/United States General Accounting Office. United States.General Accounting Office. Washington, D.C.:The Office,1977. United States. Federal Power Commission. Electric power systems United States Design and construction. Interconnected electric utility systems Design and construction. MAY 2,1977 UNITED STATES GENERAL ACCOUNTING OFFICE Problems In Planning And Constructing Transmission Lines Which Interconnect Utliies Federal Power Commission Acoroing to Federal and indendent power COASTAL ZONE Studies, future reliability and adequacy of the INFORMATION CENTER electric power Supply depends on the timely installation of generating and transmitting facilities to meet our future needs. The Federal Power Commission should --take the lead in promoting joint Fed- erd industry studies to identity and evaluate new interconnections and changes in existing interconections; --follow up on completed studies to re U.S.DEPARTMENt OF COMMERCE NOAA solve objections which might frustrate the adoption of study recommenda COASTAL SERVICES CENTER tion. 2234 SOUTH HOESION AVENUE SC 4405-2413 work with utlities to establish criteria for interconnection Studies. which will adequately consider national goals and identify factors which may adversely affect proposed interconnections. and --work with utilities to make sure they use the criteria in both industry and Federal studies. HD 9685 EMD-77-21 JUNE 9, 1977 .U62 U554 1977 Property of csc Library CZIC COLLECTION 15272 UNITED STATES GENERAL ACCOUNTING OFFICE WASHINGTON, D.C. 20548 ENERGY AND MINERALS DIVISION B-180228 The Honorable Richard L.Dunham Chairman, Federal Power Commission Dear Mr. Dunham: This report discusses problems in planning and constructing transmission lines which interconnect utilities. Our review was made to determine if needed interconnections were being identified and if they were being constructed in atimely manner. This report contains recommendations to you on page 29. As you know, section 236 of the Legislative Reorganization Act of 1970 requires the head of a Federal agency to submit a wri tten statement on actions taken on our. recommendations to the House Committee on Government Operations and the Senate Committee on Governmental Affairs not later than 60 days after the date of the report and to the House and Senate Committees on Appropriations with the agency's first request for appro- priations made more than 60 days after the date of the report. We, are sending copies of this report to the Director, office of management and Budget, and tothe Secretary of the Interior. Sincerely yours, COASTAL ZONE Monte Canfield, Jr. INFORMATION CENTER Director UNITEr) STATES PROBLEMS IN PLANNING AND GENERAL 'ACCOUNTING OFFICE CONSTRUCTING TRANSMISSION LINES WHICH INTERCONNECT UTILITIES Federal Power Commission D I GE S T According to Federal a:-.d Indepenjent studies, adequacy of the national the reliability and electric power supply depends on the timely in,stal Lat ion ofnew gen.era.ting-and transmitting facilities. Electric utilities have increasingly interconnected with, each other to permit the flow of electricity .,among them.' Interconnections generally have @technical and economic advantages for utilities, and e Nation. siirilar benefits for regions and th individual utilities may save money.throu,gh interconnections by --sharing their electric power-generating capacity to cover an unexpected deficiency in their normal power.supply,. --purchasing lower cost power, --reducing or delaying.additional generating capacity, and --selling excess power that would not be otherwise used. Even,,when an interconnection presents minimalor no economic advantage to a utility, a region or fit by the Nation may bene --the ability to transfer power to shortage areas during national emergencies, --the conservation of scarce resources, --the reduction of effects on the environment by delaying additional generating capacity, and -,-the con@,ideration of national defense, issues. EMD-77-21 11@t UPon rernoval. the r6port cove- date should be noted hereon. DO INTERCONNECTIONS MEET POWER NEEDS-i Yes--data from utilities, utility po.,er pools, and national organizations shows that the present interconnections of utilities were sufficient at the time of our study to meet power needs in emergencies. Utilities have transferred power to meet national or regional needs on a regular basis as well as during emergencies. For example, when the Tennessee valley Authority's Browns Ferry nuclear plant was shut down due to a fire, the Authority purchased adequate replace- ment power from utilities which interconnected with it. However. a report prepared for the Energy Research and Development Administration said that reliable and efficient production of the growing el-?ctric loads projected through the year 2000 would require higher capacity transmission lines to interconnert utility systems. (See pp. 4 and 5.) ADEQUACY OF INTERCC-NNECTION STUDILS The Federal Power Ccqimission, responsible for encouraging utilities to interconnect voluntarily, studied interconnections and issued 35 reports from 1969 to 1975. Power agencies within the Department of the lnter4ir have a2so studied interconnections. (See p. 6.) Federal studies for the most part were --based on costs and benefits for the interconnecting utilities; --aimed at systems 'in the Southwest and concentrated on small iF3olated systems rather than regional sl,:stems, which could rel"Pult in larger benefits; and --done W:."Lhout involving the affected utilities. (See p. 6.) Need for expanded Federal ommissibn role Power C recognizing national criteria The national advantages of interconnections should be considered when planning lines among utiiiti.es. The Federal Power Commission did. not do t:iis wl-en evaluating interconnections; instead it studied the economic benefits to the utilities, particularly those in the Sout!"j- W@est. (Twenty-eig,ht of the 35 studiesmade. were of the Southwest.) Commission,followup action on its studies is limit ed to maintaining status listings. 14-, does not determine why the.utilities have not e stablished interconnections rr further analyzed I-!,.p proposed interconnections- Fcpj: example, one st,idy, examined the benetits of interconnection.and coordination of 93 separate electric generating systems in-Kansas and weEtern and southern Missouri. The studv estimated savings of $1.92 billion bet,,,,een .1980-90 to the utilities. Whether there were poSsible national benefits in addition to those savings was not considered in the analysis. The Commission's only action was to send copies of the study in November 1975 to the utilities involved. However, Commission staff we inter- viewed felt that it could do more to promote and encourage voluntary interconnection.if it. had more resources. (See pp. 7 and 8.) The Commission should establish national'criteria to oe used when considering needed interconnections because an interconnection could present no ecq- nomic advantage (or disadvantage) to a utility, while providing advantages to a region or the Nation. These criteria should be directed-at conservation of scarce resources, reduced trans- mission and generation, and reliable national emergency services and national defense. Each of these goals becomes increasingly important as the Nation's domestic energy supplies decrease. According to the utilities contacted, unless an interconnection shows economic benefits to one or more of the interconnecting parties, a utility Tear SheI o inst all' an inter will,not act on its.own t connection. Consideration of national goals should be an integral part of the interconpection planning process. Establishing criteria to .:evaluate whether those goals ar-e met would:.be afirst step in making the utilities aware Of. the Government's serious interest in promoting interconnections. If the criteria, once estab- lished, are not used by utilities ih their decisionmakingr the ComwisPlion should move to pel their seek legislative authority to com consideration. The-Energy Research and Development Admindstration is developing criteria,for the study of electric utility system expansion. This is a good first step which would help the Commission establish. nationallcriteria and should help it determine the next steps in. improving its performance in. this.area. .(See p. 13.) Need for ioint @_interconnection studies The Commission and Interior independentlystudied interconnections, usually without consulting the utilities. These studies were not well received by the utilit-ies. and, as a result, most recom,- have not'been implemented. (See p@ 14.) The Commission. should encourage joint Government-utility studies to systematically W identify and study future regional and inter- follow up.on regional interconnections and (2) previous studies to determine why the utilities have not implemented them or further analyzed onnection. the proposed interc These studies should recognize the various, purposes, needs, and objectives of each organization irvolved, as well as nationaY goals. Differences. among organizations will then be identified, discussed, and ultima-.ely resplved. (See p. 28.) Joint Federal-industry studies should determine how all relevant factors (finarcial, environmental, and institutional) affect inte.connection and consider methods to develop alternative plans for providing the needed services. (See pp.',20 and 24.) FACTORS AFFECTING CC45TRUCTION OF INTERCONNECTIONS The utility industry must deal with financial, environmental, and institutional considerations which may delay or cancel proposed intercon- neotions. These factors are complex, and some outside the control of individual utilities a, ana at times, Lhe utility industry. As a result, individual utilities and Government agencies may not be able to deal with these factors in a way to expedite the construction of transmission facilities. (Sk:e p. 19.) RECOMMENDATIONS TO THE CHAIRMAN, FEDERAL POWER COMMISSI09- Tne Chairman should --take the lead in promoting, throughout the Nation, joint Federal-industry studies-to identify and evaluate new interconnections ind changes in existing interconnections; --follow up on completed int;-connection studies to resolve objections to t'- studies which might result in aaoption oz study recommen- dations; --work with utilities to establish criteria for carrying out interconnection studies which will require adequate consideration of national goals and timely identification of factors which may adversely affect the pro- posed interconnection; and --work with the utilities to make sure the criteria are used; if they are not used voluntarily within a reasonable time after their release.. the Commission should consider whether further steps should be taken to com- pel their consideration and seek additional legislation