, for example, $100 million was spent on
temperature control device for the Central Valley Project.
So it is little incremental things that add up that is
ultimately paid for by the power user. And so much what we are
facing is, one, making sure decisions are made with sound
science. We understand resources are sensitive. We get that. We
are working with our generating agencies. I don't wish that
mission on anybody because they have to balance a bunch of
priorities. And we work closely to try and maximize whatever
water we have that goes through the generation.
Mr. Tipton. One thing if you could provide this, visiting
with staff, as you note, we have all got budgetary concerns
right now, and I think that the outreach that you are doing
with the customers is admirable. I think it is 93 million, if I
recall correctly, that you have been in consultation with. But
we have been trying to get some answers in regards to some of
the new staff hires in the Lakewood office that we are going to
be addressing attrition and retirement that was going to be
coming. Can you get us that information? Because those are
going to be some real increased costs.
And I would like to know, how much of your operational
costs overall are related to environmental concerns?
Mr. Meeks. I will get you an answer for the record on that.
Mr. Tipton. OK. We would appreciate that. And if you would
also, in terms of the follow-up on that, we would just like to
know how much those costs do ultimately affect the consumers.
You know, we are going through every one of our communities,
senior citizens, struggling young families right now having a
tough time paying their bills, and this is obviously a very
critical component for all of our communities, and we need to
be looking out for them at this particular time.
Thank you. Mr. Chairman, I yield back the balance of my
time.
Mr. McClintock. Thank you. Mr. Garamendi.
Mr. Garamendi. Mr. Chairman, thank you for a very
informative hearing, and, the witnesses, thank you. We bounced
around the issue of transmission. This is a particular issue in
the Western Power Administration. The lines coming in from the
Columbia River Basin into California, they are some 50 years
old. Could you briefly discuss or at length discuss where we
are with the upgrade of those lines and what might be in the
offing?
Mr. Wright. I would be willing to take that one. There has
been a great deal of conversation about what the potential
upgrade for either the A/C or the D/C interties that connect
the Northwest to California. The first thing that happened is a
group made of Western Area Power Administration
representatives, Pacific Gas & Electric, and Bonneville Power
Administration was to look at the utilization of the existing
interties and determine whether in fact they were being fully
utilized. And the reports that I have seen indicate that while
there are times of the year when the intertie is not fully
utilized, it actually is pretty heavily utilized right now. So
that raises the question as to whether there are upgrade
opportunities, and that group that has been working together is
taking that on as the next phase of their efforts--to look at
just what are those opportunities, how much would it cost, is
it cost effective, and are there people who are willing to put
capital on the table in order to be able to support those kinds
of things?
Mr. Garamendi. At one point, there was a new intertie line
that was supposed to be developed from the Northwest into
California. I understand that has been dropped. Has there been
further discussion about upgrading the cables, that is, the
transmission cables themselves, on the existing line?
Mr. Wright. So the only thing that I am familiar with right
now is on the D/C intertie there is an opportunity to
potentially accomplish an upgrade there. There is some work
that we are doing at our end to modernize facilities, which
could also add an increment of additional capacity. We are
working with our partners in Southern California to determine
whether they have an interest in that as well.
Mr. Garamendi. Yes. I understand that there are
transmission facilities, cables available that are 20, 30
percent more efficient in transmitting power. Is that true?
Mr. Wright. There have been companies that have approached
us that believe that they can increase the capacity of the
line. We are involved in a research and demonstration program
with one of them now to determine in fact how much capability
there is there. I would say we are not at a point yet where we
know enough to make a determination as to whether it is worth a
substantial investment.
Mr. Garamendi. Well, it seems to me that if you can
increase the flow or power by 20, 30 percent, that is like
creating a new power plant that gives you that much more
capacity. I would like to have you follow up on that.
Mr. Wright. OK.
Mr. Garamendi. The other question has to do with the wind
power in the Northwest as well as in California, the
transmission of that power through the lines, and how you deal
with the necessity of balancing. You briefly touched on this,
both of you. Could you go into that in a little more detail,
what problems exist, what opportunities exist, and how you
intend to deal with that?
Mr. Wright. It will be hard to deal with that briefly. I
will do the best I can. The fundamental challenge that we find
with respect to wind is the variability of the output,
particularly within the hour because within the hour of the
transmission, the provider is responsible for maintaining
reliability and assuring that loads and resources are in
balance. What we are doing currently in order to be able to
balance that is use the hydro system.
