[Federal Register Volume 61, Number 62 (Friday, March 29, 1996)]
[Notices]
[Pages 14089-14093]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7734]



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DEPARTMENT OF ENERGY
Bonneville Power Administration


Policy on Excess Federal Power

AGENCY: Bonneville Power Administration (Bonneville), Department of 
Energy (DOE).

ACTION: Proposed policy and request for comment.

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SUMMARY: As part of the 1996 Energy and Water Development 
Appropriations Act (Public Law 104-46 or P.L. 104-46), Congress passed 
legislation that provides new marketing authority to Bonneville. 
Section 508 (a) and (b) of

[[Page 14090]]
P.L. 104-46, provides the Administrator of Bonneville (the 
Administrator) new authority to market a category of surplus federal 
power called ``excess federal power'' without certain statutory 
restrictions. The Administrator's policy implementing this new 
marketing authority could potentially impact regional and out-of-region 
customers and other utilities. In the interests of a fair and workable 
policy, and to ensure the success of the new legislation, Bonneville 
seeks public comment on its proposed implementation policy.

DATES: Comments must be received by May 28, 1996.

ADDRESSES: Comments should be addressed to David J. Armstrong--MPF, 
Bonneville Power Administration, P.O. Box 3621, Portland, OR 97208-
3621, phone number 503-230-3658, fax number 503-230-7568.

SUPPLEMENTARY INFORMATION:

Background and Purpose

    Section 508(a)(3) of P.L. 104-46 provides in general that the term 
``excess federal power'' means such electric power that has become 
surplus to the firm contractual obligations of the Administrator under 
section 5(f) of the Pacific Northwest Electric Power Planning and 
Conservation Act (16 U.S.C. 839c(f)) due to either: any reduction in 
the quantity of electric power that the Administrator is contractually 
required to supply under subsections (b) and (d) of section 5 of the 
Pacific Northwest Electric Power Planning and Conservation Act (16 
U.S.C. 839c), due to the election by customers of the Bonneville Power 
Administration to purchase electric power from other suppliers, as 
compared to the quantity of electric power that the Administrator was 
contractually required to supply as of January 1, 1995; or those 
operations of the Federal Columbia River Power System that are 
primarily for the benefit of fish and wildlife affected by the 
development, operation, or management of the system.
    Section 508(b) provides in general that notwithstanding section 2, 
subsections (a), (b), and (c) of section 3, and section 7 of P.L. 88-
552 (16 U.S.C. 837a, 837b, and 837f), and section 9(c) of the Pacific 
Northwest Electric Power Planning and Conservation Act (16 U.S.C. 
839f(c)), the Administrator may, as permitted by otherwise applicable 
law, sell or otherwise dispose of excess federal power: outside the 
Pacific Northwest on a firm basis for a contract term not to exceed 7 
years, if the excess federal power is first offered for a reasonable 
period of time and under the same essential rate, terms and conditions 
to those Pacific Northwest public body, cooperative and investor-owned 
utilities and those direct service industrial customers identified in 
subsection (b) or (d)(1)(A) of section 5 of the Pacific Northwest 
Electric Power Planning and Conservation Act (16 U.S.C. 839c); and in 
any region without the prohibition on resale established by the second 
sentence of section 5(a) of the Act entitled ``An Act to Authorize the 
Completion, Maintenance, and Operation of the Bonneville Project for 
Navigation, and for Other Purposes,'' approved August 20, 1937 
(commonly known as the ``Bonneville Project Act of 1937'') (16 U.S.C. 
832d(a)).
    In the conference report accompanying this new legislation,1 
Congress recognized that current Bonneville authorizing legislation 
severely limits the agency's flexibility to market federal power 
placing it at a marketing disadvantage and restricting potential 
revenues. In order to increase Bonneville's revenues and its 
competitiveness, Congress enacted this new legislation which removes 
some of those marketing restrictions from sales of excess federal 
power. Excess federal power is any power generated by routine power 
operations, or fish and wildlife operations of either the Federal 
Columbia River Power System or other electric power plants from which 
Bonneville is contractually obligated to acquire electric power and 
that is made surplus to the Administrator's firm requirements 
contractual obligations in two instances: (1) By requirements customers 
decisions to remove load from Bonneville; or (2) because of hydrosystem 
operations primarily for the benefit of fish and wildlife affected by 
the development, operation, or management of the system.