if necessary. TeAl Sh v AGENCY CO-jIENTS The Depa. t-n,-,nt of the Inter i or (see app. II stated ttat our report presents a comprehens0e analysin and agrees that transmission and gen- eration sh-oild be planned to consider the advantages interconnections may offer for pur- suing ridtional or regional energy conservation programs, reduced transmission and generation investment, emergency service, and national defense. The Federal Power Commission (see app. III) said that there is little basis presented in GAO's report to conclude that the Commission has not effectively carried out its responsi- bilities in promoting Linterconnections and that the current network speaks for itself. The Nationil Electric Reliability Council said that the present system of interconnections is a result of the eftorts and good judgment ot highly qualified, dedicated engineers and exec- utive-s who are intimately involved in these matters. vi C o n t e n t s Page DIGEST CHAPTER INTRODUCTION Scope of review 3 2 ADEQUACY OF INTERCONNECTIONS TO MEET POWER NEEDS 4 3 ADEQUACY OF INTERCONNECTION STUDIES 6 Need for expanded consideration of nat4onal criteria 6 Need for joiat interconnection studies 14 utility industry views of FPC responsibility to promote interconnections 17 4 FACTORS AFi'ECTING CONSTRUCTION OF INTERCONNECTIONS 19 Financial problems 20 Environmental considerations 20 Institutional constraints 24 5 CONCLUSIONS, RECOMMENDATIONS, AND ,jGENCY COMMENTS 27 Conrlusions 27 Recommendations to the Chairman, FPC 29 APPENDIX Agency comments and our evaluation 29 National Electric Reliability Council 31 II Letter dated November 29, 1976, from AsSistant Secretary, Administration and Manaqement, Department of the Interior 32 III Letter dated November 3, 1976, from Chairman, Federal Power Commission 37 IV Principal officials responsible for administering activities discussed in this report 39 A ABBREVIATIONS BPA Bonneville Power Administration ERCOT Electric Reliability Council or Texas ERDA Energy Research and Development Administration FPC Federdl Power Commission KV kilo )It MAAC Mid-Atlantic Area Council MARCA Mid--Continent Area Reliability Coordination Agreement NERC National Electric Reliability Council PJM Pennsylvania-New Jersey-Maryland Interconnection SEC Security and Commission SPP Southwest Power Pool TWA Tennessee Valley Authority WSCC Western Systems Coordinating Council CHAPTER I INTRODUCTION Electric utilities have increasingly interconnected I/ their systems because they provide more reliable and economical service. The Federal Power Commission (FPC) said that the following are the three principal objectives in providing adequate transmission facilities for the purpose of inter- connecting utilities. 1. To support immediately any area Suddenly faced with a serious and unexpected deficiency in its normal generating The network must have capacity to handle, well with , stable limits, the automatic infavor of supporting power from the hundreds of generators in the surrounding intercornected network. 2. To transfer, without serious restrictions, capcity and energy within rEgions and between regions to meet powEr shortages. Emergencies can arise from innumerable causes, such is delays in commercial operation of new generation, problems with new equipment, the failure of major qener- ating units or other elements of the system, and unexpected peak demands caused by weather extremes. "3. To exchange power and energy on a regional and interregional scale, and to achieve important reductions in generating capacity investment and in cost of energy production." Other benefits of interconnected operation may include: --Displacement of oil and natural gas with other types of _ generating fuels which are abundant (e.g., coal). Bulk energy transfers to take advantage of energy-cost differentials between the areas. I/ An interconnection is a transmission line permitting a flow of electricity between the facilities of two eletric systems. when the first transmission line is built between two systems, every additional line becomes part of a network because all transmission lines--intrasystem and intersystem--have an inter- acting role and become a part of an overall "system." --Diversity excha@tges made r-issible by diffe:ing load characteristics due to se sonal patterns, -Ame zones, and weather. --Sharing of ating reserve to take advan:age of differen, s of generation and to maxim@-ze efficiency in unit commitment and scheduling. --Improvement in system stability. Even in instances where an interconnection m3y not present an economic advantage to a utility, there may be Pivantages to a region or the Nationj such as --the ability to transfer power to shortage areas during national emergencies, --the conservation of scarce resources, --the reduction of environmental impact by delaying or reducing additional generating capacity, and --national defense considerationq. The present highly interconnected transmission network in the United States has been developed by the electric utility industry. Facilities have been installed so chat the network can (1) sustain a wide variety of disturbances due to forces of natUre, equipment breakdowns, a wide variety of load con- ditions and (2) provide a medium for inutual emergency support to all systems. The development of the network by the ir,du9try has provided economies in operation and reductions ir investments by sharing generating capacity, exchanging peakload assistance, transferring power to conserve high-cost fuel or critical types of fuel, and providing a raliable and adequate bulk power supply in the United States through emergency assistance among systems. With tne exception of Texas utilities 1/, most large utilities are now interconnected across StaEe boundaries; however, there is a continuing need to expand and improve power facilities. Through the years, improved transmission and gen- eration technologies, growing loads, and system reliability requirements further stimulated transmission line construction. I/ See page 24 for a discussion of the reluctance of Teyas utilities to interconnect with out-of-state utilities. 2 The utilities operating independently and qroup@.-, of utilities which form power pools plan and construct cransmission lines to interconnect utility systems and various utility associations' study interconnections. In addition, 2ederal agencies are involved in planning and constructing (Q.g., Department of the Interior), a,nd promoting and eucouraging (e-g-, FPC) voluntary interconnections. SCOPE OF REVIEW our objectives were to determine how FPC was carrying out its responsibilit., to promote and encourage volurtary interconnections, if needed interconnections were being iden- tified and studied, what problems utilities naa in constructing interconnections, and what the Federal interconnection role sh3uld be. Our review was made primarily at (1) FPC's headquarters office in Washington, D.C., and its regional offices in Fort Worth, Texas; San Francisco, Caliiornia; and New York, New York; f2) the Department of the Interior in Washington, D,C,; (3) Bureau of Reclamation's Lower and Upper Missouri, Upper Colora6o, and nid-Pa-ific regional offices; (4) Bonne- ville Po. r Administration (BPA) in Portland, Oregon; (5) Nati_,l Electric Reliability Council (NERC) in Princeton, New Jersey; (6) four NERC regional councils--Southwest Power Pool (SPP), Electric Reliability Council of Texas (ERCOT), Western Systems Coordinating Council (WSCC), and Mid-Atlantic Area Council kMAAC); and (7) numerouF public (non-Federal) and investor-owned utilities. We examined the pertinent documents, records, reportq.. and files relating to the above organizations' procedures --,r identifying, planning, and const,:ucting intcr:onnections. 3 CHAPTER 2 ADEQUACY OF INTERCONNECTIONS TO MEET POWER NEEDS In our review, which included an analysis of data from utilities, power pools, and national organizations, we found that present interconnections of utilities were sufficient ot the time, of our study to meet power needs in emergencies However, Federal and independent studies of the reliability and adequacy of the national power supply indicate that future reliability and adequacy of the electric bulk power supply depends on the timely installation of new generation and transmission facilities to meet our future needs. Also, several studies indicate that additional inter- connections are economic but suggest further evaluation is needed. Unfortunately, there is little or no consensus on the validity of these studies. This matter is discussed in chapter 3. We noted instances where utilities have transterred power to meet needs on a regular basis as well as during emergencies. For example, the Tennessee Vallev Authority (TVA) power load r--@quiraments are higher in winter than in other seasons. According to TVA the seasonal variation in load requirements is largely compensated through its interchange agreement with otner electric utilities. TVA receiv,!@ power from utilities primarily in the winter and provides power to them primarily in the summer. Interchange agreements accounted for about 8 percl--it of total kilowatt-hours of power passing through TVA's system in fiscal year 1974. The 1973 oil embargo necessitated the transfer of energy to tne Middle Atlantic and Ncw EnglanJ States. A National Association of Regulatory Utility Commissions report I/ said that from December 1973 to May 1974, 800,000 megawatt-hours 2/ of energy had beer. transferred into this area. Also, when - TVA's Browns Ferry nuclear plant was shut down due to a fire, TVA was able to Durchase adequate energy from utilties with which it inter cot,nected . 1/ 1974 Report of the Committee on Electric and Nuclear Energy. 2/ One megawatt equals one million watts. 