[Federal Register Volume 59, Number 152 (Tuesday, August 9, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-19294]


[[Page Unknown]]

[Federal Register: August 9, 1994]


-----------------------------------------------------------------------

DEPARTMENT OF ENERGY
Western Area Power Administration
RIN: 1901-AA50

 

Proposed Energy Planning and Management Program

AGENCY: Western Area Power Administration, DOE.

ACTION: Notice of proposed Program and request for public comments.

-----------------------------------------------------------------------

SUMMARY: The Western Area Power Administration (Western) proposes to 
adopt an Energy Planning and Management Program (Program). The Program 
is being proposed in part to implement section 114 of the Energy Policy 
Act. The proposed Program would require the preparation of integrated 
resource plans (IRP) by Western's customers and establish a framework 
for extension of existing firm power resource commitments.

DATES AND ADDRESSES: Combined public information/comment forums on the 
proposed Program will be held on the following dates and at the 
following locations:

September 7, 1994, 9 a.m., Doublewood Inn, 3333 Thirteenth Avenue 
South, Fargo, ND (701) 235-3333
September 8, 1994, 1 p.m., Ramkota Convention Center, 2400 North Louise 
Avenue, Sioux Falls, SD (605) 336-0650
September 9, 1994, 10 a.m., Red Lion, 2001 Point West Way, Sacramento, 
CA (916) 929-8855
September 13, 1994, 10 a.m., Holiday Inn, 10 East 120 Avenue, 
Northglenn, CO (303) 452-4100
September 15, 1994, 1 p.m. Doubletree Hotel, 215 West South Temple, 
Salt Lake City, UT (801) 531-7500
September 26, 1994, 1 p.m., Airport Hilton, 700 North Haven Avenue, 
Ontario, CA (909) 980-0400
September 27, 1994, 1 p.m., Phoenix Area Office Conference Room, 615 
South 43rd Avenue, Phoenix, AZ (602) 352-2662

    Written comments on the proposed Program should be submitted to 
Western by October 11, 1994.

FOR FURTHER INFORMATION CONTACT: To submit written comments, or for 
additional information, please contact:

Robert C. Fullerton, Western Area Power Administration, P.O. Box 3402, 
A6100, Golden, CO 80401-0098 (303) 275-1610
James D. Davies, Billings Area Office, Western Area Power 
Administration, P.O. Box 35800, Billings, MT 59107-5800 (406) 657-6532
Stephen A. Fausett, Loveland Area Office, Western Area Power 
Administration, P.O. Box 3700, Loveland, CO 80539-3003 (303) 490-7201
J. Tyler Carlson, Phoenix Area Office, Western Area Power 
Administration, P.O. Box 6457, Phoenix, AZ 85005-6457 (602) 352-2453
James C. Feider, Sacramento Area Office, Western Area Power 
Administration, 1825 Bell Street, Suite 105, Sacramento, CA 95825-1097 
(916) 649-4418
Kenneth G. Maxey, Salt Lake City Area Office, Western Area Power 
Administration, P.O. Box 11606, Salt Lake City, UT 84147-0606 (801) 
524-6372

SUPPLEMENTAL INFORMATION:

Background

    On April 19, 1991, Western proposed in concept an Energy Planning 
and Management Program (56 FR 16093). The goal of the Program was to 
require planning and efficient electric energy use by Western's long-
term firm power customers and to extend Western's firm power resource 
commitments. On May 1, 1991, Western announced its intention to prepare 
an environmental impact statement (EIS) on the Program due to 
potentially significant environmental and economic issues that may be 
of interest to the public (56 FR 19995).
    Combined public information/environmental scoping meetings on the 
Program were held in seven States in June of 1991. Based on the 
feedback received from these meetings, Western developed alternatives 
to be analyzed in the EIS. Alternatives workshops were held in eight 
cities during March and April 1992. Based on further public input 
received during these workshops, as well as comments previously 
received, Western announced a tentative preferred alternative for the 
EIS in a Program newsletter in June of 1992.
    On October 24, 1992, the President signed into law the Energy 
Policy Act of 1992 (EPAct), Public Law 102-486. Section 114 of that 
legislation requires the preparation of IRPs by Western's customers and 
amends Title II of the Hoover Power Plant Act of 1984. Western has 
adjusted its Program proposal to reflect fully the provisions of this 
law.
    On March 31, 1994, a notice of public availability of the draft EIS 
was published in the Federal Register (59 FR 15198). The Environmental 
Protection Agency also published a notice of availability of the draft 
EIS on April 1, 1994, officially starting a 45-day public comment 
period. Eight hearings were held throughout Western's service 
territory, with over 130 members of the public in attendance. About 200 
written comments were received on the draft EIS. Discussion of all 
comments is attached to this Federal Register notice.
    Western is now at the point in the Program development process when 
issuance of proposed procedures is appropriate. A 60-day consultation 
and comment period starts with the publication of this notice in the 
Federal Register.

Proposed Action

    The Program goal is to promote the efficient use of electric energy 
by Western's customers and to extend Western's long-term firm power 
resource commitments in support of customer IRPs. A major purpose of 
this action is to assure the customers who purchase Federal power 
greater stability in planning for future resources than would exist in 
the absence of the Program. The Program proposal has two major 
components: (1) an IRP provision conforming to the requirements of 
EPAct and (2) a Power Marketing Initiative (PMI). The IRP provision, 
formerly known as the Energy Management Program, would require most 
long-term firm power customers to (1) develop and implement an IRP, (2) 
submit an updated IRP every 5 years, and (3) submit an annual progress 
report. A different requirement for small customers with an annual load 
or usage of 25 gigawatthours (GWh) or less is proposed, as allowed in 
the Energy Policy Act of 1992. This IRP provision and small customer 
provision will amend Western's Final Amended Guidelines and Acceptance 
Criteria (G&AC) for Customer Conservation and Renewable Energy (C&RE) 
Programs of August 21, 1985 (50 FR 33892). Western will continue to 
provide a wide range of technical assistance services to customers. A 
penalty provision for noncompliance with the IRP provision would 
consist of a 10-percent surcharge for the first 12 months of 
noncompliance, 20 percent for the next 12 months of noncompliance, and 
30 percent thereafter for as long as noncompliance persists. In lieu of 
a surcharge after the first 12 months of noncompliance, Western 
proposes to impose a 10-percent resource reduction penalty if such an 
approach is more effective in assuring compliance or is more cost-
effective for Western. Penalties in existing contracts will continue to 
be in effect until changed. The penalties proposed in this Program will 
be incorporated into the contracts that extend resources and will be 
effective upon contract execution.
    The proposed PMI would extend a major portion of the power 
currently under contract with existing purchasers. Western proposes to 
extend its existing long-term firm resource commitments, subject to the 
outcome of project-specific environmental work as appropriate. Western 
projects proposed for initial coverage under this PMI are the Pick-
Sloan Missouri Basin Program-Eastern Division and the Loveland Area 
Projects. The term of the extension would be 18 years from the date 
that existing contracts expire. The level of the commitment to existing 
customers would be a project-specific percentage of the resource 
available when existing contracts expire, as described in section IV.C 
of the proposed Program, with two withdrawals at 5-year intervals after 
the new contracts become effective. Unextended resources would be 
available for allocation to new customers and other purposes as 
determined by Western. In addition, marketable resources placed under 
contract could be adjusted on 5 years' notice, and then only in 
response to changes in hydrology and river operations.
    Western believes that customer actions taken as a result of 
preparing an IRP should (1) either maintain or enhance existing energy 
services provided to consumers served by Federal power customers; (2) 
produce savings or benefits equal to or exceeding investment and 
operational costs over some reasonable period of time for demand-side 
management (DSM) alternatives, renewable energy investments, or supply-
side efficiency improvements; (3) produce measurable energy and/or 
capacity benefits as a result of customer investments; and (4) 
demonstrate sensitivity to environmental impacts and values.
    In these proposed procedures, Western commits to the use of IRP 
principles in its own resource acquisition and transmission planning 
programs. Western's commitment concerning the use of IRP principles 
will be pursued independently from the Program through a separate 
public process by Western starting within 90 days after the publication 
of this Federal Register notice. This separate public process will 
commence with publication in the Federal Register of a draft set of IRP 
principles, with opportunity for public comment prior to adoption of 
formal IRP procedures applicable to Western.
    The Program is being developed pursuant to Secs. 302(a) and 501 of 
the Department of Energy (DOE) Organization Act, 42 U.S.C. Secs. 7152 
and 7191; the Reclamation Act of 1902, 32 Stat. 388, as amended by 
subsequent enactments and acts specifically applicable to the projects 
involved; and section 114 of the Energy Policy Act of 1992, Public Law 
102-486.

Proposed Program

Section I--Contents

Section II--Definitions

Section III--Integrated Resource Planning

A. Applicability
B. IRP Content
C. Submittal Information
D. Approval Criteria
E. Special Provisions
F. Processing of IRPs and Small Customer Plans
G. Annual IRP Progress Reports
H. Noncompliance
I. Administrative Appeal Process
J. Periodic Review by Western
K. IRP by Western
L. Western Annual Report
M. Freedom of Information Act
N. Program Review

Section IV--Power Marketing Initiative

A. Applicability
B. Term
C. Resource Extensions and Resource Pool Size
D. Extension Formula
E. Adjustment Provisions
F. New Purchaser Eligibility
G. Marketing Criteria
H. Process

Section V--Energy Services

Section VI--Effective Date

Section II--Definitions

    A. The term ``Administrator'' means the Administrator of the 
Western.
    B. For any customer, the term ``applicable integrated resource 
plan'' or ``applicable IRP'' means the IRP approved by Western under 
these procedures for that customer.
    C. The term ``customer'' or ``customers'' means any entity or 
entities purchasing firm capacity with or without energy from Western 
under a long-term firm power contract. Such terms include member-based 
associations (MBA) and their distribution or user members that receive 
direct benefit from Western's power.
    D. The term ``integrated resource planning'' or ``IRP'' means a 
planning process for new energy resources that evaluates the full range 
of alternatives, including new generating capacity, power purchases, 
energy conservation and efficiency, cogeneration and district heating 
and cooling applications, and renewable energy resources, in order to 
provide adequate and reliable service to a customer's electric 
consumers at the lowest system cost. The process shall take into 
account necessary features for system operation, such as diversity, 
reliability, dispatchability, and other factors of risk; shall take 
into account the ability to verify energy savings achieved through 
energy conservation and efficiency and the projected durability of such 
savings measured over time; and shall treat demand and supply resources 
on a consistent and integrated basis.
    E. The term ``least-cost option'' means an option for providing 
reliable electric services to electric consumers which will, to the 
extent practicable, minimize life-cycle system costs, including adverse 
environmental effects, of providing such service. To the extent 
practicable, energy efficiency and renewable resources may be given 
priority in any least-cost option.
    F. The term ``long-term firm power contract'' means any contract 
with Western for the sale of firm capacity, with or without energy, 
which is to be delivered over a period of more than 1 year. This term 
includes contracts for the long-term sale of power from the Boulder 
Canyon Project.
    G. The term ``member-based association,'' or ``MBA,'' means a 
parent-type entity composed of utilities or user members.
    H. The term ``purchaser'' means the entity that has signed a long-
term firm power contract with Western. It does not include distribution 
or user members where the MBA is the purchaser, and it does not include 
the MBA where the distribution or user members are the purchasers.
    I. A ``small customer'' is defined as a customer with total annual 
sales or usage of 25 GWh or less which is not a member of a joint 
action agency or a generation and transmission (G&T) cooperative with 
power supply responsibility, and that Western finds has limited 
economic, managerial, and resource capability to conduct integrated 
resource planning.

Section III--Integrated Resource Planning

    A. Applicability: All customers of Western must prepare an IRP, 
regardless of a customer's resource needs, with the following two 
exceptions:
    1. Those meeting the criteria for a ``small customer'' as detailed 
in section III.E(1) of these procedures; and
    2. State-regulated, investor-owned utilities.

    Nothing in these procedures shall require a customer to take any 
action inconsistent with a requirement imposed by the Rural 
Electrification Administration.
    B. IRP Content: An integrated resource plan should support 
customer-developed goals and schedules. The plan should evaluate the 
full range of practicable alternatives for energy resources, including 
the appropriate use of cost-effective renewable and DSM resources to 
meet future needs.
    IRPs submitted pursuant to these procedures must consider 
electrical energy resource needs and may also consider, at the 
customer's option, water, natural gas, and other energy resources. Each 
IRP submitted to Western must meet the requirements of the EPAct, 
section 114, which provides that IRPs must:
    1. Identify and accurately compare all practicable energy 
efficiency and energy supply resource options available to the 
customer.
    2. Include a 2-year action plan and a 5-year action plan which 
describe specific actions the customer will take to implement its IRP.
    3. Designate least-cost options to be utilized by the customer for 
the purpose of providing reliable electric service to its retail 
consumers and explain the reasons why such options were selected.
    4. To the extent practicable, minimize adverse environmental 
effects of new resource acquisitions.
    5. In preparation and development of the plan (and each revision or 
amendment of the plan), have provided for full public participation, 
including participation by governing bodies.
    6. Include load forecasting.
    7. Provide methods of validating predicted performance in order to 
determine whether objectives in the plan are being met.
    8. Meet such other criteria as the Administrator shall require in 
this Program or subsequent revisions.
    These criteria are discussed with more detail and guidance in 
section III.D(1)(a-h).
    C. Submittal Information:
    1. General Information: An IRP submitted to Western for approval 
may be a summary document with sufficient detail for Western to confirm 
it meets the requirements of these procedures, or it may be the full 
plan. Compliance with these procedures is primarily the responsibility 
of the purchaser of long-term firm power from Western. If more than one 
long-term firm power contract exists between Western and a purchaser, 
only one IRP is required for that purchaser.
    2. Submittal Options: Customers may submit IRPs to Western under 
one of the following options:
    a. Individual Submittal: Purchasers of long-term firm power may 
submit IRPs individually.
    b. MBAs: MBAs may submit individual IRPs for each of their members 
or submit one IRP on behalf of all of their members, so long as 
individual member responsibilities and participation levels are 
identified. It is acceptable for any member of a purchaser MBA to 
submit an individual IRP to Western.
    c. IRP Cooperative: With Western's approval, customers may form 
integrated resource planning cooperatives. Western believes the 
benefits of joint integrated resource planning can be significant and 
encourages customer consideration of this approach when an appropriate 
resource planning ``decision block'' exists. Western will allow the 
submittal of joint IRPs if an appropriate resource planning decision 
block exists, such as if all the entities covered by an IRP are 
contained within a power supply chain, so long as individual member 
responsibilities and participation levels are identified.
    Examples of eligible entities include (1) existing first-level MBAs 
which were formed to meet the load growth of their members through 
supply-side resources, such as G&T cooperatives; (2) existing second-
level MBAs, such as organizations with G&T cooperative members, which 
may acquire IRP cooperative status due to the magnitude and effort 
involved in development of such comprehensive IRPs; and 3) new 
associations where potential members have not previously evaluated 
supply-side and demand-side resources on a joint basis.
    3. Small Customers: Customers approved by Western as small 
customers according to the small customer provision, discussed in 
section III.E(1) of these procedures, shall submit a small customer 
plan in place of an IRP.
    4. Schedules: Every customer must provide written notification to 
Western regarding how it intends to submit its initial IRP. This 
notification must be provided to the Area Manager of the area in which 
the customer is located within 60 days of the effective date of these 
procedures. The submittal options are discussed in section III.C(2).
    a. IRP Cooperative Status Requests: Requests for IRP cooperative 
status must be made to the Area Manager of the area in which the 
customer is located within 60 days of the effective date of these 
procedures, and Western shall respond to the requests within 30 days of 
their receipt. If a request for IRP cooperative status is disapproved, 
the requesting purchasers must submit their initial IRPs no later than 
1 year after the date of the letter of disapproval. Any subsequent 
requests by customers for IRP cooperative status will be responded to 
by Western within 30 days of receipt of the request.
    b. Small Customer Requests: Requests for small customer status must 
be made to the Area Manager of the area in which the customer is 
located within 60 days of the effective date of these procedures. 
Western shall respond to the requests within 30 days of receipt of the 
request. If a request for small customer status is disapproved, the 
requesting customer must submit its initial IRP no later than 1 year 
after the date of the letter of disapproval. Any subsequent requests by 
customers for small customer status will be responded to by Western 
within 30 days of receipt of the request.
    c. Initial IRP Submittals: Each customer must submit its initial 
IRP to the appropriate Area Manager no later than 1 year after the 
effective date of these procedures. Approved IRP cooperatives shall be 
allowed 18 months from the effective date of these procedures to submit 
an initial IRP.
    d. IRP Resubmittals: If an IRP submittal is found to be 
insufficient after Western review, a notice of deficiencies will be 
provided to the entity that submitted the IRP. Western, working 
together with the customer, will determine the time allowable for 
resubmitting the IRP. However, the time allowed for resubmittal will be 
not greater than 9 months after the date of the disapproval.
    e. Updated IRPs: Updated IRPs must be submitted to the appropriate 
Area Manager every 5 years, beginning 5 years after Western's approval 
of the initial IRP submitted.
    D. Approval Criteria: IRP approval will be based upon (1) whether 
or not the IRP criteria as defined within these procedures are 
satisfactorily addressed, and (2) the reasonableness of the IRP given 
the size, type, resource needs, and geographic area of the customer.
    Customers will make their own choices regarding resource type, 
quantity, and timing in accordance with their IRP. Western will not 
dictate resource choices.
    Where a customer or group of customers implements the IRP process 
under a program responding to other Federal, State, or other 
initiatives, Western shall accept and approve such a plan as long as 
the IRP substantially complies with the requirements of these 
procedures, and therefore meets the IRP criteria.
    Important elements of an IRP are (1) an assessment of resources on 
an equitable basis, where supply-side, demand-side, and renewable 
resources are compared on a fair and accurate basis to determine an 
appropriate low cost resource portfolio, and (2) an integration of all 
options in a comprehensive manner, as opposed to a piecemeal and 
sequential approach.
    1. The IRP criteria must be addressed as follows:
    a. Identification and Comparison of All Practicable Energy 
Efficiency and Energy Supply Resource Options: This is an assessment 
and comparison of existing and future supply- and demand-side resource 
options available to a customer based upon its size, type, resource 
needs, and geographic area. Identification of resource options 
evaluated by the specific customer, or members in the case of IRP 
cooperatives or MBAs, must be provided. The options evaluated should 
relate to the resource situation unique to each Western customer as 
determined by profile data (such as service area, geographical 
characteristics, customer mix, historical loads, projected growth, 
existing system data, rates, and financial information) and load 
forecasts.
    Supply-Side Options: Supply-side options include, but are not 
limited to, purchased power contracts or conventional or 
nonconventional generation options.
    Demand-Side Options: Demand-side options alter the customer's use 
pattern in a manner that provides for an improved combination of energy 
services at least cost to the customer and the ultimate consumer.
    Considerations that may be used to develop the potential options 
include cost, market potential, consumer preferences, environmental 
impacts, demand or energy impacts, implementation issues, and 
commercial availability.
    The IRP should discuss the comparisons made between resource 
options by describing (1) the method(s) or rationale used to select the 
options to be compared, (2) the options evaluated, (3) the assumptions 
and costs related to the options, and (4) the evaluation methods.
    Resource Comparison--The IRP should describe any quantitative and 
qualitative methods used to compare the resource options.
    b. Action Plans: Customers must submit an action plan covering a 
minimum period of 5 years describing specific actions the customer will 
take to implement its IRP. These plans must outline both short- (2 
years) and long-term (5 years) actions proposed for implementation 
during the period covered by the plan. Where a customer is implementing 
IRP in response to State, Federal, and other initiatives, Western will 
accept action plans of other than 2 and 5 years if they substantially 
comply with EPAct. This action plan must summarize the load profile 
data and address the results of the IRP resource evaluation. In 
addition, the action plan must include the following:
    (1) Actions the customer expects to take in accomplishing the goals 
identified in the IRP process.
    (2) Milestones to be used to evaluate accomplishment of those 
actions during implementation.
    (3) Quantified estimated energy and capacity benefits for each 
action planned.
    (4) Estimated or proposed costs for implementing each action.
    c. Designated Least-Cost Options to be Utilized: This is a 
comparative evaluation of supply- and demand-side resources using a 
consistent economic evaluation method. An objective of the evaluation 
should be to achieve the most cost-effective energy services to the 
consumer, taking into account reliability, economics, price risk, and 
all other factors influencing the quality of energy services. The 
analysis should consider impacts on suppliers, distribution entities, 
and end-use consumers, as applicable. The resource selection process 
and criteria should be explicit and identify the rationale for 
selection.
    Cost-effectiveness is basic to this evaluation and therefore must 
be undertaken. Western recognizes the criteria for determination of 
least-cost options in each IRP will by nature vary between Western's 
customers by size, type, resource needs, and geographic area. For 
Western's smaller customers that prepare an IRP, this may be a 
generalized analysis which describes the cost comparison processes 
utilized and economic assumptions. These may be limited to the total 
resource cost test for demand-side resources and may involve simplified 
methods and procedures to analyze important variations in supply-side 
characteristics such as service lives, construction periods, and price 
inflation influences. For Western's larger customers Western would 
expect a much more in-depth evaluation of demand and supply resource 
cost effectiveness, on a levelized basis. This may include evaluation 
of demand-side resources under some combination of the total resource 
cost, participant, rate impact measure, utility, and societal tests; 
life-cycle screening and screening curve analyses for the supply-side 
resources; production costing analysis; rate impact analysis; risk 
analysis; and impacts to the power supply chain as applicable.
    Exceptions to least-cost-based decisions may be made if the 
customer explains the basis for the decision and can show in the IRP 
document that decisions were made on a clear analysis of resource 
options and environmental effects.
    d. Environmental Effects: To the extent practicable, the customer 
should minimize adverse environmental effects of new resource 
acquisitions and document these efforts in the IRP document. Customers 
are neither precluded from nor required to include environmental 
externalities as a part of their IRP process. Western will not 
determine for its customers the level of environmental compliance 
appropriate for each action.
    e. Full Public Participation: Full public participation means that 
ample opportunity exists for the public to participate in or influence 
the preparation and development of an IRP. An effective public 
participation program includes techniques for getting information to 
the public (information techniques) as well as techniques for getting 
information from the public (involvement techniques). Examples of 
information techniques include newsletters, briefings, feature stories, 
newspaper inserts, and bill stuffers. Involvement techniques include 
activities such as interviews, meetings or workshops, informal 
meetings, task force/advisory committees, and polls.
    Member-based associations and their distribution or user members 
must demonstrate public participation in the development and 
implementation of the IRP. Given the wide diversity of customers that 
Western serves and the variety of resource planning circumstances that 
they face, Western is not proposing to mandate that customers hold a 
specific number of public meetings. The summary of the public 
participation process in the IRP must include descriptions of how the 
public was involved, resolutions to public concerns, and how the public 
influenced IRP decisions.
    As part of the public participation process, the governing body of 
each MBA member (such as a board of directors or city council) must 
approve the IRP, confirming that all requirements have been met. In 
addition to MBA approval, customer/member approvals must be indicated 
by signature of a responsible official in the IRP document submitted to 
Western or by documentation of passage of an approval resolution by the 
appropriate governing body. The customer/member approvals should also 
be included or referred to in the IRP document submitted to Western.
    Several Western customers, such as Department of Defense 
installations, Department of Energy laboratories, and State agencies, 
do not have boards or consumers in the normal utility sense. The public 
participation requirement for these customers is satisfied if there is 
review and concurrence by a top management official with resource 
acquisition responsibility, and the concurrence is noted in the IRP 
document submitted to Western.
    f. Load Forecasts: Load forecasting, as a planning process used to 
estimate future electrical demand and energy consumption patterns, 
should include data which reflects the size, type, resource conditions, 
and demographic nature of the customer using an accepted methodology 
(such as the time series method, end-use method, and/or econometric 
method).
    g. Methods of Validating Predicted Performance: Customers must 
provide methods of validating predicted performance in order to 
determine whether objectives in the IRP are being met. Validation must 
include identification of the baseline from which a customer will 
measure the benefits of its IRP implementation and then demonstrate its 
performance against targeted objectives. Western will assess the merits 
of the validation methods and give latitude for any identified lack of 
unavailable baseline data. A reasonable balance should be struck 
between the cost of data collection and the benefits resulting from 
obtaining exact information.
    h. Other Criteria: Customers must meet such other criteria as the 
Administrator shall require in this Program or subsequent revisions.
    2. Reasonableness Test: Western will use a ``reasonableness test'' 
in the review and approval of IRPs and small customer plans to 
determine plan adequacy. It shall answer both of the following 
questions:
    a. Is the IRP consistent, overall and for individual criteria, with 
customer achievement of its own defined IRP goals?
    b. Does the customer meet the full intent of EPAct and these 
procedures in their definition of an IRP for each of the eight IRP 
criteria, and are they appropriate for the customer's size, type, 
resource needs, and geographic circumstances?
    E. Special Provisions: 1. Small Customer Provision: Western 
realizes that it may not be administratively or economically feasible 
for small customers to submit an IRP. Therefore, as an alternative, 
small customers may submit a request to prepare a small customer plan 
which (1) considers all reasonable opportunities to meet future energy 
service requirements using DSM techniques, new renewable resources, and 
other programs that will provide retail consumers with electricity at 
the lowest possible cost; and (2) minimizes, to the extent practicable, 
adverse environmental effects. There is no expectation for small 
customers to expend significant resources--time and money--in acquiring 
the expertise and data with which to prepare these plans. Western will 
be available to assist customers in developing an appropriate strategy 
for preparing the plans.
    In order to meet these criteria, an entity approved for small 
customer status must submit in writing a small customer plan every 5 
years which presents in summary form the following information: (a) 
customer name, address, phone number, and contact person; (b) type of 
customer; (c) current energy and demand profiles; (d) future energy 
services projections; (e) the manner in which items (1) and (2) in the 
preceding paragraph were considered; and (f) actions to be implemented 
over the next 5 years. The first small customer plan is due to the 
appropriate Western Area Manager 1 year after Western's approval of the 
request to prepare the plan.
    Every year on the anniversary of submittal of the plan, small 
customers must submit a letter to Western verifying that their annual 
energy sales or usage is 25 GWh or less and identifying their 
achievements against their targeted action plans. The letter will be 
used for overall program evaluation and comparison with the customer's 
plan.
    When a small customer exceeds total annual energy sales or usage of 
25 GWh, becomes a member of a joint action agency or G&T cooperative 
with power supply responsibility, or no longer has a limited economic, 
managerial, and resource capability, it will no longer be eligible for 
the small customer provision. In this case, Western will work with the 
customer in developing an appropriate timeframe, no longer than 1 year, 
for submittal of an IRP.
    2. Irrigation District IRP: For purposes of these procedures, 
Western shall equate water planning, efficiency improvements, and 
conservation to energy planning and efficiencies. Therefore, irrigation 
districts may comply with EPAct by quantifying results through 
submission of their IRPs in terms of water conservation plans. However, 
to the extent practical, irrigation district customers should convert 
their water savings to energy values. In recognition of the impact of 
weather and commodity prices on energy usage, progress in implementing 
IRPs may be reported and measured based upon efficiency improvements 
instead of power usage. These procedures do not require a customer to 
engage in complex cost-benefit analysis when information on resource 
cost-effectiveness is available from other sources. For example, an 
irrigation district preparing an IRP may use information available from 
an extension service or a university to judge the merits of a demand-
side resource opportunity; there is no requirement to hire a consultant 
to independently verify this kind of information. The customer's 
knowledge and experience should be central in the IRP resource 
evaluation and selection process.
    F. Processing of IRPs and Small Customer Plans: Western shall 
review all IRP and small customer plan submittals and respond to 
customers as to each plan's acceptability within 120 days after 
receipt.
    In order to ensure consistent application of these procedures in 
all Area Offices, Western will utilize IRP evaluation criteria and 
small customer plan checklists. The checklists will be provided to the 
public as part of a future Program public involvement newsletter and 
will provide for consistent review of IRPs. These are internal 
documents to Western and are made available to the public for 
informational purposes only.
    G. Annual IRP Progress Reports: IRP progress reports must be 
submitted each year within 30 days of the anniversary date of the 
currently applicable IRP. Western will use this information to (1) 
ascertain compliance with an approved IRP, (2) analyze overall program 
impacts, (3) provide a basis for preparation of Western's annual 
report, and (4) provide a basis for Western to furnish appropriate 
technical assistance for customers.
    Generally, annual progress reports must include actions taken by 
the customer to implement its IRP and an evaluation of associated 
quantitative and qualitative benefits achieved. The most important 
subject in the annual progress report is quantification of the energy 
and capacity saved under the IRP, dollars saved, renewable energy 
benefits achieved, or other quantifiable benefits identified by the 
customer. Measured values are preferred, but credible estimates are 
acceptable if measurement is infeasible or not cost-effective. Western 
is also interested in reporting on the qualitative benefits of IRP 
related to (1) risk, (2) competition, (3) planning flexibility, and (4) 
public involvement. Events or circumstances may occur which could 
significantly alter the content or implementation of a customer's IRP. 
Therefore, modifications to an approved IRP should be submitted in the 
annual progress report.
    Following is a list of items which must be included in annual 
progress reports:
    1. General customer information (i.e., name, address, phone, 
contacts).
    2. Accomplishments achieved pursuant to the action plan (i.e., 
projected goals, implementation schedules with anticipated quantifiable 
benefits, milestones, and resource expenditures).
    3. Quantitative and qualitative benefits (i.e., energy and capacity 
savings and renewable energy developments) achieved as compared to 
those anticipated.
    4. Problems, issues, or achievements of note.
    5. Any significant changes that may be planned for the IRP in the 
coming year.
    H. Noncompliance:
    1. Definition of Noncompliance: A penalty for noncompliance shall 
be imposed for (1) nonsubmittal of an IRP or an annual progress report 
within the designated timeframe, (2) failing to obtain Western 
acceptance of an IRP, or (3) failing to implement an IRP approved by 
Western, unless Western determines that a good-faith effort has been 
made to comply. A penalty for noncompliance will be imposed following 
periodic review (see section III.J) if a customer's actions are 
inconsistent with its approved IRP and it is found that there are no 
mitigating circumstances which justify those actions.
    2. Assessment of Penalties: If the entity submitting the IRP to 
Western is in violation of these procedures, a notice of noncompliance 
will be issued to the purchaser which will trigger the penalty 
provisions. The 10-percent resource withdrawal penalty in existing 
contracts will continue to be in effect until changed. The penalties 
proposed below will be incorporated into the contracts that extend 
resources and will be effective upon contract execution.
    Beginning with the first full billing period following the notice, 
a surcharge penalty of 10 percent of the monthly power charges will be 
assessed for each of the next 12 months of noncompliance. The penalty 
will then increase to 20 percent of the monthly power charges for each 
of the following 12 months of noncompliance. If the entity remains in 
noncompliance thereafter, Western will assess a 30-percent surcharge. 
As an alternative to imposing the 20- and 30-percent graduated 
surcharge on power charges, Western proposes a penalty which would 
reduce the resource delivered under a purchaser's long-term firm power 
contract(s) by 10 percent. The power withdrawal penalty may be imposed 
in cases of either (1) when it is determined that the power withdrawal 
will be more effective to assure compliance than the surcharge penalty 
by itself, or (2) when the power withdrawal is more cost-effective for 
Western, by avoiding acquisitions of resources from another entity to 
meet the contractual obligation.
    The surcharge will be assessed on the total charges for all power 
obtained by a customer from Western and will not be limited to firm 
power charges. When a customer resolves the deficiencies, the imposed 
surcharge and/or power withdrawal will cease, beginning with the first 
full billing period after compliance is achieved.
    In situations involving an IRP submitted by a member-based 
association on behalf of its members or an IRP cooperative where a 
single member does not comply, a penalty or withdrawal shall be imposed 
upon the member-based association or IRP cooperative on a pro rata 
basis in proportion to that member's share of the total member-based 
association's power received from Western.
    If a customer has more than one long-term firm power contract with 
Western, the penalty would be imposed under each contract.
    If a small customer is found in noncompliance with any of the 
requirements of the small customer provision, it will be subject to the 
penalty conditions stipulated in this section.
    I. Administrative Appeal Process: If a customer disagrees with 
Western's determination of the acceptability of its IRP submittal, its 
compliance with an approved IRP, or any other compliance issues, the 
customer may request reconsideration by filing a written appeal with 
the appropriate Area Manager. Appeals may be submitted any time such 
disagreements occur and should be very specific as to the nature of the 
issue, the reasons for the disagreement, and any other pertinent facts 
which the customer believes should be brought to Western's attention. 
The Area Manager will respond within 45 days of receipt of the appeal. 
If resolution is not achieved at the Area Office level, a further 
appeal may then be made to the Administrator who will respond within 30 
days of receipt.
    Upon request, Western is open to mutually agreeable alternative 
dispute resolution procedures, to the extent allowed by law, on the 
issues of IRP compliance and acceptability. Western will not impose a 
penalty while an appeal process/alternative dispute resolution is 
pending. However, if the appeal/alternative dispute resolution is 
unsuccessful for the customer, Western will impose the penalty 
retroactively from the date Western made the determination of 
deficiency that led to the use of the appeal process/alternative 
dispute resolution.
    J. Periodic Review by Western:
    1. Timeframe: Beginning 3 years after the effective date of these 
procedures, Western shall periodically review a representative sample 
of applicable IRPs and the customer's implementation of the applicable 
IRP. These reviews are in addition to, and separate and apart from, the 
review of initial IRP submittals and updated IRPs made under section 
III.D of these procedures.
    2. Purpose: The purpose of the review shall be to determine if 
customer actions are consistent with the approved IRP. Small customer 
plans are not subject to this periodic review.
    3. Selection of Representative Sample: A representative sample of 
IRPs from each of Western's marketing areas will be developed. The 
representative samples will consist of IRPs that reflect the diverse 
characteristics and circumstances of the customers that purchase power 
from Western. At a minimum, Western will review a sample of IRPs from 
the following:

