[Federal Register Volume 72, Number 144 (Friday, July 27, 2007)]
[Notices]
[Pages 41309-41322]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-14533]


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DEPARTMENT OF ENERGY

Western Area Power Administration


Load in the California Independent System Operator Corporation's 
Balancing Authority Area

AGENCY: Western Area Power Administration, DOE.

ACTION: Notice of Final Resource Adequacy Plan.

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SUMMARY: The Western Area Power Administration (Western) announces its 
Final Resource Adequacy (RA) Plan for load in the California 
Independent System Operator Corporation's (CAISO) Balancing Authority 
Area. This notice responds to the comments received on the proposed 
Final Resource Adequacy Plan (Final RA Plan) and sets forth the Final 
RA Plan. Western developed the Final RA Plan as a Local Regulatory 
Authority (LRA). The Final RA Plan will be submitted to the CAISO and 
will be utilized by Western when Western, in the CAISO Balancing 
Authority Area, is acting as a Load Serving Entity (LSE) as defined 
under the CAISO's Conformed Simplified and Reorganized Tariff 
incorporating the Interim Reliability Requirements Program (CAISO 
Tariff) and under the CAISO's proposed Market Redesign and Technology 
Upgrade (MRTU) Tariff.

DATES: The Final RA Plan becomes effective on August 1, 2007.

FOR FURTHER INFORMATION CONTACT: Ms. Jeanne Haas, Contracts and Energy 
Services Manager, Sierra Nevada Customer Service Region, Western Area 
Power Administration, 114 Parkshore Drive, Folsom, CA 95630-4710, 
telephone (916) 353-4438, e-mail: [email protected].

SUPPLEMENTARY INFORMATION: 

Authorities

    Western is developing this Final RA Plan in accordance with its 
power marketing authorities, which include the Act of June 17, 1902 (32 
Stat. 388), the Act of August 26, 1937 (50 Stat. 844), the Act of 
August 4, 1939 (53 Stat. 1187), and the Department of Energy 
Organization Act of August 4, 1977 (91 Stat. 565), including all acts 
amendatory and/or supplementary to the above listed.

Background

    On February 9, 2006, the CAISO filed its comprehensive MRTU Tariff 
with the Federal Energy Regulatory Commission (Commission).\1\ Under 
the MRTU Tariff, the CAISO proposed to end the current ``must offer'' 
structure and transition to a capacity-based system. In this capacity-
based system, the California Public Utilities Commission (CPUC) and 
other LRAs establish procurement requirements for all LSEs within their 
jurisdiction to obtain sufficient resources to meet their load with an 
adequate reserve margin and to ensure appropriate resources will be 
made available to the CAISO in the day-ahead market, the hour-ahead 
scheduling process, and the real-time market.\2\
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    \1\ FERC Docket ER06-615-000 (2006).
    \2\ See Article V, Section 40 of the CAISO's MRTU Tariff.
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    On March 13, 2006, the CAISO filed its Interim Reliability 
Requirements Program (IRRP) as an amendment to the CAISO Tariff. On May 
12, 2006, the Commission issued an order accepting certain 
modifications under the IRRP in Docket No. ER06-723-000.\3\ The 
modifications established under the IRRP are intended to implement RA 
programs developed by the CPUC and other LRAs for LSEs under their 
respective jurisdictions. The IRRP adjusts the CAISO's existing 
operations to incorporate RA programs implemented by the CPUC and other 
LRAs for the period between June 2006 and the implementation of 
MRTU.\4\ Section 40 of the CAISO Tariff, as amended to incorporate the 
IRRP and the MRTU Tariff, provides the guidelines for RA.
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    \3\ 115 FERC ] 61,172 (2006).
    \4\ Id. at paragraph 6.
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    In the Commission's September 21, 2006, Order in Docket No. ER-06-
615-000, which in part accepted and affirmed the CAISO's proposed MRTU 
Tariff, the Commission summarized the CAISO's RA program as follows:

    Resource adequacy is the availability of an adequate supply of 
generation or demand responsive resources to support safe and 
reliable operation of the transmission grid. Until June 2006, the 
CAISO market did not require load-serving entities to procure 
sufficient generation capacity to serve their customers. The lack of 
this requirement jeopardized reliability and made it difficult to 
ensure that wholesale prices would remain just and reasonable. Under 
MRTU, load serving entities under the authority of the California 
Public Utilities Commission will be required to obey its requirement 
to maintain a level of capacity above load-serving entities' 
forecasted customer needs (currently 15-17 percent). They will also 
have to demonstrate a year in advance that they have procured 
resources to cover 90 percent of their summer (May through 
September) peak period needs. Other load serving entities that are 
CAISO members and serve customers in the CAISO control area are 
required to comply with the planning reserve margin for capacity 
that is set by their Local Regulatory Authority. If the Local 
Regulatory Authority does not establish such a margin, the default 
margin will be 15 percent. These resource adequacy requirements will 
help ensure sufficient supply, enhance reliability, protect against 
price volatility, and reduce the opportunities to game the market 
that exist when electricity supplies are insufficient to meet 
customers' needs.\5\
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    \5\ 116 FERC ] 61,274 (2006) at paragraph 10.

    In Paragraph 1116 of the same decision, the Commission concluded 
that meeting the MRTU RA requirements is a reasonable condition of 
participation in the CAISO markets and required that each LSE serving 
load within the CAISO-controlled grid maintains adequate resources and 
does not ``lean on'' others to the detriment of its customers and grid 
reliability as a whole. Under the current schedule, the MRTU Tariff is 
not expected to be implemented before February 2008.
    Under the MRTU Tariff Western is an LRA. To ensure non-
discriminatory treatment for load in the CAISO Balancing Authority 
Area, Western, as

[[Page 41310]]

an LRA, established interim RA Plans comprised of an Initial RA Plan 
and its Current RA Plan. However, due to the short time frame between 
the acceptance of the CAISO's IRRP and its effective date, Western was 
unable to conduct a public process before implementing its interim RA 
Plans.\6\
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    \6\ The Commission accepted the CAISO's IRRP filing on May 12, 
2006, with an effective date of May 12, 2006.
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    Western conducted a public process to develop its Final RA Plan. As 
part of the process, Western solicited input from the public, including 
its customers and interested parties.

Acronyms and Definitions

    See Final RA Plan below for Acronyms and Definitions.

Public Notice and Comment

    Western conducted a public process to develop its Final RA Plan. 
The steps Western took to involve interested parties in the public 
process were:
    1. On April 19, 2007, Western sent an e-mail to all interested 
parties notifying them of the expected publication date of the Federal 
Register notice announcing the Proposed Final RA Plan.
    2. The Federal Register notice was published on April 25, 2007 (72 
FR 20528) which announced the proposed Final RA Plan, began the public 
consultation and comment period, and announced the public information 
forum and public comment forum.
    3. On May 25, 2007, Western mailed letters to all interested 
parties transmitting the Federal Register notice (72 FR 20528) and 
reiterating the dates and locations of the public information forum and 
the public comment forum.
    4. On May 2, 2007, Western held a public information forum at the 
Marriott Hotel in Rancho Cordova, California. Western provided 
informational slides as handouts.
    5. On May 9, 2007, Western held a public comment forum at the 
Marriott Hotel in Rancho Cordova, California, to give the public an 
opportunity to comment for the record. One individual commented at this 
forum. In addition, two customers asked questions regarding the 
Proposed RA Plan.
    6. As a result of the public information forum, the CAISO requested 
a meeting with Western to ask clarifying questions on the proposed 
Final RA Plan. All interested parties were invited to attend this 
meeting. Western met with the CAISO on May 16, 2007. In addition to the 
CAISO, six interested parties attended the meeting in person, and four 
interested parties participated via conference call. Notes from the 
meeting are included in the record.
    7. In addition to the above meetings, Western communicated 
clarifying information on the proposed Final RA Plan to the following 
customers. This information is included in the record.