4 The advantagps of iaterconnections are recogn zed by the utility industry and additional interconnections aj? being constructed. in addition, an increasing need exists to strengthen the existing transmission network and ccnstruct higher capacity tran:;mission lines. A National ElEctric Reliability Council I/ report made in July 1975, stated that the future reliabiliFy and a1equacy of the electric bulk power supply depends on the timely installation of new generation and transmission facilities to meet the projected electric loads and provide sufficient reserves for emergencies. NERC believes that, in view of recent delays and cancellations of planned facilities experienced by the power industry, the Nation's transmission system needs to be strengthened. The report points out that It* * * interconnections cannot replace a long-term deficiency in installed generating capacity or * * * fuel supply -, * *. However, correction of any existing weakness in t-he transmission network will increase the cperating flexibility and provide additional support when forced outages (shutdown cf a generating plant for emergency reasons] cause shortages oi generating capacity." NERC in the report recommended that electric systems should continue to investigate all possible options for augmenting generating capability, and ways in which emergency transfer capabilities can be increased A report prepared for the Energy Research and Development Administration (ERDA) said that m,.ich higher capacity trans- mission and distribution lines must be constructed to reliably and efficiently serve the growing electric loads projected through 2000. I/ NERC 4s an organization formed by nine regional councils representing the Nation's utilities to augment the reliability and adequacy of bulk power supply in the electric utility systems of Nort:i America. NERC consists of nine regional reliability councils (see app. I) whose memberships comprise essentially all ot the elActric power systems in the United states and some Canadian systems. 5 CHAPTER 3 ADEQUACY OF INIERCONNECTION STUDIES The Federal Power Commission has legislative responsibility to promot(, and encourage interconnections on a voluntary basis. In carrying out this responsibility, it studied and issued 35 interconnection reports from 1969 to 1975. However, these studies for the most part were --based on costs and benefits accruing to the inter- connecting utilities without consideration of any national criteria, --aimed at systems in the Southwest and concentrated on small isolated systems rather than regional areas which could result in larger benefits, and --made withouc involving the affected utilities, and their results were not always accepted by them; also, a followup on COMDleted studies by FPC to encourage their acceptance was lacking. Power agencies within the Department of the Interior and utilities h,@ve also performed interconnection studies, but their studies do not consider national criteria unless it benefits the participants. interior, in two of its three interconnection studies, considez-ed some naticnal goals; but the studies basically retlected the advantages to the utilities. The national advantages of interconneet",)ns--power transfers during emergencies, conserving scarce resources, reduction of ervironmental impact by delayinq or reducing additional generating capacity, national defense--should be considered when planning lines between utilities. The National Electric Reliability Council and the Energy Research and Development Administration have emphasized the national importance of interconnections and their concern over tne adequacy of interconnections in the future. NEED FOR EXPANDED CONSIDERATION OF NATIONAL CRITERIA FPC is the only agency with responsibility to promote and encourage voluntary interconnections. However, FPC has not (1) established national criteria for evaluating interconnections, (2) developed pro,@edures calling for its regional offices to 6 rev;-,,w interconnections, (3) been involved in other studies performed by Interior and utilities, and (4) followed up on its cwn studies to determine why the utilities have not imple- mented them or further analyzed the proposed interconnection. According to FPC, section 202 of the Federal Power Act (16 U.S.C. 791-825) directs FPC to : 11* * * promote and encourage the voluntary inter- connection and coordination of electric utility facilities for the purpose ot assuring an abundant supply of electric energy throughout the nation with the greatest possible economy and with regard to the proper utilization and conservation 3f natural resources." Under the act FPC can order interconnections only during emergencies or when a utility or State commission requests an interconnection with another utility (but only after FPC determines the interconnection is necessary or appropriate for the public interest). FPC studi-s Through a preliminary analysis, FPC determines if the cost of power differs substantially between two or more utility systems or if other c4r-cumstances indicate the pos- sibility of savings through interconnectzd operations. This analysis is to estimate the monetary benefits of interconnected and coordinated operations. It the preliminary analysis shows a benefit of an interconnection, FPC will do a detailed study independently to determine if the interconnection is cost beneficial. Also, according to FPC staff, it performs inter- connection studies at the request of MemLers of Congress and utilities. However, FPC has not established guidelines for its regional offices to systematically identify and st,.;-.-,, inter- connections nor has it established national criteria for evaluating interconnections. As a result FPC's efforts to promote and encourage voluntary intetconnections have been limited geographically and have only encouraged the involved utilities to interconnect when the corporate cost benefit ratio is favorable. Our review of 28 of 35 FPC E'udies made bE een 1969 and 1975 showed that FPC did not cons der national riteria or benefits. FPC interconnection stL.jies were concerned with the benefits to the utilities and iot the Nation. 7 FPC interconnect:on studies primarily focus on small isolated syszems. Dujing the period 1969-75 onl, two FPC studies involved more than two utiliti 'es. The 21 studies we reviewed involved small. isolated systems in the 'outhwest. Followup action by FPC on its studies is limited to maintaining status listings on a routine basis and not detern.ining why the utilities have not implemented the studies or fuither analyzed the proposed interconnection. The FPC staff, in commenting on their role to promote and encourage voluntary intercon- nections, said that they could do more i- meeting FPCIs responsibility if given more -esources. For example, FPC issued a report in November 1975 on the benefits of inteiconnecting and coordinating the operations of 93 separate electric utility generation systems operating in Kansas and western and southern Missouri. These systems included 3 generation and transmission cooperatives, 54 inter- connected municipal generating systems, 28 isolated municipal systems, and 8 investor-owned electric utility systems. The studv estimated savings to the utilities ot $1.92 billion between 1980 and 1990 trom full interconnection and coordination of these 93 systems without considering possible national benetits. To realize these potential savings the utilities must --establish a pooling agreement which allows the most efficient operation ot the participating utilities' combined resources, --establish a central control over all operating systems, --obtain financing authority from the State legislatures in Kansas and Missouri to permit municipalities to participate in jointly planned and constructed facil- ities, and --perform studies to determine transmission facilities required for full coordination. FPC believes it will be difficult to get the smaller municipal systems to participate in a coordinated area-wide system, because municipal systems in that area have traditionall wanted to maintain total control over their systems. The only action FPC took was to send copies of the November 1975 study to the utilities; involved; no followup action has been taken by FPC since then. However, FPC says it is monitoring these systems. 8 Department of the Interior's activities Since 1968, two of Interior's power agencies--Burciu of Reclamat on and Bonneville Power Administration--have @rformed three inzerconnection studies. Only two of these studies con- sidered some national goals--oil conservation and diversity in customer demand between Dower systems--but even these consid- erations were in terms of the economic advantages to the utilities. National benefits were considered incidental. For example, a steering committee in interior publishpd a study in 1968, "Transmission 190," which found that electricity supply and demand data indicate that seasonal variations in demand and related supply requirements by 19BO will permit diversity exchanges I/ between the Pacitic Northwest and the central United States. This conclusion was recognized in the FPC National Power Survey of 1964. The study investigated 12 different plans for making the interconnections, eauh of which showed positive benetit-to-ccst ratios ranging from 1.3:1 to 1.9:1. The study stated that the proposed extra-high-voltage transmission interconnections would enable the interconnected utilities to look Deyond their area boundaries for economical sources of energy. In addition, these utilities could share in the output of larger and more economical generating units. The steering committee recommended that a program of inter-regional planning and construction be initiated--by Federal and non-Federal utilities--to provide the power system benefits identified in the report. The report related the benefits to the utilities by showing that interconnections would enable them to look beyond their area for economical energy sources and did not discuss the advantages to the Nation from the interconnection, On December 16, 1975, the Secretary of the Interior received autho@ization, through Public Law 94-156, to engage in feasibility studies of 12 potential water resource developments. Included was the authority to study the power interconnections for the purpose of improving electric power transmission systems affecting the 17 Western States. I/ Diversity exr-anges can be used when one regional area's high use period occurs at a different time from another. Thus, the two regions exchange power so that each can import electricity during high use periods and export it during low use periods. 9 Interior's interconnection studies would (1) include consideration of potential power interconnections which would assist Federal, public, and investor-owned power suppliers to serve their custorier's load requirements at a lower cost and (2) result in conservation of resources. An Interior official said that Interior has not requested 'funds for the study in their fiscal year 1977 budget. Utilities' studies Utility officials said that identification of potential interconnections by individual utilitieb is generally initiated by a utility which projects a deficit or surplus of capacity or energy. The utility will try to identify and e-.