--IRPs indicating a need to acquire resources in the IRP study period.
--IRPs prepared by individual customers, IRP cooperatives, and member-
based associations.
--IRPs that do not show plans to implement DSM programs in the IRP 
study period.

    4. Method of Review: Periodic reviews may consist of any 
combination of (1) Review of the customer's annual IRP progress 
reports, (2) telephone interviews, or (3) on-site visits. Western will 
document these periodic reviews and shall report on the results of the 
reviews in Western's annual report.
    K. IRP by Western: In these proposed procedures, Western commits to 
the use of IRP principles in its resource acquisition and transmission 
planning programs. Western's commitment concerning the use of IRP 
principles will be pursued independently from the Program through a 
separate public process by Western starting within 90 days after the 
publication of this Federal Register notice. This separate public 
process will commence with publication in the Federal Register of a 
draft set of IRP principles, with opportunity for public comment prior 
to adoption of formal IRP procedures applicable to Western.
    L. Western Annual Report: Western must prepare and include in its 
annual report a description of the activities undertaken by Western and 
by customers under these procedures and an estimate of the energy 
savings and renewable resource benefits achieved as a result of such 
activities.
    M. Freedom of Information Act: IRPs and associated data submitted 
to Western are not exempt from public access under the Freedom of 
Information Act (FOIA). However, customers may request confidential 
treatment of all or part of a submitted document under FOIA's exemption 
for ``Confidential Business Information.'' Materials so designated and 
which meet the criteria stipulated in the FOIA will be treated as 
exempt from FOIA inquiries.
    N. Program Review: Within 1 year after January 1, 1999, and at 
appropriate intervals thereafter, Western shall initiate a public 
process to review these IRP procedures. Western may at that time revise 
the eight criteria for approval of IRPs to reflect changes, if any, in 
technology, needs, or other developments.

Section IV--Power Marketing Initiative

    A. Applicability: The proposed PMI provides a general framework for 
the marketing of Western's long-term firm hydroelectric resources. Many 
project-specific determinations are necessary before any final 
decisions can be made on marketing power. Such important issues as the 
resource available for marketing in the future, the size of a resource 
pool, any adjustments to the size of this pool, and allocation criteria 
for new purchasers must be decided on a project-specific basis, with 
public input and appropriate environmental documentation.
    Western proposes to make a major portion of the resources currently 
under contract available to existing long-term firm power purchasers 
for a period of time beyond the expiration date of their current 
contracts. The PMI would apply if consistent with other contractual and 
legal rights, subject to the outcome of project-specific environmental 
work as appropriate. Western projects proposed for initial coverage 
under this PMI are the Pick-Sloan Missouri Basin Program-Eastern 
Division and the Loveland Area Projects (LAP).
    For Central Valley Project and Washoe Project resources, all power 
contracts between Western and its long-term firm power customers expire 
in 2004, as do the Western-Pacific Gas & Electric Company contracts. 
Western is at an early stage of the post-2004 decision-making process 
and is preparing an EIS for the Sacramento Area Office (SAO) 2004 
marketing plan. Western will not make any decision at this time about 
application of the PMI to SAO resources for the post-2004 time period. 
Western will include the PMI as an alternative in the SAO marketing 
plan EIS for purposes of impact assessment and comparison with other 
alternatives. As a result of further analysis in the 2004 marketing 
plan process, Western may at a later date propose through the public 
process adoption of the PMI for SAO resources in the post-2004 time 
period. If the PMI provision is implemented, Western estimates that an 
initial extension level of 95 to 98 percent of the SAO resources 
available at the end of the term of existing contracts would be made. 
The additional resource pool increments described in section IV.C would 
also be applicable.
    Application of the PMI to the Salt Lake City Area/Integrated 
Projects (SLCA/IP) resources would be evaluated after its electric 
power marketing EIS is completed and the associated marketing criteria 
and contract changes are implemented. Western's ongoing project-
specific EIS for the SLCA/IP analyses power marketing between now and 
the year 2004. For customer planning purposes, Western estimates that 
an initial extension level of 98 percent of the SLCA/IP resources 
available at the end of the term of existing contracts would be made 
upon PMI adoption. The additional resource pool increments described in 
section IV.C would also be applicable.
    If necessary, the resource pool size estimates for SAO and SLCA/IP 
resources may be adjusted during a project-specific public process to 
reflect the actual fair share needs of eligible new customers and other 
purposes as determined by Western.
    Western also proposes to evaluate application of this PMI to other 
Western firm power contracts that expire after January 1, 2005--
principally the Parker-Davis and Boulder Canyon Projects. This 
evaluation would be published after a separate public process and would 
take place no more than 10 years before termination of these contracts.
    B. Term: For existing customers with long-term firm power 
contracts, and in accordance with the applicability criteria in section 
IV.A, Western proposes to extend resource commitments for 18 years from 
the date existing contracts expire. All long-term firm power contracts 
for a particular project would expire at the same time.
    C. Resource Extensions and Resource Pool Size: Western proposes to 
extend a project-specific percentage of the marketable resource 
available at the time current contracts expire to existing customers 
with long-term firm power contracts (see extension formula in section 
IV.D below). The remaining unextended power would be used to establish 
project-specific resource pools. The proposed project-specific resource 
pools (including both the initial pool and future increments) could be 
as large as 6 percent over the term of the contracts. Initially, an 
extension level of 97 percent is proposed for the Pick-Sloan Missouri 
Basin Program-Eastern Division and 97 percent for the Loveland Area 
Projects. These percentages are based on Western's judgment of the 
hydropower needed to meet a fair share of the projected power needs of 
potential new customers in the applicable marketing area at the time 
existing contracts expire.
    Western proposes an incremental resource pool that makes power 
available for potential new customers over time, without the disruptive 
influence of creating a large pool all at once, before the need exists. 
Another purpose of a graduated resource pool is to provide Western with 
the flexibility that is necessary when long-term contracts are offered 
to customers.
    At two intervals of 5 years after the effective date of the 
extension to existing customers, Western proposes to create a project-
specific resource pool increment of up to an additional 1.5 percent of 
the marketable resource available at the time current contracts expire. 
The size of the additional resource pool increment would reflect the 
actual fair-share needs of eligible new customers and other purposes as 
determined by Western. Since Western estimates a 3-year public process 
will be needed to market resources after PMI extension contracts 
expire, no additional resource pool increment is proposed for the last 
8 years of the PMI contract term.
    The additional resource pool increments will be established by pro 
rata withdrawals from existing customers which could be mitigated or 
delayed if good water conditions exist, or if Western acquires 
sufficient energy made available as a result of investment in energy 
efficiency and DSM, conventional supply-side, or renewable resources to 
create the additional resource pool increments.
    The following table illustrates the timing and size of the proposed 
resource pool creation, as applied to the Pick-Sloan Missouri Basin 
Program-Eastern Division and the Loveland Area Projects. In all cases, 
the percentages are applied to the marketable resource available at the 
time current contracts expire. 

------------------------------------------------------------------------
                Year                      P-SMBP-ED           LAP       
------------------------------------------------------------------------
2000................................  3%..............                  
2004................................  ................  3%              
2005................................  up to 1.5%......                  
2009................................  ................  up to 1.5%      
2010................................  up to 1.5%......                  
2014................................  ................  up to 1.5%      
------------------------------------------------------------------------

    Once the extensions for existing customers and allocations to new 
purchasers from the resource pool have been made, additional power 
resources may become available for various reasons.
    Power reserved for new purchasers but not allocated and resources 
offered but not placed under contract may become available. This power 
would be offered on a pro rata basis to existing customers that 
contributed to the resource pool through application of the extension 
formula described in section IV.D.
    Power resources freed up by Western's acquisition of cost-effective 
energy efficiency/DSM may become available. Resources resulting from 
the enhancement of existing generation, project-use load efficiency 
upgrades, the development of new resources or resources turned back to 
Western may also become available. Western proposes that this power be 
used to reduce the need to acquire firming resources, retained for 
operational flexibility, or allocated by the Administrator.
    Resources may become available due to penalty imposition pursuant 
to section III.H of these procedures; this power may be made available 
to existing customers, subject to withdrawal on 30 days' notice.
    For the Pick-Sloan Missouri Basin Program-Eastern Division, both 
the State of South Dakota and the Department of Defense have been 
allowed to transfer Western power from one location to another. After 
existing contracts expire, Western proposes to require that power 
commitments to specific State and Defense sites not be changed unless 
the contract rate of delivery exceeds the total load at that site. If 
the contract rate of delivery exceeds the total load at a State or 
Defense site, Western proposes that only the excess power at that site 
may be transferred to other State or Defense sites. Transfers are 
subject to negotiation of transmission service contracts for the 
delivery of transferred power. To be consistent with requirements for 
other firm power deliveries, Western further proposes to require the 
delivery of a proportional share of firm Pick-Sloan Missouri Basin 
Program-Eastern Division power at each State or Defense site in both 
the summer and winter seasons. If there is closure of a Defense 
installation or facility after the year 2000, the allocation may be 
impacted by the report required in section 2929 of the 1993 National 
Defense Authorization Act, Pub. L. No. 103-160. Section 2929 requires 
the Secretary of Energy, in consultation with the Secretary of Defense, 
to submit a report to Congress by November 30, 1994; this report must 
contain recommendations regarding the disposition of hydroelectric 
power allocations to military installations closed or approved for 
closure outside of the marketing area of the Central Valley Project.
    D. Extension Formula: The amount of power to be extended to an 
existing purchaser would be determined according to this formula:
    (Purchaser contract rate of delivery (CROD) today/total project 
CROD under contract today  x  project-specific percentage  x  resource 
available at the end of the term of existing contracts) = CROD 
extended.
    If a purchaser's CROD is or would become (except for a resource 
withdrawal penalty under section III.H) less than 1 megawatt (MW), no 
reduction would take place.
    Where contract rates of delivery vary by season, the formula would 
be used on a seasonal basis. A similar pro rata approach would be used 
for energy extensions. Determination of the amount of resource 
available after existing contracts expire, if significantly different 
from existing resource commitments, would take place only after an 
appropriate public process.
    Amounts of firm power subject to withdrawal at 5-year intervals 
after the effective date of the extension to existing customers also 
would use the formula set forth above, except the percentage used would 
be up to 1.5 percent for each of the two withdrawal opportunities. New 
customers who have received power from the resource pool would not be 
subject to withdrawal to create a resource pool increment for other new 
customers.
    If no better information is available, for initial IRP planning 
purposes, Western would provide existing customers with estimated 
resource commitments (based on application of the percentages set forth 
in these procedures to the resources currently under contract). Actual 
resource commitment numbers would be developed and included in 
contracts as soon as practicable.
    E. Adjustment Provisions: Western proposes to adjust marketable 
resources committed to all customers with long-term firm power 
contracts only in response to changes in hydrology and river 
operations. Under the terms of contracts that extend resources under 
this PMI, existing purchasers would be given at least 5 years' notice 
before adjustments are made. Depending on when new customer contracts 
are signed, new customers may receive less notice. The earliest that 
any notice under this section would become effective is the date that 
existing contractual commitments expire. Adjustment would only take 
place after an appropriate public process. Withdrawals to serve project 
use would continue to take place based on existing contract/marketing 
criteria principles.
    F. New Purchaser Eligibility: Allocations to new purchasers from 
the project-specific resource pool would be determined through separate 
public processes in each project's marketing area. New purchasers 
receiving an allocation must execute a long-term firm power contract to 
receive the allocated power and would be required to comply with the 
IRP procedures. Contracts with new customers would expire on the same 
date as firm power contracts with all other customers of a project.
    To be eligible for an allocation, a potential new purchaser must be 
a preference entity, as defined in Reclamation law, within the 
currently established marketing area for a project. In order to 
increase widespread distribution of hydropower resources, Western will 
allocate a fair share of power to eligible new preference entities who 
do not have a contract with Western or are not a member of a parent 
entity that has a contract with Western.
    The specific terms and conditions associated with allocations to 
new purchasers would be determined during future, project-specific 
public processes. All new applicants for power would be considered and 
be given an opportunity to receive an allocation in accordance with 
Reclamation law. For example, Western expects to make allocations to 
Native American tribes (as that term is defined in the Indian Self 
Determination Act of 1975, 25 U.S.C. Sec. 450b) for use on the 
reservation and will consider making allocations to national parks and 
public mass transit agencies. Western also will consider making power 
available to preference entities in support of fish and wildlife (such 
as power to pump water to increase or improve wildlife habitat) and to 
firm up renewable resources. Proposals for providing allocations 
directly to Native American tribes will be developed on a project-by-
project basis, during the allocation of project-specific resource 
pools. This flexibility is critical, because an allocation of power is 
of no value unless an organization has the means to receive power; the 
potential customer must be ready, willing, and able to take delivery of 
power. Ready, willing, and able means that (1) the potential customer 
has the facilities needed for the receipt of power or has made the 
necessary arrangements for transmission service, (2) the potential 
customer's power supply contracts with third parties permit the 
delivery of Western's power, and (3) metering, scheduling, and billing 
arrangements are in place. Limits on the power received by any 
customer, as well as minimum load requirements, also may be adopted.
    Certain entities, such as municipalities, cooperatives, public 
utility districts and public power districts, must have utility status 
to purchase power from Western. Utility status means that the entity 
has responsibility to meet load growth, has a distribution system, and 
is ready, willing, and able to purchase power from Western on a 
wholesale basis for resale to retail consumers. To be eligible to apply 
for power available from a project's initial resource pool, those 
entities that desire to purchase Western power for resale to consumers 
must have attained utility status by January 1, 1996, for the Pick-
Sloan Missouri Basin Program-Eastern Division, and by September 30, 
2000, for the Loveland Area Projects. To be eligible to apply for power 
from subsequent resource pool increments, these entities must have 
attained utility status no later than 3 years prior to availability of 
the incremental addition to the resource pool. Deadlines for attaining 
utility status for other projects would be established at a later date.
    All potential new customers, both utilities and nonutilities, would 
be required to apply for power in a project-specific marketing plan by 
a date to be determined in the project-specific process. All potential 
new customers must be ready, willing, and able to receive and 
distribute or use power from Western. A potential new purchaser would 
be responsible for transmission arrangements beyond Western's system/
points of delivery necessary to receive power from Western.
    An existing customer would not be eligible to receive power from a 
resource pool unless Western provides otherwise on a project-specific 
basis. A new customer receiving power from a project-specific resource 
pool would not be eligible to receive additional power from a 
subsequently available resource pool increment unless Western provides 
otherwise on a project-specific basis.
    G. Marketing Criteria: Western proposes to retain applicable 
provisions of existing marketing criteria for projects where resource 
commitments are extended beyond the current expiration date of long-
term firm power sales contracts. Western must retain important 
marketing plan provisions such as classes of service, marketing area, 
and points of delivery, to the extent that these provisions are 
consistent with the proposed PMI. The PMI, eligibility and allocation 
criteria for potential new customers, retained or amended provisions of 
existing marketing criteria, the project-specific resource definition, 
and the size of a project-specific resource pool would constitute the 
future marketing plan for each project. Any necessary amendments to 
existing power marketing criteria could be pursued at the time Western 
determines the amount of resource available after existing contracts 
expire.
    H. Process: Resource extensions and allocations to new customers 
from the initial resource pool would take effect when existing 
contracts terminate. These dates would be the year 2000 for the Pick-
Sloan Missouri Basin Program-Eastern Division and 2004 for the Loveland 
Area Projects. For the Pick-Sloan Missouri Basin Program-Eastern 
Division, Western proposes to offer contracts to existing purchasers 
for resource extensions as IRPs are received by Western from existing 
purchasers. For the Loveland Area Projects, existing contracts provide 
for potential adjustments to marketable resources in 1999. Western 
proposes that no contracts be offered to existing customers for post-
2004 Loveland Area Projects resources until the analysis of potential 
resource adjustments in 1999 has been completed and any adjustments are 
implemented. Existing power sales contracts require that this analysis 
be completed by 1996.
    The timing of offers of power to existing Salt Lake City Area/
Integrated Projects customers for the time period after 2004 may be 
impacted by the replacement power process relating to loss of capacity 
due to changes in operations at Glen Canyon Dam. For the SLCA/IP, 
existing contracts provide for potential resource adjustments in 1999. 
Western proposes that no contracts be offered to existing customers for 
post-2004 SLCA/IP resources until the analysis of potential resources 
in 1999 has been completed and any adjustments are implemented. 
Existing power sales contracts require that this analysis be completed 
by 1996.
    Modified contractual language would be required to place resource 
extensions under contract. For all projects receiving resource 
extensions under the PMI, Western will develop contractual language 
which would allow the customer to assume the responsibility of 
acquiring resources to firm up Western's hydroelectric commitments if 
the customer so chooses.