A few years ago, we thought that we could probably handle
about 2,000 to 3,000 megawatts of wind, and then we would
exhaust the capability of the hydro system. Through a variety
of mechanisms that we have put in place, we are now operating
at about 3,400 megawatts, and we think we can get above 4,000
megawatts, probably in the 5,000-megawatt range, just as we put
new technology in place.
I will tell you the expansion of wind power is happening at
a much, much more rapid pace than we had predicted. And
consequently, our ability to keep up technologically has been a
real challenge for us.
Mr. Garamendi. Thank you very much. I yield back my time.
Mr. McClintock. Well, thank you. Mr. Gosar.
Dr. Gosar. Mr. Meeks, as you may not know, the Navajo
generating station and the Glen Canyon Dam are both in my
district in Arizona. So given those questions, I want to refer
to my colleague's question and kind of highlight a little bit
more about the Aspinall Unit. If it is not in play, how do we
make up for the loss during those high peak times? What is
going to replace it?
Mr. Meeks. Well, you would have to definitely purchase, be
out on the market, and that is a mixture of all sorts of
things, whether it is gas, coal, if there is other hydro out
there, whatever. But we would be on the market. It definitely
wouldn't be our hydro.
Dr. Gosar. So is it even available right now?
Mr. Meeks. Is it available? I don't know the answer to
that. In other words, it is a precious resource. The ability to
follow load is a very valuable commodity. Let us put it that
way.
Dr. Gosar. I would sure like to know what the backup would
be for the next five years, if I could get an answer on that.
Mr. Meeks. Sure, absolutely.
Dr. Gosar. Because it is much more expensive, particularly
an intermittent, particularly if we are looking at wind and
solar and buying it on the market.
Mr. Meeks. Though you notice I didn't throw that out
because those aren't resources that are able to do what those
units are able to do. So it would be more of a guess,
combustion-type generation.
Dr. Gosar. Thank you. You answered my question. Your agency
sells any excess power from the coal burning Navajo generating
station in Page.
Mr. Meeks. Right.
Dr. Gosar. In 2009, your agency sold about 4 million
megawatt hours from the plant, generating about $121 million to
the U.S. Treasury. If EPA goes through with its worst case
scenario in air regulations upon NGS, either the plant shuts
down because it is uneconomical to make the retrofit, or the
price of the energy produced goes through the roof. The net
effect on WAPA is that no one would want to buy the power since
it would be expensive.
What would be the impact of the EPA proposal, specifically
the cost of the power sold in 2009, versus what it could be
under the EPA scenario?
Mr. Meeks. Basically, when it comes to the Navajo plant, we
provide a service, if you will. In other words, we have no
repayment responsibility for that plant. We are providing a
service through the Bureau of Reclamation for selling excess
energy, as you stated.
So whatever we can sell is what gets returned to the
Treasury. Obviously, it is a market-based price. It is a price
that has competition. So if I am unable to sell it, then I am
unable to return anything to the Treasury.
Dr. Gosar. But that whole area has grown immensely over the
last 10 years, wouldn't you agree, its service line? And if it
was to go out of production, we have no way of compensating for
that, do we?
Mr. Meeks. Again, if you take something out of service, it
has to be replaced by something else.
Dr. Gosar. OK. Finally, to close, in light of the
Administration's policies that are reducing generation at the
Glen Canyon policy, regulating uncertainty on the NGS is
putting that kind of power at risk, and the aging and the
inadequate amount of transmission lines, particularly on the
reservations in my rural district, and considering your
operational costs recovered by your rates, how much do you
estimate my constituents will increase their rates in the next
10 years?
Mr. Meeks. Again, as I stated before, a lot of the things
that we are looking at are scary as far as someone who is in
the business to sell hydropower. One other figure that I didn't
mention from the impacts of Glen Canyon in your district, we
used to track the costs as far as the lost generation, and what
we found out from--an average amount of extra money for
replacing Glen Canyon is $50 million a year that customers have
to pay.
And in addition, going back to your replacement question,
replacing that generation source, the estimates have been a
billion dollars in capital costs to replace the resource we
lost through Glen Canyon Dam.
So again, I don't want to be the generating agencies. They
have a tough mission. But again, if you lose something, you
have to replace it with something.