-aluate potential generation facilities and/or interconnections which could be used to eliminate the deficit or transfer the surplus. Utilities we contacted said that eacli potential inter- connection is unique; therefore, each evaluation of ari inter- connection must be molded to reflect the suecific characteristics of that interconnection, such as size and type of generation, amount of capacity and energy to be transferred, and distance between the utilities to be interconnected. Utilities view interconnections as an advantageous method of meeting their capacity arid energy requirements as long as the surpluses available from another system are dependable or a diversity between their systems can be utilized. When evaluating interconnections, utilities cunsider the advantages to their systems; national and inter-regional needs and objectiNes do rot concern them. Some utility groups--known as power pools--have coordinated the planning and/or operation of their generation and trans- mi%,@@on facilities. This allows the members of the pool to acrieve greater economy and reliability. As of 1970 there wp-:e 22 formal power pools nationally which had 60 percent of the 4ation's generating capacity. One prerequisite to the achievement of coordinated opera- tions is adequate transmission interconnections between the member utilities. The following explanation tells how one of these power pools identifies and evaluates potential inter- connections. 10 The Pennsylvania-New Jer;ey-Maryland Interconnection (PJM) PJM is a voluntarily organized power pool responsitle for the coordinated operation of the electric generation and trans- mission of bulk power for 11 investor-owned utilities. PJM operates a single system with central operational control over its members' generating and transmission facilities. This practice allows power to be freely transferred among members over interconnections so that electricity can be delivered to the ultimate customers as efficiently as possible. PJM is heavily interconnected--internally and exterrially--with 54 interties among system members and 25 with utilities not in the pool. PJM uses two methods for identification and evaluation of potential interconnections. First, member companies develop plans for interconnertions needed to meet their own syster.'s requirements. Secona, the Planning and Engineering Committee of PJM periodically conducts long-range planning studies to identify the overall needs of the pool without regard to ownership of facilities. The Committee is responsible for coordinating the plans developed by member companies. The companies' planning is not superceded by the Committee; however, plans are reviewed for their effects on the reliability of the PRI system. This central review of proposed facilities is to make sure that the transmission facilities, including interconnections which are constructed, serve the best interests of the entire system. The Committee's periodic studies provide general guide- lines as to the preferred types, sizes, timing sequence, and general Iccation of future generation and oulk transmission capacity needed by PJM. These overview studies have played an important part in PJM's development because they ideptif% -- the need for facilities, including interconnections on a syctemized basis rather than on the needs of individual utilities. How- ever, according to Pim officials the final decision of what facilities are to be constructed remains with individual members. Specifically, PJM considers the following as the benefits it derives from an integrated operation: --Improved network reliability. Greater operating efficiency. --Economies of scale. --Better scheduling of additions. --Flexibility in maintenance programs. --Improved use of manpower and money. --Lower cost to the customer. NERC studies NERC was formed voluntarily by the electric utility industry in 1968. -Its membership includes Government, investor-owned, and public utilities in the United States as well as Canadian utilities interconnected with systems in the United States. NERC is managed by a Board of Trustees, which includes repre- sentatives from each of nine regional councils and all segments of the electrical industry. Although not a member, FPC attends NERC meetings as an-official observer. NERC's purpose is to augment' the reliability and adequacy of bulk power supply in the electric utility systems of North America, rather than to consider economic factors. To achieve this goal, NERC proposeL, to --encourage and assist the development of inter-regional reliability arrangements among Regional organizations or their members; --exchange information with respect to planning and operating matters relating to the reliability and adequacy of bulk power supply; --review periodically regional and inter- regional activities on reliability and adequacy; --provide independent reviews of inter- regional matters referred to it by a Regional organization; and --provide information, where appropriate, to the Federal Power Commission and to other Federal agencies with respect to mattcr!6 considered by the Council." 12 NERC evaluates whether existing and planned transmission acilities are adequate to provide reliable service and to sup port generation-deficient areas during emergencies. According to NERC many lines are built because they are essential for maintaining the integrity of the network, and if this were not so, the existing network would not nave its present reliability and flexibility. NERC established a permanent subcommittee (Inter-regional Subcommittee) in 1970 to continuousiy review the overall adequacy and reliability of the Nation's bulk power system. NERC feels the coordination efforts by the regional reliability councils has assured tnat the ex0ansion of the netwoi,k is always such that new facilities are compatible and the network-can remain reliable. However, NERC does not consider national goals and objectives in its evaluations. Efforts to develop F@a_tiona I _&r -iter i a - As previously stated in chapter 1, even in instances where an interconnection presents no economic advantages to a utility, there may be advantages to a region or the Nation. The only agency presently developing national criteria is ERDA. ERDA contracted three companies in 1975 to develop criteria for the study of electric utility system expansion. Part of the study is expected to be completed by mi6-1177. This process, which we believe has considerable value, is viewed by ERDA as an initial step in identifying all factors (quantitative and qualitative) which should be taken into account in identifying and evaluating potential interconnections. One of the ERDA contracts requires the contractor to: Identify paragieterc which are necessary and sufficient for conduct of studies of national issues relating to bulk power supply expansion, including, but not limited to parameters in the following areas: a. National Resource objective and resource policy b. Load growth (haracteristics c. Economic trends or forces d. Supply criteria and objectives e. Fuel availability and costs f. Regulatory policy, national and state g. Electrical (system data) h. Tecnnological factors (new equipment or process optioT 13 NEED FOR JOINT INTERUN-N-E-E-TION STUDIES FPC and Interior have performed many of their inte--con- nection studies independently froin the affected utiliti..-s. All 28 FPC studies and 2 of the 3 Interior studies, included in c,@:- review, were done independent of utility input according to -atilities we talked to. These studies were not well received by the utilities. As a result, 14 C?C studies and both Interior studies have not been implemen@@ed. In our review we noted that four studi?s were peLformed involving inter-regional interconnections (two FPC and two Interior), none of wtich have had che'ir recommendations implemented. The following two cases are examples of such inter-regional studies where joint involvement could have increased the opportunities for the acceptance of the study. FPC study FPC published a staff report on a proposed interconnection between the Electric RCliability Council of Texas and Southwest Power Pool I/ in October 1972 2/. Electric utility systems within ERCOT are isolated from-systems outside Texas. (See app. I.) The report concluded that interconnected and coordin- atel operation would result in a capacity savin7s of 2,080 megawatts between 1975 and 1980. This capacity reduction would represent a savings of $193 million during the 5-year period. -rhe savings would result because of shared generating capacity between the two reliability councils and would not reduce the level of system reliability existing under isolated opera.-.ion. FPC proposed three high-voltage interconnections to connect the two areas. They would provide an estimated inter-regional power transfer capability of abou*, 2,200-megavolt amperes be- tween ERCOT and SPP, and were estimated to have a cost of $37 million, over the study period, resulting in an overall net savings of million. Although ERCOT operates a number of interconnections with the Commision Federal de Electricidad, in the Republic-of Mexico, no normally used interconnections connect ERCOT to 1./ ERCOT and SPP are two of the nine NERC regional councils. 2/ FPC ordered its st aff to update and amend as necessary its 1972 study as a result ot a petition and application filed with it by the four corporation utilities (Docket No. E-9558, issued July 21, 197b). 14 other councils in the United States. Several executives ef the ERCOT utilities said ti,at interconnection with SPP wolld be a costly project which would produce few tangible economic benefits. Many of the ERCOT Members we interviewed did not addiess themselves directly to the methods or conclusions of the FPC study, but expressed the opinion that resetves could not be reduced below present levels without adv,-rse effects on system teliability. They also questioned the significance of FPC'S findings on reserve savings in light of the fact that utilities in Texas give first priority to construction of co&l-fired and nuclear-gen-lrating capacity (not reserve capacity). They argue that with 3r without interconnections, ERCOT will prob- ably have a large reserve margin, since Pxisting j4.1 and natural gas ,eneration will remain i6le "nd can be used as reserves. In a-_'dition to questi.on;ng the validity of the economic benefits projected by FPC, ERCOT criticized the cost estimate of interconnection developed by FPC. FPC concludea that only three segments ot a high-voltage transmission line would be required to interconnect ERCOT and SPP. SevEral ERCOT rep- resentatives said that substantial funds would have to be spent nn internal strengtnening of Dotn the ERCOT and SPP transmission system to permit stable operatiGn. They added that the cost ot this internal strengthening was not consid- ered in PPC's study and, consequently, the cost of intercon- necting ERCOT and SPP was consideraoly understated. A number of ERCOT executives also said that ERCOT's pattern of isolated operation produces intangible benefits in the areas of planning and operation. For example, ERCOT is a group of manageaule size utilities; theretore, planning conflicts can be resolved and responses to operating con- tingencies can be developed quickly by personal contacts between utility personnel. They said that if ERCOT is inter- connected to othef regions, problem solving will requirc more meetings, effort, and time. operating solely in intrastate commerce is a qLialifi(-ation for -.