Section V--Energy Services

    Western will provide technical assistance to customers to conduct 
integrated resource planning, implement applicable IRPs, and otherwise 
comply with the requirements of these procedures. Technical assistance, 
which may include publications, workshops, conferences, individual 
assistance, equipment loans, technology and resource assessment 
studies, marketing studies, and other mechanisms to transfer 
information on energy efficiency and renewable energy options and 
programs to customers, will be provided under Western's energy services 
functions and will not be addressed as a part of these customer IRP 
procedures. Customers will be kept informed at all times of the 
technical assistance available to them in support of their development 
and implementation of IRPs through Western's energy services 
publications.

Section VI--Effective Date

    Western proposes that the final Program procedures become effective 
on the date that the Record of Decision on the Program EIS is published 
in the Federal Register, or 30 days after the final Program rule is 
published in the Federal Register, whichever date is later.

Regulatory Procedure Requirements

Determination Under Executive Order 12866

    DOE has determined that this is not a significant regulatory action 
because it does not meet the criteria of Executive Order 12866, 58 FR 
51735. Western has an exemption from centralized regulatory review 
under Executive Order 12866; accordingly, no clearance of this notice 
by the Office of Management and Budget (OMB) is required.

Regulatory Flexibility Analysis

    Pursuant to the Regulatory Flexibility Act of 1980, 5 U.S.C. 601 et 
seq., each agency, when required to publish a proposed rule, is further 
required to prepare and make available for public comment an initial 
regulatory flexibility analysis to describe the impact of the rule on 
small entities. Western has determined that this Program relates to 
services offered by Western and therefore is not a rule within the 
purview of the Act. In addition, the requirements of this Act can be 
waived if the head of the agency certifies that the rule will not, if 
promulgated, have a significant adverse economic impact on a 
substantial number of small entities. By his execution of this Federal 
Register notice, Western's Administrator certifies that this Program, 
if promulgated, will not have a significant adverse economic impact on 
a substantial number of small entities.

Paperwork Reduction Act of 1980

    In accordance with the Paperwork Reduction Act of 1980, 44 U.S.C. 
3501-3520, Western has received approval from OMB for the collection of 
customer information proposed herein.

National Environmental Policy Act

    Western is preparing an environmental impact statement on the 
Program, pursuant to the National Environmental Policy Act of 1969.

    Issued in Golden, Colorado August 1, 1994.
William H. Clagett,
Administrator.

Response to Comments on the Energy Planning and Management Program.

    The Western Area Power Administration (Western) has received 
numerous comments on the proposed Energy Planning and Management 
Program (Program) during the public process to date. The following 
section responds to those comments and is intended to assist the public 
in understanding Western's rationale for the proposed Program. Each 
issue is presented in a format featuring background, public comments, 
and discussion.

Contents

A. Energy Planning and Management Program-Overview
    1. General
    2. Public Process
    3. Environmental Impact Statement
B. Integrated Resource Planning
    1. Proposed Procedures
    2. Specificity of Procedures
    3. IRP Content
    4. IRP Review and Approval
    5. Member-Based Associations
    6. IRPs Prepared for Others
    7. IRPs for Utilities in Surplus
    8. Economic Feasibility and Administrative Burden
    9. IRP Cooperatives
    10. Technical Assistance
    11. Submittal Timing
    12. Irrigator Issues
    13. Future Program Review
    14. Penalty
C. Power Marketing Initiative
    1. Extension Term
    2. Extension Percentage
    3. Resource Pool Uses
    4. Resource Adjustment Provisions
    5. PMI Implementation
    6. Purchase Power
    7. Other Marketing Issues
D. Other Issues
    1. IRP by Western
    2. Price and Rate Design
    3. Incentives
    4. Project Use
    5. Support of Renewables and DSM
    6. Profile Data
    7. Proprietary Information
    8. Transmission Access

A. Energy Planning and Management Program-Overview

1. General

a. Background
    Western has proposed to make future commitments of long-term firm 
power at the same time that customers commit to identify and pursue 
cost-effective supply- and demand-side resources through preparation of 
an integrated resource plans (IRP).
b. Comments
--Western should link power marketing and energy management.
--If the current program were strengthened to the satisfaction of both 
customers and its detractors, the perceived need to link resource 
allocations with energy efficiency performance would prove unnecessary.
--Linkage should not take place, especially if the Energy Management 
Program (EMP) is subject to change every 5 years.
--Some linkage between allocations and efficient energy use is 
desirable; but, if linked, flexibility and cost-based rates should 
continue.
--Linkage is an important incentive to promote demand-side management 
(DSM) on the part of Western's customers.
--Western's ability to link power allocations to energy efficiency 
gains is one of the few options available for providing an affirmative 
incentive to customers that promote DSM.
--The linkage should be expanded to holders of nonfirm power sales 
contracts, such as investor-owned utilities. Nonfirm sales encourage 
inefficiency, so the Program should apply to nonfirm purchasers from 
Western.
--Western should either break the linkage, or couple a more modest 
linkage proposal with a package of reforms. Western practices in need 
of reform include the acquisition of supplementary resources to meet 
customer needs, construction and use of transmission, moving of 
renewables to market, and encouraging efficiency. Better decisional 
processes based on IRP are needed.
--To our knowledge, no other power marketing administration has 
combined the issues of long-term power allocations and conservation.
--If this environmental impact statement (EIS) takes longer than 2 
years, Western should separate the Power Marketing Initiative (PMI) 
from the EMP.
c. Discussion
    Prior to the passage of the Energy Policy Act of 1992 (EPAct), the 
PMI was viewed by Western as an important incentive to encourage energy 
efficiency and promote cost-effective DSM by its customers. The 
character of the incentive has now changed, as Congress has mandated 
IRP preparation whether resources are extended or not. The IRP title in 
the EPAct, while not referring to the PMI, certainly does not prohibit 
making decisions on resource commitments in a time frame that promotes 
the quality of integrated resource planning. The PMI remains an 
incentive for potential new customers to apply for power and prepare 
IRPs. In addition, the improved planning stability that results from an 
appropriately timed extension of resources can be seen as an incentive 
for future planning. Western creates a disincentive to energy efficient 
resource choices, with their associated economic and environmental 
benefits, when the existing customer resource base is uncertain.
    Western has proposed a Program to meet a number of changes that are 
taking place in the utility industry. The business of generating, 
transmitting, and distributing electrical power is increasingly 
dynamic. More competition and uncertainty exists in the industry than 
ever before. Integrated resource planning, coupled with the resource 
stability needed to effectively plan for the future, can meet the 
challenges of the 1990s and beyond.
    Diverse interests are reflected in the users of the multipurpose 
water projects from which Western markets hydroelectric power. In the 
past, such interests as irrigation, flood control, navigation, treaty 
obligations, and hydropower generation dominated discussions on the use 
of these multipurpose facilities. More recently, such purposes as 
recreation and preservation and enhancement of endangered and 
threatened species have become more prominent. Timely commitments of 
hydropower resources are more difficult to make as a result of the 
ongoing debate on the purpose and operations of Federal resources. 
Western has designed the Program to provide the resource stability 
necessary for integrated resource planning, while allowing for 
adjustments in marketable resources in response to changing priorities 
for multipurpose water projects.
    Environmental issues are critically important to Western. Western 
believes that the Program can and must be responsive to environmental 
issues and concerns. For example, the PMI provides for flexibility in 
the determination and marketing of Western's hydropower resources in 
response to operational changes due to environmental factors. In 
addition, Western believes that integrated resource planning must be 
sensitive to the environmental effects of resource options. IRPs 
should, to the extent practicable, minimize the adverse environmental 
effects of new resource acquisitions.
    Western's proposed Program will respond to all of these changes and 
achieve several objectives. The Program has been proposed to promote 
greater planning stability, to encourage energy efficiency, and to 
promote the evaluation of both demand- and supply-side resource 
alternatives through integrated resource planning by Western's 
customers. Western is committed to achieving all of these goals and 
objectives as a group, with a Program that meets several related 
objectives simultaneously. The proposed Program meets all of these 
goals and objectives as an integrated solution to the identified 
issues.
    Strengthening the existing Conservation and Renewable Energy (C&RE) 
Guidelines and Acceptance Criteria (G&AC) alone does not meet the goals 
and objectives that underlie Western's Program proposal. The existing 
G&AC only require that a customer perform a certain number of 
activities, usually demand-side or renewable in nature, to be in 
compliance. When these activities are identified as the best resource 
choice in an IRP, as required by the EPAct, only then do they represent 
the most appropriate approach for meeting customer needs for cost-
effective electricity. Integrated resource planning, with its emphasis 
on considering both cost-effective supply- and demand-side resource 
opportunities, fulfills the goal of making Western's customers better 
equipped to provide low-cost power to consumers and to meet the 
challenges that exist in the more competitive utility environment of 
today. The Program also provides Western's customers with the resource 
stability necessary to effectively engage in integrated resource 
planning, an objective that could not be met simply by strengthening 
the existing G&AC.
    Western agrees with the viewpoint that Energy Management Program 
stability is undercut and the goals of the Program are not met if the 
EMP is subject to change every 5 years. The EPAct is consistent with 
this view. In accordance with this legislation, Western presently 
anticipates no change in the integrated resource planning process 
requirements until at least 1999, and then only if technology or other 
developments warrant. No change will take place without a full and open 
public process.
    Western concurs with the comment that flexibility should be part of 
the Program approach and philosophy. Western also concurs with the 
comment that cost-based rates should continue, pursuant to applicable 
law.
    Western does not agree that the IRP requirement should be expanded 
to purchasers of nonfirm power. Extension of the IRP requirement to 
nonfirm purchasers would not significantly expand the scope of the 
Program. Nonfirm purchasers who are also long-term preference customers 
must comply with the IRP preparation requirement by virtue of the 
conditions set forth in their long-term firm contracts with Western. 
Although section 205(c) of the IRP title set forth in section 114 of 
the EPAct specifically exempts investor-owned utilities from IRP 
preparation pursuant to the bill, to the extent that nonfirm purchasers 
of power are investor-owned utilities, they likely are or will soon be 
preparing IRPs in response to State public utility commission 
regulations.
    Requiring preparation of IRPs as a condition of commitments that 
can be terminated on telephone notice by either party offers little 
opportunity for penalty imposition for noncompliance. Revenue levels 
could be adversely impacted if purchasers who offer to pay an 
attractive price for surpluses decide to stop purchasing nonfirm energy 
due to Western's attempts to expand the scope of IRP preparation.
    Preparation of an EIS on this Program has been proceeding, and 
comments have been received on the draft. Western sees no reason to 
abandon its proposed approach at this point in the process due to 
delays in developing the necessary environmental documentation.
    Western agrees that its purchase power and transmission planning 
processes should be based on integrated resource planning principles. 
Detailed responses to comments on this subject can be found in section 
D.1 of these responses to comments.

2. Public Process

a. Background
    Western has committed to preparing an EIS on the Program. A public 
involvement process, including the development of a mailing list of 
diverse members of the interested public, has been pursued. Newsletters 
and brochures have been developed and distributed, and public meetings 
and workshops have been held throughout Western's service area on the 
substance of the Program and the draft EIS.
b. Comments
--Preparation of an EIS is not warranted. No negative environmental 
impacts are foreseen, so an EIS need not be prepared.
--An EIS should be prepared, but in an expedited, 12- to 15-month time 
period.
--Considering the diversity among Western's customers and service 
territories, 12 to 15 months for EIS preparation is too short. Do not 
go too quickly, as customers must respond to the radical changes that 
have been proposed in the EMP.
--An EIS should be done because of the significant impacts that power 
generation facilities could have on major river systems and on fishery 
resources.
--Western should let customers know how it is reacting to and 
evaluating issues before the draft EIS is made available.
--Western should address the issues raised in the scoping meetings. 
Where in the alternatives are such options as 100-percent extension of 
power resources for 40 years? Carrots versus sticks options on the EMP? 
Retain existing G&AC with quantification of benefits?
--Western should tie the Salt Lake City Area/Integrated Projects (SLCA/
IP) Power Marketing Criteria EIS to the Program EIS.
--Western needs to integrate more fully the EIS with the decision 
making process so that reviewers can understand both the economic and 
environmental effects of Program alternatives.
--The several separate public processes currently envisioned under the 
Program over the next 10 years should be abbreviated.
--The public development process is a good one that shows what can be 
accomplished when cooperation exists between the private sector and 
Government.
--Although an EIS is unneeded for this Program, socioeconomic impacts 
do need to be evaluated.
--The lack of detailed Program regulations hampers review of the draft 
EIS.
c. Discussion
    Western initially decided that the proposed Program may involve 
potentially significant environmental and economic issues and impacts 
that may be of interest to the public. Preparation of an EIS would 
document any significant impacts which could be taken into account by 
Western's Administrator in his final decision on the Program.
    After Western decided to prepare an EIS through its Federal 
Register notice of May 1, 1991, Congress enacted the Energy Policy Act 
of 1992. Section 205(a) of the integrated resource planning title of 
that legislation mandates the preparation of an EIS by defining the IRP 
provision as a major Federal action significantly affecting the quality 
of the human environment. Therefore, Western will continue its EIS 
preparation.
    Western is taking all prudent steps to assure that the preparation 
of the EIS is accomplished as soon as practicable so that the benefits 
of integrated resource planning are realized by Western's customers and 
their electrical consumers in the near future.
    Western is responding to all comments received on the Program in 
this Federal Register notice. Comments that were previously advanced 
are addressed so that the public understands why Program development 
has progressed in the way that it has.
    Western is sensitive to the public's need for information as the 
Program development process moves forward. In recognition of this need, 
Western has held 46 meetings and workshops during the Program 
development process to date and has issued a brochure and a series of 
11 newsletters to entities who have expressed an interest in the 
Program prior to the publication of this Federal Register notice. 
Western has also scheduled several public meetings in this Federal 
Register notice to receive comments on the Program proposal. Through 
these mechanisms, Western keeps the public apprised of progress in 
overall Program development.
    Western has fully integrated the Program development process with 
the ongoing environmental documentation. The notice of Western's intent 
to prepare an EIS was published in the Federal Register soon after the 
first notice announcing the proposed Program. EIS scoping meetings and 
informational meetings on the substance of the Program were held on the 
same day throughout Western's marketing area. Although not required by 
the National Environmental Policy Act of 1969 (NEPA), a public meeting 
was held in Denver to inform the public of the comments received during 
the scoping meetings and to describe the range of alternatives under 
consideration for evaluation in the draft EIS. Western also held a 
series of alternatives workshops to gather public input on defined 
alternatives in the spring of 1992. This Federal Register notice is 
being published soon after the draft EIS was made available for public 
comment. While open to more specific comments on how the integration of 
the decision making and environmental processes could be enhanced, 
Western believes that the process to date has demonstrated its 
commitment to this goal.
    Comment was received that the Power Marketing Criteria EIS for the 
SLCA/IP should be tied to the Program EIS. Western agrees that a 
relationship exists between these two processes. The Program EIS is 
programmatic in nature. It analyzes on a Western-wide basis the 
environmental impacts of the Program, including customer integrated 
resource planning and the extension of resources for projects, with the 
timing of the extension to be project-specific. Any necessary 
environmental analysis resulting from project-specific application of 
Program principles (e.g., significant changes in marketable resources, 
size of the resource pool, and allocations to new customers) will be 
tiered off the Program EIS. The SLCA/IP Power Marketing Criteria EIS 
recognizes the programmatic nature of the Program EIS and further 
recognizes Western's Program proposal that customers purchasing power 
from the SLCA/IP will be required to prepare IRPs as soon as the 
Program becomes final. The Program EIS will be incorporated into the 
SLCA/IP Power Marketing Criteria EIS.
    Western agrees that the lack of detailed Program procedures has 
made it difficult for the public to comment on the draft EIS. Due to 
the lack of a preferred alternative in the draft EIS, Western did not 
find it appropriate to issue proposed procedures when the draft EIS was 
released for public review. The detailed Program procedures are part of 
this Federal Register notice.

3. Environmental Impact Statement

a. Background
    Western has prepared a draft EIS on the Program. The draft EIS 
predicts that environmental benefits will be realized upon Program 
implementation. The majority of the projected benefits result from 
implementation of integrated resource planning. Additional 
environmental benefits are attributable to resource certainty and 
stability resulting from implementation of the PMI.
b. Comments
--Although the draft EIS is not perfect, we agree with the general 
trends identified within the document.
--We agree with the aggregated simulation in the draft EIS, as opposed 
to a system-specific approach.
--The draft EIS does not adequately recognize the significant 
conservation, renewable resource, and energy efficiency accomplishments 
of Western's customers.
--The predicted energy savings and associated environmental benefits 
projected in the draft EIS should not be used as a standard against 
which future customer IRP implementation will be measured.
--Western should recognize that some end-use technologies are so 
efficient that adoption leads to net reductions in CO2 emissions; 
this is recognized in the Administration's Climate Control Action Plan.
--The environmental benefits associated with the extension of resources 
identified in the draft EIS would be even stronger if the analysis 
extended beyond 2015.
--Western should coordinate environmental mitigation strategies with 
the Bonneville Power Administration (BPA).
--Rate stability and cost containment should be part of the purpose and 
need statement for the EIS.
--There is no recognition in the draft EIS of the impact of resource 
extensions on purchases of thermal power.
--The draft EIS is flawed in its lack of analysis of its relationship 
to other EISs.
--Some numbers, trends, and assumptions in the draft EIS are 
questionable.
--An alternative should be added allowing a 70-percent extension of 
existing resources to existing customers.
--Due to the greater environmental benefits that would result, we 
suggest an alternative of 35 to 40 years at a 100-percent level be 
adopted.
--Wind energy will be a larger resource in the future than the draft 
EIS suggests.
--The impact of extension options on SO2 emission credits needs to 
be recognized.
--An alternative should be added reserving a noncompetitive allocation 
of Federal power for Indian tribes in Western's service territory.
--The environmental benefits of long-term extensions may be far greater 
than the draft EIS suggests.
--The draft EIS is flawed, as it does not provide a basis for 
determining whether a 10-percent resource pool is too small, and does 
not analyze disposition of new power resources, allocation criteria 
based upon need, the economic impact of marketing policies on new 
customers, the benefits of allocating power to Native Americans, the 
need for utility status to receive an allocation of power, or the need 
for equity in Western's marketing policies.
--The environmental benefits associated with resource certainty and 
stability are understated in the draft EIS. Such factors as the ability 
to borrow money, the impact on utility revenue requirements, the need 
to acquire more supply-side resources at the expense of customer 
efficiency programs, and the character of supply-side resources 
acquired are impacted by short-term contracts.
c. Discussion
    Western appreciates these comments and suggestions and will address 
them in the final EIS. Several comments deserve brief responses here.
    Western did not analyze the environmental impact of uses of the 
resource pool, as we cannot predict with any certainty who will apply 
successfully for power from project-specific resource pools during 
future allocation processes. For example, entities considering 
submitting an application for Western power may not be able to acquire 
transmission access, or existing power supply contacts may be an 
obstacle to receipt of hydropower from Western. Western will engage in 
environmental analysis on issues arising from resource pool size and 
allocation criteria on a project-specific basis at a time closer to the 
expiration dates of existing contracts.
    Although environmental benefits associated with Program 
implementation are forecast in the Program draft EIS, Western will not 
use those predicted energy savings as the measure of successful 
customer IRP implementation. The predicted energy savings in the draft 
EIS are useful in identifying regional trends for purposes of 
environmental analysis, but the assumptions and analysis approach are 
far too broad to be useful in setting customer-specific energy savings 
goals. In fact, the establishment of customer conservation goals by 
Western would be totally inappropriate, as an IRP should consist of 
customer-defined goals and objectives.