Dr. Gosar. Real quickly, could you compare the transmission
lines from the Hoover Dam on the western side of Arizona to the
eastern side of Arizona? Which is in worse condition?
Mr. Meeks. It depends where you are at. In other words, I
would say they are equal. We need help.
Dr. Gosar. Thank you.
Mr. McClintock. Mr. DeFazio.
Mr. DeFazio. Thank you, Mr. Chairman. To the Bonneville
Power Administrator, Mr. Wright. And Mr. Garamendi at least
initiated the issue, the discussion of integrating wind in the
Northwest, which is contracted to Southern California. And
obviously, we want to optimize the capability of transmitting
that, and I am all on board with that.
But my other concern is where the costs go. You know, the
costs should not be borne by Northwest ratepayers for wind
power contracted to California. So I would like you to just
tell me a little bit about the integration, cost of service
issues. I know you have some particular problems now, and I
have heard a lot of concerns about this high wind, high water
situation, which we may see this year, the way snow pack is
going. And if you could address those two things, I would
appreciate it.
Mr. Wright. So first on wind integration. There are costs
associated with wind integration. When wind is operating on
your system, you have to be able to fill in the holes. When
wind goes up or wind goes down, that requires an operation of
the hydro power system, and there are costs associated with
that.
In 2008, we put in place our first wind integration rate.
The 2009, we adopted an additional rate, and then we are
operating our rates today, '10 and '11, that increase that rate
because as we have added more wind to the system, the costs of
wind integration have increased as well.
Mr. DeFazio. What is that cost? Can you tell us? How is it
measured?
Mr. Wright. It is measured in dollars per kilowatt month.
You can roughly translate it to about six dollars a megawatt
hour.
Mr. DeFazio. OK.
Mr. Wright. So we are in the midst of rate case right now
to set rates for the '12-'13 period, and wind integration is a
substantial issue in that case. I am not allowed to speak very
much about it because it is an ex parte process, and I am the
decision maker in that process. So discussing the merits of it
would be----
Mr. DeFazio. Yes. I have been there before, OK.
Mr. Wright. The second part of your question got to just
what about this high water, high wind event, which is really a
set of unique circumstances that is a little different from
wind integration. What we find in this circumstance, in the
spring we can have more electricity than we need. In fact, if
you get a slug of water that comes down the system, you get a
big rainstorm of some kind, we can produce enough energy off
the hydropower system to meet all of the loads in the Pacific
Northwest, even assuming that the thermal units are shut down,
coal plants, gas plants, et cetera are shut down.
And then if wind is operating on top of that, we have more
electricity than we know what to do with, even if all of the
interties are full. In that moment, we actually face a very
difficult circumstances where we have to choose among our
values. If there is more water than we can use to produce
electricity, the only way to pass it is to spill it over the
top of the dams. And yet at certain points, we can be spilling
so much water that we exceed what are called the gas caps. A
certain amount of gas in the water is bad for threatened and
endangered salmon. And so we have an exposure with respect to
trying to provide salmon protection, trying to provide
reliability, make sure that the lights don't go out, try to
make sure that any costs are paid for by those why created the
costs and the system, and assuring that we are at the same
trying to encourage renewable resources, which has been a part
of our mandate, to try to encourage renewable resources.
So we find ourselves having to choose between those values.
Fortunately, so far we have not had to make that choice. We
came very close last spring to having to do so. We have held
six months of public process on this issue, trying to identify
options so that we wouldn't have to make those hard choices. I
would say so far we have found alternatives that help us to
delay the choice. We have not found alternatives so far that
solve the problem. And so I am concerned that we will have to
make choices even this spring if we get that large slug of
water.
Mr. DeFazio. Well, some way if you just went to 120 percent
on the dissolved, you know, on the spill, that you could solve
the problem.
Mr. Wright. Yes. So the issue there is that there are
certain gas caps that are created under the Clean Water Act
that are implemented by the States, and there are differences
of use between the States of Oregon and Washington, which share
the river system, about what those gas caps should be.
Mr. DeFazio. So Washington is higher?
Mr. Wright. Washington allows--it cuts off spill at a lower
point.
Mr. DeFazio. Oh, a lower point, OK.
Mr. Wright. This is an issue in which we have a great deal
of interest because our salmon protection program, we are
spending about $800 million a year, have costs about $800
million a year. And so candidly, we have not been willing to
take a lot of risk with respect to salmon protection because it
puts at risk the other investments that we are making in trying
to make sure that we are mitigating for damage cause by the
Federal hydroelectric resources.