@-.embership in ERCOT, and its chairman told us that ERCOT utilities believe isolated operation best meets their goal of providing economical, reliable electric service. Texas utility executives expect tc face a number of regulatory problems if they interoonnect in@erstate and are subjected to FPC juris- diction. 15 Although we did aot attempt to determine t1? validity of FPCIP or ERCOT's contentions, the Central ane Southwest Corporation, which ha3 subsidiary utilities in EZCOT's and SPP's regions, evaluazed the benefits from interonnecting its four subsidiaries. The study points out tha,_ long-run economic benefits of $38.7 million are available by inter- connecting the Corporation's subsidiaries. The study indi- cated that an additional potential savings of $227 million is available if full, coordinated use can be made of the trdnsmission systems in Texas. (A further discussion of the Corporation's study is contained in chapter 4.) Although ERCOT is isolated from its neighbors, ERCOT officials said that joint studies would have the advantages of obt3ining input from all parties and, therefore, would have a bettt-r chance of being accepted. The participants would identify and understand areas of disagreements--not necessarily eliminate disagreements. Such a joint effort, which would in- clude ERCOT, should (1) reduce questions concerning the validity of projected economic benefits and cost estimates and (2) resialt in the study's acceptance. Department of the Inter'i8r's study The Bureau of Reclamation published an interconnection study in March 1975 which idantified a potential for cost savings and reduction in oil and gas consumption. The inter- connection considered was between the companies in the Mid- Continent Area Reliability Coordination Agreement (MARCA) and in the Western Systems Coordinating Council 1/. The study was based on data publ4shed by MARCA and WSCC. The study projected that entities in :he KARCA area may be capable cf generating enough excess energy during light load periods to displace the consumption of 23.9 million barrels of oil at an estimated cost of $245.3 million by 1983 when the line could be operational. The $245.3 million represents about one- sixth of the amount required to consturct the two 1,900-mile, 765 kilovolt (kV) alternating current lines. The study con- cluded that a more comprehensive interconnection study should be undertaken to determine how these two systems might be interconnected to achieve these savings. I/ MARCA and WS;_'C are two of the NERC regional councils. See appendix I for map indicating the areas covered by MARCA and WSCC. 16 In March 1975 WS--'-C officials told us that t@-,ey were not aware that such a potential had Deen identified. Some utility officials believed that it would riot be Leliable for customers, to be supplied with electricity generated 1..900 r,iles away because of the possibility tnaz tne lines could ro out of ser- vice and leave customers witnout power. In Decerber 1975 the Congress authorized the Secretary of ':he Interior to engage in detailed feasibility studies of power intercortnection poten- tial. These studies will include consideration of a MARCA-WSCC interconnection. As part of FPC's role of promoting and encouraging inter- connections, it snould participate in interconnection studies. NERC believes that studies can only be conducted by those who are intimately knowledgeable of the present facilities, the capabilities of the faC41itieS, the mode of operation, and the lirriftations, that exist. If FPC had participated jointly with interior, as well as witn WSCC and MARCA utilities, all parties would have been aware of the potential benefits. As a result of their awareness (and 3oint participation), their concern for reliability may have been reduced and could have increased the chances ot their accepting the study conclusions or in the modification of the studv to account for any valid concerns of the utilities. UTILITY INDUSTRY VIEWS OF FPC RESPONSIBILITY TO PROMOTE INTERCONt4ECTIONS We met with executives of 48 electric utilities to discuss FPC's responsibility to promote ana encourage interconnections. These executives presentA widely diverse opinions on the need for FPC involvement in identifying and evaluating intercon- nections, and on the need for FPC to take a more aggressive role in promoting interconnections through mcre studies. Mos, felt that the transmission system generally has been meeting ti..: zeds of the Nation. The NERC president recognized the advantages of a joint Federal and utility industry effort to study potential inter- connections. Such a join. effort should address and help solve the problems associated with construc Vg I nterconnections. Some executives of a private utility favored FPC's efforts in promoting interconnections. They viewed !@'K as a catalyst for more anlaysis ef interconnections. An official of the Bonneville Power Administration believes that FPC could provide the needed leadership to ensure that all beneficial interconnections are identified and built. 17 Other private utility executives believed that FPC can not make any contributions to the utility industry by promoting and encouraging interconnections. Furthermore, utility exec- utives told us that constructing additional interconnections will not by themselves solve the energy, fuel, or capacity problem facing the utility industry. Most _,tility executives do not believe that FPC personnel possess tii@ detailed knowledge of individual power systems neceqsar,., .. --ftectively ass-:@ss the specific costs and benefits of int;- rinections between such systems. For example, one of the criLAAASMS Of tne FPC report which identified benefits to interconnectirg ERCOT and SPP was the argument that it failed to recognize improvements to ERCOT's system whi-@:h would be required before interconnections could be made. Utility exec- utives ccntend that only engineers with a detailed knowledge of a given system would recognize such requirements. Host of the utility executives we met with said that if FPC continues or expands its efforts in studying and promoting in@erconnections, it must be with the volunatry participation of t:@e utilities affected. Such cooperative efforts would allow those individuals most familiar with the system to actu- ally participate in the analysis. In their opinion these coop- erative efforts could also ensure nat study conclusions would be "objective and realistic" because they would have inpilt from the utilities directly involved as well as the Government. Also, because all parties concerned would have a part in performing th-2 studies, tnere would be a much higher probability that the recommendations would be implemented than if FPC were to do the studies independently. In any future eftorts to work more closely with utilities in joint studies of interconnections, FPC should make every effort to maintain its independence and objectivity. 18 CHAPTER 4 FACIORS AFFECTING CONSTRUCTION OF INTERCONNECTIONS The utility industry must deal with financial, environ- mcntal, and institutional considerations which may result in delay or cancellation of proposed interconnections. These factors are often complex and outside the control of individual utilities and, in some situations, the utility.industry itself. Delays and cancellaticns as a result of these factors may limit the efficiency-and effectiveness of the utility industries, efforts to provide customers with the most reliable and economic supply of electrical power. The effect of delays and cancella- tions of interconnections could reduce operating flexibility and transmission capability. Furthermore, in a number of areas, delays in transmission lines could make the netw-:)rk vulnerable to outages. Successful completion of many planned transmission lines needed to interconnect systems is questionable because of various..factors. The following schedule shows some uf the reasons cited by FPC I/ for transmission line delays. Line Delays as of June 1975 Number of lines Average Reascn for delay delayed (note a) delay (months) Fiscal problems 22 32.5 Environmental considerations 38 26.3 Institutional (pEolonged pro- 32 17.4 cedures to obta.-*-n approval from Government agencies) a/ Some lines are delayed for more than one reason. I/ Data is from FPC@s Transmission Line Construction Data for the month of June 1975. is Obstacles to the construction of lines have already caused man@ postponements. in June 1975 FPC reported that 184 (68 percent) out of the 271 transmission lines under ccnstruction were delayed. These delays were the result of the previous factors as well as others such as technological lintitations and equipment delivery and installation problems. FPC reported that the delays ranged from I month to 13 years, and z@veraged 15 months. These factors have also caused cancellations of planned transmission lines. FINANCIAL PROBLEMS The electric power industry is one of the most capital- intensive indUSILieS in tl,,e United 5tates, with financing requirements representing about 15 to 20 pt-rcent of all U.S. corporate financing. The utility industry's ability to provide a supply of electLical power between J970 and 1976 had been financially restricted in many cases by --rapid increases in the rate of inflation, which caused increased constructio@i, operating, and maintenance costs, --te6uction in the development of new technological, cost-saving opportunities, --increased public pressure to reducc. the number of rate increases granted, and --reduced investor confidence. These cor.