    \ 1\ H.R. 1905, Conf. Rep. No. 293, 104th Cong., 1st Sess. 94 
(1995).
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    This excess federal power can be sold or otherwise disposed of 
outside the region for up to 7 years without the Regional Preference 
Act call back provisions upon 60-days notice for energy sales and 60-
months notice for capacity sales.2 This power also can be sold in 
any region without the Bonneville Project Act restriction on the resale 
of federal power by private entities not in the business of selling 
power in the retail market.3 In addition, the existing requirement 
that Bonneville provide notice to existing regional customers is made 
more flexible for sales of excess federal power to reflect the current 
competitive market and the type of transaction. In all cases, however, 
Bonneville must first offer the excess federal power to regional 
customers for a reasonable period of time and under the same essential 
rate, terms and conditions as the proposed out-of-region sales.

    \ 2\ The Act of August 31, 1964, Pub. L. No. 88-552, Sec. 3 (a), 
(b), and (c), 78 Stat. 756 (1964).
    \ 3\ The Bonneville Project Act of 1937, Pub. L. No. 75-329, 
Sec. 5(a), 50 Stat. 731 (1937).
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    It is Bonneville's preliminary view as a matter of policy that 
Bonneville should make retail sales outside the Pacific Northwest 
region to purchasers, other than preference customers and federal 
agencies, only where such sales are consistent with the state law that 
would apply if Bonneville were not a federal agency. Bonneville 
specifically seeks comment on this policy.

Process

    This notice announces Bonneville's initiation of a procedure to 
establish policy on the implementation of the new marketing authority 
in P.L. 104-46. Bonneville is interested in and will take public 
comment on the attached proposed implementation policy. All comments 
should be submitted before May 28, 1996 to be considered prior to 
issuance of a final policy. Submit written comments to David J. 
Armstrong--MPF, Bonneville Power Administration, P.O. Box 3621, 
Portland, OR 97208-3621. Bonneville will conduct two public meetings, 
one in the Pacific Northwest region and one outside the region.4 
After close of the public comment period, Bonneville will evaluate all 
comments and issue a final implementation policy.

    \ 4\ Additional public meetings may be held, if necessary.
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General Approach

    Bonneville intends the scope of this policy making to be limited to 
the development of a policy necessary to implement the relevant 
provisions of P.L. 104-46; including processes and specific 
determinations required to be made of the amount of excess federal 
power as defined by this law, and how notice will be provided to 
Pacific Northwest customers of extraregional sales of excess federal 
power.
    Bonneville believes that this proposal is fully consistent with the 
letter and intent of P.L. 104-46. In proposing interpretations of and 
processes for implementing P.L. 104-46, Bonneville is proposing those 
that result in the most efficient, simple, straight-forward, and 
administratively least-burdensome implementation of the law.

Determination of Excess Federal Power

    Section 508(a)(3) of P.L. 104-46 defines excess federal power as 
federal

[[Page 14091]]
power made surplus to the Administrator's firm contractual obligations 
under section 5(f) of the Northwest Power Act 5 in two instances. 
First, excess federal power includes reductions in the quantity of 
power the Administrator is contractually required to supply under 
sections 5(b) and 5(d) of the Northwest Power Act (5(b) and 5(d) 
obligations) because of elections by the Administrator's firm 
requirements customers, that is, Pacific Northwest public agency, 
federal agency, investor-owned utility, and direct service industry 
customers, to purchase power from other suppliers, as compared to the 
Administrator's 5(b) and 5(d) obligations as of January 1, 1995. 
Second, excess federal power is that power made excess due to operation 
of the federal hydrosystem, whether generated or purchased, primarily 
for the benefit of fish and wildlife affected by that system.

    \ 5\ Pacific Northwest Electric Power Planning and Conservation 
Act, Pub. L. No. 96-501, Sec. 5(f), 94 Stat. 2697 (1980). Section 
5(f) of the Northwest Power Act provides: The Administrator is 
authorized to sell, or otherwise dispose of, electric power, 
including power acquired pursuant to this and other Acts, that is 
surplus to his obligations incurred pursuant to subsections (b), 
(c), and (d) of this section in accordance with this and other Acts 
applicable to the Administrator, including the Bonneville Project 
Act of 1937 (16 U.S.C. 832 and following), the Federal Columbia 
River Transmission System Act (16 U.S.C. 838 and following), and the 
Act of August 31, 1964 (16 U.S.C. 837-837h).
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    In order to implement this new marketing authority, Bonneville must 
make three determinations: (1) the amount of reductions in the 
Administrator's 5(b) and 5(d) obligations relative to those obligations 
as of January 1, 1995, which can further be broken into two findings: 
(a) The actual amount of the Administrator's 5(b) and 5(d) obligations 
as of January 1, 1995, and (b) a yearly forecast of the Administrator's 
current 5(b) and 5(d) obligations to serve Pacific Northwest firm 
requirements power loads; (2) the amount of excess power that results 
from operating the hydrosystem primarily for fish and wildlife; and (3) 
a process for making annual determinations of excess federal power.