So our view has been we would stick with the current
standards which have been debated for probably more than 10
years rather than make a modification to them to allow more
spill to occur.
Mr. DeFazio. OK, thank you. Thank you, Mr. Chairman.
Mr. McClintock. Thank you. Mr. Costa.
Mr. Costa. I would like to go back to that line of
questioning that Mr. DeFazio was engaged in because it is my
understanding on the Columbia and on the Bonneville project you
have some issues with the Endangered Species Act with regards
to salmon and biological opinions that have been part of the
standard of their criteria that you have had to comply with
over the years. Is that not correct?
Mr. Wright. It is correct, that we do operate under a
biological opinion.
Mr. Costa. Yes. And they have been disputed, and then
various debate has taken place between all the parties, between
the power users, between the farmers, between the Indians,
between the environmental community. Is that correct?
Mr. Wright. That is correct. And that plan is pending in
the Federal District Court today.
Mr. Costa. OK. So then there has been more than one
biological opinion, I think. Secretary Locke and I had a
conversation about that a year ago.
Mr. Wright. There have been a number of biological opinions
over the years, starting in 1994. We are operating under a
biological opinion that was adopted in 2008 today. It was
adopted under the Bush Administration but was reviewed under
the Obama Administration. And as I indicated before, it is
pending in Federal District Court of Oregon.
Mr. Costa. So depending upon that decision, it could
maintain the current level of power that you are able to
generate, or it could decrease it. Or what other impact might
it have?
Mr. Wright. Well, the 2000 biological opinion made
modifications to the way we operate the hydro system and did
result in some reductions in the output of the system as we
increase spill to help juvenile salmon pass downstream. That
plan, like I say, is the one we have been operating under for
the last two years as we wait for the Federal District Court to
rule.
Mr. Costa. I see. And so is there a level of consensus that
has taken place as a result, or everybody is waiting for the
court to decide?
Mr. Wright. Well, we are very proud of the fact that at the
court's direction, we went off and instigated a collaboration
process in the region, and currently in the Federal District
Court, three Northwest States, Washington, Idaho, and Montana,
have joined with the Federal Government, along with six Indian
tribes, and are supporting that Federal plan. So there has been
a great deal of collaboration, and we hope that the court will
sustain that decision.
Mr. Costa. We have a similar situation in California that
you may have heard about, and it seems like the court may be
the final arbiter of trying to get people to reach an
agreement, for reasons that I think are probably similar on the
Columbia.
Back to the point of transmission of power and the question
that was asked earlier with regards to the need to upgrade our
transmission lines. How much more power could we provide if we
were to make that investment? Mr. Meeks, are you the proper
person to ask that question?
Mr. Meeks. I wish I was. One thing I do want to address,
there are a lot of things we need to look at, including
upgrading of existing infrastructure. One thing I just wanted
to go back to the Congressman's question on composite
conductor, it is not as simple as just slapping in a new
conductor and calling it good. You have to as well upgrade your
equipment on each end, you know, for higher amperage, and
follow-up duty and things like that.
Mr. Costa. But no. My sense is it is a significant
investment. Otherwise, we would have done it----
Mr. Meeks. Exactly.
Mr. Costa.--two years ago. But again, in terms of the cost
effectiveness or efficiencies that you would realize, I think
that is what we really need to know, what bang for our buck.
How much more power could we provide from power that we lose by
the existing transmission lines that are outdated and not as
efficient? There has to have been some study on this.
Mr. Meeks. I will get you that for the record as well.
Mr. Costa. Yes. We want to know the cost benefits. If you
could provide that to the Subcommittee, I think we would all
like to know that because we are looking at investing in our
infrastructure. This is an important part of our
infrastructure, and go from there.
I hear it was touched upon earlier, and I don't know if we
got a complete answer or not on the conditions of the
Bonneville projects to withstand seismic issues, since we are
looking at the situation in Japan. Did we get a definitive
answer on what standards of seismic events you think you are
capable of withstanding?
Mr. Wright. The question that came earlier was with respect
to the nuclear project that Bonneville pays for and receives
all the output from. And for that project, it is located on the
Hanford Reservation. They looked at historical earthquakes that
have occurred in that area. And the seismic event that they
have planned for is well in excess of the historical seismic
events that have occurred there.