@,.tlons had a critical impact on many utility companies. Accutding to FPC, the rapid expansion of the utility industry's external financing requirements, combined with rising interest rates, caused the deterioration of elec- tric power company credit. Since 1970 the credit ratings of secruities of approximately 70 major investor-owned utility companies had been declining; however, the economy has been improving, and credit ratings are now improving. ENVIRONMENTAL CONSIDERATIONS The production and delivery of electricity has undesirable effects on the environment, Some ol these effects are --land use effect caused by transmission rights-of-way, --general esthetic effects such as noise and appearance, end 2U --interference with other spatial uses such as approaches to airports arid waterway3. Electric utility companies must meet various Federal, State, and local environmental requirements that have significantly increased the time necessary for planning and constructing power facilities. Also, the location of generating plants determines the location of transmission lines. While the plants may be en- vironmentally acceptable, the resulting transmission lines may have to cross land where the lines would be environmentally unacceptable. Therefore, lines, as well as plant locations, must be jointly evaluated. Environmental acceptability of one does not mean the same acceptance of the other. Although the requirements of State and Federal agencies vary in specific information requested, all generally require information to evaluate the environmental impact of the facilities. For example, the Interior's Bureau of Land Manage- ment requires the applicant who wishes to construct a line across Federal lands to submit an application and conduct an environmental impact survey from which an environmental report is prepared. The report includes --a description of proposed construction and --information concerning the pro4ect's impact on air space, air and water quality, scenic and esthetic features, historical and archaeological features, and wildlife, fish, and marine life. The application and above required data are reviewed, and the district offico prepares an environmental analysis report of the proposed construction. The report assesses the impact the proposed transmission line will have on the surrounding environment and contains an environmental statement and analysis of alternatives. During preparation of the report, the public is informed ahout the proposed construction, and comments are solicited. The completed report is sent to the Council on Environmental Quality which distributes copies to appropriate Federal, State, and local Qovernment bodies and sees that a notice appears in the Federal Register. If a decision is made that the construction will signif',_ cantly affect the environment, then an environmental impact statement must be prepared. A notice of the final statement is published in the Federa.@ Register. The sta,zement is supposed to include 21 --a description of c(.nstruction, --a description of environmental impacts, --a summary of probable adverse environmental effects which cannot be avoided, --a description of the relationship between local short-term uses and maintenance of long-term productivity, --a summary of irreversible and irretrievable commitment of resources, and --comments from the public, Federal, State, and local governments. After the statement is approved by Interior, a permit is issued. Utility and'land agency officials state that it generally takes about 18 months to 2 years to obtain right-of-way permits for larger transn-iission lines. If law suits are filed against the proposed construction, the time may be even longer. Prese,it attitudes on protecting the environment are strong and legitimate. Environmental protection is not a peripheral aspect to constructing interconnections and, therefore, requires attention in planning such lines. The following case exemplifies the many environmental considerations that have to be recognized. Keeney-Salem transmission line In 1965, Delmarva Power & Light Company initiated plans for a 500-kV transmission line in Delaware to connect with the Pennsyl,@ania-New Jersey-Maryland Interconnection's 500-kV transmission system. The proposed line was designed to cross the State of Delaware extending from the western border with Maryland to the New Jersey State line on the eastern side of the Delaware River. The Keeney-Salem interconnection has met continual concern from environmental groups. Sinc2 1966 the following events have affected the proposed line: --The original layout, presented in 1966, was not con- structed because (1) the location's proximity to an airpcrt limited the height of the line, (2) the low 22 height of the line did not allow ships adequate clearance on the Delaware River, and (3) the line would be,too close to ahistoric park and a national cemetery. --A second approach required a right-of-way @paralleling the river.., Opposition was made to.this route on the basis that the line would be partly located on tidal marshland.and would traverse potertial, parkland. .--A third alternFtive route was secured. Construction permit applications for this route were initiated in late,1969. Subsequent public hearings raised objections from local @sailing clubs, that the I ine would cause additional obstacles in the riverand would be esthetically undesirable. The utility comp,any,.therefore., made,several st-udies of both. underground and@overhead alternatives. None 'was @found to be feasible. A construction permit for the proposed site was obtained from the Corps of Engineers in July 1973. --Planning and construction began immediately. In October 1973 the Corps of Engineers, acting,on a State of Delaware ruling " ordered work to stop. ..The Delaware State Attorney General s@--,@Ited that the permit had been improperly issued because.the State Water and Air Resources Commission failed to hold"' a.public hearing. The utility company. filed a, complaint in the.:courts challenging the State of: 'Delaware's position. --The legal issues were cleared and the permit needed to.resume construction was givea by the Corps of Engineers in August 1976. Construction began again in Sept:ember 1976 and it is estimated that it will be 15 months from start to finish. This line will be part of an.extension of .500-kV bulk power system in.PJM, and the two lines together are necessary to 'deliver the output of nuclear generating units to the vari-. ous load centers. Delayed construction of the.Keeney-salem transmission 1-ine has required implementation of, emergency .operating procedures on several occasions to@relleve critical line loadings. 23 INSTITUTIONAL CONSTRAINTS The existence of statutes, policies, and contracts has caused institutional constraints to constructing transmission facilities. Such institutional constraints have kept utilities from considering or entering into some interconnection projects, while delaying some others. During our review, we identified the fc1lowing instances affecting the construction of inter- connections. Reluctance of Texas utiliF-iesto interconnect ERCOT prohibits any of its member compenies ---:rom inter- connecting with systems outside of Texas. This prevents members from buying or selling electric ener-gy in interstate commerce. The Central and Southwest Corporation, a public utility holding company, had operating subsidiaries in both ERCOT and SPP. Eac'11 subsidiarv represented an economic operating area responsible for dLSiatching electric power within its bound- aries. The-@ su@-A'iaries include: Service Company of Oklahoma. --!;outhwestern Electric Power Company. --Central Power and Light Company. --West Texas Utilities Company. West Texas Utilities Company, at that time, had divisions in each Council and had two economic operating areas. Subse- quently, West Texas Utilities Company's divisions merged and now belong to the same council (SPP). In November 1975 the Corporation released an exp,:nsion study covering a 20-vear period (1975-95) examining the relative @conomies of continuing the isolated pattern or operaLing as an interconnected system.. The study recognized that the operating pattern had been well suited to an era when low cost and abun- dant oil and natural gas supplies were available locally to use as fuel for power generation. It also recognized that fuel conditions are undergoing a fundamental and probably irrever- sible change, and that recent emphasis on oil and natural qas conservation indicates the future baseload generation for the Corporation will be coal-fired or nuclear. 24 The expansion study indLcated that additional loncun total economic benefits of $38.7 million by 1995 were availatLe through interconnecting the operatiois of the four Corporation 3ubsid- iaries. However, these potential benefits to interconnicted operation could not be realized because of ERCOT's memt-@rship requirement. The savings are primarily the result of operating economies available when using an economic dispatch which con- siders the consolidated electrica: load of the entire inter- connected area. The Corporation began a more detailed study of the specific costs and benefits in Januai-y 1976. An additional potential savings of $227 million l/ above the $38.7 million discussed above is available if full, coor- dinated use can be made of the transmission systems in Texas to transfer power between the Corporation's operating subsid- iaries. In this situation, short-high-capacity interconnections could be put in place between ERCOT and SPP. Preliminary indications are that the Corporation's power transfers would not adversely affect the load of existing and planned ERCOT circuits. However, detailed load flow and stability studies are still required. Legal limitation on Bonneville Power Administration energy transfers Public Law 88-552 (16 U.S.C. 823) limits BPA in trans- ferrinq surplus energy from the Pacific Northwest, and therefore, restricts utilities outside the Pacific Northwest from either constructing additional interconnections or increasing the capacity of t',e existing interconnections. The act requires BPA to serve the requirements of the fic Northwest before marketing such power and energy out- Paci side the region. The act states that the export of Federpl hydroelectric power in the Pacif ic Northwest is limited to surplus energy and surplus peaking capacity, and notes that the Secretary of the Interior can stop delivery of the surplus energy i t 4 by giving notice, within 60 days, of any cond @ons that may impair the Northwest's energy. The act also states that the Secretary may terminate any contract of surplus peaking capacity upon notice within 5 years. The 5-year provision, while protecting the Northwest, removes opportunities for new long-term contracts for power with l/ The study does not recognize the impact that may accrue to other utilities. 25 Southwestern utilities. Without the assurance of a loi-g-term contract, utilities we contacted state they would have no guarantees to meet their energy needs and justify their invest- ment in new interconnections. 