B. Integrated Resource Planning

1. Proposed Procedures

a. Background
    Options considered in the draft EIS include:
    1. No change to the existing C&RE Program.
    2. An IRP requirement for all customers.
    3. An IRP requirement with a small customer provision. Western's 
proposal is an IRP requirement with a small customer provision.
b. Comments
    i. Comments Concerning Applicability:

--IRP provisions should be mandatory.
--IRP provisions should be voluntary.
--There should be exemption provisions.
--No exemption provisions should be proposed.
--Is there a possibility of waiver of the IRP provision for new 
customers? Does the EPAct require it?
--The IRP rule should apply to contractors only and not all recipients 
of Federal power.
--Some customers are concerned about the practicality of the IRP 
analysis and process.
Discussion
    Section 114 of the EPAct requires all of Western's firm power 
customers to develop and implement IRP. The EPAct also provides Western 
with the option of developing a small customer provision. Only State 
regulated investor-owned utilities (IOU) are exempt from the IRP 
requirement under EPAct. Beyond the State regulated IOU exemption, 
Western has no flexibility to exempt new or existing customers from the 
IRP requirement. The EPAct defines customer as including parent-type 
entities and their distribution or user members. The IRP procedures are 
not limited to contractors only because of this broad definition.
    ii. Comments Concerning Special Provisions:

--Western should adopt a small customer provision for those 
unaffiliated with member-based associations. The size for small 
customers should be below 75 gigawatthours (GWh).
--Small customers should be allowed to submit an IRP but should be 
allowed an option to invest a specific percentage of gross revenues 
(\1/2\ to 1 percent) in DSM targeted to end-users. Western should allow 
up to one third of this investment to be used for technical or economic 
feasibility studies and evaluations.
Discussion
    Western has included the small customer provision in response to 
public comment. The small customer provision, as defined in section 
114, will apply to customers whose annual sales or consumption is equal 
to or less than 25 GWh and who have limited economic, managerial, and 
resource capability to conduct integrated resource planning. Customers 
may request small customer status, and Western will make a 
determination as to the customers' qualifications. This Program does 
not limit a customer that could otherwise qualify under the small 
customer provision from preparing an IRP. In addition, there is nothing 
in the proposed Program that restricts a customer from adopting a 
policy to invest a percentage of gross revenues in DSM as part of its 
small customer plan.
    iii. Comments Concerning Flexibility:

--There are local and regional differences.
--Any final requirement must be reasonable and achievable.
--The level of effort required may be too much/little.
--IRP regulations should be flexible enough to respond to regional and 
project differences.
Discussion
    In the development of the proposed procedures, consideration was 
given to the administrative burden, flexibility, and equity of the 
alternatives on Western's diverse customers. In addition, consideration 
was given to the regional diversity in Western's service area. We 
believe that with the IRP requirement and small customer provision, 
each customer will have the flexibility necessary to adequately address 
regional needs and to expend an appropriate level of resources, such as 
time and money, on these planning efforts. Western will not dictate 
energy decisions a customer makes based upon regional conditions or 
needs as long as all of the IRP criteria are met.

2. Specificity of Procedures

a. Background
    Section 114 of the EPAct provides the framework for the IRP 
requirement. It sets forth IRP criteria as well as administrative 
principles and requirements. As defined by section 114, Western shall 
approve an IRP if, in developing the plan, the customer in a reasonable 
manner has:
    1. Identified and accurately compared all practicable energy 
efficiency and energy supply resource options available to the 
customer.
    2. Included a 2-year action plan and 5-year action plan which 
describe specific actions the customer will take to implement its IRP.
    3. Designated least-cost options to be utilized by the customer for 
the purpose of providing reliable electrical service to its retail 
consumers and explained the reasons why such options were selected.
    4. To the extent practicable, minimized adverse environmental 
effects of new resource acquisitions.
    5. In preparation and development of the plan (and each revision or 
amendment of the plan) has provided for full public participation, 
including participation by governing boards.
    6. Included load forecasting.
    7. Provided methods of validating predicted performance in order to 
determine whether objectives in the plan are being met.
    8. Met such other criteria as the Administrator shall require.
b. Comments
--The IRP option needs to be more specific and less subjective.
--There are too many specifics which could lead to insufficient 
flexibility.
--Will Western recognize customer size and type differences?
--Should Western be specific in its definition of content and 
evaluation criteria?
c. Discussion
    In developing the IRP requirement, it is important to balance needs 
for flexibility and equity among Western's diverse customers. For this 
reason, the proposed Program is based upon the premise that the 
development of each IRP must be tailored to each customer's unique 
characteristics, reflecting that customer's size, type, resource needs, 
and geographic area. Western's primary interest is in providing an 
adequate framework for customer use of the IRP process as a tool for 
meeting resource needs.
    While some comments have expressed a preference for specific 
standards, Western believes that quantitative standards are likely to 
limit the potential of an IRP process, assuring only the achievement of 
minimum standards. Flexible and general guidance will lead to locally 
tailored, relevant, and meaningful IRP as the customer works with its 
consumers in this planning process. Any need for specific technical 
guidance on how to prepare and implement an IRP can be met through 
technical services provided by Western's energy services program.

3. IRP Content

a. Background
    During the early portion of the public process on this Program, 
Western proposed in concept that IRPs address several subjects. The 
EPAct directed Western to develop procedures regarding IRP content.
b. Comments
    i. Comments of General Nature:

--The final requirements should not address small versus big customers, 
but power suppliers versus all-requirements customers.
--Some customers should not have to address all elements.

    ii. Comments on Identification and Comparison of Alternatives:

--Western should require customers to analyze the costs and benefits of 
all options.
--Western's Program should identify and target all practicable 
potential opportunities to save energy.
--Western should not stipulate the type of test (i.e., RIM test, total 
resource cost test, etc.) that a customer uses in its IRP.

    iii. Comments on Action Plans:

--IRPs should include budgets, milestones, and completion dates.

    iv. Comments on Environmental Analysis:

--How far need a customer go on the supply-side for environmental 
analysis?
--Western should not require customers to consider environmental 
externalities in their IRPs. It should accept the decision of 
individual States on externality issues.
--Quantification of environmental externalities should not be a 
requirement.
--Environmental externalities should be required.
--Do not require a customer to prepare an EIS as a part of an IRP.

    v. Comments on Public Involvement:

--Boards and city councils should be sufficient public involvement.
--Only local consumers and not the general public should be involved in 
IRP development or implementation.
--Public review of an IRP is costly.

    vi. Comments on Load Forecasting:

--Load forecasting methodologies which require lengthy lead times 
(e.g., end-use) should not be required before the second round of IRPs.

    vii. Comments on Quantification:

--IRPs should emphasize cost-effectiveness and demonstrated benefits.
--IRP approval criteria should include minimum standards for energy 
efficiencies in each customer class, minimum annual progress 
requirements for each customer class, recognition of the relative 
environmental cost of resource alternatives, and guidelines for the 
selection of new resources which always address environmental costs and 
encourage selecting alternatives that minimize environmental damages.
--Western should let customers evaluate energy and capacity on an equal 
level, so that demand options such as load shifting and peak reduction 
are on an equal DSM level with conservation.

    viii. Comments on IRP Updates:

--Updates should not require public review.
c. Discussion
    The EPAct defines the elements or content that must be included in 
IRPs. Western is proposing that the extent to which the elements are 
addressed should reflect each customer's size, type, resource needs, 
and geography. It would be expected that a power supplier and an all-
requirements customer would address each of the IRP criteria in a 
unique manner and to a different extent. Western is not attempting to 
develop different procedures for each type of customer situation, but 
rather one Program which is flexible enough to be applied to any 
customer situation.
    Western is requiring that each customer identify and compare all 
practicable demand- and supply-side alternatives. Western will not 
prescribe the methods to be utilized in making these comparisons. 
Western will require the customer to describe the method used to select 
the options to be compared; describe the options, assumptions, and 
costs related to the options; and describe the evaluation methods.
    Western is proposing that each customer submit an action plan that 
sets forth both short- (2 years) and long-term (5 years) actions that 
it will take to implement its IRP. The action plans must contain goals 
and milestones, quantify energy and capacity benefits, and give the 
estimated or actual implementation costs for each action. Annual 
progress reports will also be required. To the extent possible, Western 
has attempted to combine reporting requirements in order to reduce 
paperwork and avoid duplication of effort.
    The IRP procedures require that, to the extent possible, customers 
should minimize adverse environmental effects of new resources, either 
supply or demand. Customers will not be required to quantify 
environmental externalities since this is not required by the EPAct, 
and the States within Western's marketing area have taken different and 
sometimes conflicting positions on this issue. Western is not proposing 
to require customers to prepare an EIS or any other environmental 
compliance as part of their IRP submittal. In addition, Western will 
not determine for its customers or review or approve plans with respect 
to the level of environmental compliance appropriate for each proposed 
action.
    The EPAct requires governing board and full public involvement. 
Western believes that public involvement will help assure that resource 
planning and choices meet local needs. Western has defined full public 
participation to mean that ample opportunity exists for the public to 
participate in or influence the preparation and development of an IRP. 
Western will be interested in how the public was involved, how 
resolutions to public concerns were handled, and how the public 
influenced IRP decisions. Western believes that each customer can 
manage the costs of its public involvement process by planning a 
process appropriate to the scope and magnitude of its IRP process.
    Western is not requiring customers to adopt a specific load 
forecasting method, only that customers utilize an accepted 
methodology. We are proposing however that customers develop forecasts 
upon which to base their IRPs.
    The EPAct requires that least-cost options be adopted by utilities 
as well as annual reporting on the benefits achieved under the IRP. 
Western is proposing to allow exemptions to the least-cost requirement 
if the customer can show in the IRP that decisions were made on a clear 
analysis of demand- and supply-side resource options and environmental 
effects.
    Updated IRPs, at a minimum, must be submitted at least every 5 
years after the anniversary date of approval of the initial IRP 
submittal. The criteria utilized to review updated IRPs will be the 
same as for initial IRP submittals. However, periodic changes and 
updates to IRPs may be submitted as part of the customer's annual 
progress report.

4. IRP Review and Approval

a. Background
    Western has proposed that the required elements of an IRP must be 
addressed in a reasonable manner by a customer before Western approves 
the IRP.
b. Comments
--How much will Western expect from its customers in developing and 
implementing an IRP?
--On what basis will customer IRPs be graded?
--Western should focus on having customers develop productive IRPs, not 
on ``window dressing.''
--Western's IRP review should be administrative and not regulatory or 
judicial. Acceptance of an IRP should be based on process and customer 
goals. Western should not be analyzing customer choices or decisions.
--Western should be flexible for surplus utilities. It should accept 
IRPs prepared for other governmental entities.
--Past customer efforts should be recognized.
--There should be a peer review of IRPs.
--Western should not hire consultants to review customer IRPs.
--A dispute resolution provision should be included.
c. Discussion
    Western will apply a reasonableness test in its review and approval 
of customer IRPs. The following two questions will be answered by 
Western in the review and approval process:
    1. Is the IRP consistent, overall and for individual criteria, with 
customer achievement of its own defined IRP goals?
    2. Does the customer meet the full intent of the EPAct and this 
Program in their definition of an IRP for each of the IRP criteria, and 
are they appropriate for the customer's size, type, resource needs, and 
geographic circumstances?
    Western will not direct a customer to utilize specific 
methodologies in the development of its IRP. Customers will make their 
own choices regarding resource type, quantity, and timing in accordance 
with their IRP.
    Western will not dictate resource choices but will review them for 
reasonableness.
    Western will accept an IRP prepared for another Federal, State, or 
other regulatory body if the IRP substantially complies with the 
requirements of Western's IRP procedures. Western recognizes that the 
past efforts of many of its customers in implementing conservation and 
demand-side management have been significant. Historic investments by 
Western's customers will influence the future resources available for 
consideration in an IRP or a small customer plan. However, the EPAct 
makes no allowances for the approval of IRPs or small customer plans 
based upon past efforts.
    Only Western personnel will review customer IRPs. Western does not 
plan to employ consultants to review IRPs, nor does it propose to use 
peers for the review of customer IRPs. Western considered the merits of 
peer reviews, but issues related to proprietary or sensitive customer 
data and administrative burden seem to outweigh any potential benefits. 
Most importantly, the EPAct requires Western's Administrator to review 
IRPs; this responsibility should not be delegated to consultants or 
customer peers.
    Western has included an administrative appeal process that provides 
for appeals to the Area Manager or Administrator in the event the 
customer does not agree with Western's determination of the 
acceptability of an IRP or small customer plan or its compliance with 
an approved IRP or small customer plan. In addition, Western will 
consider the use of mutually agreeable alternative dispute resolution 
practices, to the extent allowed by law, on issues of IRP acceptability 
and compliance.

5. Member Based-Associations

a. Background
    There is a considerable mix of contractual arrangements among 
Western's member-based associations (MBA) customers. Some MBAs are the 
sole supplemental power supplier for the members and have load growth 
responsibility, while others act as a representative for the members 
and have no generation or transmission capabilities.
b. Comments
--In order to achieve the most cost-effective and operational IRPs 
possible in their situations, all of the members/participants must 
support the IRP with data and during the final decision making process.
--While most MBAs or power suppliers may wish to prepare a unified IRP 
on behalf of all their membership, not all members may be supportive of 
such a centralized approach and prefer the option of doing their own 
IRP.
--Western should accommodate the variations represented by its 
customers and their numerous organizational and supply arrangements.
c. Discussion
    Western has proposed an IRP requirement which allows MBAs to submit 
individual IRPs for each of their members, or submit one IRP on behalf 
of all of their members, so long as individual member responsibilities 
and participation are identified. Western has also provided an option 
for any member of an MBA to submit an individual IRP to Western. While 
Western agrees that members should support the IRP process with data 
and during the decision making process, it is the responsibility of 
each MBA to work with its membership on these issues. Each member will 
be required to sign the IRP or a resolution accepting the IRP prior to 
submittal to Western.
    All customers will be required to notify Western within 60 days of 
the effective date of the final Program of their intent to submit an 
IRP individually, through an MBA, or as an IRP cooperative.

6. IRPs Prepared for Others

a. Background
    A number of Western customers are required to submit IRPs to 
regulatory bodies and other agencies in addition to the requirement to 
submit an IRP to Western.
b. Comments
--Western should accept IRPs prepared by its customers for other 
entities.
--The Rural Electrification Administration requires an IRP only when a 
customer applies for financing; Western should have a similar timing 
requirement.
--Would Western adopt a different criteria for review and acceptance of 
IRPs prepared for other entities than for IRPs prepared specifically 
for Western?
--Western's energy planning and marketing programs are intruding into 
customers' traditional utility responsibilities. Customers are 
concerned about multiple jurisdictions requiring IRPs.
--The IRP regulations should not be burdensome or duplication for 
customers preparing to meet State and other Federal requirements. 
Conflicts with IRP requirements should be avoided. If IRP rules are 
stringent or specific, they should not apply to entities subject to 
IRPs from State regulations.
c. Discussion
    The EPAct stipulates that Western will accept IRPs prepared for 
other governing agencies if those IRPs substantially comply with 
Western's Program. In addition, it stipulates that State-regulated IOUs 
are exempt from Western's procedures. Western has, in the development 
of this Program, considered resource planning regulations and policies 
of other entities, particularly State public utilities commissions and 
the Rural Electrification Administration. We have reviewed and compared 
those other requirements and proposals with the fundamentals of this 
proposal. While we have not found any other proposals, regulations, or 
policies that are mirror images of the Western proposal, we believe 
that this proposed Program is generally compatible with other 
requirements. The EPAct does not provide an option to require IRPs only 
when a new resource and/or associated financing are necessary.
7. IRPs for Utilities in Surplus
a. Background
    Within Western's 15-State marketing area there is a great deal of 
diversity in the resource situation in various regions and in the types 
of customers. There are utilities and regions with surplus power and 
utilities and regions facing the next resource acquisition decision. 
There are both large and small utilities that may or may not have 
direct control over generation decisions of their power supplier.
b. Comments
--Customers suffering from loss of load should be exempted from the new 
programs for conservation and efficiency.
--In situations where utilities have surplus generation, marketing 
should be considered an acceptable option.
--Western should not mandate additional expenditures on DSM which would 
create additional surpluses and increase rates.
c. Discussion
    Utilities in surplus could be viewed as having the time and tools 
necessary today to plan better for the future without being under the 
time pressure facing utilities with a more immediate need for 
resources. The EPAct does not give Western the flexibility to exempt 
customers with surpluses or in a load-loss situation from the IRP 
requirements. The IRP process has no predetermined outcomes. Western 
will not mandate the selection of a DSM technology over other resource 
options; however, we are requiring the evaluation of the economics of 
DSM technologies compared with other resource options. Should a DSM 
technology be the least cost, Western believes that it should be 
adopted or that there should be documentation explaining why another 
option fits better with the utility's objectives. Exceptions to least-
cost-based decisions may be made if the customer can show in the IRP 
document that decisions were made on a clear analysis of demand- and 
supply-side resource options and environmental effects.

8. Economic Feasibility and Administrative Burden

a. Background
    A number of Western's customers are smaller or medium-sized 
utilities. To date, there are more examples of the costs of preparation 
and implementation of IRPs by larger utilities, mostly IOUs. These 
examples have tended to set the baseline for what smaller and medium-
sized utilities expect to incur in preparation and implementation of 
IRPs. Western is not proposing to define how much time and money a 
customer should invest in IRP development and implementation. Rather 
Western's review will be focused on the end-product IRP. The EPAct 
requires that customers develop and submit annual progress reports to 
Western. Western is interested in both quantitative and qualitative 
reporting. The draft IRP procedures list five items that must be 
included in the annual report. A penalty may be assessed for 
nonsubmittal of an annual report to Western.
b. Comments
i. Comments on Cost of IRP Development
--Some customers believe that the cost of preparing an IRP would be a 
higher percentage of their revenues (as compared to a larger utility) 
and subsequently serves to be a double penalty or inequity as compared 
to larger customers.
--There should be a ceiling on the costs customers should be expected 
to incur in preparation of an IRP; i.e., it has been suggested that IRP 
costs should not be in excess of 1 percent of the customer revenues, 
while others have suggested a ceiling based on 2 percent of annual 
administrative cost (as averaged over 5 years).
--Do not stipulate an IRP funding percentage.
ii. Comments on Cost of IRP Implementation
--Some customers are concerned about the economic feasibility of 
demand-side management for small utilities.
--The proposal threatens to shift load away from electricity toward 
more reliance on petroleum and natural gas if, as a result of IRP 
development and implementation, electric rates increase.
--The administrative cost of IRPs estimated in the draft EIS does not 
appropriately recognize the cost of monitoring and verification.
--The IRP implementation costs may be too imposing.
--Western's actions could impact rates.
--Customers have resource limitations.
iii. Comments on Burden of Reporting
--Reporting requirements should be kept to a minimum.
--The administrative burden of reporting for small customers could be 
too much.
--Since growth, weather, and changing economics drive power use as much 
as or more than conservation, most data cannot be used to measure the 
Program's effectiveness.
--Research and development should be recognized, even if no measurable 
benefits are evident today.
--Western needs to simplify and streamline its reporting requirements.
c. Discussion
    Western is sensitive to and understands the concerns about the 
costs of development and implementation of an IRP and the importance of 
practicality. Western believes that the benefits of preparing an IRP 
could outweigh IRP development and implementation costs. The IRP 
process holds the potential for customers to make better decisions, 
develop greater credibility with their end-users, and provide more 
cost-effective and valued service. The level of resources a customer 
expends in the development and implementation of its IRP is not a 
factor in the review and approval of the IRP.
    Western believes that many of its customers are already performing 
some of the aspects of IRP and subsequently incurring costs associated 
with good planning and customer service activities. The costs of 
developing and implementing an IRP are also somewhat staged. In this 
sense, an IRP can be viewed as a risk management tool, since the 
assessment of the best resource options can take place before the 
resource need is imminent so that less start-up time is necessary when 
resource needs are apparent. Western anticipates that the benefits from 
IRP implementation will outweigh the administrative burden of data 
collection, data preparation, and reporting.
    The level and extent of reporting should be consistent with each 
customer's size, type, resource needs, and geographic area in the same 
manner as the IRP preparation itself. The IRP procedures identify 
specific items that should be included in annual progress reports. The 
most important portion of the annual progress report is quantification 
of benefits achieved. Credible estimates of benefits are appropriate if 
actual measurement is infeasible or not cost-effective. Western will 
prepare a summary of customer IRP activity and publish it in its annual 
report.
    References to benefits in the procedures are not limited to 
conservation. Integrated resource plans may lead to a variety of 
different resource acquisition strategies, including the development of 
supply-side resources. Although Western is proposing that customers 
quantify both demand-side and supply-side investments that add to 
supply or reduce demand, other less quantifiable benefits may result 
from a successful IRP. Examples include creating a more diverse, 
flexible, or reliable resource mix; improving external and internal 
customer communications; improving the environmental sensitivity in 
resource planning; and developing improved customer knowledge of its 
system and its consumers. For utilities in surplus conditions, a 
marketing program developed pursuant to an IRP also presents an 
opportunity to measure benefits.
    Research and development efforts related to a customer's IRP should 
be valid components of the plan, since the result would eventually lead 
to tangible and measurable benefits.
    Western expects that the costs and methods of verifying, 
monitoring, and reporting on IRPs will vary substantially among 
Western's customers. For this reason we believe it is infeasible to 
attempt to set a specific verification standard because of the 
differences in customer size, type, resource needs, and geography 
associated with the plans. Western will provide technical assistance, 
upon request, to its customers in monitoring and verifying the results 
of IRPs.