Mr. Costa. Which is?
Mr. Wright. It is in the range of somewhere around four to
five on the Richter scale.
Mr. Costa. I am just as concerned about the dams.
Mr. Wright. So I actually would need to provide that for
the record. I don't know exactly what that is. I do know that
the fundamental concern with respect to the nuclear plant was
whether a dam might be taken out, and then you would have
potentially a surge of water coming downstream that would
affect the nuclear plant. And from the evidence that I have in
front of me, it appears that that would be very unlikely, that
the nuclear plant is built on high enough ground that a loss of
Grand Coulee or Chief Joseph would not cause an inundation of
the diesel generators that provide the backup power supply for
Columbia generating station.
Mr. McClintock. I am going to have to cut it off there. But
happily, we do have time for a bonus of questioning that begins
right now. Mr. Wright, we have been talking about the enormous
amount of wind generation that you folks have added in the last
few years, and we have also talked about the fact that because
wind generation is unreliable, obviously the wind comes and
goes, you have to be able to have an equal amount of backup
power ready to replace it.
So does that mean that wind generation essentially adds
zero to the baseline because you have to back up every megawatt
of wind with a megawatt of reliable power?
Mr. Wright. We have quite a debate about that going on in
the Northwest, but basically the capacity factors that we use
in the Northwest are somewhere between 5 percent and zero.
Mr. McClintock. And you testified, if I understand
correctly, that this mandate is adding about six dollars per
megawatt to your generating costs?
Mr. Wright. It creates costs that work out to be about six
dollars per megawatt of wind. We collect that cost from the
wind producers to assure that there is not a cost shift between
wind purchasers and sellers, and then Northwest ratepayers who
buy our firm power----
Mr. McClintock. But that is a rather substantial amount
compared to your baseline costs, isn't it?
Mr. Wright. I think it does make a difference to the wind
power producers. They certainly are very active in our rate
case.
Mr. McClintock. What does a megawatt of hydroelectricity
cost, and what is the final cost of the same megawatt of wind,
taking account for a need for backup, obviously including all
subsidies, and the additional transmission cost because a lot
of these areas, I understand, require additional transmission?
Mr. Wright. So we sell our firm power products at roughly
about $30 a megawatt hour today, which is an all-in cost, and
includes the hydro project, the nuclear projects, Fish and
Wildlife mitigation costs, et cetera.
Mr. McClintock. Yes. But again, what I am trying to get at
is what is the basic price or cost of generating, say, a
megawatt of hydroelectricity compared to the same megawatt of
wind?
Mr. Wright. So the cost of the hydro units alone would be--
the fully allocated costs would probably be in the $10 per
megawatt or less range. If you were purchasing a wind power----
Mr. McClintock. And wind?
Mr. Wright. If you were purchasing a wind power product in
the market today, the price may range from anywhere from 70 to
say $100 a megawatt hour.
Mr. McClintock. Good heavens. I guess the answer to the
next question may be self-evident. Suppose instead of your
mandate being to encourage renewable electricity, suppose it
was to encourage the most efficient and least expensive
electricity. How would that change your policy?
Mr. Wright. Actually, that is the policy. It is in Federal
law today under the Northwest Power Act.
Mr. McClintock. Well, obviously, $10 a megawatt power is an
awful lot cheaper than $70 a megawatt power.
Mr. Wright. It is. And for that reason, we are very
actively pursuing trying to make sure that we are getting as
much out of the hydro system as we possibly can. It is the
cheapest resource available.
Mr. McClintock. You have all testified to substantially
increased costs because of ESA compliance mandates. Suppose the
policy were changed to allow the product fish hatcheries not
only to be included in population counts, but also to be used
as mitigation. Would that increase or decrease your costs?
Mr. Wright. That would make a substantial difference in
terms of the calculation of how to meet threatened and
endangered species costs. It would be a substantial change in
the policy with respect to whether a hatchery fish is the same
as a wild fish or not. And not being a biologist, I would
probably need to stop there in terms of my explanation. But it
certainly would make a difference.
Mr. McClintock. Mr. Meeks, how about you folks? You have
substantial compliance costs.
Mr. Meeks. I agree with my colleague here.
Mr. McClintock. Let me have one final question for Mr.