26 CHAPTER 5 CONCLUSIONS, RECOMMENDATIONSt CY COMMENTS AND AGEN CONCLUSIONS Althou pear adequate to meet gh present interconnections ap our current needs based on experience to date, Federal and -independent studies of the reliability and adequacy of the national power supply indicate that. future reliability and adequacy of the electric bulk power supply depends, on the timely installation of new generation and transmission facil- ities.to.meet our future needs.Further, several studies indicate that additional interconnections are economic. Un- fortunately, there is little or no concensus on the validity, of these studies. This conclusion stems in part from our belief that FPC has not effectively carried out its existing responsibilities of promoting and coordinating interconnectio throughout the, Nation. Its recent studies have been conducted primarily in the Southwest and have received only partial acceptance by the utility industry. Interconnection studies have. also been independently made by utilities,the Bureau of Reclamation, BPA, and others without FPC involvement. We believe that FPC should establish national criteria to be used in considering needed interconnections because there may be many instances where an interconnection could present minimal or no economic advantage (or disadvantage)to a utility but could provide advantages to a region or the Nation. These criteria should allow consideration of such goals as energy conservation, reduced transmission and generation, reliable ices, and.national defense. Each of national emergency serv these goals is becoming increasingly important as the Nation's domestic energy supplies decrease. National resource objectives and resovrce policy have not b,een considered by utilities as a benefit of an interconnection. Uniesslan interconnection shows economic benefits to one or more of the interconnecting parties, a utility will not act on. its own to install it. We believe that consideration of such goals should,be an integral part of the interconnection planning process. ERDA is developing criteria for the study of electric util- ity system expansion. ERDA sees this as an initial step, which we believe has considerable value in identifying factors-which 27 should be taker, into account in identifying and evalu,-,ir potential interconnections. FPC, in establishing nationEL interconnection criteria, should consider and use, where practical, the results of ERDA's study. The establishment ck such criteria would be a first step in making the utilities aware ot the seriousness of the Govern- ment's interest in promoting interconnections. If the criteria, once established, are not used by the utilities in their deci- sionmaking, then FPC s@--,uld move to seek legislative autt-ority to compel their considccation. We belipve, however, it is premature to move lo suct.,compulsory action at this time, A recent study prepared for the Congressional Research Service pointed out that interconnection studies have been nerformed but that additional evaluation of those studies is needed. However, despite this need, no entity--Federal or non- Federal--assures that such further evaluations will be made. Tile only followup action that might be initiated would be if the specific participants decide on their own to further evalL@ate the interconnections. We believe that a need exists for FPC to promote a joint Federal-utility effort to systematically (1) idenitfy and study future interconnections 3n a regional and inter-regional basis, and (2) follow up on previous studies to determine whv the utilities have not implemented them or further analyzed the proposed interconnection. The interconnection studies that result from these joint planning efforts should recognize the various purposes, needs, and objectives of each organization involved, as well as national goals. This coordination should insure that differ- ences among oraanizations will be idpntified and discussed, and ultimately improve the opportunity for their resolution. Financial, environmental, institutional, and technological factors are affecting the utility industry's caility to provide its customers with completely reliable servico at the lowest prices consistent with our Nation's social and environmental goals. Joint Federal-industry studies shoul-I include a deter- mination of the impact of all relevant lactors and consider- a@ion of methods to develop alternative plans for providing the needed services. 28 Ile, RECOMMENDATIONS TO THE CHAIRMAN, FPC We recommend that the Chairman, FPC --take the lead in promoting, throughout the Nation, joint Federal-industry studies to identify and evaluate new interconnections and changes in existing interconnections, - follow up on compleced interconnection studies to -resolve objections to the studies which might result in adoption of study recommendations, work with utilities to establish criteria for carrying --out interconnection studies which will require ad- equate consideration of national goals and timely identification of factors which may adversely affect the proposed interconnection, and --work with the utilities to make sure the criteria are used; if they are not used voluntarily within a reasonable zi'me after their release, the Commission should cons4'i.!,-r whether further steps should be taken to compel their consideration, including seeking addit-onal legislation as necessary. AGENCY COMMENTS AND OUR EVALUATION 0epartmenz of the In:erior Interior stated in their lc-tter of November 29, 1976, (3ee app. II), that our report presents a comprehensive anal- yE.is and agrees that transmission and generation should be planned to consider the advantages interconnections r-,,ay offer for pursuing national or regional energy conservation programst reduced transmission and generation investment, emergency service, and national defense. Interior pointed out that two of their studies were of an exploratory nature and for this reason, all. potenti,,l parties were not includeJ. We believe, however, that any interconnection studies should be of a joint nature to include all parties. Federal Powei Commi=-:-"nn FPC said in the:.- 16tter of November 3, 1976, that there is little basis presented ir, our report to conclude that FPC has not effectively carried out its responsibilities in pro- moting interconnections and that the current network speaks for itself.. (See app. III.) 29 According to NERC, iowever, it has been the in '.tiative of industry to interconn @ct and not because of FPC )r any other Government agency. We believe the future eleftrical demands win require joiat studies and that natione - criteria should be considered. Trierefore, it is important f )r FPC to follow its mbndate to promote interconnections. National Electric Reliability Council NERC said that the present system of interconnections is a result of the efforts and good judgment of highly qualified, dedicated engineers and executives who are intimately involved in these matters. NERC said that the present system of inter- connections is a rcsult of the planning and development by the electric utility industry. We agree that the present system should be attributed to the electric utility industry; however, we believe that the future electrical demands will require joint studies and that national criteria should be considered. Therefore, it is important that industry and the Government work toqether to achieve this. 30 APPENDIX I APPENDIX 1 "7L 711 01 NATIONAL ELECTRIC RELIABILITY COUNCIL Coal C,&@ffi Afso ECAS 00@mms_ MAIN ""@ a SERC InIO-DW Ne Pi .0 C-'-' Ala. EnCOT E@00@ lPloo-ab-y MARCA ov. ld-,.@ SPP P- P@ co@ a, U." Aq- !fW A@ PiFCC ,,l p*am:.0009 MA.AC r'. C,"a-a @g Co. wscc cW0 31 APPENDIX IT APPENDIX II United States Department of the Interior OFFICE OF THE SECRE.ARY %'@ASHINGTON, DC 2W40 NOV 20 1976 Mr. Monte Canfield, Jr. Director, Energy and Minerals Division General &ccounting Office Washington. D.C. 20548 Dear Mr. Canfield: We have reviewed your proposed report to the CongreRs entitled "Problems in Planning and Constructing Transmission Lines w7hich Interconnect Utili- ties" forwarded with your letter of October 4, 1976. While the report makes no reconnendations. to the Department. we oifer the following comments in the hope that they will be useful in clarifying certain sections of the report. General Comments The subject draft report presents a comprehensive analysis of a highly romplex subject. The GAO should be commended for the scope of its efforts and its presentation of a very difficult subject. The main impact of the report suggests that the Federal Power Commission (FPC) establish and ensure the uFe of national criteria In future inter- conr-@ction studies. The point is well taken, We feel transmission and generation should be planned to consider the advantages interconnect ions may offe- for pursuing national or regional energy conservation programs, reduced 7ransmission and generation investment, emergency service, and national aefense. The Department of the Interior chouI6 be actively involved in any inter- connection planning since often regional iiterties require an inter- connection with one cr more af the five power marketing agenrics of the Department. The report is somewhat critical of past actions of the Department. The Bureau of Reclamation's authority for involveniia In transmission inter- ties is limited. Until the sign ing of Public Law 94-156 on December 16, 1975, the authority granted to the Secretary of the Interior. by the Reclamation Act of 1939 and the Flood Control Act of 1944, to be involved in power transmission wqs related to the marketing of surplus power from Federal hydroprojects. Acting witoin that authority, Reclamation has con- ducted or participated in several joint studies of interties. LoTjo,, FC M 32 APPENDIX II 11,PPENDIX II The draft report makes, no .-tention of studies that led to the evt tual construction of interconnE tion transmission intertics. Both ti Bureau and the Bonneville Power A ministration (BPA) 'nave coordinated a -me interconnection studies wi-h customers and other affected utilit es. For example, the 3,900 KvJ .:apacity Pacific Norchwest-Pacific Sot hwest intertie was constructed f 111owing a series of studies conductel jointly by Interior agencies and tne utilities durIng the early 1960's. Further- more, current studies are in progress, conducted by the same orl inizations, which consider increasing the capacity Of the intertie lines by 4,400 K-4. While the report criticizes Reclamation for conducting studies without involving all potential interested partieg, what seems to have been over- looked is the necessity to make a preliminary analysis of possibilities before in-depth studies can be formulated. The szudies cited by GAO have all been reconnaissance- leve I studies attem?ting to determine whether further in-depth analysis Is justified. Both the "Trai.smj-.:;ion Study 190" and the March 1975 "Intertie Appraisal Study," referred to in the report, were of an explorat-sry nature, as evidenced by the fact that the primary recommendation in the report of each of thc@e stud, s 2 - for forther study. Specific Comments Digest, Page 1. In aJd1tion to the listed advant@.