9. IRP Cooperatives

a. Background
    Customers may form IRP cooperatives under the EPAct and request 
Western's approval to submit IRPs for those cooperatives.
b. Comments
--Western should consider permitting the formation of cooperatives that 
could represent the common interests of several customers.
--IRPs should be accepted from generation and transmission (G&T) 
cooperatives.
c. Discussion
    The IRP proposal allows purchasers with common interests, such as 
where a resource decision block exists, to form an IRP cooperative for 
the purpose of jointly developing and implementing an IRP. Western is 
proposing to extend IRP cooperative status to existing first-level and 
second-level G&T cooperatives that make such requests. For MBAs and IRP 
cooperatives, individual member responsibilities and participation 
levels must be identified in the IRP.

10. Technical Assistance

a. Background
    Western has provided technical assistance to customers, which 
includes workshops, equipment loan programs, technical studies and 
analyses, peer-match evaluations, and other support since 1980.
b. Comments
i. Comments Related to the Cost of Services and Resources
--Caution should be exercised in considering the rate and revenue 
impacts which offering technical assistance may entail.
--The proposed action should indicate the level of effort that Western 
intends to devote to the program (budget, staff, etc.).
--How can Western provide technical assistance, review, and approval of 
IRPs within 120 days as required by the EPAct when it is reducing its 
personnel?
--Anything beyond nominal technical assistance should be paid for by 
the benefiting customer.
ii. Comments Related to Services
--Western should develop an idea list by activity and should cofund 
IRPs and develop packaged demand-side management programs.
--Technical assistance should include cash, grants, reinstating cost-
share programs, and other financial assistance for such things as 
circuit riders, plan monitoring techniques, developing a `cookbook' for 
doing IRPs, and/or a general sharing of customer IRPs through an 
electronic bulletin board or library.
--If IRPs are necessary, we need a copy of the Resource Planning Guide 
(RPG) and technical assistance.
--In general, we are impressed with the comprehensive and thoughtful 
nature of the IRP materials Western plans to provide to its customers.
--Western should do less technical assistance on IRPs and emphasize 
customer acquisition of efficiency instead.
c. Discussion
    Technical assistance will continue to be an integral part of 
Western's programs and services. Western's present technical assistance 
budget is about $5 million per year. Western also acquires cost sharing 
and cosponsors whenever possible. We will continue to seek additional 
funding and resources from potential cosponsors of services and 
activities in order to leverage the benefits of the service, reduce 
financial risk, and remove barriers to the successful application of 
emerging technologies. While Western expects to continue to experience 
limitations on staffing, we will make every effort to assure that the 
technical assistance is available to customers upon request, while 
ensuring review and approval of customer IRPs as provided by the EPAct. 
The majority of Western's customers have not done an IRP before and 
need technical assistance. The EPAct specifically directs Western to 
give priority to providing technical assistance to customers that have 
limited capability to conduct IRP. Requiring the benefiting customer to 
pay for technical assistance would raise an obstacle to effective IRP 
for those customers that have limited resources.
    The range of customer technical assistance activities has been 
extremely diverse and customer driven over the last decade. We do not 
expect this to change as we focus on technical assistance in the 
customer preparation and implementation of IRPs. Western is willing to 
look at reinstating the cost-share program, has provided financial 
assistance for circuit riders, developed the RPG to assist customers in 
developing IRPs, and has instituted an electronic bulletin board 
service. We are willing to assist in the development of IRPs and 
demand-side management programs. Copies of the RPG are available upon 
request to Western.
    Western believes that an emphasis on IRP technical assistance is 
appropriate at present and consistent with the EPAct emphasis. A 
customer should not acquire an efficiency resource before an analysis 
of cost-effectiveness takes place pursuant to an IRP.
    Western's energy services program utilizes a 5-year planning 
process, reviewed annually to ensure that customers are receiving the 
best and most appropriate assistance possible. Customers can telephone 
Western's energy service managers in the appropriate Area Office to 
discuss their needs for technical assistance.

11. Submittal Timing

a. Background
    The EPAct requires updated IRPs to be submitted to Western for 
review every 5 years. The Program is drafted to assure that customers 
are benefiting from IRP development and implementation and to ensure 
that customers meet the IRP criteria. The 5-year timeframe is also 
consistent with a long-term action plan timeframe thereby ensuring that 
the action plan is fully updated.
b. Comments
--Every 2 years is too frequent for IRP submittal because power 
requirements studies for large generation and transmission cooperatives 
are done every 3 years and end-use surveys are done every 3 years in 
some utilities, and an IRP would be based on these documents.
--The frequency of submittal could be based on need to meet load growth 
development.
--Suggestions included 5-year IRP submittal with biannual status 
reports, and plans should be evaluated and revised every 5 years.
--There should be an evaluation period every 10 years for IRP 
submittals.
c. Discussion
     Western has proposed the 5-year IRP submittal period as set forth 
in the EPAct. We believe that this period is more compatible with the 
power requirements study and end-use survey frequencies of many Western 
customers than other shorter periods of time. The proposal also allows 
customers to submit other changes to their IRPs to Western as part of 
the annual progress report.
12. Irrigator Issues
a. Background
    Western is proposing that the IRP provisions required by the EPAct 
apply to all customers, with the exception of those qualifying for the 
small customer provision. Irrigation districts may qualify for small 
customer status. This supersedes earlier proposals for accepting 
previously approved and implemented energy and water efficiency plans 
submitted to other Federal or State governmental agencies.
b. Comments
--Public review of irrigation district IRPs would be costly and staff-
consuming.
--Irrigators should not have to address all IRP elements--some elements 
apply only to generating entities (e.g., resource comparisons, 
environmental impacts of actions); it is not cost-effective for small 
customers to look at all of this.
--Western must recognize water conservation activities.
--IRP rules need to recognize that agriculture is different from other 
loads and that progress must be measured differently. Western must 
recognize the unique character of irrigators and give credit for past 
investments that are still providing benefits. Western's regulations 
must take into account constraints such as water conservation mandates, 
weather changes, and individual farmer decisions.
--Irrigators have no access to other sources of power supply.
--Irrigators cannot meet the rigid definition of IRPs as set forth in 
Western's periodic newsletter; make the language more flexible and 
allow irrigators to do a different type of energy management plan.
--Western should consider the best management practices plan and State 
conservation plan as alternatives.
--Preparation of an IRP would be so costly and sophisticated in terms 
of cost-benefit analysis that irrigators would have to hire consultants 
at considerable expense to prepare the plan.
--Water districts of 2 megawatts (MW) or less should be exempt from 
IRP.
c. Discussion
    The EPAct limits Western's ability to propose special program 
requirements or exemptions for irrigators. However, Western believes 
that IRPs can be beneficial for irrigation customers. IRPs can be 
developed to assess possible efficiencies in the use of power and water 
and document accomplishments in water conservation.
    An irrigation district might find that its IRP would consider more 
demand-side resources in its assessment because it has limited control 
over the supply side. An IRP prepared for a district in one area may 
look entirely different from one prepared elsewhere due to regional 
issues such as different soil types, irrigation practices, and water 
availability and quality, which would necessitate different approaches 
to planning.
    Western recognizes that water conservation may be equated to energy 
conservation practices and that the IRP process may easily address 
both. Western feels that the IRP process, as we have now defined it, 
can accommodate the wide range of differences among its customers. The 
flexibility contained in the IRP language will allow for creativity in 
the planning process and in resource selection. An IRP allows customers 
to use their own resources, experiences, and talents to address the 
requirements. Consultants need not be retained to do extensive analysis 
of the costs and benefits of various resource opportunities when the 
evaluation and resource decision is based on an irrigator's experience 
or the preexisting analysis of agencies and institutions as it relates 
to prudent management of resources.

13. Future Program Review

a. Background
    The historic program review interval was based upon the existing 
G&AC requirement of a C&RE program review every 5 years. Western 
published its initial G&AC on November 13, 1981. An amendment to the 
G&AC was issued on August 21, 1985, as a result of a 5-year review and 
passage of the Hoover Power Plant Act of 1984. There is concern that 
continued 5-year reviews of the program will create uncertainty and 
work against acceptance of integrated resource planning.
b. Comments
--Western needs to clarify its intentions concerning the current 5-year 
review period for the C&RE program to assure customers that radical 
program changes are not anticipated in the near future.
--Western's 5-year review of conservation programs is not acceptable 
unless significant changes in the Program are mutually agreed to by 
Western and its customers.
--Periodic review of the Program is necessary; there was objection to 
linking power contracts to an EMP which might undergo radical revisions 
every 5 years.
--Customers cannot plan and achieve stability if subject to wholesale 
revisions every 5 years.
--Program changes should be phased in gradually and done with the 
approval of Western's customers once the Program is established.
c. Discussion
    Western is sensitive to customer concerns and interest in the 
planning stability that this Program offers. The EPAct requires that 
Western review the IRP program requirement beginning 1 year after 
January 1999 and at appropriate intervals thereafter. The review will 
be for the purpose of reflecting changes, if any, in technology, needs, 
or other developments. This review will take place pursuant to a public 
process.

14. Penalty

a. Background
    Western proposed that penalty imposition would be triggered by (1) 
nonsubmittal of an IRP or a required annual progress report or (2) not 
addressing each of the required IRP elements. Prior to the alternatives 
workshops, Western proposed a rate penalty of 10 percent of the firm 
monthly bill for each of the first 6 months of noncompliance with 
Program requirements, increasing to 20 percent of the firm power 
monthly bill for each of the next 6 months of noncompliance, followed 
by withdrawal of the entire Federal resource commitment if 
noncompliance persists for more than 1 year. Pursuant to the EPAct, 
Western is now proposing a graduated surcharge on all power purchased 
from Western for noncompliance with the Program.
b. Comments
--The allocation loss provision is unacceptable; the addition of 
another rate penalty layer is better than a resource loss.
--Penalty provisions should be eliminated. Instead, the focus should be 
on providing incentives.
--The existing 10-percent resource penalty provision should be 
continued.
--A penalty provision with a sliding scale should be adopted. For 
example, if a customer comes up 10 percent short of its energy 
efficiency goals, the penalty should be a 10-percent resource 
reduction.
--An appeals process is necessary. Western should use arbitration or 
mediation to resolve disputes under the Alternative Dispute Resolution 
Act.
--Be realistic about the ``death penalty'' loss of the entire 
allocation approach. Western cannot be serious about pulling the plug 
on a customer.
--Penalties should start 1 year after the noncompliance notice, then 
10-percent rate penalty for the next year, 20 percent for the next 
year, followed by a total resource loss.
--Western should adopt a 10-percent penalty for the first year of 
noncompliance, followed by a 20-percent penalty for the second year, 
with an additional 10-percent penalty for each succeeding year. A 
partial loss of an allocation (up to 25 percent) should occur only if a 
customer is more than 12 months behind in the payment of late charges.
--Compliment Western on the proposal of rate penalties before any 
resource withdrawal.
--A resource withdrawal penalty is not favored, as it would be the most 
severe for a customer and probably the most difficult to administer for 
Western. Resource withdrawal would necessitate customer acquisition of 
replacement power at higher rates, while Western would be faced with a 
possible loss of revenues and would create an administrative burden of 
marketing the withdrawn power.
--Federal agencies that are long-term firm power customers should be 
exempt from penalty imposition.
--The withdrawal of the total Federal resource should not be permanent. 
Customers losing their allocation due to noncompliance should be 
allowed to recapture the power once compliance is achieved.
--Sanctions should be imposed at the final customer level and not on 
the member-based association.
--How will Western impose a penalty when an IRP is being prepared by an 
MBA and only one member of the MBA refuses to comply with Western's 
program?
--There should be only one penalty imposition on a customer.
--Western begins by penalizing existing customers by proposing the 
extension of less than the resource they possess today and then offers 
nothing but more penalties for failure to comply with the EMP.
--We recommend a 1.0 mill per kilowatthour (mill/kWh) rate penalty for 
the first year of customer noncompliance, increasing by .5 mill/kWh 
increments annually up to a maximum rate penalty of 5.0 mills/kWh. The 
resulting funds should be used for environmental mitigation activities 
and energy conservation projects.
--A rate penalty is much preferred because it provides an appropriate 
penalty without jeopardizing community health or safety. Impacts would 
be economic rather than operational.
--A resource reduction penalty for noncompliance with the IRP 
requirements may not be permissible under Federal law for Hoover 
contractors.
c. Discussion
     Since Western's original penalty proposal, Congress enacted the 
Energy Policy Act of 1992. This law mandates the use of a graduated 
surcharge on all power purchased by a customer from Western for 
noncompliance with the Program. An alternative penalty of loss of 10 
percent of the resource delivered under a long-term firm power contract 
after the first 12 months of noncompliance has been proposed by 
Western.
    Due to the action by Congress, Western has lost its flexibility to 
respond to many comments through changes to Program procedures 
regarding penalties. Western will adopt the provisions of the EPAct on 
this issue. Penalties in existing contracts, which provide for a 10-
percent reduction in firm power resources for noncompliance with the 
G&AC, will continue to be in effect for the Program until changed. The 
EPAct recognizes the appropriateness of the 10-percent resource penalty 
approach. The graduated surcharge provisions in the EPAct and proposed 
in these procedures will be incorporated into the contracts that extend 
resources.
    Western does not intend to impose Program penalties in an 
unreasonable way. Western is much more interested in working with its 
customers to comply with the IRP requirement so that the benefits of 
IRPs are realized by electrical consumers. During customer interviews 
that took place to help Western assess the organizational impacts of 
the Program, many customers indicated that they supported integrated 
resource planning. Western will continue to provide technical 
assistance to customers so that IRP preparation can take place in a 
timely and acceptable way.
    In situations involving an IRP submitted by a member-based 
association on behalf of its members where a single member does not 
comply, the proposed penalty would be applied to the member-based 
association on a pro rata basis in proportion to that member's share of 
the total member-based association's long-term firm power contract.
    Western does not believe that exempting Federal installations from 
the proposed penalty provisions is good policy. As in the past, Western 
does not believe that special treatment for any customer is fair or 
appropriate. Federal installations would have a lesser incentive to 
realize the potential benefits that may be identified in an IRP if a 
penalty exemption were to be granted. Cost savings in acquiring 
appropriate supply- and demand-side resources should be as beneficial 
to Federal installations as any other customer. Moreover, the EPAct 
does not exempt Federal installations from the statutory penalty 
provisions.
    Revenues resulting from the imposition of penalties cannot be used 
to fund environmental mitigation activities and energy conservation 
projects. By law, all of Western's revenues, including those from 
penalty imposition, must be deposited in the United States Treasury and 
are applied to project repayment. For most of Western's projects, 
revenues cannot be used to fund activities; appropriations from 
Congress are the budgetary resource from which expenditures are made.
    Western does not agree that a resource reduction penalty for 
noncompliance with the IRP requirements is not allowed for Hoover 
customers. Section 114 of the EPAct amends Title II of the Hoover Power 
Plant Act, indicating that Congress intended to apply the penalty to 
Boulder Canyon Project purchasers. Moreover, existing Hoover contracts 
already have a resource reduction penalty as part of their terms and 
conditions. Western sees no obstacle to enforcement of the penalty, if 
necessary, for purchasers of Boulder Canyon Project power.
    Western has adopted several of the comments received. Provisions 
for dispute resolution and administrative appeal have been included in 
the proposed Program.

C. Power Marketing Initiative

1. Extension Term

a. Background
    Western is proposing to extend resource commitments to existing 
customers beyond the expiration date of currently effective contracts. 
In the early stages of the Program public process, Western suggested 
that 10 to 40 years would be an appropriate range of extension terms. 
After receiving comments during the EIS scoping process, Western 
developed a limited extension alternative of 10 years from the date of 
IRP approval and three extension alternatives for evaluation in the 
draft EIS: 15 years, 25 years, and 35 years, all from the date existing 
contracts expire.
b. Comments
--We favor alternative eight in the draft EIS, with a term of 25 years.
--Recommendations for the length of resource extensions to existing 
customers included 10 or more years, 15 years, at least 20 years, 25 
years, 30 or more years, 40 years, and 50 years.
--Preference was expressed for a 15-year extension at a higher level, 
as opposed to the other alternatives with lower levels of extension.
--Why should I opt for anything longer than 15 years? With 
uncertainties that exist over Western's marketable resources due to 
environmental concerns and the rising costs of Western's power, we may 
not want to be tied into long-term contracts.
--Those who have paid for projects in the past should have first call 
on future resources.
--Western customers who have developed resource plans with a planning 
horizon beyond 10 years should be considered for allocation terms of a 
comparable length.
--As many customers base load their Western allocation, an extension 
should be for as long as the useful life of base-load capacity, such as 
a thermal plant.
--The draft EIS alternatives do not provide resource stability.
--In order to meet the needs of fish and wildlife, Western needs to 
extend resources for a minimal time period or provide for resource 
adjustment capability. Western should explain the impact of resource 
stability on fish.
--Western should extend resources for a 50-year period of time, 
comparable to Federal Energy Regulatory Commission (FERC) licenses.
--A longer-term extension should be granted if the power is linked to a 
specific renewable resource project with long-term benefits.
--Longer resource extensions at a high level have environmental 
benefits.
--Resources should be extended for at least 25 years.
--Thirty-five-year contracts have superior environmental benefits as 
compared to 25 years.
--Suggest 35- to 40-year contracts.
--We support a limited 10-year extension with a resource pool to 
promote energy conservation and the use of renewables.
--Western should consider extending 70 percent of existing commitments 
for 10 years.
--We strongly support nonextension alternatives, as resource extensions 
are not needed for effective IRPs.
--Heavy reliance on long-term contracts is inconsistent with current 
IRP practices and utility planning in the 1990s.
--Shorter-term planning horizons are needed to be competitive. The 
trend is moving away from relative stability associated with exclusive 
franchise monopolies.
--Many public utility commissions are discouraging utilities from 
incurring costs associated with acquiring long-term resources.
--Customer willingness to fund environmental improvements will be 
impacted if the Western resource is short-term.
--Twenty-five year contracts are objectionable on environmental 
grounds; it will be more difficult to change hydropower operations to 
protect the environment if resources are locked in.
--While it is true that long-term contracts will discourage 
construction of new generating facilities, this will also be a 
disincentive to improving energy efficiency and will frustrate IRP.
--The cost of borrowing goes up when resource uncertainty exists, 
especially for renewables/DSM.
--Western power helps us remain competitive in a changing utility 
industry.
--We prefer 25-year extensions of 100 percent of our current 
allocations.
--Existing customers have provided enormous financial support to 
Western; this should be recognized.
--Long-term contracts maintain the competitive balance in the utility 
industry.
--Renewable resources, in particular, can require a longer period to 
amortize and would be easier to select when a dependable cost-effective 
long-term Western resource complements them in a customer resource mix.
c. Discussion
     In developing a proposal for the length of the resource 
extensions, Western has considerable discretion. One of the limits on 
that discretion is the prohibition, as set forth in the Reclamation 
Project Act of 1939, on power sales contracts with terms in excess of 
40 years. Western may legally consider commitments of power up to, but 
not beyond, this 40-year maximum.
    Western proposes a resource extension period of 18 years for 
several reasons. This time period is long enough to maintain a 
sufficient customer planning horizon. Long-term project financing, 
whether for supply-side, demand-side, or renewables, would be feasible 
with such an extension. Western agrees that financing of renewable 
resources is particularly sensitive to Federal hydropower resource 
uncertainty. Eighteen years will maintain the resource stability 
necessary for effective integrated resource planning. At the same time, 
18 years is not so long that Western cannot reasonably guarantee the 
availability of the extended resource. The proposal of a graduated 
resource pool available to new customers gives Western the flexibility 
to allocate power equitably over the term of the contract.
    Western's goal is to provide a sufficient incentive for new 
customer preparation of IRPs and to offer an extension compatible with 
the time horizon for other resources evaluated in IRPs. Another goal is 
to reduce the amount of Western, customer, and public time and 
resources spent on marketing plan development. An extension of resource 
commitments for 18 years beyond the expiration date of contracts with 
existing customers would mean that new contracts would be in place 
until at least 2020. Initial extensions would be about 23 years from 
the date that extension commitments are offered to customers of the 
Pick-Sloan Missouri Basin Program--Eastern Division; this time period 
approaches the average useful life of thermal generation.
    The concern about being locked into long-term arrangements with 
Western is answered by existing contractual language. The General Power 
Contract Provisions, which are part of every long-term contract for the 
sale of power by Western, allow a customer to terminate the contract if 
a rate adjustment causes power to become uneconomical. This principle 
will be retained in contracts extending resources pursuant to the PMI.
    Western has provided for resource adjustment capability as part of 
the PMI. Extensions would be based on the resource available at the 
time existing contracts expire. This allows Western to respond to 
changes in operations at Corps of Engineers (Corps) and Bureau of 
Reclamation (Reclamation) hydroelectric plants before the term of 
contract starts for extended resources. In addition, Western can make 
further adjustments in its marketable resources in response to changes 
in hydrology and operations upon 5 years' notice. Because of this 
capability, no need exists to extend resources for a minimal time 
period to protect fish and wildlife resources. The impact of resource 
stability on fish can be summarized as an extension of existing 
commitments, with the recognition that adjustments to the marketable 
resource as a result of operational accommodations for fish and other 
wildlife resources can be accomplished within the extension framework.
    Western prefers to encourage the development of cost-effective 
renewable resources through means other than tailoring the extension 
period to particular renewable resource development/payback time 
periods. Such an approach would lead to varying contract terms, making 
project-wide marketing difficult in the future. The proposed extension 
term of 18 years is sufficiently long to make the long-term financing 
of renewable resources feasible.
    Western realizes that the draft EIS predicts relatively greater 
environmental benefits for contract terms in excess of 18 years. At the 
same time, an 18-year proposal has clear future environmental 
advantages over a shorter extension period, such as those represented 
by the limited extension alternatives. An even greater environmental 
advantage exists for 18-year future resource extensions under the 
Program as compared to the uncertainty and delays associated with a 
potential project-specific marketing plan approach. Western's proposal 
balances environmental benefits associated with resource certainty 
against the need for flexibility to respond to changing circumstances 
over time.
    Some of Western's customers suggest that since they have paid for 
projects in the past, they should have first call on resources in the 
future. Western agrees that the resource choices made by customers in 
the past have led to the construction or purchase of certain 
supplemental generating resources, as well as investment in 
transmission resources or negotiation of transmission service 
contracts. Certainly, Western does not want to disrupt regional power 
supply and transmission arrangements at considerable economic and 
environmental cost to the area. At the same time, Western's existing 
customers have no equity position in Western's facilities, and they 
have no right to receive power from Western in the absence of a 
contract. Western believes the public interest is served by having the 
flexibility to meet a fair share of the needs of new customers from the 
publicly owned, taxpayer-financed hydroelectric facilities in the West.
    Western agrees that the Program does not provide its customers with 
absolute resource certainty. Instead, the Program attempts to provide 
as much certainty as possible to facilitate the development of 
integrated resource plans, while retaining the flexibility to respond 
to changing conditions and evolving needs.
    The holder of a FERC license typically plans, funds, and constructs 
the hydropower resource itself. A long-term license is appropriate in 
such a case, given the length of the construction debt service and the 
responsibilities of the licensee. With Western's resources, the 
planning, construction, financing, operation, and maintenance of the 
hydroelectric generation and high-voltage transmission is usually the 
responsibility of the United States. Since the two situations are not 
strictly comparable, Western feels that a proposal of an 18-year term 
of contract is appropriate.
    Western does not concur with comments advocating adoption of either 
a limited extension alternative or 10-year extensions of resources from 
the date existing contracts expire. Integrated resource planning is a 
future-oriented planning process that is enhanced by resource 
stability. Instead of planning for the replacement of Western's 
resources or customer hedging of bets on the future availability of 
Western's resources, IRPs can be focused on implementing cost-effective 
resources, including energy efficiency and renewables, to meet load 
growth in the future. The Program public process to date illustrates 
how long Western's marketing initiatives can take to implement. A 10-
year resource extension would require Western to commence the 
development of post-extension, project-specific marketing plans in the 
near future. The time and resources spent by Western and the public in 
the continuous development of marketing plans could be better spent on 
pursuing cost-effective energy efficiency and renewable resource 
opportunities.
    According to the attachments submitted as part of the comments of 
the Edison Electric Institute, 25 States have mandated planning 
horizons for regulated utility integrated resource planning; 13 of 
these States have established a planning horizon of 20 years. Western's 
18-year resource extension proposal is consistent with a planning 
horizon of 20 years.
    A comment was received stating that heavy reliance on long-term 
contracts is unwarranted and incompatible with current IRP practices 
and utility planning. Western's proposal does not lock a customer into 
a long-term, take-or-pay arrangement, as the extension contracts would 
allow a customer the option to terminate a contract upon implementation 
of a rate adjustment by Western. Western agrees that the utility 
industry is increasingly dynamic, and that utilities must be flexible 
and forward-looking in order to be successful. The IRP requirement in 
this Program will provide Western's customers with the tools necessary 
to succeed in a changing utility climate. Many comments were received 
from the public indicating that an extension of resources would assist 
IRP and not hinder future resource planning.
    Western does not agree that long-term contracts will be a 
disincentive to improving energy efficiency. Short-term contracts cause 
customers to focus on the uncertainty surrounding the Western resource, 
rather than looking to implementation of cost-effective energy 
efficiency and DSM to meet future needs. Western only provides a 
portion of the resource needs of its customers, about 30 percent on 
average Western-wide. The cost of supplemental resources, whether 
supply-side or demand-side, is usually significantly higher than the 
cost of Western's resources. Supplemental resource prices provide a 
significant incentive to implementation of cost-effective energy 
efficiency improvements.
     Some customers indicated that their willingness to fund 
environmental improvements would be impacted by short-term contracts. 
Western agrees that short-term contracts could be a disincentive to the 
implementation of environmentally beneficial project improvements.
     Several comments were received stating that Western power 
preserves the competitive balance in the utility industry. Western's 
hydropower commitments provide a yardstick that enhances competition in 
the utility industry within Western's marketing area. Eighteen-year 
contracts help preserve the competitive balance in the regional utility 
industry.