Meeks on the Central Valley Project Improvement Act. Obviously,
water customers have been charged $30 million annually. The cap
was supposed to be reduced to 15 million upon completion. It
was specified mitigation and restoration activities. I
understand today, 19 years after enactment of the Act, the
annual fee cap on water and power customers is still $30
million per year, with no indication of when that cap will be
reduced, if ever. And I am told that makes the price above
market.
What is going on with that? Ten seconds, what is going on
with that, and what can be done about it?
Mr. Meeks. Ten seconds. You are right in everything you
said, 20 percent added on top, at market. I am meeting with the
Commissioner next week, hopefully, to talk about that very
issue.
Mr. McClintock. Great, thank you. and if you could submit
an additional response for the record, that would be
appreciated. Now I recognize the Ranking Member, Mrs.
Napolitano.
Mrs. Napolitano. Thank you, Mr. Chair. And while you do
that, maybe it is possible to have the people, the tribes and
the States who are saying that the increase in salmon is
creating another increase in their economy, whether it is
tourism, whether it is fishing for the salmon, and what is that
in return giving those areas in terms of economy, if you would
look into that. Or maybe they have the ability to get input
from your customers.
Mr. Meeks. Well, actually, I have another question that has
to do with--on page 6, Mr. Worthington, you indicated on the
right-of-way clearing because of the blackouts, the inadequate
right-of-way clearing. You have increased it. When I toured one
portion of the WAPA, and I was looking at the clearing, and
apparently the bark beetle infestation, the pine beetle
infestation was creating a problem with the right of way
because those trees could fall on the lines that were--the
right of way wasn't wide enough, and apparently there was an
issue with forestry and all that.
Is that still a problem, and is there an R&D on the pine
beetle infestation that has been looked at? It is an update on
the environmental impact statement regarding the protection of
the power lines against possible damage due to that
infestation, including the right of way issue.
Mr. Worthington. We have utilized aggressive means to
address this situation, but we don't have specific issues with
the pine beetle infestation in our service region.
Mrs. Napolitano. Mr. Meeks does.
Mr. Meeks. Yes, I do. We are continuing to work with the
Forest Service. We expect to have the draft environmental
statement done in October of this year, and a final April of
next year. So we are aggressive with it. We are doing the best
we can on that issue.
Mrs. Napolitano. Who is working on the R&D to be able to
address this?
Mr. Meeks. R&D, as far as what you said in your opening
statement, I do not know as far as how do you prevent this in
the future. I will get you something.
Mrs. Napolitano. Please. Then the other question, Mr.
Meeks, is how are you helping to integrate the renewable energy
into the service area while keeping the core mission?
Mr. Meeks. As I have said in the past, we cover nine of the
ten windiest states. So we have 14,000 megawatts of wind in the
queue. We only have 1,000 megawatts in service right now today.
So what we are doing is, one, we have open access transmission
tariffs. In other words, if people want to build into it, they
have access to the system, given the proper constraints. We are
offering products, transmission products, like long-term, non-
firm, and conditional-firm, that is attractive to renewable
users, as well as working with the balance with our borrowing
authority, our customer needs, and all of the above.
Mrs. Napolitano. So you are juggling pretty well.
Mr. Meeks. Yes.
Mrs. Napolitano. There is a question in regard to the
mandatory standards that have increased in 2008 from 60 to
current 102. Is there anything that can be done to consolidate
some of those mandates and save you time and money and save the
ratepayers? Anybody? I am looking at the North American
Reliability Corporation, the NARC.
Mr. Meeks. Oh, there is an added burden, there is no doubt
about it, as far as the reliability standards. One of the
things that we are trying to work with the reliability
organizations is how much is real, is value added to
reliability of the system, versus checking the box and feeding
a monster.
So that is one thing throughout industry that we are
working on moving toward. We are doing things internally I
would be happy to tell you about--I know time is short--to help
alleviate costs related to those.
Mrs. Napolitano. I would like to have you answer that in
writing so that the rest of the Committee can understand what
some of these standards do, how it affects your ability to
provide the service. And with that, I yield back.
Mr. McClintock. Thank you. Mr. Labrador.
Mr. Labrador. Thank you, Mr. Chairman. I only have one
question for Mr. Wright. As you know, there has been a dramatic
increase in the amount of wind generation located in the
Northwest. I realize that some of the resulting wind energies
are being used to meet our RPS requirements in Washington and
other Northwest States. With California increasing its RPS to
33 percent, I am curious about what percentage of the wind
energy generated in the Northwest is exported to California?