    California Public Utilities Commission
    California State University, Sacramento
    Tuolumne Public Power Agency
    City of Redding
    Sacramento Municipal Utilities District
    Trinity Public Utilities District

Responses to Comments Received on the Notice of Proposed Final RA Plan 
for Transactions in the CAISO's Balancing Authority Area

    During the public consultation and comment period, Western received 
11 letters containing written comments from the following 
organizations:
    Calaveras Public Power Agency
    California Independent System Operator Corporation
    California Public Utilities Commission
    Lassen Municipal Utility District
    Modesto Irrigation District
    Pacific Gas and Electric Company
    City of Redding
    Southern California Edison
    Trinity Public Utilities District
    United States Department of Energy, Berkeley Site Office
    United States Department of the Interior, Bureau of Reclamation

    In addition to providing written comments, the Trinity Public 
Utilities District (TPUD) commented during the May 9, 2007, public 
comment forum. Western reviewed and considered all comments received by 
the end of the public consultation and comment period, May 25, 2007, in 
preparing the Final RA Plan.
    The following is a summary of the comments received during the 
consultation and comment period and Western's responses to those 
comments. Comments are grouped by subject and paraphrased for brevity. 
Specific comments are used for clarification where necessary.

Allocation of Costs for RA

    Comment: A commenter questions why it should pay for RA when it has 
a congressional right to power that is significantly higher than its 
peak demand. The commenter states that the Commission made it very 
clear that it should not have to buy RA from the market. The commenter 
states that the operation of the regulating reservoirs could be changed 
to meet RA (the Planning Reserves portion) for the use of Project Use 
and First Preference Customers without affecting water deliveries. The 
commenter states that since all the Central Valley Project (CVP) 
customers are benefiting from Western's proposal not to use the CVP 
regulating reservoirs to provide RA for First Preference Customers and 
Project Use load, all CVP customers should be responsible for paying 
the RA costs. The commenter provides three alternatives to Western's 
proposal for allocating RA costs: (1) Include the cost of RA purchases 
in the Power Revenue Requirement which, in the commenter's opinion, is 
analogous to purchases made to supplement the Base Resource (BR) that 
maximize the value of CVP generation for all CVP customers; (2) spread 
the cost of the RA purchases to Western customers based on the amount 
of supplemental power they need to meet their load above what is served 
by Western (this alternative is based on the commenter's opinion that 
there is a difference between those customers who have their loads met 
by the BR and those that do not); or (3) allow for the commenter to 
determine its own RA amount acting as its own LRA, and have Western 
factor this RA amount information into the amount of RA that Western is 
planning to purchase for those CVP customers that Western is 
responsible to purchase RA for and then pass on the cost based on how 
much RA is being purchased for each CVP customer. Of the three 
alternatives the commenter has proposed, the commenter notes that the 
first alternative would be the most costly for the commenter. While the 
commenter does not believe that the first alternative is the fairest 
for the commenter, the commenter realizes that it is the fairest for 
the group of all CVP customers as a whole.
    Another commenter states that the CVP generation/transmission 
resources and their costs have been fairly allocated and sub-allocated 
to project beneficiaries. Whether a CVP water user or a CVP power user 
is a part of the CAISO Balancing Authority Area, the Western Sub 
Balancing Authority Area (SBA), or the Sacramento Municipal Utility 
District (SMUD) Balancing Authority Area has not typically mattered. 
The cost for CVP energy does not change based on the Balancing 
Authority Area in which the customer is located. In other words, all 
CVP water users pay the same amount for the energy they receive from 
the CVP. Similarly, all CVP Preference Customers and First Preference 
Customers generally pay on the same basis for the CVP energy they 
receive. The

[[Page 41311]]

commenter strongly suggests that Western maintain this equitable 
process in its RA Plan. As such, all CVP water and power customers 
should be assessed the cost of the RA resource acquired by Western and 
not just those that are located in the CAISO Balancing Authority Area.
    Another commenter believes that Western's current methodology of 
spreading the costs to implement Western's RA Plan to those customers 
that are situated in the CAISO Balancing Authority Area is consistent 
with sound cost causation principles. As such, Western's proposal to 
include Liquidated Damages Contracts (LD Contracts) that are backed up 
by reserves in the originating balancing authority area should also be 
treated in this fair manner so if there is a requirement for Western or 
any other balancing authority to provide reserves or firming services 
to satisfy the obligations to meet the RA requirements for those 
customers, these costs not be spread to all Western customers.
    Another commenter feels that commenter's public agency members 
should not have to pay for RA in light of the fact that it is only 
using 55 percent of its share of the New Melones entitlement. The 
remaining 45 percent of its entitlement will provide for its load 
growth well into the future. The commenter is also concerned that 
control of the generating units by the CAISO could possibly reduce the 
amount of energy generation at New Melones and, therefore, potentially 
impact the commenter's entitlement. The New Melones entitlement was 
granted to public agencies within Calaveras and Tuolumne Counties to 
mitigate, in part, the adverse impacts the New Melones Project has on 
the local counties. Every effort should be made by Western to preserve 
the intent of this entitlement and not burden these customers with 
additional costs.
    Response: The United States' CVP hydroelectric facilities are 
operated by the Bureau of Reclamation (Reclamation) and are operated 
primarily to meet authorized project purposes that have a higher 
priority than power generation, such as irrigation and flood control. 
These purposes are determined by Federal law.\7\ Western's flexibility 
to modify generation schedules and ancillary service availability is 
limited by these and other related constraints. Once the above 
obligations are met, the power remaining must next be used to meet the 
Project Use needs of the CVP.\8\ After the Project Use needs are met, 
under Federal law and the 2004 Power Marketing Plan (Marketing Plan), 
the next priority for the use of the CVP generation is to meet the 
First Preference Customer loads.\9\ The New Melones Project provisions 
of the Flood Control Act of 1962 (76 Stat. 1173, 1191-1192) and the 
Trinity River Division (TRD) Act (69 Stat. 719) (together, First 
Preference Acts) specify that First Preference Customers are entitled 
up to 25 percent of the power generated as a result of the construction 
of the New Melones Project and the TRD Project. Under Western's 
Marketing Plan, Western serves First Preference Customers with power 
prior to making power available to other Preference Customers.\10\ 
Western recognizes that costs associated with the Planning Reserve 
Margin (PRM) are incurred based on loads in the CAISO Balancing 
Authority Area. Western has analyzed the allocation of the PRM from a 
cost/causation standpoint. Western recognizes it markets power in 
excess of Project Use loads, and that First Preference Customers are 
entitled to receive up to 25 percent of the extra generation, which the 
TRD and New Melones Projects add to the integrated CVP system. Western 
agrees that the First Preference Customers in Trinity, Tuolumne, and 
Calaveras Counties currently do not utilize their entire allocations. 
Western agrees that both the Project Use loads and the First Preference 
Customers receive the generation of the CVP hydroelectric units under 
the Marketing Plan before it is marketed as BR power to other Western 
customers, and all Western customers are benefiting from Western's 
proposal not to use the CVP regulating reservoirs to provide the 
required PRM for the Project Use loads and First Preference Customers. 
By not utilizing the CVP regulating reservoirs to supply PRM for 
Project Use loads and First Preference Customers, Western is able to 
provide more preference power to other CVP power users. Western has the 
discretion to weigh the benefits and burdens of utilizing the CVP 
regulating reservoirs to provide PRM versus making purchases for PRM 
from the market. Based on the statutory entitlements to Project Use 
loads and First Preference Customers and the benefits to the preference 
customers of not utilizing the CVP for PRM for Project Use loads and 
First Preference Customers, Western has decided to include a portion of 
the costs associated with Western's obligations to meet the PRM for the 
Project Use loads and First Preference Customers in the CAISO Balancing 
Authority Area in the Power Revenue Requirement.
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    \7\ See, e.g, 50 Stat. 844, 850 (1937).
    \8\ See id.
    \9\ See 64 FR 34417 (1999).
    \10\ See 64 FR 34417 (1999).
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    Western has determined that it will first allocate the costs 
associated with its acquisition of PRM on a load ratio share basis to 
the loads in the CAISO Balancing Authority Area for which the PRM was 
procured. Then adjustments will be made to these costs in recognition 
of the statutory requirements for Project Use loads and First 
Preference Customers. The PRM costs to be allocated to Project Use load 
will be limited to a percentage determined as a ratio of forecasted 
annual Project Use load to annual CVP generation similar to those used 
in Reclamation's cost sub-allocation of annual operation and 
maintenance costs. The remaining portion of the PRM costs for the 
Project Use load will be allocated to the Power Revenue Requirement. 
The PRM costs to be allocated to First Preference Customers will be 
limited to their First Preference Customer percentage calculated at the 
beginning of each fiscal year, as it is identified under Western's 
Schedule of Rates for BR and First Preference Power, currently rate 
schedule CV-F12, as it may be superseded from time-to-time. This 
percentage, when utilized for allocating PRM costs, will be subject to 
revision in October only and will not be revised in March of each year 
as provided for in rate schedule CV-F12. The remaining portion of the 
PRM costs for the First Preference Customers will be allocated to the 
Power Revenue Requirement.
    The remaining Preference Customers on whose behalf Western is 
procuring PRM do not have an allocation of power based on similar 
statutory requirements. Their allocation is discretionary in accordance 
with Western's Marketing Plan. Under the Marketing Plan, such 
Preference Customers receive an allocation of BR, which is an 
allocation of power remaining after serving Project Use loads and First 
Preference Customers. Therefore, Western will continue to allocate the 
costs associated with its acquisition of PRM for these customers on a 
load ratio share basis based on their loads in the CAISO Balancing 
Authority Area, and such PRM costs will not be included in the Power 
Revenue Requirement.