2. Extension Percentage

 a. Background
     Western is proposing to extend a major percentage of the power 
currently under contract with long-term firm customers. In the early 
stages of the Program public process, Western suggested that 70 percent 
to 100 percent might be an appropriate extension range. The possibility 
of extending resources on a graduated scale, weighted towards some 
customer characteristic, was suggested. After receiving public comments 
during the EIS scoping process, Western developed three extension 
alternatives for evaluation in the draft EIS: 98 percent, 95 percent, 
and 90 percent. A limited extension alternative would extend resources 
at a 100-percent level for 10 years, starting at the time of IRP 
approval by Western.
b. Comments
--The extension percentage should be as high as possible. Requests were 
made for a 100-percent extension and a 98-percent extension.
--Extensions of resources at a high level have environmental benefits.
--The concept of a resource pool goes against Western's expressed goal 
of providing customers with resource certainty.
--The PMI shifts the risk of resource availability to customers--this 
does not promote long-term resource stability! Western should meet the 
risk issue through power pooling or other creative approaches. Western 
can do this more efficiently than customers due to economies of scale, 
its extensive transmission system, and its experience.
--Twenty-five percent of Pick-Sloan Missouri Basin Program-Eastern 
Division power should be made available to Native Americans.
--Get rid of the resource pool. A resource pool is unnecessary given 
your marketable resource adjustment windows. What is the risk if 
Western can withdraw?
--If necessary, extension reductions should be phased in. As part of a 
35-year extension, Western should extend 98 percent of existing 
commitments for the first 15 years, 95 percent for the next 10 years, 
and 90 percent for the last 10 years.
--The impact of changes in hydroelectric commitments on auxiliary 
suppliers must be considered.
--Extensions of firm, long-term resources should be provided sparingly, 
and only to customers who are very diligent in setting and meeting 
energy efficiency goals.
--The Program should be a requirement in all of Western's contracts and 
should apply to the Central Valley Project's (CVP) post-1994 power 
marketing criteria.
--Clean Air Act concerns exist if power is not renewed to existing 
customers. Not only will a customer lose part of the Western power 
allocation, but a utility must obtain Clean Air Act allowances to 
generate to meet the shortfall.
--Western should extend 70 percent of the marketable resource presently 
under contract, as opposed to a higher percentage of a resource to be 
determined at a later date.
--Twenty-five percent of the power extended to Western's customers 
should be designated as an ``efficiency allocation'' that must be 
earned through energy efficiency efforts and results.
--Western should let customers know how much of their allocation is 
tied to successful energy efficiency accomplishments.
--Western should allocate only 80 to 90 percent of the marketable 
resource available to customers on a firm basis, rather than the 98 
percent under consideration.
--The need for a resource pool is acknowledged. The resource pool is a 
good answer to critics of long-term extensions of power to existing 
customers.
--The resource pool would undermine the tremendous benefit derived by 
the ``yardstick'' service to preference customers in sparsely populated 
areas.
--Up to 10 percent of existing resources would be sitting in a pool and 
not being used. This policy has a major environmental impact for those 
customers needing to acquire replacement resources.
--Withdraw capacity only, not both capacity and energy. The withdrawn 
capacity could be used to firm up renewable resource or cogeneration 
facilities.
--Build the resource pool with turnbacks of power from existing 
contractors or out of project-use efficiency upgrades. Pool could also 
be derived from contractual terminations or new resources that become 
available.
--Capacity allocation reductions should be phased in at no more than 2 
percent per year and should be applied on a pro rata basis to all 
customers.
--Customers should have the ability to increase their allocations 
through compliance with the Program.
--Extensions should be given on a pro rata basis; a graduated scale 
approach is not warranted.
--Opposition is strongly expressed to any type of ``graduated scale'' 
extension concept.
--We prefer an extension of resources on an equal percentage basis to 
all customers. If another concept must be used, the stepped-inverse 
approach appears best.
--Prefer extension at 100-percent level for those who comply with 
program regulations.
--Priority in the commitment of resources should be given to existing 
customers who committed to Federal power when it was not the lowest 
priced resource in the region. Western should recognize the historic 
risk that many existing customers took in committing to hydropower and 
the equity that existing customers have in the existing resources due 
to their payment of bills through the years.
--Since CVP hydroelectric resources are more than 2,000 MW nameplate, 
plus 400 MW or more Intertie capacity, a resource pool can be developed 
without a mandatory reduction of existing contract rates of delivery.
--Reductions in the allocations could degrade the customer's ability to 
meet obligations with respect to the financing of renewables and would 
send the wrong signal regarding renewable resource development.
--Instead of reducing resources, Western has the responsibility to 
develop additional resources.
--Due to the substantial impact on smaller customers of a reduction in 
resources, Western should purchase power to cover any shortfalls.
--Small customer rates are high enough already. A reduction in the 
Federal resource would unduly impact consumers and threaten the 
continued financial stability of small customers.
--A reduction of power is unfair for our cooperative when Western 
serves a higher percentage of the needs of other customers; this is 
especially inequitable for Native Americans served by our cooperative.
--A relatively small extension of power would create a shortfall of 
power for the customer that could not be made up by DSM alone. DSM 
works well to meet incremental load growth, but a major loss of 
resource would require supply-side action.
--Western should extend a customer's current allocation in full and 
provide a 10- to 20-percent bonus if it currently meets Western's EMP 
criteria.
--A lower extension amount would be unfair to CVP customers whose 
contracts expire in 1994.
c. Discussion
     Western believes that the Program proposal set forth in this 
Federal Register notice provides certainty in customer planning 
efforts. An extension of resources at this level is substantial enough 
so that existing purchasers will not have to build new generation or 
enter into large purchases of thermal generation. A lesser level of 
extension could cause customer pursuit of other resources, with 
potential associated economic and environmental impacts. The resource 
planning of auxiliary suppliers would be disrupted by the nonextension 
of a significant percentage of Federal power. Western agrees with the 
comment that a substantial near-term shortfall in the Federal resource 
could not likely be met in the short term by DSM alone.
    Western agrees with the comment that significant reductions in 
future allocations could degrade the purchaser's ability to meet 
obligations with respect to the financing of renewables and would send 
the wrong signal regarding renewable resource development.
    Western also agrees that it is not appropriate under this Program 
to shift the majority of the risk of resource availability onto 
purchasers without their consent. Western's contracts will allow 
customers to take on the responsibility of acquiring firming resources 
in the future if the customer chooses to do so. If a purchaser prefers 
that Western carry out this responsibility, Western can take advantage 
of its extensive transmission system to purchase firming resources, in 
accordance with IRP principles, to meet contractual obligations during 
drought conditions. The use of resource adjustment provisions, rather 
than a large resource pool, meets Western's need for flexibility in 
making long-term resource commitments. Western agrees that reservation 
of a large percentage of existing firm resources in an initial resource 
pool could have economic and environmental impacts. Instead, Western is 
proposing an incremental resource pool over time. This approach avoids 
the disruption of one large resource pool implemented all at once, with 
the potential for power being reserved for future needs but not being 
used at present.
    Western has developed a proposed extension formula that provides 
equitable treatment to all existing purchasers, as the risk of change 
in marketable resources before existing contracts expire is shared. 
Existing purchasers may get more or less power if marketable resources 
are redefined to a different amount.
     Western has reserved the right to change the marketable resource 
on 5 years' notice. Any change would take place only after an 
appropriate public process. This flexibility balances the ``firm'' 
nature of Western's resource with the need to address changing 
conditions throughout the contract term. Western agrees that the risk 
of changing operational constraints is addressed by the resource 
adjustment capability and a resource pool need not be created for this 
purpose.
    Withdrawal of only capacity from existing purchasers would not meet 
the needs of new customers in the absence of energy availability from 
other sources. Purchasing energy to go with this capacity would create 
additional pressure on Western's firming resource acquisition budget 
during future drought conditions. However, in the process of 
determining the amount of project-specific marketable resource, Western 
would consider the possibility of redefining resources to meet regional 
needs. An appropriate public process and any necessary NEPA 
documentation would occur before significant changes in the marketable 
resource are implemented.
    Very little support was received for the concept of extending 
resources on a graduated-scale basis. The issue here is whether 
extensions should be offered on a pro rata basis to all existing 
purchasers or if extensions should take place on some other basis, such 
as the percentage of the total customer load that is served by Western. 
Given the lack of public support for the graduated-scale idea and the 
associated administrative complexities, Western has decided to propose 
an equitable pro rata policy. All existing purchasers will receive the 
same treatment in the application of the extension.
    Western received a number of comments that the resource pool should 
be created in ways other than reducing the existing commitments to 
Western's purchasers. Examples of these options include building a 
resource pool with turnbacks of power from existing purchasers, 
project-use efficiency upgrades, contractual terminations, new 
resources, and power withdrawn from customers due to EMP penalty 
imposition.
    Once the extensions for existing customers and allocations to new 
purchasers from the resource pool have been made, additional power 
resources may become available for various reasons.
    Power reserved for new purchasers but not allocated and resources 
offered but not placed under contract may become available. This power 
would be offered on a pro rata basis to existing customers that 
contributed to the resource pool through application of the extension 
formula described in section IV.D.
    Power resources freed up by Western's acquisition of cost-effective 
energy efficiency/DSM may become available. Resources resulting from 
the enhancement of existing generation, project-use load efficiency 
upgrades, the development of new resources or resources turned back to 
Western may also become available. Western proposes that this power be 
used to reduce the need to acquire firming resources, retained for 
operational flexibility or allocated by the Administrator.
    Resources may become available due to penalty imposition pursuant 
to section III.H of these procedures; this power may be made available 
to existing customers, subject to withdrawal on 30 days' notice.
    An additional commenter observed that Western has the 
responsibility to develop additional resources. Western does not agree, 
as it does not have the statutory obligation to meet load growth. 
Western markets power from water projects developed by the Corps, 
Reclamation, and the International Boundary and Water Commission and is 
not authorized to acquire additional generation as loads grow. One 
exception to this general statement is contained in Public Law 102-575, 
which allows Western to identify replacement resources for power that 
may be lost as a result of decisions stemming from the Glen Canyon Dam 
EIS and propose legislation necessary for the acquisition of such 
replacement resources.
    One comment suggested that a CVP resource pool could be created 
without a reduction in commitments to existing purchasers by 
redetermining the level of risk of availability of the marketable 
resource. Other comments suggested that Western should purchase power 
to cover any resource shortfalls, due to the substantial economic 
impact to small purchasers of a reduction in resources. Western is not 
proposing to alter existing methods of determining resources available 
for marketing under the Program. Western has provided for an 
opportunity to determine, before new commitments are effective, what 
resource will be available at the end of the term of existing 
contracts. This would be the appropriate time to evaluate whether any 
change in risk level (including the risk of firming resource 
acquisition) should be made for a particular project.
    Several comments were received in favor of customer competition for 
resources, so that a customer with demonstrated exemplary efforts in 
energy efficiency and conservation could earn more Federal power than 
it presently has under contract. Comment was received that long-term 
firm resource extensions should be provided sparingly and only to 
customers who are very diligent in setting and meeting energy 
efficiency goals. Western also received suggestions that 25 percent of 
the power extended to Western's customers, or some other defined 
percentage, should be earned and contingent on energy efficiency 
efforts and results.
    Western has not adopted these comments for several reasons. First, 
power purchased from Western is key to the resource mix that customers 
possess today and central to a customer's planning for the future. 
Periodic competition for the Federal hydropower, or requiring that a 
customer earn a portion of its Federal power periodically, would 
undercut Western's expressed need for the customer resource stability 
that is necessary to enhance integrated resource planning. Second, 
Western is concerned that making Federal power contingent in the 
suggested manner will induce purchasers to address this uncertainty 
through construction of new generation or new purchases of thermal 
generation, with associated economic and environmental impacts. Third, 
Western believes that it would be very difficult to judge comparatively 
and reward customers who have pursued and achieved superior energy 
efficiency results. With the great diversity that exists among 
Western's customers, it would be a daunting task to decide whether the 
conservation efforts of a small irrigation district are comparable to 
the achievements of a much larger, vertically integrated utility. Since 
larger utilities have more opportunities to excel in this area, 
competition for power could serve to redistribute power from smaller 
customers to larger utilities with the staff, resources, and knowledge 
to succeed. As customers facing load growth have greater opportunity to 
plan and implement cost-effective DSM and energy efficiency resources, 
the concept of competition could similarly work to the detriment of 
customers facing stable loads or experiencing supply-side resource 
surpluses. However, Western remains open to comments that might assist 
in determining how to measure energy efficiency achievement.
    Western agrees with the observation that the Clean Air Act presents 
a potential double penalty for existing purchasers if Federal resource 
commitments are not extended at a high level. Not only will the 
purchaser be faced with the added expense of replacing any Western 
resource not extended, but the customer could well be forced to acquire 
credits under the Clean Air Act emission trading scheme to generate or 
purchase replacement power.
    Western recognizes that existing purchasers made an historic choice 
to pursue Federal hydropower and that some customers elected to 
purchase this resource before the economic advantages were clear. 
However, Western does not believe that the historic enjoyment of the 
benefits of Federal hydropower means that a purchaser has a perpetual 
right that cannot be diminished. Western's policy of widespread use and 
the potential allocation of power to new preference customers must be 
balanced against the fact that existing purchasers have developed 
contractual relationships with supplemental suppliers, transmission 
arrangements with Western or third parties, and in some instances, have 
constructed transmission facilities to receive Federal power. Western 
believes that its proposal, as set forth in this Federal Register 
notice, provides for a proper balance among these policy issues. The 
phasing in of resource reductions over a 35-year time period is a 
creative approach. However, Western has chosen a less complicated 
approach of allowing for the adjustment of marketable resources on 5 
years' notice in response to changes in river operations and hydrology 
only.
    A CVP customer expressed the point of view that a lower extension 
amount would be unfair to CVP purchasers whose contracts expire in 
1994. This comment has been overtaken by events, as these CVP 
commitments have been extended to 2004 through the execution of new 
contracts. CVP customers party to contracts that expired in 1994 are 
subject to the provisions of the 1994 CVP power marketing plan 
developed and completed pursuant to a separate public process. The PMI 
does not apply to these contracts, so no issue of equity exists. 
However, the IRP provision of the Program will apply to all CVP 
customers as of the effective date of the final Program.
    Western agrees that a 10-percent reservation of power in a resource 
pool would have an impact on existing customers. The draft EIS 
documents these impacts.
    Western realizes that the draft EIS predicts relatively greater 
environmental benefits for high-percentage extensions. A need exists to 
retain the flexibility to meet a fair share of the needs of new 
customers and other purposes as determined by Western. Western's 
proposal balances environmental benefits associated with resource 
stability with the need for flexibility to respond to changing 
circumstances over time.
    The initial extension percentage is directly related to Western's 
estimate of what hydropower must be reserved in a resource pool to meet 
a fair share of the needs of potential new customers. Western's 
project-specific estimate in this proposed Program could be adjusted 
for certain projects to reflect more accurately potential new customer 
needs at a time closer to the expiration date for existing contracts.
    A reservation for Native Americans of 25 percent of the current 
power commitments from the Eastern Division of the Pick-Sloan Missouri 
Basin Program is far greater than that needed to meet a fair share of 
the power needs of the requesting tribes. Western proposes to allocate 
power to Native Americans for use on the reservation out of project-
specific resource pools but will determine the size of the pool based 
upon the need to meet an appropriate share of the load for eligible new 
customers.
    Western proposes to define Indian tribe as provided for in the 
Indian Self Determination Act of 1975, 25 U.S.C. Sec. 450b.
    Rather than extend a percentage of the resource available at the 
end of the term of existing contracts, one comment suggested that 
Western extend 70 percent of the marketable resource under contract 
today. Western believes that the approach set forth in the proposed 
Program will result in a more precise commitment, based upon 
information available nearer to the time that existing contracts 
expire. The proposed Program better meets the need to balance resource 
certainty with the flexibility to react to changing circumstances.
    An extension of power at a 100-percent level to customers in 
compliance with the IRP procedures will not be adopted, as it does not 
recognize the need to react to changes in hydrology or river operations 
and does not accommodate the need to make power available to potential 
new customers.
    A cooperative in the upper Midwest commented that it was unfair to 
extend a relatively low level of resources when other entities were 
meeting a higher percentage of their needs with Western's hydropower. 
This entity remarked that this was especially unfair for Native 
Americans served by the cooperative. For the same reasons that a 
graduated-scale extension approach is not being adopted, Western will 
treat this cooperative the same as all other project customers. 
Allocations out of the resource pool for the benefit of Native 
Americans may compensate for any initial reduction of resources 
currently sold to this cooperative.