Mr. Wright. I am not sure I can answer with respect to the
Northwest as a whole, but for the Bonneville system--and I
believe this is applicable for the rest of the region--it is in
excess of half.
Mr. Labrador. OK. And does BPA have policies that
differentiate between wind projects, where the output is
consumed in the Northwest, versus sold out of region?
Mr. Wright. We do not have a difference in terms of pricing
for where the power ultimately is delivered to. We do create
charges to assure that the costs that are created by wind
power, wherever it is delivered to, are paid for by wind
purchasers and sellers.
Mr. Labrador. All right. Thank you. I yield back.
Mr. McClintock. Mr. DeFazio.
Mr. DeFazio. Thank you, Mr. Chairman. Mr. Wright, the
Chairman asked a question I thought was interesting, but I
doubt that anyone has developed the data because it would
require a present cost or value analysis. But he was comparing
the cost of the wind, new wind generation, versus the installed
hydroelectric capacity, which of course was built 70 years ago
during the Great Depression, for the most part, or then through
World War II.
Has anyone ever looked at--I mean, it would be a real Blue
Sky thing, but if you had to build Grand Coulee today and
install the capacity, I assume it would be much more expensive
than it was then. Anyone ever looked at that?
Mr. Wright. I think it would be safe to say it would be
much more expensive.
Mr. DeFazio. Yes. So any new capacity is obviously very
expensive, no matter what technology we are using. And that
said, I would like to ask, as I understand it, the most cost
effective way to meet the future projected power needs in the
Pacific Northwest is neither wind, hydro, coal, oil, gas, or
nuclear. There is one thing left, right?
Mr. Wright. Yes. The number one resource in the resource of
priority for the Northwest is energy efficiency. By all of the
studies that I have seen by the Northwest Power and
Conservation Council or by Bonneville staff, we think that we
can acquire energy efficiency at somewhere in the range of
about $30 a megawatt hour, which is probably half the cost of
any other resource that is out there.
Mr. DeFazio. My local utility has been very good at
subsidizing the cost of compact fluorescents. I believe BPA had
a program perhaps encouraging them to do that. I am not sure.
And I know historically BPA has been very involved in
conservation. Are there any estimates just on--I mean, as I
understand, there are some cities in Washington State where you
can't even find incandescent light bulbs anymore, they have
been so aggressive.
But can you tell me just on the lighting side what we can
save? Do you have an estimate on that breakout?
Mr. Wright. I don't have that one at the tip of my tongue.
I know that our market penetration rate is still probably in
the 15, 20 percent range. So there is a substantial amount of
opportunity still out there in the lighting area, both in
residential, but particularly in the commercial arena, where
our programs have really just begun.
Mr. DeFazio. Well, I would be interested in any estimates
you might have on that. We are about to have a raging
controversy over, you know, save Edison's invention and, you
know, ignore the 21st century here in Washington to move beyond
the incandescent light bulb. It would be useful to have that
data for that debate.
Mr. Wright. I would be happy to provide that for the
record.
Mr. DeFazio. All right. Thank you. I just want to get
straight on the 115, 120 nitrogen issue. I mean, are you
feeling--is it just the legal constraints or is your agency
convinced that the preponderance of the evidence is that 120 is
detrimental, and therefore you wouldn't want to go there even
if you weren't concerned about further litigation?
Mr. Wright. I think it is both.
Mr. DeFazio. Yes.
Mr. Wright. So the biological opinion says that we will
comply with the water quality standards as adopted by the
States of Oregon and Washington. And so the adopted standard
right now is Oregon different from Washington. But a majority
of the facilities are, of course, in Washington.
So it is a matter of complying with the law. But in
addition to that, our view has been that excessive levels of
gas can have a negative impact on salmon and steelhead. And the
fundamental problem that you have is there is a curve out
there, and the curve is you put more gas in the river, and you
get increased risk. And the question just is where do you draw
the point on that curve that says that is the straw that breaks
the camel's back.
Given the substantial investment that we are making in the
salmon and steelhead restoration, we have been reticent to draw
that place in the curve in a place where we might be putting at
risk the hundreds of millions of dollars a year investment that
we are making in salmon restoration.