Types of Resources for RA Capacity and Qualifying Capacity

A. Availability of Resources

    Comment: A commenter states that Western's proposed RA Plan is 
based on making only the reserve portion of

[[Page 41312]]

Western's capacity available to the CAISO. The commenter further states 
that it understands the CAISO is expecting the entire resource 
portfolio (capacity serving load and used for reserves) to be available 
for CAISO use. Western should reconcile this apparent difference.
    Response: Due to Federal policies in support of the Marketing Plan 
in Western's marketing and operations processes, Western cannot make 
CVP hydroelectric units available to the CAISO for PRM. Western will 
use the CVP hydroelectric units as Qualifying Capacity to meet 
Western's load in the CAISO Balancing Authority Area. Western has made 
this clarification in its Final RA Plan. Section 40.5.1 of the CAISO 
Tariff and Section 40.2.2.2 of the CAISO's proposed MRTU Tariff require 
the Scheduling Coordinator (SC) for a CPUC non-jurisdictional LSE to 
provide the CAISO with a description of the criteria adopted by the LRA 
or Federal agency for determining qualifying resource types and the 
Qualifying Capacity for such resources. Western has followed the 
requirements in Section 40.2.2.2 and has included its criteria in its 
Final RA Plan.

B. Customer Purchases of RA

    Comment: A commenter requests that Western's Final RA Plan 
explicitly provide for a load serving customer that has a separate SC 
identifier (ID) with the option to ``self provide'' the required RA 
rather than being required to subscribe to the capacity provided by 
Western. The commenter routinely provides its own resources to serve 
load and may, in the future, also wish to meet its RA requirements 
through a similar procurement process. The commenter recognizes that 
any resource being self provided for RA purposes would have to meet 
comparable criteria that are used by Western to qualify as RA or 
otherwise as provided by the IRRP and/or MRTU Tariff. The commenter 
also recognizes that the option to self provide would need to be 
exercised in a timely manner such that Western has sufficient notice to 
act appropriately. The commenter recognizes that such self provision 
may not include Western's BR.
    Response: Western understands that certain customers may want to 
explore other options for meeting their individual RA requirements. 
Western will consider a modification to its Final RA Plan at any time 
in the future if a customer presents an option to Western for self 
providing its own RA requirements that meets the requirements of 
Western's Final RA Plan, can be implemented by Western, is acceptable 
to the CAISO, and is consistent with the requirements of Section 40 of 
the CAISO Tariff and the proposed MRTU Tariff.

C. LD Contracts

    Comment: A commenter supports Western's determination that the use 
of LD Contracts with firm transmission qualify as capacity for the 
purpose of meeting applicable reserve requirements.
    Several commenters are concerned that Western's proposal to use LD 
Contracts to meet its RA Plan requirements does not explain what, if 
any, limits Western will set on the use of LD Contracts. The commenters 
state that under the CPUC program, which is applicable only to LSEs 
under the CPUC's jurisdiction, firm imports and unit specific LD 
Contracts may be counted as RA Capacity, while non-unit specific 
contracts are limited as RA Resources. The commenters believe that 
Western should adopt these limitations for the RA requirements that 
Western intends to meet through its LD Contracts unless Western is 
relying, for RA purposes, solely on LD Contracts with firm transmission 
to a tie point; i.e., import LD Contracts. In the case of such import 
LD Contracts, the limitations set forth in the CAISO Tariff and the 
proposed MRTU Tariff will not be necessary, but Western should clarify, 
for avoidance of doubt, the nature of the LD Contract at issue. A 
commenter states that Western has a duty to ensure the resources it 
contributes to the CAISO Balancing Authority Area to promote 
reliability actually do contribute to that goal.
    Response: In its May 12, 2006, Order in Docket No. ER06-723-000, 
the Commission states, ``WAPA, as an LRA, can determine the extent to 
which liquidated damages contracts count toward its resource adequacy 
requirements.'' \11\ The Commission recognized that Western has the 
latitude to determine the extent to which it can use LD Contracts to 
meet its RA requirement. To address the concerns regarding the use of 
LD Contracts in the future, Western has determined at this time that it 
will begin to phase out its procurement of LD Contracts that originate 
within the CAISO Balancing Authority Area. However, Western reserves 
the right to revisit this decision and may opt to use LD Contracts 
procured in the CAISO Balancing Authority Area in the future to meet 
its RA requirements if the CAISO's scheduling and accounting protocols 
are modified so that the CAISO's concerns about deliverability and 
double-counting can be properly addressed. If, in the future Western is 
able to use LD Contracts procured in the CAISO Balancing Authority Area 
to meet its RA requirements, Western may purchase LD Contracts within 
the CAISO Balancing Authority Area under its Final RA Plan. In contrast 
to LD contracts that originate within the CAISO Balancing Authority 
Area, imports into the CAISO Balancing Authority Area are backed by 
reserves in the balancing authority area where the generation 
originates including imports from the SMUD Balancing Authority Area; 
whereby, Western meets both the North American Electric Reliability 
Council (NERC) and the Western Electricity Coordination Council (WECC) 
standards for operating reserves. In addition to the operating reserves 
that are already supporting the imports, Western will be providing an 
additional 5 or 10 percent of PRM, thereby, bringing the total amount 
of reserves that Western is making available to the CAISO for imports 
10 to 15 percent or more depending on the SMUD Balancing Authority Area 
reserve requirements under NERC and WECC. Western has established 
amounts of PRM in its Final RA Plan that it considers sufficient to 
meet its responsibilities as an LSE meeting its loads in the CAISO 
Balancing Authority Area, which prevents Western from leaning on other 
entities, avoids cost shifting, and is consistent with the terms and 
conditions of Section 40 of the CAISO Tariff and the proposed MRTU 
Tariff.
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    \11\ California Independent System Operator Corp., 115 FERC ] 
61,172, slip op at p. 27 (2006).
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D. Counting Methodologies