1. Reductions in the Administrator's Firm Contractual Obligations Under 
5(b) and 5(d) of the Northwest Power Act

    (a) 5(b) and 5(d) Obligations as of January 1, 1995: Bonneville's 
contractual obligations under sections 5(b) and 5(d) of the Northwest 
Power Act are comprised of and limited to the Administrator's sale of 
firm requirements power for consumer loads of public body, cooperative, 
federal agency customers, investor-owned utilities,6 and for 
direct consumption by existing direct service industrial customers in 
the Pacific Northwest.7 All other remaining firm contractual 
obligations are not sales of power for the general requirements of 
utility customers or direct service industrial customers and are not 
governed by sections 5(b) and 5(d) of the Northwest Power Act. 
Therefore these other sales are not included in this determination of 
the Administrator's contractual obligations as of January 1, 1995.

    \ 6\ All of the investor-owned utilities in the region have 
signed long-term firm power sales contracts that obligate 
Bonneville, upon compliance with certain notice requirements, to 
deliver power in amounts requested by the investor-owned utilities 
to meet a portion of their loads in the region. These utilities have 
not elected to place loads on Bonneville under these agreements, 
with the exception of a relatively small amount of electric power 
loads placed on Bonneville under the New Resource Firm Power Rate 
schedule(s). These obligations will be included in the determination 
of excess federal power due to load reductions.
    \ 7\ ``Pacific Northwest'' as defined in the Regional Preference 
Act, 1(b), 78 Stat. 756, as amended by Pacific Northwest Electric 
Power Planning and Conservation Act, 8(e), 94 Stat. 2729.
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    The Administrator's 5(b) and 5(d) obligations as of January 1, 
1995, are the amounts based on the sum of the following calculations:
     Actual and Planned Computed Requirements Customers: 
Obligations for the actual and planned computed requirements customers 
8 are the annual average of the customers' monthly energy 
requirements in average megawatts for calendar year 1994 submitted to 
Bonneville for the Pacific Northwest Coordination Agreement for 
operating years 1993-94 and 1994-95.

    \ 8\ As of January 1,1995, Grant County PUD No. 2, Chelan County 
PUD No. 1, Cowlitz County PUD, Douglas County PUD No. 1, Eugene 
Water and Electric Board, Pend Oreille PUD No. 1, Seattle City 
Light, Snohomish County PUD No. 1, Tacoma Public Utilities.
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     Metered Requirements Customers: Obligations for the 
metered requirements customers 9 are the calendar year 1994 annual 
average firm energy sales in average megawatts to this customer class 
as reported in Bonneville's Generation and Power Sales Report.

    \ 9\ Small and Non-Generating Public Utilities, including 
Federal Agencies.
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     Direct Service Industrial Customers: Obligations for the 
direct service industrial customers are the annual average of the 
customers' monthly Operating Demands for calendar year 1994 submitted 
to and approved by Bonneville for contract years 1993-94 and 1994-95.
     Regional Investor-Owned Utilities: Obligations for the 
investor-owned utilities are the calendar year 1994 annual average 
sales under the New Resource Firm Power Rate in average megawatts to 
this customer class as reported in Bonneville's Generation and Power 
Sales Report.
    Based on the above calculations, the Administrator's total 5(b) and 
5(d) obligations as of January 1, 1995, were 8309 average megawatts. 
Consistent with P.L. 104-46, this amount will be the baseline for all 
annual calculations of excess federal power. This is a fixed 
determination and will not change once the final implementation policy 
is issued.
    (b) Current Contractual Obligations: Each year Bonneville will 
determine the Administrator's current 5(b) and 5(d) contractual 
obligations based upon executed contracts. In order to accommodate 
power deliveries of up to 7 years, Bonneville will produce a 10-year 
annual average energy forecast of its current 5(b) and 5(d) 
obligations.
    (c) Reductions in Contractual Obligations: Reductions in the 
Administrator's 5(b) and 5(d) obligations will be calculated in each 
annual determination of excess federal power. On an average annual 
energy (average megawatts) basis for each year of the 10-year forecast 
period, the reductions in 5(b) and 5(d) obligations will be the 
difference between the forecasted current obligation in that year and 
the Administrator's contractual obligation as of January 1, 1995, or 
8309 average megawatts. In order to determine the amount of excess 
capacity available for marketing, Bonneville will calculate an average 
annual load factor based on its remaining 5(b) and 5(d) obligations. 
This load factor will be applied to the difference between the 
forecasted current obligations and the obligations as of January 1, 
1995, to determine the amount of capacity in average megawatts which 
the Administrator may market as excess federal power.
    2. Fish and Wildlife Operations: Bonneville has run two 50-year 
continuous water year studies to determine the amount of excess 
generation in average megawatts caused by hydrosystem operations 
primarily for fish and wildlife. The first study removes all fish and 
wildlife requirements. This study shows the firm energy production 
capability of the federal system in each month. The second study 
includes all fish and wildlife restrictions and also provides monthly 
firm energy production. Each study was run with the rule curves and 
resource operations which simulate the most efficient operation for 
their specific conditions and limitations. The difference in monthly 
energy production between the two studies was