Mr. DeFazio. I find it interesting that Oregon would have a
higher standard, Washington a lower standard. Yet as I
understand it, Oregon is the one outlier in the pending Federal
litigation among the affected states who does not agree with
the proposed biological opinion. Is that because they want a
higher dissolved nitrogen standard?
Mr. Wright. Well, to be fair to Oregon, their view in the
litigation has been that additional spill would be a good
thing. And so I think that their position with respect to the
state's position on gas----
Mr. DeFazio. Oh, it is a good thing even with higher
nitrogen, in Oregon's view?
Mr. Wright. Oregon has been of the view that increasing
spill does increase juvenile survival, and that they have been
less concerned about the gas impacts than the potential
benefits from spilling fish. Now, that has been different from
Washington's view and different from our view.
Mr. DeFazio. Thank you.
Mr. McClintock. Mr. Garamendi.
Mr. Garamendi. A fascinating issue. I hope you can resolve
it in Oregon. We have similar issues in California with our
downstream flows, temperature and the like.
I want to go to conservation here. Clearly, it is the
cheapest, the best, and the most immediate available. I just
stepped out into the hallway and noticed the window that I was
standing next to has to be about a 1920 to 1930 model window,
single pane. I was just thinking about a public-private
partnership where maybe we get a private entity to come in and
take us and enjoy some of the benefit of the savings that would
inure if we were to replace the windows in at least these two
buildings, the Longworth as well as the Cannon.
We will have to talk to Mr. Lungren about that, Tom, when
we get back on the airplane going to California.
Mr. DeFazio. Rayburn is also single pane, even though it
was built in the 1960s.
Mr. Garamendi. OK. We will change out all the windows and
get a private contractor in to do it, and let him benefit with
some of the cost savings.
Just a question--just not a question, a comment. California
energy standards, among the highest in the nation, if not the
highest, have allowed the state to actually maintain the same
per capita energy consumption, even though we have had enormous
growth in the population over the last 20 years, 25 years,
since it was put in place. We ought to have a national energy
standard.
If we take a look across the nation, certain Midwest States
have very cheap power and extraordinary energy consumption in
their homes. And so just something we ought to be thinking
about if we want to meet the entire nation's demand.
I want to go really the--I guess I am stuck on conduit
today. It just keeps coming back. Somebody handed me a piece of
conduit 10 years ago and said, if we did this, we wouldn't need
to build an additional power plant. I really want to get into
that. I would like to have the analysis done by the two, I
guess all three of you, on conduit. How much more energy can we
push through the lines, taking into account, yes, you have to
be on both sides. You have your substations and switching and
so on and so forth.
And the other issue, which I don't think we are going to
get an answer to today, has to do with the integration of the
green energy sources together with the baseload power, which
hydro does have flexibility, but again nuclear.
And finally, on the nuclear issue, it seems to me that we
will be building nuclear power plants, notwithstanding the
Fukushima issue, if not here, then other nations will. That
brings us to what are we going to do with the used nuclear
fuel, of which about 95 percent will remain, even with the
French recycling. What do we do with that? How do we handle it?
Do we stick it in the ground someplace and walk away, or do we
close the nuclear cycle? And if any of you gentlemen are
involved in that, could you please for the record speak briefly
to that?
These are issues that are not going to be answered today.
National energy standards, similar to what California has, we
ought to do it, Tom. I should say Mr. Chairman. Excuse me for
being more familiar. We are just Californians here today, so we
are talking down home. And then the issue of how we deal with
the integration of the green, the renewables. I think we really
need to spend a lot of time on that. Various kinds of storage
systems. I was thinking of water pumping into various
reservoirs, and then being released later, something that is
used in California, I think in other states also.
Perhaps more of that, and this is part of what I know the
Chairman is interested in, this off-stream storage, which is
part of what we are going to have to do. And then I guess I am
talking and not asking questions. I am sorry, gentlemen. But
for the record, if you could provide some insight into these
issues. I will yield back my time, Mr. Chairman.
Mr. McClintock. Well, thank you. And that concludes the
hearing today. I want to thank our witnesses for sharing their
valuable time and the insight into these issues. Members of the
Subcommittee may have additional questions for witnesses. In
fact, I can personally guarantee it. And we would ask that you
respond to these in writing. The hearing record will be open
for ten business days to receive these responses.
And if there is no further business to come before this
Subcommittee, without objection, the Committee stands
adjourned.
[Whereupon, at 11:31 a.m., the Subcommittee was adjourned.]