    Comment: A commenter notes that Western has developed counting 
methodologies that diverge from those in use for the majority of 
resources in the CAISO-controlled grid and has not provided sufficient 
justification for this approach. In particular, Western and the CPUC's 
methodology differ when it comes to the counting of hydro resources. If 
Western believes that the use of its own metrics merit the increased 
cost and burden, are a better representation of the capacity it will 
have to offer to the CAISO on a monthly basis, and are worth the 
potential detriment to reliability, Western has an equitable obligation 
to explain its conclusions and to help minimize any resulting 
difficulty in assessing relative RA contributions of entities subject 
to the IRRP and/or MRTU Tariff requirements.
    Response: Section 40.5.1 of the CAISO Tariff and Section 40.2.2.2 
of the MRTU Tariff require the SC for a CPUC

[[Page 41313]]

non-jurisdictional LSE to provide the CAISO with a description of the 
criteria adopted by the LRA or Federal agency for determining 
qualifying resource types and the Qualifying Capacity for such 
resources. Western has followed the requirements in Section 40.5.1 of 
the CAISO Tariff and Section 40.2.2.2 of the MRTU Tariff and has 
included its criteria in its Final RA Plan. Western believes that using 
the 50 percent rolling 12-month forecast to determine the Qualifying 
Capacity and Net Qualifying Capacity for the CVP hydroelectric units is 
reasonable because this method takes into account the current water 
year conditions. Western looks at this information every year as part 
of its process to provide annual information to its First Preference 
Customers and Preference Customers under the BR contracts. In addition, 
although the CVP is a hydroelectric resource, the generation that can 
reasonably be expected is significantly less variable than typical 
hydroelectric projects. The CVP is not a run-of-the-river-system; it 
consists of a dozen, integrated, large, multi-use, Federal water and 
power projects with many dams and reservoirs throughout northern 
California.\12\ The considerable storage in the CVP reservoirs enables 
Reclamation to meet water demands through dry and critical years at 
reduced, but reasonably predictable, levels. Another factor which 
reduces variability is the fact that the CVP is an integrated multi-
reservoir project. The firmness and predictability of the CVP power 
resource is, therefore, significantly greater than most other 
hydroelectric projects in California.
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    \12\ See, e.g., 50 Stat. 844, 850 (1937); 63 Stat. 852 (1949); 
64 Stat. 1036 (1950); 69 Stat. 719 (1955); 76 Stat. 1191-2 (1962).
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E. Separation of Resources

    Comment: A commenter states that Western, through the RA Plan, 
intends to meet RA requirements for Western customers residing in the 
CAISO Balancing Authority Area. Such an approach appears to provide 
adequate separation of resources that are to provide: (1) BR and 
ancillary services to all Western customers and (2) resources that are 
procured for RA requirements for those Western customers residing in 
the CAISO Balancing Authority Area. It is the commenter's expectation 
that future purchases by Western to meet RA requirements for certain 
Western customers within the CAISO Balancing Authority Area will be 
given the same treatment. The commenter further states that it does not 
view capacity purchases for PRM requirements to be the same as 
purchases made for CAISO RA requirements. PRM provides supply coverage 
to all Western customers regardless of whether that customer resides in 
the CAISO Balancing Authority Area or the SMUD/Western Balancing 
Authority Area.
    Response: Western's Final RA Plan does provide a separation of the 
resources that will be used to meet BR and ancillary services to all 
Western customers from the resources that will be procured for RA 
requirements for Western customers residing in the CAISO Balancing 
Authority Area.

Amount of PRM To Be Procured

    Comment: A commenter states that Western's application of the 
reserve percentage and the CAISO's application of the reserve 
percentage differ. The commenter states that Western needs to clarify 
how it will apply its reserve percentage and explain how it compares to 
the method employed by the CAISO.
    Another commenter is concerned that the 5 to 10 percent reserve 
margin proposed by Western may prove inadequate. The commenter suggests 
that Western adopt a higher reserve margin and assure that this reserve 
margin is uniform throughout the year.
    Another commenter believes that the reserve margin percentage for 
the RA Capacity procured by Western should not vary on a monthly basis 
or from season-to-season.
    Another commenter recommends that Western consider procuring from 
the market only the RA needed to meet what used to be called planning 
reserves. The commenter suggests that Western add this procurement to 
what used to be called operating reserves (those reserves that Western 
is already obligated to provide) and present the sum total as Western's 
RA level. If so, while Western's total RA level may be more than 5 or 
10 percent, the amount of RA Western purchases for planning reserves 
should arguably be less.
    Another commenter wants to commend Western's staff for arranging to 
meet its customers' needs regarding the CAISO's MRTU RA requirements. 
While the commenter does not believe the RA requirements are truly fair 
or necessary, the commenter acknowledges the CAISO's ability to demand 
such reserves within its Balancing Authority Area. In addition, the 
commenter states that it believes Western's RA reserve acquisition plan 
for its Full Load Service (FLS) Customers fully meets reserve margins 
that could occur as a result of the commenter's operations. The 
commenter believes that the power purchased by Western for the FLS 
Customers comes with reserve margins that meet WECC and NERC 
requirements. The commenter states that the RA reserves that Western 
will purchase under its RA Plan will supplement and fully meet any 
reserve levels required under the CAISO's MRTU regulations.
    Another commenter states that it supports Western's acquisition of 
generation capacity resources to be committed to the CAISO in order to 
meet the RA requirement.
    Another commenter is concerned that Western's proposed PRM does not 
adequately address the variety of concerns necessary to assure reliable 
grid operations. The commenter states that the CPUC has adopted a PRM 
of 15 to 17 percent and has proposals before it to raise that 
percentage. The commenter states that the CAISO suggests maintenance of 
7 percent operating reserves in order to meet WECC requirements. This 7 
percent does not include accounting for a variety of additional 
concerns, including forced generator outages, forecast error, and 
uncertainties in resource counting conventions.
    Another commenter states that Western's currently proposed RA Plan 
calls for a seasonal PRM ranging from 5 to 10 percent. The description 
of this PRM and Western's Proposed RA Plan and the discussion held with 
the CAISO on May 16, 2007, make it clear that Western's RA Plan 
confuses the PRM element by misapplying capacity and energy issues, 
collapsing operational and planning reserve concepts, avoiding 
obligations to make resources available to the CAISO and to contribute 
to local RA needs, misunderstanding RA import allocations, and 
providing for load forecasting methodologies that are not permissible 
under the IRRP and/or MRTU Tariff. The commenter states that although 
Western does have some flexibility to determine its own PRM and is not 
bound by the CAISO default level, Western has the burden to show that 
any level proposed below the default will be sufficient to prevent 
leaning and consequent cost shifting. Given the level of load served by 
Western in California, a PRM at least on par with the minimum adopted 
for CPUC jurisdictional LSEs, currently 15 percent, should be expected 
to prevent Western from leaning on other entities.
    A commenter states that Western's RA Plans propose to establish a 
peak seasonal PRM of 10 percent and an off-peak seasonal PRM of 5 
percent. At a May 16, 2007, meeting with the CAISO, the CAISO claimed 
that Western misunderstood the underpinnings of the PRM because the 
stated values did not incorporate the expected provision of