3. Resource Pool Uses

a. Background
    The originally proposed purposes of the resource pool were to 
absorb any changes in marketable resources, to make allocations to 
potential new customers, to reward the energy efficiency 
accomplishments of existing purchasers, to meet ``contingencies'' that 
might arise, and to consider fostering the development of cost-
effective renewable resources.
b. Comments
--Western should not use the resource pool for allocations to new 
customers or as incentives for developing renewable resources.
--Western should encourage development of cost-effective renewable 
resources through allocations from the resource pool and should expand 
the list of eligible technologies to include fuel cells.
--Western should not use the resource pool to encourage development of 
renewable resources; these resources are unneeded and too indefinite to 
warrant the reservation of firm power.
--There is no reason to use the resource pool to foster new 
technologies. If these technologies are economical, customers will be 
motivated to adopt them to save money.
--Western should not require Native Americans to acquire utility status 
before tribes become eligible for an allocation of power out of the 
resource pool.
--Western should allocate power based upon need. Our tribe has many 
members living in poverty.
--Native Americans should receive power from Western, as they 
sacrificed many acres of prime land when the Corps constructed dams on 
the Missouri River.
--New customers should get new resources only. New customers should pay 
for new resources at the marginal cost or at a 10-percent premium.
--Western should provide all power to existing customers. An apt 
analogy is the first right of refusal for FERC licensees when a 
hydropower license is up for renewal.
--Resource pool power should be used to reduce purchase power expense 
and keep existing customer rates down.
--Use of firm power in a resource pool to meet ``contingencies'' is far 
too vague. Do not cut back on power to existing customers because of 
``pie in the sky'' future needs.
--Market ``contingency'' power in the pool to existing customers on a 
withdrawable basis.
--Concern was expressed that power in the resource pool might be sold 
to investor-owned utilities or to California pending a decision on how 
to use it.
--Any use of the resource pool for contingencies should be temporary 
until Western can acquire ``makeup'' supplies elsewhere. Shifting the 
risk of power unavailability to customers means customers and Western 
are competing against each other for resources; this is not efficient.
--Appreciate Western's recognition that a customer's rate of delivery 
(CROD) should not be based on EMP compliance.
--Penalize those who do not conserve energy now to get the energy pool 
you are trying to build.
--The concept of a resource pool is poorly justified by Western. The 
establishment of the pool is also premature.
--It does not seem prudent to consider potential additional customers 
at a time when water levels are so low and massive runoff is needed to 
avoid purchases or reductions of CROD.
--Limit the use of a resource pool to just what is needed for an 
enhanced planning and management program.
--The use of the resource pool is ill-defined. We object to reducing 
Federal power commitments to existing customers for events that might 
occur in the future.
--The resource pool should be used for resource adjustments first, 
before withdrawals from existing customers.
--A customer should not be restricted from receiving an entitlement 
above its current allocation.
--Existing customers should have the first right to any unallocated 
power resulting from diminished extensions.
--Several existing preference customers (such as the National 
Aeronautics and Space Administration Ames Research Center) are heavily 
engaged in research and development activities in the fields of energy 
conservation and environmental protection. These activities benefit not 
only the residents in the area served by Western but the entire 
population of the United States. The contributions of these customers 
should be recognized by additional allocations from the resource pool.
--New customers should compensate existing customers for the benefit 
they receive from not paying for all of the original investment.
--Offer prospective new customers a portion of the excess energy 
available from time to time from Western on a nonfirm basis and leave 
the capacity and energy already under existing contracts with the 
existing customers.
--The only capacity that should be reserved in the resource pool is the 
capacity needed to cover projected load growth.
--Only those customers who contribute to the pool by reduction of their 
CROD prior to extensions should receive pool allocations. Historic 
investments in energy efficiency should be recognized in resource pool 
allocation criteria.
--Increase the energy allotment by a percentage of load growth of 
existing customers.
--Resource pool allocations should be completed 5 years versus 3 years 
in advance of the delivery of power to assist utilities in their 
resource planning.
--Western must recognize the increased need for electrical energy to 
enhance water pumping operations resulting from wildlife refuge 
expansion, undependable surface water supplies, and other factors. 
Meeting the goals for an anadromous fish hatchery production, including 
the listed winter-run Chinook salmon, also would increase the 
electrical energy needed for water chillers, disease control, and other 
water treatment technologies.
--Several Indian tribes desire an allocation of 25 percent of the Pick-
Sloan Missouri Basin Program-Eastern Division resources. Western should 
provide a mechanism for wheeling preference power over existing 
transmission and distribution lines.
--The Nebraska cities of South Sioux City, Wakefield, Madison, and 
Randolph request that their allocations be firmed up and that their 
allocations be sized so as to compensate them for past losses.
c. Discussion
    Western is persuaded that the Program goal of providing existing 
customers with long-term resource stability is undermined by the 
immediate creation of a large resource pool out of unextended power, 
with the potential for firm power to be unused for a period of time. 
Instead, an incremental resource pool is proposed.
    Western is not proposing to extend all of the existing long-term 
firm resource to existing purchasers. Balance must be achieved between 
avoiding disruption in existing customer power supply and transmission 
arrangements and Western's policy of encouraging widespread use of the 
Federal resource. Principles of widespread use of preference power are 
better served by making an appropriate amount of power available to new 
customers who have not previously enjoyed the benefits of Federal 
hydropower. Precedent for this approach exists for many of Western's 
projects, including the Pick-Sloan Missouri Basin Program-Eastern 
Division post-1985 power marketing plan, the post-1989 power marketing 
plans for both the Loveland Area Projects and the SLCA/IP, and the CVP 
1994 power marketing plan.
    An advantage to making some power available to new customers is 
that the benefits of IRP preparation will be available to a broader 
customer base. In addition to receiving power from Western, new 
customers not approved for small customer status will be required to 
engage in integrated resource planning, a planning approach that many 
utilities have found to result in lower-cost resources being provided 
to the ultimate consumer.
    Western will not adopt comments opposing resource pool use to 
foster renewable energy and other new technologies. The resource pool 
will be available to meet a fair share of the power needs of new 
customers and other purposes found to be appropriate by Western. 
Western believes that fostering renewable energy and new technologies 
is an appropriate use for Federal hydropower. Western also will assist 
in developing renewable resource technologies through such avenues as 
providing transmission access, targeted technical assistance based upon 
demonstrated or promising cost-effective technologies, and shaping and 
storage service.
    Western does not believe that new customers should pay a premium to 
existing customers or pay for power at a level higher than the rate 
charged existing customers for Western's hydropower resources. Neither 
equity nor administrative convenience is served by the creation of 
different classes of customers dependent upon the timing of initial 
service from Western. Given the relatively small amount of power being 
proposed for availability to new customers, the existing customer rate 
impacts of charging a higher rate to new customers is not significant.
    A comment was received suggesting that the resource pool could be 
used to offset the need to purchase firming power. As described 
elsewhere in this Federal Register notice, Western will employ IRP 
principles in its acquisition of firming resources in the future. 
Western will not use the resource pool power to mitigate the need to 
acquire firming resources, as this would unfairly limit the power 
available to new customers. Resources made available to Western from 
the enhancement of existing generation, improved project use 
efficiencies or the development of new resources could be used to 
lessen Western's resource acquisition needs.
    Western recognizes that allocations of power to new customers 
during prevalent drought conditions may not seem prudent. However, 
drought periods are cyclical in nature, and some regional water 
conditions have improved recently.
    Western sees no need to reserve capacity in the resource pool to 
meet future load growth of existing customers. Keeping power in a 
resource pool that otherwise could be marketed to preference customers 
has an adverse impact on the stability of the Federal resource for 
existing customers and may impact Western's rates in the future. 
Withdrawing power from existing purchasers to meet future load growth 
of other existing purchasers creates a present need for power that 
would not exist if the withdrawal did not take place in the first 
instance.
    Several existing and potential new customers commented that they 
should receive new or increased allocations of Federal power. The 
merits of allocating power to applicants not presently receiving the 
benefits of Federal hydropower will be determined under a separate, 
future public allocation process for each project.
    Western disagrees with the suggestion that new customers should be 
offered only a portion of the excess energy available from time to time 
instead of a long-term firm commitment. This approach would relieve new 
customers from the IRP provision and would mean that the benefits of 
IRPs would not be available to a broader Western customer base. In 
addition, Western expects many potential new customers will not be in a 
position to use excess energy because of their small size and lack of 
operational personnel. No change in Western's policies on excess energy 
marketing is proposed at this time; this is a subject appropriate for 
consideration at the time that any project-specific determinations of 
changes to marketable resources are proposed.
    With regard to Native Americans, Western has always considered 
tribes to be preference entities. Proposals for providing allocations 
directly to the tribes will be developed on a project-by-project basis 
during the allocation of power from project-specific resource pools.
    This flexibility is critical, since an allocation of power is of no 
value unless an organization has the means to receive power; the 
potential customer must be ready, willing, and able to take delivery of 
power. The resource pools proposed in this Program are sized to include 
a fair-share amount for allocation to Native American tribes. Western 
is not requiring utility status for tribes as a precondition to receive 
an allocation of power from Western.

4. Resource Adjustment Provisions

a. Background
    Western originally proposed that both a resource pool and resource 
adjustment provisions were necessary to allow Western the flexibility 
to meet changing conditions, including changes in river operations and 
hydrology. The adjustment provisions set forth fixed windows of 
opportunity to adjust marketable resources; the timing of these 
adjustment opportunities varied depending on the extension terms 
discussed during alternatives workshops.
b. Comments
--Instead of fixed windows, define the withdrawal criteria up front. 
Prefer 5 to 10 years' notice over a predefined time window.
--The reopener provision makes Western's power less than firm; it is 
not a firm commitment when open-ended windows are featured.
--Limit resource adjustments to changes in hydrology or mandated 
operational changes.
--Adjustments should be made on 5 years' notice only for changes in 
hydrology or ``Law of the River.''
--Resource adjustments should be limited to those that make Western's 
resources as firm as possible, while reducing the need for firming 
purchases.
--Limit resource adjustments to changes in hydrology.
--Extend resources for 35 years and review the need for any change in 
marketable resources after 15 years, but do not actually adjust the 
resource until 25 years into the extension term.
--Limit resource adjustment provisions to hydrology, with operational 
changes handled on a pass-through-cost basis like the SLCA/IP contract 
amendments.
--Resource adjustments should be limited to 5 percent of existing 
contact rates of delivery.
--Any adjustments in allocations due to the shortfalls in water runoff 
as found under applicable hydrology studies should be accomplished upon 
completion of the studies.
--The adjustment provisions are not sufficiently defined.
--Establish a floor/limit on withdrawals pursuant to contract.
--Allow a 10-year notice by Western for adjustment, with a shorter 
period for customers to terminate in the event that Western power 
becomes uneconomical.
--Western should establish a contract period that allows sufficient 
advance notice of any change to accommodate utility planning horizons.
--Western needs to consider the ecological impacts of altering the flow 
of Colorado River water into the northern Gulf of California.
--Program alternatives limit Western's flexibility to respond to 
environmental issues and other changes that are sweeping the utility 
industry.
c. Discussion
     Western no longer proposes to use the resource pool as a means to 
meet any changes in the marketable resources during the term of the 
extended resource. Instead, Western believes that customer resource 
stability is better served by an ability to adjust the marketable 
resource upon 5 years' notice for changes in river operations and 
hydrology only. This length of notice allows for timely response to 
changes in river operations and hydrology, while giving customers ample 
notice before any adjustments. In this way, Western believes a balance 
will exist between customer resource stability and the ability to 
respond to possible resource acquisition requirements to meet Western's 
long-term firm resource commitments.
    Western has also proposed to provide for flexibility prior to the 
time that existing contractual commitments expire. In Western's 
proposed Program, a proposal is set forth that would base pro rata 
extensions on the resource available at the end of the term of existing 
contracts. This would allow Western's commitments to take place with 
full knowledge of any operational or hydrology study results. If the 
determination of the future available resource is significantly 
different from existing resource commitments, the change will only take 
place after an appropriate public process. Any appropriate National 
Environmental Policy Act documentation would also be prepared at that 
time.
    Western cannot commit to a floor or a limit on use of these 
adjustment opportunities at present. The future is too uncertain for a 
guarantee that the marketable resource cannot be changed beyond certain 
limits. However, Western fully understands the need for customer 
resource stability and will evaluate any changes in marketable 
resources with an appreciation of the importance of any significant 
change in Western commitments.
    Existing contractual rights, as set forth in the applicable General 
Power Contract Provisions, allow a customer to terminate its contract 
if Western's rates become noncompetitive. Western plans to retain this 
provision in future contracts.
    Western's Program proposal is neutral on the issue of operations 
for a particular project or hydropower facility. The approach set forth 
in this Federal Register notice flexibly allows for changes in 
operations but does not influence such changes. Any proposed changes in 
river operations are properly evaluated on a project-specific basis 
separate and apart from the Program proposal.

5. PMI Implementation

a. Background
     Western originally proposed to make extensions of resource 
commitments when the Record of Decision on the Program EIS is published 
in the Federal Register. Later, Western asked the public for input on 
what event should trigger contract execution. Initial extensions would 
be offered to purchasers from the Pick-Sloan Missouri Basin Program-
Eastern Division and the Loveland Area Projects.
b. Comments
--Why does Western feel a need to offer extensions of the Pick-Sloan 
Missouri Basin Program-Eastern Division power before the Corps finishes 
the revision of the Master Operating Manual? If we wait, everyone will 
know what the resource is.
--Western's approach of making an early commitment to extend 
allocations to existing customers is supported and endorsed.
--Concerned that these allocation decisions will be made before 
Western's customers can reasonably be expected to have engaged in 
meaningful experiments with energy efficiency.
--Western should not limit the extension of resources to only those 
projects where contracts expire between the years 1995 and 2004. If the 
Program is desirable for some of Western's customers, it should be 
desirable for all of them, including CVP customers.
--Resource extensions should not be considered for SLCA/IP resources 
until all outstanding issues related to the Colorado River are 
resolved.
--SLCA/IP customers should receive the same treatment under the PMI as 
other customers and receive an extension of resources as soon as the 
Program regulations become effective.
--No new allocations should be made until such time as it is known with 
reasonable certainty what reductions in resources Western is likely to 
experience.
--Contract extensions should be limited to term, resource, and IRP 
implementation.
--Contract execution should be triggered by IRP submittal.
--Extension terms should start when existing contracts expire.
--The resource should be precisely defined--a number should be in the 
contract.
--The commitment of Western power needs to be specific, and adjustments 
well-defined, for transmission-dependent utilities to negotiate 
wheeling agreements.
--Resources made available for tribes should be provided through their 
present power supplies.
--Contract execution should be triggered by issuance of the EIS Record 
of Decision.
c. Discussion
    As Western receives IRPs from existing Pick-Sloan Missouri Basin 
Program-Eastern Division customers, Western proposes to offer contracts 
to those customers. This approach provides an incentive for customers 
to prepare an IRP expeditiously, to avoid the uncertainty of not having 
a signed contract for future resources. Extensions of resources upon 
IRP receipt offers Western the flexibility of using the new penalty 
provisions required by EPAct, as opposed to the 10-percent resource 
reduction penalty in existing contracts. Extension terms will start 
when existing contracts expire. Customers can include Federal 
hydropower as a current resource in their IRPs based upon the 
provisions of these procedures. Contracts will be offered to existing 
LAP purchasers after the redetermination of marketable resources, 
pursuant to existing LAP contracts, takes place.
    There is no guarantee that the Master Operating Manual completion 
schedule will be free from delay. Mechanisms exist in the proposed 
Program to adjust the marketable resource if necessary to reflect the 
results of the Master Operating Manual revisions.
    Through the extension formula and the provision that allows for 
adjustments to marketable resources on 5 years' notice, Western has 
retained the flexibility to consider marketing changes in the event 
that resource reductions are experienced. New allocations can be made 
under these circumstances.
    An early commitment to extend resources provides the foundation for 
effective integrated resource planning. Western believes that customer 
energy efficiency planning and achievement is enhanced by the stability 
provided by resource extensions. Meaningful resource planning, 
including demand-side and renewable resource evaluation, is difficult 
if the existing resource is not relatively well-defined and stable. 
Energy efficiency investments should take place following, and not 
before, the preparation of IRPs. Otherwise, there is no way to assure 
that investments are cost-effective. IRPs cannot be prepared with 
assurance until resource extension commitments have taken place.
    Western is proposing the initial application of the PMI be limited 
to the Pick-Sloan Missouri Basin Program-Eastern Division and, after 
any adjustment to resources pursuant to existing contracts, the 
Loveland Area Projects. CVP resources under contracts expiring in 1994 
have been marketed under a separate public process, and Western is 
preparing an EIS on the 2004 marketing plan for the CVP. Given the 
existing uncertainties regarding CVP marketing, application of the PMI 
to the CVP will be determined at a future date. Western would evaluate 
applying the PMI to the SLCA/IP after its electric power marketing EIS 
is completed and the associated marketing criteria and contracts are 
modified consistent with the results of the SLCA/IP EIS. Western 
received comments that SLCA/IP customers should receive the same 
treatment under the PMI as other customers and receive an extension of 
resources as soon as the Program becomes effective. Such an approach 
would extend resources committed under a marketing plan and contracts 
that are not yet final. Western believes that offering contracts at 
such an early date would be premature for the SLCA/IP.
    Western expects to provide Federal hydropower to Native Americans. 
Proposals for providing allocations directly to the tribes, or 
providing the benefits of an allocation to tribes through a rural 
electric cooperative, will be developed on a project-by-project basis 
during the allocation of power from project-specific resource pools.
    Extensions of resources under the PMI could take place either 
through amendments to existing contracts or new contracts, depending on 
the project. The nature of extension implementation would take place on 
a project-specific basis.
    Western has not adopted the comment that the resource should be 
defined precisely and immediately in the contract through a numerical 
commitment of capacity and energy. Western must retain the flexibility 
to adjust its resource commitments. Numbers reflecting Western's 
precise capacity and energy commitments will be included in each long-
term firm contract as soon as practicable, but this would not be 
possible until the generating agencies have answered ongoing 
operational questions, after extension commitments are offered pursuant 
to this proposed Program.

6. Purchase Power

a. Background
    Western proposed to continue its past practice of purchasing 
firming resources to meet its firm power commitments.
b. Comments
--Western may overcommit its resources by providing contract extensions 
up to 98 percent of the available resource. Such a large commitment can 
have enormous consequences, both on the interconnected electrical 
network and the regional environment. We believe these purchases 
influence unit dispatch, regional loop flows, and emissions from coal 
plants. Western will be under considerable pressure from its utility 
customers to provide large amounts of energy even when Western cannot, 
on a firm basis, provide such quantities from its hydropower resources.
--In response to these purchase power concerns, Western should ensure 
the electricity it markets is used in the most efficient manner 
possible and assist its customers to provide energy services to retail 
customers in the most economical and environmentally benign fashion.
--Western could exchange power with BPA to avoid purchase power needs 
for the SLCA/IP.
c. Discussion
    In the proposed PMI, Western has set forth mechanisms to assure 
that an appropriate level of resource is marketed. Western anticipates 
that the extension formula, which allows for the determination of 
future resources prior to the date that deliveries under new contracts 
start, will allow for a better determination of a prudent level of 
commitment. Significant changes from existing levels of resource 
commitments will take place only after an appropriate public process. 
In addition, Western has reserved the right to change the marketable 
resource commitment on 5 years' notice after the new contracts become 
effective. In this way, Western can adjust its commitments of resources 
if necessary. An important factor in changes to Western's marketable 
resources is the resource acquisition risk. Resource acquisition risk 
factors to be evaluated would include economics and the availability of 
firming resources.
    In the future, Western will meet its firming resource needs through 
employment of IRP principles. While Western has carried out the role of 
acquiring firming resources on behalf of its customers in the past, 
Western will design contracts which would allow customers to take on 
this responsibility in the future. Whether Western or its customers 
carry out this role in the future, there should not be a dual standard 
in planning for and acquiring resources. The acquisition of resources 
in support of Western's hydroelectric commitments should be based on 
integrated resource planning principles, with cost-effective renewable 
resources, demand-side management, and energy efficiency being treated 
as viable alternatives to the purchase of firming energy.
    Western has in the past explored the potential for mutually 
beneficial exchanges of power between the SLCA/IP and BPA. Suitable 
transmission arrangements are key to such an arrangement. Western will 
continue to pursue cost-effective exchange arrangements in the future.

7. Other Marketing Issues

a. Background
    Historically, Western has marketed firm power at a level defined in 
project-specific marketing criteria. During periods of drought, Western 
has purchased firming power to meet the obligations defined in the 
marketing criteria. When water conditions are good, surplus energy (and 
occasionally surplus capacity) may be available for sale on a short-
term basis. Typically, these surpluses are sold to regional utilities. 
These regional utilities may or may not be long-term firm power 
customers; these sales are often made to both preference entities and 
IOUs.
    Western's marketing approach has historically been project-
specific, based on public comment and policy decisions made during the 
development of specific marketing criteria. Some resources are marketed 
on a resource pattern basis, while others are based on the load pattern 
of the customer. Restrictions on scheduling Western's hydropower 
resources are also project-specific in nature.
    Western is proposing to extend a major percentage of the power 
currently committed to existing customers beyond the expiration date of 
existing contracts. Western is not proposing to acquire new resources 
to meet customer load growth.
b. Comments
--Western should market all surpluses to preference customers in the 
marketing area and not to California or to IOUs. Extension of less than 
100 percent of present commitments to existing customers means IOUs 
would get the benefit of power currently sold as a firm resource. 
Marketing to IOUs violates the preference clause as set forth in 
Reclamation law.
--Western should expand its role to meet the wholesale power needs of 
all CVP public power utilities and should also do power pooling and 
scheduling for small entities.
--Western should take on a greater level of risk regarding its long-
term firm commitments. The Billings Area Office should follow the 
example of the Loveland Area Projects and market capacity on a 90-
percent level-of-probability basis.
--Western should market power on a load-pattern basis as opposed to a 
resource-pattern approach.
--Western should market surplus power available in good water years to 
existing customers first; this commitment would be in addition to the 
base extension of long-term firm contracts.
--It is important that Western evaluate the type of product being 
offered and consider the mix of capacity and energy. Western should 
study reshaping the amount of energy being supplied because of the base 
load capabilities of power suppliers such as Basin Electric.
--Western should consider changing the marketing approach for the 
Eastern Division of the Pick-Sloan Missouri Basin Program to a 
resource-pattern allocation rather than the existing load-pattern 
policy. There will be greater direct benefit to customers, and it will 
improve hydrothermal integration.
--The flexibility of hydroelectric resources in load following and 
peaking must be retained.
--By changing the product from a predominately load-following resource 
to a more capacity-oriented product and achieving greater energy 
sufficiency through integration with regional thermal sources, we 
believe that there is great potential to maintain or increase capacity 
resources to existing customers and still supply resources to a pool.
--Western should not market to nonpreference customers.
--Alternative reformulations of the commodities should be evaluated, 
such as moving to a run-of-the-river basis for energy.
--Western should consider offering more flexibility in scheduling firm 
power, such as on an hour-by-hour or monthly basis.
--Department of Defense and State of South Dakota allocations must be 
fixed in place for the Pick-Sloan Missouri Basin Program--Eastern 
Division.
--Consider allowing adjustment of fixed deliveries, as this would delay 
the need for new generation.
--Cost-effective investments should be made by Western in hydro 
facilities.
c. Discussion
    The preference clause generally applies to sales of capacity and 
energy by Western. For most of Western's projects, long-term firm power 
is offered to preference entities first before any resource is made 
available to nonpreference entities. Short-term surplus Federal energy 
is generally sold on a shared-savings basis. Within a range of rates, 
short-term firm energy is usually made available first to preference 
entities and then to IOUs. Short-term surplus energy is made available 
to both preference entities and IOUs. Changes to this short-term 
marketing policy, and other marketing approaches referred to in the 
comments set forth above, are not within the scope of this proposal and 
are not appropriate on a Western-wide basis, given the wide variety of 
customer needs and regional differences that exist within Western's 15-
State service territory. Changes in Reclamation law and the preference 
clause are outside the scope of the Program and its EIS.
    Changes in Western's current marketing approach for a specific 
project can be appropriately considered in a separate project-specific 
proceeding at a later date. The extension formula provides for a pro 
rata commitment to existing purchasers, based on the new resource 
available at the end of the term of existing contracts. Changes in the 
marketable resource are best addressed at that time on a project-
specific basis and not at this stage of the Western-wide development of 
the PMI. Marketable resource issues that might be appropriate for 
discussion at that time include adjustments to fixed deliveries, 
scheduling flexibility, load pattern versus resource pattern, and the 
way we sell nonfirm energy.
    Western has no general legal obligation to acquire additional 
resources to meet the load growth needs of its customers. Western is 
open to discussions to provide power pooling and scheduling services 
with any of its customers as long as such services are feasible and 
cost-effective. However, these discussions should take place outside 
the process of developing the Program.
    Western does not have the authority to make cost-effective 
investments in hydroelectric facilities. However, Western is willing, 
in cooperation with the generating agencies, to use its existing 
contractual authorities to support cost-effective investments by other 
parties in hydroelectric improvements under appropriate terms and 
conditions.
    For the Pick-Sloan Missouri Basin Program--Eastern Division, both 
the State of South Dakota and the Department of Defense have been 
allowed to transfer Western power from one location to another. After 
existing contracts expire, Western proposes to require that power 
commitments to specific State and Defense sites not be changed unless 
the contract rate of delivery exceeds the total load at that site. If 
the contract rate of delivery exceeds the total load at a State or 
Defense site, Western proposes that only the excess power at that site 
may be transferred to other State or Defense sites.
    Transfers are subject to negotiation of transmission service 
contracts for the delivery of transferred power. To be consistent with 
requirements for other firm power deliveries, Western further proposes 
to require the delivery of a proportional share of firm Pick-Sloan 
Missouri Basin Program-Eastern Division power at each State or Defense 
site in both the summer and winter seasons. If there is closure of a 
Defense installation or facility after the year 2000, the allocation 
may be impacted by the report required in section 2929 of the 1993 
National Defense Authorization Act, Pub. L. No. 103-160. Section 2929 
requires the Secretary of Energy, in consultation with the Secretary of 
Defense, to submit a report to Congress by November 30, 1994; this 
report must contain recommendations regarding the disposition of 
hydroelectric power allocations to military installations closed or 
approved for closure outside of the marketing area of the Central 
Valley Project.