[[Page 14092]]
averaged over the 50-year period for each month. The positive monthly 
averages, representing the increased generation due to fish and 
wildlife operations, were summed to determine the annual average energy 
amount in average megawatts of excess federal power due to fish and 
wildlife operations. A 100 percent load factor was assumed for 
determining the capacity amount of excess federal power due to fish and 
wildlife operations. BPA relied on two studies that were developed in 
support of the implementation of the BPA fish spending limitation. The 
results from those two studies established an amount of excess federal 
power due to hydrosystem operations primarily for the benefit of fish 
and wildlife of 129 average megawatts annually. Unless further changes 
in the future are required in the scope and magnitude of hydrosystem 
operations for the benefit of fish and wildlife, this amount of excess 
federal power due to such operations will not be revisited in each 
annual determination of excess federal power. If future changes impact 
hydrosystem operations Bonneville may revise the amount of excess 
federal power by reopening this policy.
    3. Process: Each year Bonneville will determine the total amount of 
excess federal power on its system. Each annual determination will be 
based on a revised 10-year forecast of Bonneville's then-current 
section 5(b) and 5(d) contractual obligations. The net of each year's 
forecast and 8309 average megawatts will be the amount of excess 
federal power due to forecasted reductions in those contractual 
obligations. This amount will be added to the amount of excess federal 
power due to fish and wildlife obligations in order to determine the 
total amount of excess federal power that may be marketed in any year 
of the forecast. This total amount of excess federal power will be 
reduced by the amount of any current sales of excess federal power to 
determine the total amount available to the Administrator for 
marketing. The results of this determination will be included in an 
annual notification to Bonneville's then existing Pacific Northwest 
customers of Bonneville's intent to market excess federal power or 
surplus power outside the region. Bonneville's date of issuance of the 
notification may vary from year to year.

Sales of Excess Federal Power

    1. Sales Outside the Region: In section 508(b) of P.L. 104-46, 
excess federal power may be sold or otherwise disposed of outside the 
Pacific Northwest region without the marketing restrictions contained 
in sections 3(a), (b) and (c) of the Regional Preference Act and 
section 9(c) of the Northwest Power Act.10 The Administrator is 
authorized to sell excess federal power without the requirement that 
energy or capacity deliveries to an out-of-region customer be subject 
to termination of deliveries (recall) upon 60-days notice for energy 
and 60-months notice for capacity if the Administrator determines it is 
needed to meet the requirements of the Administrator's regional 
customers.

    \10\ The Pacific Northwest Electric Power Planning and 
Conservation Act, Pub. L. No. 96-501, 9(c), 94 Stat. 2697 (1980).
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    In addition, the notice required for out-of-region sales in section 
2 of the Regional Preference Act is made inapplicable to sales of 
excess federal power.11 The new law conditions the sale of excess 
federal power outside the region upon the requirement that the 
Administrator first offer the power to Pacific Northwest public body, 
cooperative, and investor-owned utilities and direct service industrial 
customers for a reasonable period of time and under the same essential 
rate, terms, and conditions. This notice requirement provides the 
Administrator with considerable flexibility in providing Bonneville's 
existing regional customers with notice of sales to out-of-region 
customers.12