[[Page 41314]]

required operating reserves. For instance, the CPUC derived its 15 to 
17 percent PRM to account for: (1) The LSE's demand; (2) the LSE's 
proportionate share of operating reserves; (3) generator forced 
outages; and (4) intrinsic forecast error. Western, or the LRA it 
serves, has the authority to determine its PRM. The commenter requests 
that Western consider PRMs that fully incorporate, at a minimum, for 
the above-described factors and that it fully explain the development 
of the revised PRMs.
    Response: While Western is not required to submit an RA Plan, 
Western has voluntarily done so to comply with the spirit of the 
Commission's order and to assist the CAISO to meet its CPUC 
obligations. The CAISO Tariff and the MRTU Tariff acknowledge that 
Western, as an LRA, may establish its own RA Plan and its own level of 
PRM.
    For imports, Western has chosen to provide more reserves to the 
CAISO during the summer peak months when reserves are more critical to 
the CAISO. In addition to the operating reserves that are already 
supporting imports, Western will be providing an additional 5 or 10 
percent of PRM, thereby, bringing the total amount of reserves that 
Western is providing for imports to 10 to 15 percent or more depending 
on the SMUD Balancing Authority Area reserve requirements. Because 
imports into the CAISO Balancing Authority Area are backed by reserves 
in the balancing authority area where the generation originates, 
including imports from the SMUD Balancing Authority Area whereby 
Western meets both NERC and WECC standards for operating reserves, 
Western is already meeting its requirements for operating reserves and 
will not be modifying the amount of PRM it will procure for imports 
into the CAISO Balancing Authority Area. As part of its Final RA Plan 
for imports, Western is adopting the 5 to 10 percent PRM outlined in 
its proposed Final RA Plan; however, Western will make it clear that 
such resources must be backed by appropriate NERC and WECC reserves. 
Because Western will require its imports to carry NERC and WECC 
reserves, during the critical summer months, imports under Western's 
Final RA Plan will have the equivalent of up to 15 percent PRM or more 
depending on the SMUD Balancing Authority Area operating reserve 
requirement to meet NERC and WECC standards.
    Also factoring into Western's decision is information that Western 
received at a May 16, 2007, public meeting with the CAISO in which the 
CAISO explained that the 15 to 17 percent PRM that CPUC jurisdictional 
entities are required to provide to the CAISO includes the WECC 
operating reserves. Western modified the amounts of PRM that it will 
provide to the CAISO for resources, including LD Contracts, procured in 
the CAISO Balancing Authority Area until such time as the procurement 
of LD Contracts is phased out by Western. For these resources, Western 
is adopting a 15 percent PRM for all months, which includes capacity to 
cover operating reserves for those resources within the CAISO Balancing 
Authority Area, which the CAISO states does not include operating 
reserves.
    Western has established amounts of additional capacity in its Final 
RA Plan that it considers sufficient to meet its responsibilities as an 
LSE meeting its loads in the CAISO Balancing Authority Area, which 
prevents Western from leaning on other entities, avoids cost shifting, 
and is consistent with the terms and conditions of Section 40 of the 
CAISO Tariff and the MRTU Tariff.
    As for the commenter's concerns about Western avoiding its 
contribution to local RA needs, please see response in section entitled 
``Local Capacity Area Resource Commitments.''
    As for the commenter's concerns about Western using load 
forecasting methodologies that are not permissible under the CAISO 
Tariff and/or MRTU Tariff, although Western is not required to do so, 
Western has submitted and intends to continue to submit relevant load 
data to the California Energy Commission (CEC) so that the CEC can 
provide coincident peak information to the CAISO.

Local Capacity Area Resource Commitments

    Comment: Several commenters state that Western has not addressed 
how it will meet the locational aspects of the CAISO's capacity 
planning requirements and that Western's Final RA Plan should address 
its obligations to contribute to local RA needs.
    Response: Based on the information presented during the 
consultation and comment period, Western has revised its RA Plan to 
address locational aspects of the CAISO's capacity planning 
requirements. Specifically, beginning with calendar year 2008, Western 
plans to follow the terms and conditions of Section 43 of the CAISO 
Tariff as it relates to the procurement of LRA and Section 40 of the 
MRTU Tariff as it relates to the procurement of Local Capacity Area 
Resources to the extent there are resources available to purchase.

Election of LSE Status

A. Reserve Sharing LSE versus Modified Reserve Sharing LSE

    Comment: A commenter notes that Western's proposed RA Plan does not 
provide for the provision of reserves pursuant to Sections 40.1.1, 
40.2.3, and 40.5 of the MRTU Tariff. These MRTU Tariff sections provide 
for reserves to be made available pursuant to a ``Modified Reserve 
Sharing LSE'' option. The commenter believes there are potential 
benefits to be derived from this option and strongly recommends and 
encourages Western to make the Modified Reserve Sharing LSE option 
available to its customers under its proposed RA Plan. The option would 
allow for the provision of RA based on a percentage of hourly loads 
rather than Western's proposal to provide RA based on a percentage of 
the monthly peak load. The Modified Reserve Sharing LSE option could 
greatly reduce the overall level of capacity a customer is required to 
provide to the CAISO.
    Another commenter states that Western's Final RA Plan must make it 
clear how Western will meet its obligations as a reserve sharing entity 
under the MRTU Tariff and how it plans to stay within its share of RA 
import capacity.
    Another commenter states that the SC for the LSE must communicate 
the election of either Reserve Sharing LSE or Modified Reserve Sharing 
LSE to the CAISO on behalf of the LSE. The commenter further states 
that Western must determine whether it is the SC, the LSE, and/or the 
LRA on behalf of its customers.
    Response: Western's proposed RA Plan was prepared in response to 
the terms and conditions of Section 40 of the CAISO Tariff and the 
proposed MRTU Tariff. Western's Final RA Plan clarifies how Western 
will meet its obligations as a reserve sharing entity. In accordance 
with Section 40 of the MRTU Tariff, each year Western has the ability 
to change its designation as to whether it elects to be a Reserve 
Sharing LSE or a Modified Reserve Sharing LSE. Since this election can 
change from year-to-year, this is not information that Western would 
include in its Final RA Plan, which is a document that Western does not 
expect to modify regularly. Under Western's current business operations 
and its current contracts, Western is unable to meet the necessary 
requirements contained in Section 40 of the MRTU Tariff to qualify for 
the Modified Reserve Sharing LSE option. Specifically, Western is not 
the SC for the resources it schedules to meet its loads in the CAISO 
Balancing Authority

[[Page 41315]]

Area. In addition, Western understands from the CAISO that all of the 
loads, for which Western is the LSE and the SC, must fall into the same 
category, either Reserve Sharing LSE or Modified Reserve Sharing LSE. 
If, in the future, the CAISO changes the requirements in Section 40 of 
the MRTU Tariff for a Modified Reserve Sharing LSE so that Western 
could meet the requirements, Western would have the option of changing 
its designation to a Modified Reserve Sharing LSE. Western would not 
consider such a change a significant modification of the Final RA Plan. 
Western has revised its Final RA Plan so that determination of Net 
Qualifying Capacity for deliverability within the CAISO Balancing 
Authority Area and deliverability of imports is consistent with the 
terms and conditions of Section 40 of the MRTU Tariff. Western is not 
able to address how Western plans to stay within its share of RA import 
capacity at this time as Western's share of the RA import capacity has 
not been determined. At this time, Western is an LRA and considers 
itself to be the SC and the LSE on behalf of its customers in the CAISO 
Balancing Authority Area for which Western is responsible for meeting 
their load. If, in the future, a Western customer desires to become its 
own LRA and LSE, Western is committed to working with that customer and 
the CAISO to accommodate the customer's request to the extent possible 
and allowed by Federal law.

B. Coordination With CEC

    Comment: A commenter states that the election status of an LSE/LRA 
affects the applicable Demand Forecast methodologies that can be 
employed. The commenter understands that Western intends to base its RA 
program on a coincident peak demand. The commenter urges Western to 
contact the CEC and submit the necessary load data to permit compliance 
with the MRTU Tariff.
    Another commenter encourages Western to fully cooperate with the 
efforts of the CEC to address the RA contributions of all LSEs within 
the State of California and the efforts of the CAISO to ensure base, 
consistent, and critical contributions of all LSEs toward an effective 
and reliable grid.
    Response: Although Western is not required to do so, Western has 
submitted, and intends to continue to submit, relevant load data to the 
CEC so that the CEC can provide coincident peak information to the 
CAISO.