D. Other Issues

1. IRP by Western

a. Background
    Western purchases firming energy and/or capacity to meet its firm 
power contractual commitments when hydropower is unavailable, such as 
during periods of drought. Firming purchases are typically made on a 
least-cost basis. Western engages in regional transmission planning 
with other entities and pursues joint participation in transmission 
line planning and construction whenever possible.
b. Comments
--Western should not make conservation purchases; this should be done 
by the utility responsible for load growth.
--Western should not do an integrated resource plan itself.
--Certain of Western's practices are in need of reform, such as 
acquisition of supplementary resources to meet customer needs, 
construction and use of transmission, moving of renewables to market, 
and encouraging efficiency.
--Better decisional processes based on IRP are needed for Western's 
purchase power/transmission investment and operation practices.
--Western should develop a strategic energy efficiency and renewable 
resource plan with input from customers, National Renewable Energy 
Laboratory, Department of Energy, and environmental groups.
--Western needs to diversify its resource acquisition practices.
c. Discussion
    Western agrees that integrated resource planning principles should 
be used in its future acquisition of firming resources. Customers rely 
on Western to purchase firming energy on a least-cost basis. To meet 
this responsibility in the future, Western will consider all energy 
alternatives in its purchase mix, including renewables and energy 
efficiency. Cost-effective renewable, energy efficiency, and demand-
side resources would all compete on an equal basis, with adverse 
environmental effects of new resource acquisitions being minimized to 
the extent practicable. Western wants to assume leadership in helping 
to create a bigger renewables and efficiency resource in the west.
    Western's customers will benefit by receiving the lowest possible 
rates; the environment will benefit from Western's purchases of 
environmentally sensitive sources of energy; and the larger public 
interest will be served by Western's efforts to foster the use of clean 
energy.
    Western needs to develop policies that respond to changing 
circumstances. In the future, Western will issue requests for proposals 
to meet long-term resource needs, and the solicitation will not be 
limited to conventional supply-side resources. While Western has 
carried out the role of acquiring firming resources on behalf of its 
customers in the past, Western will design contracts which would allow 
customers to take on this responsibility in the future. Whether Western 
or its customers carry out this role in the future, there should not be 
a dual standard in planning for and acquiring resources. The 
acquisition of resources in support of Western's hydroelectric 
commitments should be based on integrated resource planning principles, 
with cost-effective renewable resources, demand-side management, and 
energy efficiency being treated as viable alternatives to the purchase 
of firming energy.
    Western also commits to the use of applicable integrated resource 
planning principles and processes in its transmission planning. Use of 
integrated resource planning principles and processes would be 
beneficial to Western's ratepayers by assuring that investments are 
cost-effective. Environmental benefits could also result as Western 
evaluates new transmission or, as appropriate, significant line 
upgrades in accordance with IRP principles.
    Use of integrated resource planning principles in Western's 
transmission planning would complement the decision rules recently 
adopted by Western as part of its strategic planning process. Proposals 
for construction of new facilities must pass at least one of three 
criteria before Western will consider construction: (1) Increased 
revenues from the new facilities must exceed the annual cost over the 
first 5 years of service, (2) customers must benefit sufficiently to 
support the new facilities in spite of a possible rate increase, or (3) 
the new facilities will be funded by others. Western will also continue 
to engage in regional transmission planning with other entities and 
pursue joint participation in transmission line planning and 
construction whenever possible.
    While the commitment is clearly being made in this Federal Register 
notice, the use of integrated resource planning principles for 
Western's purchase power and transmission planning activities will be 
pursued independently from the Program. One possible vehicle for 
implementing this commitment is through a Western process to consider 
developing an IRP, pursuant to section 111 of the Energy Policy Act of 
1992. Coordination with interested entities will take place.
    Western is not proposing to develop a regional IRP to plan for the 
resource needs of its customers. The use of IRP principles by Western 
will be limited to Western's resource acquisition needs for firming of 
its hydroelectric resources and to Western's transmission planning 
activities.

2. Price and Rate Design

a. Background
    Western is committed to providing power to its customers, as 
directed by Congress, at the lowest possible cost consistent with sound 
business principles. However, rate issues are best dealt with in 
project-specific rate processes. Rates and rate design are outside the 
scope of the Program.
b. Comments
--Western has stated that a goal of the Program is to provide resource 
stability to customers so they can engage in effective integrated 
resource planning. Rates can contribute to resource stability or 
instability. Western should commit to price stability.
--Western should commit to consistent rate design policies, 
particularly for the CVP, to enhance resource stability.
--Western should coordinate the development of the Program with its 
rate adjustment activities.
--Western should develop rates that send appropriate price signals to 
customers and the ultimate consumer.
--Western's rates must remain stable if the resource is to remain 
dependable for customer planning purposes.
--Some suggest that rate increases are justified simply because they 
create the incentive to become more efficient in energy use. In this 
regard, Western has not been lax in exerting rate pressures on its 
customers in recent years.
--Incentive rates are the first step to repayment reform as advocated 
by the Office of Management and Budget.
--As opposed to establishing incentive rates by Western, incentive 
rates for conservation must be set at the customer level so that price 
signals are presented directly to the retail consumer.
--Incentive rates are undesirable because they may penalize those who 
have already invested in agricultural systems that have maximized 
conservation measures.
--Providing differential price signals to elicit appropriate 
conservation and load management responses could provide a substitute 
for or could supplement the power allocation approach proposed by 
Western. Rates could be designed for different types of service at 
different times that better reflect the cost of service, including the 
incremental costs and benefits associated with energy management 
activities.
--Rewards and penalties must be devised to make customers act as if 
they were facing efficiency prices, rather than Western's below-market 
prices. Because Western's prices are far less than ``market'' prices, 
more effort is required to reduce demand for Western's power.
--We are concerned about a lack of competitive pricing, as low-cost 
power sold by Western is offsetting customer efficiency goals.
--Rate design changes should be analyzed.
--Western should adopt an honest, market-based pricing system.
c. Discussion
    Due to drought conditions, changes in operations at certain 
hydroelectric plants, increasing purchase power expense, and other 
factors, rates for power from several projects have increased 
substantially over the last several years. Western recognizes that such 
increases adversely impact the customers' power supply expense and hold 
the potential for disruptions in power supply planning.
    Western is committed to cost containment so as to provide its 
customers with a predictably priced resource. However, major portions 
of these rate increases, such as those associated with certain changes 
in river operations, are beyond the control of Western. Western will 
continue to use its best efforts to keep rates stable into the future. 
Western also commits to evaluate fully all equity and stability issues 
prior to making any changes in rate design. The appropriate place for 
accomplishing this is through project-specific rate adjustment 
processes.
    Incentive rates and rate design modifications should not be 
analyzed as part of the Program EIS, as they are outside the scope of 
the proposed Program. Rate issues, including incentive rates and rate 
design, should be addressed within Western's long-established public 
ratemaking process.
    Although not within the scope of the Program, some discussion of 
the price and rate design issue may help in understanding Western's 
existing policies. Western markets power predominately at wholesale to 
utilities for resale to that utility's retail consumers. In some cases, 
Western markets its power to MBAs that blend the Federal resource with 
thermally generated or purchased power prior to sale to utility 
members, adding another organizational layer between Western and the 
ultimate consumer. Price signals are most effective when they take 
place at the retail level. Attempts to influence consumer actions 
through pricing strategies at least one level removed from the consumer 
are not as effective.
    Western does not meet the total power requirements of its 
customers. Given the price differential between Western's power and the 
cost of power from other sources, customer energy efficiency is driven 
by the cost of supplemental power supply. Western believes that the 
price signals resulting from this price disparity offer a significant 
incentive to its customers.
    Western's Salt Lake City Area Office is providing technical 
assistance to two customers who will participate in a 5-year pilot 
project to determine the effects of a change in rate design. The 
objective of the pilot project will be to shift load from on-peak to 
off-peak using price differentials to encourage DSM and to improve the 
efficiency of the overall power system.
    Western anticipates that the use of incentive rates and rate design 
by Western's utility customers could be a reasonable option to pursue 
as part of their IRPs. Western will provide technical assistance on 
this subject to customers on request.

3. Incentives

a. Background
    When Western originally proposed the Program, extending a major 
portion of long-term firm commitments was viewed as a major incentive 
for IRP preparation by existing customers. As part of this proposal, it 
was suggested that a resource pool, made up of unextended resources, 
could be established. One of the possible uses of this pool was 
allocation of power to preference customers for exemplary achievement 
in energy efficiency.
b. Comments
--Western's proposal is far too heavy on penalties and not heavy enough 
on incentives. Carrots would do more than sticks to assure Program 
compliance.
--Western should consider such incentives as (a) rate reductions/
billing credits; (b) maintaining existing rates; (c) bonus MW out of a 
pool or from new resources; (d) allocate surplus energy; (e) build 
resources through efficiency improvements (such as project use); (f) 
build transmission for those who have no access; (g) do not charge for 
the full CROD when customers are trying to manage loads; (h) rebates; 
(i) buybacks--if a customer with 100-MW allocation saves 10 MW, Western 
could sell the 10 MW on a shared-revenue basis and return the 10 MW to 
the customer later when it is needed; (j) put dollar penalties into a 
pool to buy power to reward good performers; (k) if a customer does not 
need an allocation at present due to conservation, Western should allow 
future use of the full allocation; and (l) allocate dollars out of an 
assistance pool to customers to help energy efficiency and renewables 
investments.
--Western should impose a surcharge on all of its customers to create a 
conservation/DSM fund.
--Western should follow the example of the collaborative process in 
California, where incentives for IOUs rather than penalties are 
emphasized. Why should Western approach this issue differently?
--The resource pool should be composed of power resources from penalty 
imposition or dollars resulting from penalty imposition; this resource 
should be available to reward good EMP compliance. Dollar penalties 
could also enhance Western's IRP and DSM assistance programs.
--Incentives should not be created by reducing existing allocations or 
otherwise penalizing existing customers.
--Western should return to the original incentive-based pool, where EMP 
accomplishments would allow existing customers to earn 100 percent or 
more of their existing allocations as a reward for aggressive 
conservation efforts.
--Western should let a customer resell Western power that is saved.
--Existing customers should be allowed to fund new resources and system 
upgrades and receive the resulting power benefits.
--Western should acquire resources and promote more hydropower 
development instead of diminishing commitments to existing customers.
--Incentives like additional CVP allocations to promote renewable 
resources, like those that took place in 1981, should be considered. 
Power could be derived from Shasta rewinds and conservation savings 
from project-use efficiency improvements.
--Incentives favor larger utilities at the expense of smaller 
customers. All customers pay for incentives, but larger customers are 
more likely to benefit from the incentive program itself.
--Western needs to proactively administer meaningful and balanced 
incentives and penalties.
--The rates of supplemental suppliers are much higher than the costs of 
Western's power. Customer energy efficiency is driven by the cost of 
supplemental supply. This price differential is much more effective 
than any incentive rates developed by Western.
--Western needs to identify barriers to wind energy development in its 
region. Cost-sharing by Western on the first major renewable energy 
power plants in the region would help to overcome a critical barrier to 
widespread wind development.
--Western should quantify environmental costs and establish a system of 
rewards for technologies, such as wind, which do not generate any air 
pollutants.
--Western should consider establishing system-wide C&RE goals and 
institute a system of tradable credits (similar to the Clean Air Act) 
among Western's customers. This would allow the lowest cost 
opportunities for conservation to be acquired first, no matter their 
geographic location.
--The provision for a 10-percent withdrawal of power creates the 
necessary incentive mechanism.
--Western's package of incentives and penalties should include rate 
surcharges and power supply reductions for noncompliance, Western cost-
sharing of conservation measures, short-term allotments of power for 
the achievement of goals, purchase of conserved power at prices higher 
than Western's contract rate, and other ``feebate'' schemes that reward 
overachievers and penalize underachievers. Western should fund the EMP 
through power rates so that customers will receive a price signal to 
participate in the Program.
--Western can get a headstart on the proposed Program by leading 
workshops on DSM and least-cost energy planning, devising peak pricing 
schedules, enforcing existing penalty provisions, and financing cost-
effective energy conservation improvements.
--Set aside some part of revenue from surplus power sales to fund 
conservation and other Program activities.
--Failure to comply should be penalized rather than compliance being 
rewarded.
--Customers in compliance should be rewarded with a 10- to 20-percent 
bonus of firm power over and above existing allocations.
--Energy conservation measures should be funded through add-on charges 
to the monthly Western power bill.
--Prefer extension at a 100-percent level for 35 years for those who 
comply with Program regulations.
--Stricter requirements for IRP are acceptable if contract extensions 
are more generous.
--Contracts should be extended an additional 25 years at the customer's 
option upon approval of subsequent IRPs by Western.
--Western provides a significant incentive to its customers by keeping 
its costs as low as possible, as this will motivate customers to do 
whatever is necessary to retain the resource.
c. Discussion
    Western serves a wide variety of different types of customers. 
Western has recognized from the outset that there will be varying 
levels in the sophistication and complexity of IRPs, reflecting each 
customer's size, type, resource needs, and geographic area. Resource 
choices and the timing of implementation will vary depending upon the 
circumstances involved. Given this diversity of customer 
characteristics and resource strategies, Western has not found an 
equitable way to judge and appropriately reward the energy efficiency 
achievements of its customers. For this reason, this proposed Program 
does not feature rewards for exceptional energy efficiency achievement, 
such as the allocation of long-term firm power.
    Western has decided against providing incentive allocations out of 
a resource pool for an additional reason. When an incentive allocation 
is made up of long-term firm power taken from existing customers, 
Western undermines its need to provide resource stability to existing 
customers. Due to customer uncertainty of receipt of power from such a 
pool, otherwise unnecessary power purchases could take place, causing 
increased expense to the consumer. In regions where surpluses are not 
available for purchase on a long-term basis, construction of supply-
side generation or transmission lines could be induced if Western 
creates a relatively large resource pool from power currently allocated 
to existing purchasers. Balance must be achieved between avoiding 
disruption in existing power supply and transmission arrangements and 
the development of appropriate incentives for IRP preparation.
    The planning stability that results when a purchaser can depend on 
its Federal power commitment can be seen as an incentive. Planning for 
the future cannot take place with any confidence if this stability is 
compromised. Energy-efficient resource choices, with their associated 
economic and environmental benefits, cannot be realized if the existing 
resource base is uncertain. The financing of new renewable and DSM 
resources could be adversely impacted if existing resources are not 
sufficiently firm for planning purposes.
    Western also views its technical assistance program as offering a 
significant incentive for customers to pursue energy efficiency. A 
major goal of Western's technical assistance program is to inform its 
customers of the economic benefits of energy efficiency and strategies 
for selecting and implementing C&RE activities, so that opportunities 
identified in IRPs are pursued with an understanding of the benefits. 
Technical assistance will continue to be available from Western to aid 
customers in developing consumer incentives for energy efficiency.
    Western supports the concept of a pool of assistance dollars that 
could help supplement and support customer investments in energy 
efficiency and renewables. Budgetary constraints prevent Western from 
implementing such a pool in the near future.
    Technical assistance will also support the marketing efforts of 
Western's customers as they pursue cost-effective DSM activities. The 
benefits resulting from IRP preparation, developed with full public 
participation, are sufficient incentives for IRP implementation without 
further incentive from Western.
    Western originally viewed the extension of resource commitments to 
existing customers as a significant inducement to preparing IRPs. With 
the passage of the EPAct, Western's long-term firm power customers now 
must prepare IRPs whether resources are extended or not. However, the 
availability of power for allocation to new customers remains a 
powerful incentive for the preparation of IRPs by those not presently 
receiving the benefits of Federal hydropower.
    Western is not proposing the imposition of a surcharge on its 
customers to create a conservation/DSM fund as part of this Program, 
since rate issues are outside of the scope of the Program proposal. Use 
of the funds collected pursuant to a surcharge would not be authorized 
without an appropriation or establishment of a revolving fund.
    In response to the suggestion that Western should establish a 
system of credits like the Clean Air Act, such an approach is too 
costly and administratively burdensome and would excessively impact 
rates. Western's role is principally one of a power supplier to 
preference entities and not to all regional utilities. The setting of 
C&RE goals for the region would inject Western into the planning 
process of regional utilities to an inappropriate degree.
    Western cannot reserve power for potential new customer needs if 
contracts are extended at a 100-percent level for those entities that 
comply with the Program. Extensions of contracts for an additional 25 
years at the customer's option, upon approval of subsequent IRPs by 
Western, would cause hydropower resources to be extended too far into 
the future for Western to respond to changing circumstances over time.
    Western will not make the PMI extensions more generous as a quid 
pro quo for a tough IRP requirement. The stringency of the IRP 
requirement is fundamentally set forth in section 114 of the EPAct. The 
character of the PMI more appropriately is determined by such factors 
as the need to support quality IRP through resource stability and 
balancing the need for certainty with flexibility requirements.
    Western disagrees with the comment that a customer should be 
allowed to resell Western power that is saved as an incentive for 
conservation. Resale of power to a nonpreference entity would violate 
the preference clause set forth in Reclamation law. Even if the power 
were proposed for sale to another preference entity, several policies 
and laws could be undermined by a purchaser's resale of Federal power. 
Power produced from Federal hydrogeneration is made possible by the 
appropriation of public funds and should not be a vehicle for profit. 
The legal requirement that Western's rates be cost based would be 
undermined if that power could be resold at a higher cost to others. 
The Administrator's allocation decisions, made during an open and 
public process, would be undermined and distorted if the benefits of 
Federal hydropower were subject to resale. Sales outside of the 
marketing area for a particular project would be in violation of the 
marketing criteria for a particular project. For all of these reasons, 
Western declines to adjust its policies, as reflected in its long-term 
firm power contractual language.
    Even though Western remains convinced that additional Western-wide 
incentives to encourage energy efficiency are not necessary, the 
possibility exists that regional incentives might be appropriate. 
Western reserves the right, on a project-by-project basis, to develop 
targeted incentives if such an approach has regional merit. One 
opportunity for consideration of such an incentive approach would be at 
the time that Western determines the resources available at the end of 
the term of existing contracts.

4. Project Use

a. Background
    Project-use power is that power reserved to meet project needs. 
Western markets power available in excess of that needed to serve 
project purposes.
b. Comments
--Western should work with Reclamation to assure that cost-effective 
efficiency improvements for project-use power are identified.
--Project-use power efficiencies should go to those customers who 
assist project-use customers in reducing those inefficiencies.
--Western should invest in energy-use efficiencies for project-use 
loads. Western could then allocate the energy saved to preference 
customers or reduce firming purchase power requirements.
--Customers could be given the opportunity to make project-use 
efficiency improvements in exchange for energy saved.
c. Discussion
    Investment opportunities have been discussed with Reclamation and 
the Corps, which are responsible for project-use facilities. A December 
1991 evaluation report by Western and Reclamation on project-use 
efficiency opportunities for the CVP indicated limited cost-effective 
opportunities for development. However, the four potential generation 
improvements that were cost-effective could increase project generation 
by 123 GWhs per year at a cost of 0.7 to 36.9 mills/kWh. Most of this 
energy is attributable to the potential uprating of generation at 
Shasta Dam.
    Within the scope of its legal authority, Western will pursue 
opportunities that are cost-effective and feasible but will not address 
this issue within the Program. Opportunities will be pursued 
independently from the Program.

5. Support of Renewables and DSM

a. Background
    Western has purchased power from cost-effective suppliers of 
renewable resources in the past and has a transmission access policy 
that allows for delivery of renewable resources to load.
b. Comments
--Western should/should not fund customer DSM activities and pilot 
programs.
--Western should share in the capital costs of renewables since 
financing is a key barrier to development.
--Western should do more with renewables to fund site studies, 
transmission analysis, and feasibility.
c. Discussion
    Western will use IRP principles in its resource acquisition 
programs in the future and will pursue cost-effective DSM and renewable 
resources. In a period of cost containment and declining budgetary 
resources for Federal agencies, Western cannot commit to extensive 
funding for investments in resources that are not needed to firm its 
hydroelectric resources. Western will continue to provide technical 
assistance in the planning, design, and evaluation of feasibility of 
DSM and renewable resources. Western will also continue to provide 
transmission access for renewable resources and look for other 
opportunities to promote DSM and renewable resource development. 
Western remains open to taking on a greater role in this area should 
budgetary resources become available for these purposes in the future.

6. Profile Data

a. Background
    Western proposed that all customers would provide an annual update 
of information for implementing and evaluating the EMP. The data was 
proposed to be used for analyzing overall Program impacts; comparative 
analysis and annual reporting on Program benefits; identifying basic 
supply, load, or consumption data for plan evaluations; and assisting 
Western in targeting technical assistance for customers.
b. Comments
--The profile data sheet included in the April 14, 1991, Federal 
Register notice did not ask for information that would have addressed 
the purposes proposed, especially measuring program effectiveness.
--Western should accept the current Rural Electrification 
Administration Form 7 in place of Western's proposed form or any other 
form currently being prepared for other agencies or regulatory bodies.
c. Discussion
    Western has reconsidered this aspect of its Program. In an effort 
to decrease the administrative burden of proposed Program provisions 
and because this information is available elsewhere, Western is 
eliminating the annual profile data requirement from its proposal. 
While the need for this type of information still exists, Western has 
the capability of acquiring the data from other sources such as the 
Rural Electrification Administration and the Energy Information 
Administration or published customer annual reports and annual progress 
reports.

7. Proprietary Information

a. Background
    Western serves a few retail customers who do not sell to other 
consumers.
b. Comments
--Some of the retail customers of MBA members objected to providing 
Western information that they consider proprietary to their business 
concerns, knowledge of which by outside parties could be detrimental to 
the customers' business.
c. Discussion
    Although Western proposes to require certain information from 
customers and customer members in fulfillment of IRP provisions, 
customers who feel that information being provided is proprietary 
should so state and identify the sensitive information. Western will 
make every effort to honor this confidentiality.

8. Transmission Access

a. Background
    Early in the development of this proposal, Western received a 
variety of comments concerning the issue of transmission access.
    Neither the PMI nor the EMP features of this Program proposal have 
included a specific transmission access component.
b. Comments
--Western should provide transmission service to other utilities at 
cost-based rates.
--Transmission access beneficiaries should provide compensation to 
those who own the lines.
--Customers having transmission capacity should be encouraged to 
provide, and be given credit for providing, transmission service to 
other utilities at cost-based rates.
c. Discussion
    Western has a transmission access policy which provides 
transmission service to other utilities at cost-based rates. There is a 
specific cost-based transmission rate for each ratesetting system. 
Ratemaking proceedings are open to the public.
    Western agrees that transmission access should yield compensation 
to the transmission provider. The issue here as related to this Program 
proposal is that transmission access may be a key in the implementation 
of a particular strategy identified in an IRP. In the absence of 
transmission access, otherwise beneficial resource choices are 
foreclosed. Availability of transmission access above a certain rate 
level has the same effect.
    The comment that customers with transmission capacity should be 
encouraged to provide, and be given credit for providing, transmission 
service to other utilities at cost-based rates was primarily related to 
an earlier proposed option called the Performance Plan. This option has 
since been replaced by a proposal for IRP for all customers. Western 
encourages an open transmission access policy by its customers.

[FR Doc. 94-19294 Filed 8-8-94; 8:45 am]
BILLING CODE 6450-01-P