&cs, an economy which can be realized by the interconnection of utilities is a reduction of trans- mission capital investments and of environmental impacL. These costs and Impacts can result from th2 reduction of facility duplication. It should be noted, however, that while transmission intertles can materially assist in energy conservation, this may not always be true. Transmission interties may enable the use of somewhat more efficient energy conversion installations to supply energy to consumers or enable a diiferent raw energy resource to be used in conversiOLI to electrical ent.:Zy, such as the use of Water that may otherwise be srilled. Cnly the gain In energy conversion efficiency can contribute to energy cor@;ervatl-n. and this may be offset in part by transmission energy losses. We think it would be useful to discuss in more detail in the body of the report the benefits to the nation of saving diminishing fossil fuel supplies, such as gas and oil, which would occur as a result of some interconnections. Page 3, Second Paragraph * The report states that Interior studie3 did not involve the affecEed utilities. BPA has perfor-mpd many interconnec- tion studies in the Northwest involving the a.c. and d.c. interties, 33 APPENDIX II APPENDIX II The draft report makes no :.ention of studies that led to the eve tual construction of interconnection transmission intertics. Both the Bureau and the Bonneville Power AdminiEtration (BPA) have coordinated me interconnection studies with customers and other affected utili es. For example, the 3,900 V apacity Pacific Northwest-Pacific Southwest intertie was constructed following a series of studies conducte jointly by Interior agencies and the utilities during the early 1960's. Further- more, current studies are In progress, conducted by the same organizations, which consider increasing the capacity of the irtertie lines by ,400 MW. While the report criticizes Reclamation for conducting studies without involving all potential interested parties, what seems to have been over- looked Is the necessity to make a preliminary analysis of possibilities before in-depth studies can be formulated. The SLudies cited by GAO have all been reconnaissance- leve I studies attempting to determine whether further in-depth analysis is justified. Both the "Transmission Study 190" and the March 1975 "Intertie Appraisal Study," referred to in the report, were of an exploratory nature, as evidenced by the fact that the primary recommendation in the report of each of these stud s for farther study. Specific Comments Digest. Page 1. In addition to the listed advantages, an economy which can be realized by the interconnection of utilities is d reduction of trans- mission capital investments and of environmental impact. These Costs and impactF can result from the reduction of facility duplication. It should be noted, however, that while transmission InLerties can materially assist in energy conservation, this may not always be true. Transmission interties may enable the use of somewhat more efficient energy conversion installations to supply energy to consumers or enable a different raw energy resource to be used in coriversion to electrical energy, such as the Use Of Water that may otherwise be spilled. Only the gain in energy conversion efficiency ran contribute tn energy conservation, and this may be offset in part by transnisslon energy losses. We think it would be useful to discuss in more detail in the body of the report, the benefits to the nation of saving diminishing fossil fuel supplies, such as gas and oil, which would occur as a result. of some interconnections. Page 3. Second Paragraph. The report states that Interior studies did not Involve the affected Utilities. BPA has performed many inrerconnec- tion studies in the Northwest Involving the a.c. and d.c. interties, 33 APPENDIX Il APPENDIX II Canadian Interties, and interties proposed to Montana, Coistr[p, etc. All of these studies involved the affected utilities and the results, -generally, were accepted by the affected utilities. (See GAO note 1. P. 36.1 Chapter 3, Pages_24 and 25. The discussion of the "Interior study" requires some editing such as: [See GAO note 1. P. 36.1 Page 25, paragraph 2 - W,! recom;,end deletion. Me Lffort bcing discussed is an appraisal to determine whether a "study" would be worthwhile. It is not practicable to have initial appraisal activity become multiorganization efforts. ChApter 3, Page 27, Last Paragraph. We agree with the report's statement that to be successful, joint studies involving thc technical experts of the utilities are essential. We would go one step farther and say that the studies should incorporate environmental concerns from their inception. [See'GAO note 1, p. 36.] 34 APPENDIX II APPENDIX II Chapter 4, Page 31, Fnvironmental Considerations, First Paragraph. The Effects listed in the report appear to deal only with transmission, not generation and marketing. This paragraph could also list: "--The physical effect of rEmoval of land from other uses; --The effect of construction and operation on natural resources such as soil, vegetation, air, and water; --The esthetic effects of noise and appearance; --The economic effects." In light of GAO's recommendation LhaL joint rederal utility studies be conducted. when Federal lands or marketing agencies are involved It would appear appropriate that such studies should fall under the Federal lead agency role established by the National Environmental Policy Act (NEPA). 'Me meeting of environmental requirements could be expedited by the consolidation of Intergovernmental Coordination (A-95) and NEPA reviews at the Federal level. BPA. in effect, does this with very few delays in projects occurring as a result of NEPA and other environmental legislation. Intertie studies might be conducted by a joint Federal/ utility task group cunsisting or both utility technical and environ- mental planning expertise. Such expertise should be drawn from the Utilities and the land management agencies involved. Such a task team under the Department of the Interior Federal lead agency designation could ensure that environmental factors are considered in the technical analysis of the intertie requirements. It would also provide a team which could complete the environmental impact statement resulting from Cop proposal generated by the feasibility studies. [See GAO note 1, P. 36.] Chapter 4, Page Second Paragraph. The report cLarvr char the 5-year commitment limits long-term contracts with Southwestern utilities. It should be noted that FPA has 20-year power salts contracts with utilities outside the region with 5-year pullback provisions for specific purposes only. This paragraph ignores the possibility of developing diversity exchanges. 35 APPENDIX II JIPPENDIX II [See GAD note 1, p. 36.] We appreciate the opportunity to comment on this very important subject. Sincerely, DePUt?AssistanL Secretary Administration and Management GAO notes: 1. The deleted comments relate to matters which were discLssed in the draft report but omitted from this final report. 2. Page references in this appendix refer to the draft report and do not agree with the page number in the final report. 36 APPENDIX III APPT:NDIX 1II FEDERAL POWER COMMISSION WASHINGTON. D.C. 20426 IN REPLY R, FER TO. NOV 3 1976 Mr. Monte Canfield, Jr. Director, Energy and Minerals Division U. S. General Accounting Office Washington, D. C. 20548 Dear Mr. Canfield: This is in response to your letter of October 4, 1976, inviting our comments on the draft of your proposed report to Congress to be entitled, "Problems in Planning and Constructing Transmission Lines Which Interconnect Utilities." A detailed review of the proposed report has ind-icated that it is deficient in some areas and that some of the reported conclusions are nut supported by the facts in the text. The GAO letter dated Februany 12, 1975, initiating this study stated that it was intended to be a general survey into the potential for increased effectiveness of interconnection and transmission systems for electric power. We feel that this would still be a more appr-3priate title for the report. This proposed report to the Congress by no means lists all the problems nor analyzes them as the present title might lead one to -@xpect. It is of particular concern to us that very little wntion is made of the nine existing Electric Reliability Councils, of the work they are doing, or of the role that the Federal. Power Commission has taken in initiating and continuing their work to provide an adequate and reliable bulk power supply in the United States. It is our opinion that the nine Councils and tht! National Electric Reliability Council, working together and with the FPC, have made great strides toward assuring an adequate bulk power supply. A key pz!rt of this effort is the coordination and interconnection of the electric systems not only within each region but among regions. A comparison of the regional interconnections existing in 1967 with those existing today and with those @Janned will WTI% 0/ CN 4 37 APPENDIX TT1 APPENDIX III Mr. Monte Canfield, Jr. i-ndicate a significant amount of interconnection progress. Although this endeavor on the part cf the -industry has been pLimarily voluntary, there seems little question that the interest, the participation and the urging of the FPC has been most instrumental in the progress that has been made. The Commission has under consideration legislative proposals that would give it authority to order electric power wheeling under certain conditions. It should be pointed out that if this authority should be granted, one of 1@he most important questions which we will have to face will be the decision on reasonable economic ard financial terms for the provision of services. The report states that the FPC has not effectively carried out its responsibilities in pr3moting interconnections. We believe that there is little basis presented in the proposed report for this conclusion. At one point, the report presents the oppo6ite opinion when it states that existing interconnections are adequate. We feel that the incorporation of the more detailed comments attached would strengthen the report. We would be happy to meet with you and your staff at your convenience to discuss these comments and other thoughts we may-both have. Sincerely yours, Richard L. Dunham Chairman Enclosure (See GAO note.] GAO note: The enclosure is not included here but was considered in this report. 38 APPENDIX IV APPENI.CX IV PRINCIPAL OFFICIALS RESPONSIBLE FOR ADMINISTERING ACTIVITIES DISCUSSED IN THIS REPORT Tenure of office From To CHAIRMAN: FEDERAL POWER COMMISSION Richard L. Dunham Oct. 1975 Present John N. Nassikas Aug. 1969 Oct. 1975 CHIEF, BUREAU OF POWER Whitman Ridgway Apr. 1976 Present Whitman Ridgway (acting) Feb. 1976 Apr. 1976 T. A. Phillips Nov. 1970 Jan. 1976 39 "b I r imr-- I MI NIIIIIIIIIIIIII @ I -1 3 6668 00001 5802 1