Transmission and Intertie Capacity

    Comment: A commenter states that it expects that current and future 
use of the California Oregon Transmission Project (COTP) and/or the 
Pacific Northwest-Southwest Alternating Current Intertie (PACI) will 
first be applied to meeting Western's obligations under the Marketing 
Plan before utilization for RA requirements for those customers located 
in the CAISO Balancing Authority Area.
    Response: Western will determine the use of its transmission 
resources to meet its obligations under the Marketing Plan and its RA 
requirements to best meet the needs of Western and its customers.
    Comment: A commenter would be interested in understanding Western's 
process for allocating its intertie capacity to other Western customers 
that may have future RA issues that are not necessarily tied to the 
CAISO RA process.
    Response: This comment is outside of the scope of this proceeding.

Deliverability

    Comment: A commenter states that Western should carefully review 
the import deliverability section of the MRTU Tariff in formulating its 
revised RA Plans.
    Response: Western has revised its Final RA Plan so that 
determination of Net Qualifying Capacity for deliverability within the 
CAISO Balancing Authority Area and deliverability of imports will be 
subject to the terms and conditions of Section 40 of the MRTU Tariff. 
Under Section 40 of the MRTU Tariff, Net Qualifying Capacity is 
determined under the criteria provided by an LRA and consistent with 
testing and verification by the CAISO and deliverability restrictions. 
Under Western's Final RA Plan, Western has designated 100 percent of 
the forecasted capacity of all of its CVP hydroelectric generation 
facilities as Qualifying Capacity. In addition, Western has designated 
the contracted capacity from firm imports into the CAISO Balancing 
Authority Area as Qualifying Capacity and the contracted capacity from 
existing LD Contracts in the CAISO Balancing Authority Area as 
Qualifying Capacity. To address the concerns regarding the use of LD 
Contracts in the future, Western has determined at this time that it 
will begin to phase out its procurement of LD Contracts that originate 
within the CAISO Balancing Authority Area until such time the CAISO's 
concerns about deliverability and double-counting can be properly 
addressed. Western reserves the right to revisit this decision and may 
opt to use LD Contracts procured in the CAISO Balancing Authority Area 
in the future to meet its RA requirements if the CAISO's scheduling and 
accounting protocols are modified so that the CAISO's concerns about 
deliverability and double-counting can be properly addressed. If, in 
the future, Western is able to use LD Contracts procured in the CAISO 
Balancing Authority Area to meet its RA requirements, Western may 
purchase LD Contracts within the CAISO Balancing Authority Area under 
its Final RA Plan.

Future Drafts of the RA Plan

    Comment: A commenter states that they look forward to the next 
draft of Western's RA Plan.
    Response: In the Federal Register notice announcing Western's 
Proposed Final RA Plan for transactions in the CAISO's Balancing 
Authority Area (72 FR 20528), Western stated that it would evaluate all 
comments received and prepare its Final RA Plan. After reviewing the 
comments received, Western does not feel the changes it has made to its 
proposed Final RA Plan are significant enough to solicit additional 
public comments. Western's Final RA Plan is included in this Federal 
Register notice.

Development of the Final RA Plan

    Western revised the Final RA Plan as a result of the comments 
received during the comment period. Western thanks all the commenters 
for providing additional information that Western used as part of its 
decision-making process.
    The Final RA Plan will be: (1) Published in the Federal Register; 
(2) submitted to the CAISO; and (3) used by Western when Western is 
acting as an LSE in the CAISO Balancing Authority Area. The CAISO has 
established guidelines for RA and RA Capacity, which LSEs must meet for 
transactions in the CAISO Balancing Authority Area. Both the IRRP and 
MRTU Tariff acknowledge that Western, as an LRA, may establish its own 
RA Plan.\13\
---------------------------------------------------------------------------

    \13\ See, e.g., Section 40.4 of MRTU Tariff, Section 40.5 of 
IRRP Tariff.
---------------------------------------------------------------------------

    Western understands that the California State Legislature enacted 
Assembly Bill (AB) 380 to require the CPUC, in consultation with the 
CAISO, to establish RA requirements for all LSEs under the CPUC's 
jurisdiction.\14\ AB 380 requires LSEs subject to the CPUC's 
jurisdiction to procure adequate resources to meet their peak demands,

[[Page 41316]]

planning, and operating reserves.\15\ The state requires LSEs subject 
to the CPUC's jurisdiction to demonstrate that they have acquired 
sufficient capacity to serve their forecasted retail customer load and 
a 15- to 17-percent margin. As a Federal agency, Western is not subject 
to the state's jurisdiction.
---------------------------------------------------------------------------

    \14\ 115 FERC ] 61,172 at paragraph 4.
    \15\ Id.
---------------------------------------------------------------------------

    In developing its final RA Plan, Western analyzed and weighed many 
different factors, including the Commission's orders related to the 
CAISO's RA requirements, the CAISO Tariff that incorporates the IRRP, 
the MRTU Tariff, the CPUC's requirements and default margins, the 
impacts on preference customers, similar treatment among the users of 
the CAISO grid, the limitations imposed on Western as a result of 
Federal law, and Federal and industry standards and guidelines related 
to reliable operations of power systems. The comments reflect a broad 
range of interests associated with the development of Western's Final 
RA Plan.
    There are several distinct factors related specifically to the way 
that Western conducts its business that influenced Western's 
preparation of its Final RA Plan. The Final RA Plan contains detailed 
information on the factors that went into Western's development of the 
Final RA Plan. Western documents, as part of this Federal Register 
notice, the pertinent factors that influenced Western's preparation of 
its Final RA Plan.
    The United States' CVP hydroelectric facilities are operated by 
Reclamation. The CVP Act, as amended, integrates the various CVP 
facilities.\16\ The CVP is operated primarily to meet authorized 
project purposes that have a higher priority than power generation, 
such as irrigation and flood control.\17\ These purposes are determined 
by Federal law. Western's flexibility to modify generation schedules 
and ancillary service availability is limited by these and other 
related constraints. Congress authorized the PACI to firm the CVP and 
authorized the COTP to support the Department of Energy (DOE) 
Laboratories and other Federal uses in the State of California.\18\ 
Western imports power into its SBA over the PACI, COTP, and other 
Federal transmission facilities. In northern California, Western 
markets power from a dozen Federal dams, primarily those in the Federal 
CVP, under its Marketing Plan.\19\ Under the Marketing Plan, Western 
executed the majority of its power sales contracts with its statutory 
Preference and First Preference Customers in late 1999 and early 2000. 
In northern California, Western has established a contract-based SBA 
within the SMUD Balancing Authority Area. Unlike other LSEs, Western 
sells power to a diverse group of customers in northern California, 
including large municipal utilities such as SMUD, the City of Redding, 
and the City of Santa Clara, as well as smaller irrigation districts, 
Native American Tribes, and Federal and state agencies. These customers 
are located within the CAISO Balancing Authority Area, the Turlock 
Irrigation District Balancing Authority Area, the SMUD Balancing 
Authority Area, and Western's own SBA. Many of Western's customers are 
wholesale customers who are LSEs for their own customers. Other Western 
customers receive power from both Western and another utility, such as 
the Pacific Gas and Electric Company (PG&E). Under Western's Marketing 
Plan, and from a contractual standpoint, Western sells CVP generation 
to loads in the CAISO Balancing Authority Area from its SBA. Western is 
unable to use the CVP hydroelectric facilities in the SMUD Balancing 
Authority Area to meet PRM requirements because, in contrast to other 
utilities and non-jurisdictional LSEs in California, Western must 
follow Federal directives in its marketing and operations. The CVP 
hydroelectric facilities are owned by Reclamation and operated 
primarily to meet authorized project purposes that have a higher 
priority than power generation. Western's flexibility to modify 
generation schedules and ancillary service availability is limited by 
these and other related constraints.
---------------------------------------------------------------------------

    \16\ See, e.g., 50 Stat. 844, 850 (1937); 63 Stat. 852 (1949); 
64 Stat. 1036 (1950); 69 Stat. 719 (1955); 76 Stat. 1191-2 (1962).
    \17\ See id.
    \18\ Pub. L. No. 88-552, 78 Stat. 756 (1964), as amended; Pub. 
L. No. 98-360, 98 Stat. 403 (1984), as amended, 50 Stat. 844 (1937), 
as amended.
    \19\ 64 FR 34417 (1999).
---------------------------------------------------------------------------

    Western's Final RA Plan addresses how the RA requirements will be 
met for those customers for which Western serves their loads and who 
are located in the CAISO Balancing Authority Area. These customers are 
Western's FLS Customers, Western's four First Preference Customers, the 
National Aeronautics and Space Administration, Ames Research Center 
(NASA-Ames), and a subset of Reclamation's Project Use loads.