    \11\ Section 2 of the Regional Preference Act provides that at 
least 30 days prior to the execution of any contract for the sale, 
delivery, or exchange of surplus energy or surplus peaking capacity 
for use outside the Pacific Northwest, the Secretary shall give the 
then customers of the Bonneville Power Administration written notice 
that negotiations for such a contract are pending, and thereafter, 
at any customer's request, make available for its inspection current 
drafts of the proposed contract.
    \12\ In the conference report, Congress states that ``this 
flexibility may include shorter notice periods and less detailed 
information on in-program negotiations. Notice periods may be very 
short for short-term sales (for example, notice to accommodate 
hourly sales) and for transactions that must be negotiated quickly. 
BPA may also provide seasonal notice with price ranges requesting 
interested parties to contact BPA to purchase power.'' H.R. 1905, 
Conf. Rep. No. 293, 104th Cong., 1st Sess. 94 (1995).
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    P.L. 104-46 provides the Administrator with the authority to sell 
excess federal power outside the region for a period of up to 7 years. 
In all sales of excess federal power Bonneville will limit the actual 
delivery of excess federal power to 7 years. Such contracts may contain 
a provision for renewal and be renewed, subject to the availability of 
excess federal power at the time the purchaser must provide a renewal 
notice.
    An annual notification of the availability of excess federal power 
will be given to existing regional customers. This notification will 
specify a range of rates, and basic terms and conditions for a sale of 
excess federal power on which Bonneville will enter into bilateral 
discussions with out-of-region customers.
    For contracts having a term of one year or greater, regional 
customers interested in purchasing excess federal power will have 30 
days from the date of the annual notice to contact Bonneville. If a 
subsequent agreement for the sale of excess federal power to an out-of-
region customer is negotiated under a rate or under terms and 
conditions different from the range of rates, terms, and conditions 
specified in the annual notice, Bonneville will provide interested 
regional customers notice of the pending sale. Regional customers 
interested in purchasing excess federal power under the same rate, 
terms and conditions in the pending out-of-region sale will have 5 days 
from the date of this subsequent notice to contact Bonneville. In order 
to enter into such an agreement, regional customers must agree to the 
identical terms and conditions in the agreement for pending out-of-
region sale, except those which clearly do not apply to the particular 
utility (such as points of delivery).
    For contracts having a duration of less than 1 year, the annual 
notification of the availability of excess federal power will serve as 
the only notification of the availability of excess federal power. Any 
interested regional customers may contact Bonneville to purchase such 
short-term excess federal power based on the general rate, terms and 
conditions proposed by Bonneville in the annual notification after 
bilateral negotiations with Bonneville. If a subsequent agreement for a 
short term sale of excess federal power to an out-of-region customer is 
negotiated under a rate or under terms and conditions different from 
the range of rates, terms and conditions specified in the annual 
notice, Bonneville will provide interested regional customers notice of 
the pending sale. Regional customers interested in purchasing excess 
federal power under the same rate, terms and conditions in the pending 
out-of-region sale will have up to 5 days, depending on the effective 
delivery date and the duration of the short-term sale, from the date of 
this subsequent notice of contact Bonneville.
    2. Sales in Any Region: Section 508(b)(2) authorizes the sale of 
excess federal power in any region without the restriction on resale 
established in the second sentence of section 5(a) of the Bonneville 
Project Act which provides

[[Page 14093]]
that contracts for the sale of electric energy to any private person or 
agency other than a privately owned public utility engaged in selling 
electric energy to the general public, shall contain a provision 
forbidding such private purchaser to resell any such electric energy so 
purchased to any private utility or agency engaged in the sale of 
electric energy to the general public, and requiring the immediate 
canceling of such contract of sale in the event of violation of such 
provision.
    This provision requires that contracts for the sale of power by the 
Administrator to private entities or agencies thereof, other than 
investor-owned utilities, contain a provision that prohibits the resale 
of that power to investor owned utilities or other private entities or 
their agents engaged in the sale of electricity to the general public. 
Consistent with the removal of this requirement in P.L. 104-46, 
contracts for the sale of excess federal power will not contain any 
provision prohibiting the resale of such power to investor-owned 
utilities or other private entities or their agents.

    Issued in Washington, D.C. on March 22, 1996.
Stephen Wright,
Assistant Administrator, Bonneville Power Administration.
[FR Doc. 96-7734 Filed 3-28-96; 8:45 am]
BILLING CODE 6450-01-P