Final RA Plan

Acronyms and Definitions

    As used herein, the following acronyms and definitions when used 
with initial capitalization, whether singular or plural, will have the 
following meanings:
    Administrator: The Administrator of the Western Area Power 
Administration.
    BR: Base Resource--CVP and Washoe Project power output, determined 
by Western to be available for marketing, after meeting the 
requirements of Project Use and First Preference Customers, and any 
adjustments for maintenance, reserves, transformation losses, and 
certain ancillary services.
    Balancing Authority: As defined by NERC: The responsible entity 
that integrates resource plans ahead of time, maintains load-
interchange-generation balance within a Balancing Authority Area, and 
supports Interconnection frequency in real time.
    Balancing Authority Area: The collection of generation, 
transmission, and loads within the metered boundaries of the Balancing 
Authority. The Balancing Authority maintains load-resource balance 
within this area.
    CAISO/ISO: The California Independent System Operator Corporation.
    CVP: The Central Valley Project--The multipurpose Federal water and 
power project extending from the Cascade Range in northern California 
to the plains along the Kern River south of the city of Bakersfield, 
California.
    Capacity: The electrical capability of a generator, transformer, 
transmission circuit, or other equipment.
    Commission: The Federal Energy Regulatory Commission.
    Current RA Plan: That plan submitted by Western, acting as its own 
LRA, to the CAISO in September 2006.
    Custom Product: A combination of products and services, excluding 
provisions for load growth, which may be made available by Western per 
customer request, using the customer's Base Resource and supplemental 
purchases made by Western.
    DOE: United States Department of Energy.
    Demand Forecast: As defined by the CAISO Tariff: \20\ An estimate 
of demand over a designated period of time.
---------------------------------------------------------------------------

    \20\ References to the ``CAISO Tariff'' refer to the current 
CAISO Tariff as that document may be amended and modified, including 
as modified by the MRTU Tariff. As indicated below, Western, 
however, reserves the right to make changes to its Final RA Plan as 
needed as a result of changes to the CAISO Tariff. Where terms only 
appear in the proposed MRTU Tariff, Western has specifically 
referenced the MRTU Tariff.
---------------------------------------------------------------------------

    Energy: Measured in terms of the work it is capable of doing over a 
period of time; electric energy is usually measured in kilowatthours or 
megawatthours.

[[Page 41317]]

    FLS Customers: Full Load Service Customers--The subset of Western's 
Preference customers that has contracted with Western to provide 
portfolio management services and meet their total projected loads.
    Final RA Plan: This plan that Western, acting as its own LRA, has 
adopted in this Federal Register notice and will submit to the CAISO.
    First Preference Customer: A customer wholly located in Trinity, 
Calaveras, or Tuolumne Counties, California, as specified under the 
Trinity River Division Act (69 Stat. 719) and the New Melones 
provisions of the Flood Control Act of 1962 (76 Stat. 1173, 1191-1192).
    Initial RA Plan: That plan submitted by Western, acting as its own 
LRA, to the CAISO on May 19, 2006.
    LD Contract: Liquidated Damages Contract--Firm Liquidated Damages 
Contracts are those transactions utilizing or consistent with Service 
Schedule C of the Western Systems Power Pool (WSPP) Agreement or the 
Firm Liquidated Damages product of the Edison Electric Institute pro 
forma agreement, or any other similar firm energy contract that does 
not require the seller to source the energy from a particular unit and 
specifies a delivery point internal to the CAISO Balancing Authority 
Area.
    LRA: Local Regulatory Authority--The Federal, state, or local 
governmental authority responsible for the regulation or oversight of a 
utility.
    LSE: Load Serving Entity--Any entity (or the duly designated agent 
of such an entity, including; e.g., a Scheduling Coordinator), 
including a load aggregator or power marketer; that (a)(i) serves End 
Users within the CAISO Control Area and (ii) has been granted authority 
or has an obligation pursuant to California State or local law, 
regulation, or franchise to sell electric energy to End Users located 
within the CAISO Control Area; or (b) is a Federal Power Marketing 
Administration that serves End Users.
    Local Capacity Area: As defined by the MRTU Tariff: Transmission 
constrained area as defined in the study referenced in Section 40.3.1 
of the CAISO Tariff.
    Local Capacity Area Resources: As defined by the MRTU Tariff: 
Resource Adequacy Capacity from a Generating Unit listed in the 
technical study or Participating Load that is located within a Local 
Capacity Area capable of contributing toward the amount of capacity 
required in a particular Local Capacity Area.
    Local Resource Adequacy: As used herein, Local Resource Adequacy 
encompasses all defined terms related to the Local Resource Adequacy 
requirements as set forth in Appendix A of, and as used in, Section 43 
of the CAISO Tariff incorporating IRRP.
    Modified Reserve Sharing LSE: As defined by the MRTU Tariff: A Load 
Serving Entity whose Scheduling Coordinator has informed the CAISO in 
accordance with Section 40.1 of its election to be a Modified Reserve 
Sharing LSE.
    Net Qualifying Capacity: Qualifying Capacity reduced, as 
applicable, based on: (1) Testing and verification; (2) application of 
performance criteria; and (3) deliverability restrictions. The Net 
Qualifying Capacity determination shall be made by the CAISO pursuant 
to the provisions of the CAISO Tariff and any applicable manual or 
procedure.
    PRM: Planning Reserve Margin--Western's Planning Reserve Margin 
shall be that amount of capacity in megawatts (MW) that exceeds the 
Demand Forecast for SNR's loads as determined under Section 40 of the 
MRTU Tariff.
    Power Revenue Requirement: The annual revenue that must be 
collected from CVP power customers to recover annual expenses, such as 
operation and maintenance, purchase power, transmission service 
expenses, interest, and deferred expenses, and to repay Federal 
investments and other assigned costs.
    Preference: The requirements of Reclamation Law which provide that 
preference in the sale of Federal power be given to certain entities, 
such as municipalities and other public corporations or agencies and 
also to cooperatives and other nonprofit organizations financed in 
whole or in part by loans made pursuant to the Rural Electrification 
Act of 1936 (Reclamation Project Act of 1939, Section 9(c), 43 U.S.C. 
485h(c)).
    Project Use: The power used to operate CVP or Washoe Project 
facilities in accordance with authorized purposes and pursuant to 
Reclamation Law.
    Qualifying Capacity: Resources used to meet load requirements. SNR 
has established the criteria for calculating Qualifying Capacity in its 
Final RA Plan.
    RA Capacity: Resource Adequacy Capacity--As defined by the CAISO 
Tariff: The generation capacity of an RA Resource listed on an RA Plan 
and a Supply Plan.
    RA Plan: Resource Adequacy Plan--As defined by the CAISO Tariff: A 
submission by a Scheduling Coordinator for a Load Serving Entity 
serving Load in the CAISO Control Area in order to satisfy the 
requirements of Section 40 of the CAISO Tariff.
    RA Resource: Resource Adequacy Resource--As defined by the CAISO 
Tariff: A resource that is required to offer Resource Adequacy 
Capacity. The criteria for determining the types of resources that are 
eligible to provide Qualifying Capacity may be established by the CPUC, 
other applicable Local Regulatory Authority and provided to the CAISO, 
or the default provision in Section 40.13 of the CAISO Tariff.
    Reclamation: United States Department of the Interior, the Bureau 
of Reclamation.
    Reserve Sharing LSE: As defined by the MRTU Tariff: A Load Serving 
Entity whose Scheduling Coordinator has informed the CAISO in 
accordance with Section 40.1 of its election to be a Reserve Sharing 
LSE.
    SBA: Sub Balancing Authority Area--An electric system operating 
within a Balancing Authority Area that is bounded by meters and is 
responsible for the performance of generation, load, and transmission 
connected to the Sub Balancing Authority Area's electric system.
    SC: Scheduling Coordinator--As defined by the CAISO Tariff: An 
entity certified by the CAISO for the purposes of undertaking the 
functions specified in Section 4.5.3.
    TPP Contracts: Third-Party Power Contracts--An agreement that a 
Full Load Service Customer has to purchase energy from an entity other 
than Western.
    Western: United States Department of Energy, the Western Area Power 
Administration.
    Western's Final RA Plan follows:

Western Area Power Administration, Sierra Nevada Region--Acting as an 
LRA Establishes the Following RA Plan

    Western, Sierra Nevada Region (SNR), is a certified SC and an LSE 
for certain loads and resources within the CAISO Balancing Authority 
Area. Acting as its own LRA, SNR establishes the following RA Plan. SNR 
is submitting this plan voluntarily to comply with the spirit of the 
Commission's order to assist the CAISO to meet its CPUC obligations in 
the development of its requirements. This RA Plan has been developed in 
accordance with sections of the current CAISO Tariff incorporating the 
IRRP and Section 40 of the CAISO's proposed MRTU Tariff and addresses: 
(1) Current load obligations; (2) qualifying capacity criteria; (3) 
deliverability considerations; (4) demand forecasts and protocols; (5) 
PRMs; (6) types of resources for RA requirements; and (7) local 
resource requirements for SNR's obligation as an LSE and SC in the 
CAISO Balancing Authority Area. As an

[[Page 41318]]

SC, SNR will apply these criteria to its monthly and annual resource 
plans.
    This RA Plan applies to the following classes of loads served by 
SNR in the CAISO Balancing Authority Area: (1) Reclamation's Project 
Use loads; (2) SNR's First Preference and FLS Customers; and (3) NASA-
Ames. These customer classes are defined later in this RA Plan. With 
this submission, Western does not alter its position nor does it waive 
any legal rights or defenses it may have regarding the applicability of 
the MRTU Tariff to Western including, but not limited to, any rights 
and defenses raised by Western in ER06-723-000, et al. and ER06-615-
000, et al. and any related dockets.

Background

    SNR markets power in accordance with specific Federal statutes,\21\ 
regulations, and policies. In contrast to other utilities and non-
jurisdictional LSEs in California, SNR must follow Federal policies in 
its marketing and operations.\22\ The following background information 
is included in light of this unique requirement. The information 
presented below is not meant to be exhaustive but may be helpful to 
better understand this RA Plan.
---------------------------------------------------------------------------

    \21\ See, e.g., 43 U.S.C. 485h; 50 Stat. 844, 850 (1937); 63 
Stat. 852 (1949); 64 Stat. 1036 (1950); 69 Stat. 719 (1955); 76 
Stat. 1191-2 (1962).
    \22\ See, e.g., id.
---------------------------------------------------------------------------

    Western's SNR Office located in Folsom, California, markets power 
from the CVP and the Washoe Project. The body of laws applicable to CVP 
facilities is known collectively as Reclamation Law, including specific 
authorizing legislation for each CVP facility.\23\ The CVP was 
reauthorized in the Rivers and Harbors Act of 1937 (Act of 1937).\24\ 
The Act of 1937 defined the priorities for the purposes of the CVP as: 
(1) Navigation and flood control; (2) irrigation and municipal and 
industrial water supplies; and (3) power supply.\25\ The Central Valley 
Project Improvement Act (CVPIA) in 1992 modified the authorizations of 
the CVP to include fish and wildlife as a new authorized purpose.\26\ 
Along with managing several threatened and endangered species in the 
CVP service area, the net effect of CVPIA was to establish specific 
mitigation objectives and to establish a CVPIA Restoration Fund, which 
requires payments from CVP water and power customers to fund activities 
to mitigate damages caused by the construction and operation of the CVP 
upon the native fish and wildlife resources.\27\
---------------------------------------------------------------------------

    \23\ See, e.g., 43 U.S.C. 371, et seq.
    \24\ See 50 Stat. 844, 850 (1937).
    \25\ See id.
    \26\ See Public Law No. 102-575 (1992).
    \27\ See id.
---------------------------------------------------------------------------

    CVP hydroelectric power is delivered to loads throughout central 
and northern California. Under Reclamation Law, the first priority for 
CVP power is to meet the authorized loads of the project including 
irrigation pumping, municipal and industrial needs, authorized fish and 
wildlife purposes, and station service at CVP facilities.\28\ 
Approximately 25 to 30 percent of the CVP's power generation is 
typically used to support Project Use loads. Under existing laws, SNR 
markets the remaining power to First Preference customers and 
preference customers, which include Indian Tribes, Federal agencies, 
military bases, municipalities, public utilities districts, irrigation 
and water districts, and state agencies.\29\
---------------------------------------------------------------------------

    \28\ See, e.g., 43 U.S.C. 485h; 50 Stat. 844, 850 (1937).
    \29\ See, e.g., 50 Stat. 844, 850 (1937); 43 U.S.C. 485h.
---------------------------------------------------------------------------

    Western provides service to its customers under federally 
authorized marketing plans. Under SNR's Marketing Plan, which became 
effective on January 1, 2005, customers receive the net power output of 
the CVP and Washoe Projects after all project needs are met.\30\ 
Project needs include Project Use loads, SBA operational requirements, 
and First Preference loads. The remaining power is provided to 
Preference Customers and is referred to as the ``BR.''
---------------------------------------------------------------------------

    \30\ 64 FR 34417 (1999).
---------------------------------------------------------------------------

    Preference customers that receive BR are generally divided in three 
groups under the Marketing Plan: BR customers, Variable Resource (VR) 
customers and FLS Customers. BR customers are those customers that have 
opted to only receive BR power from SNR. VR Customers are customers 
that have requested supplemental power from SNR in addition to their 
BR. The third category of customers, FLS Customers, are customers that 
have their total load at specified delivery points met by SNR through a 
combination of their BR and supplemental Custom Product (CP) power 
purchases by SNR on their behalf. FLS Customers also can bring their 
own contracts to SNR for SNR to manage. These contracts are called TPP 
Contracts.
    Under the Marketing Plan, SNR has four First Preference customers. 
First Preference customers are a special class of customers who are 
statutorily entitled to up to 25 percent of the generation added to the 
CVP as a result of the hydroelectric facilities built in their 
counties.\31\ The two projects whose enabling legislation provided for 
First Preference power are the New Melones Project, which is located in 
Tuolumne and Calaveras Counties, and the Trinity Project, which is 
located in Trinity County. As explained above, First Preference power 
has priority over other types of preference power in the Marketing 
Plan.
---------------------------------------------------------------------------

    \31\ 69 Stat. 719 (1955); 76 Stat. 1173, 1191-2 (1962).
---------------------------------------------------------------------------

Current Load Obligations

    SNR serves several types of loads. Appendix A lists the SC IDs that 
SNR schedules and the specific customers included under each SC ID. 
These loads are served from CVP and Washoe generation, market 
purchases, and customer energy exchange accounts. The following 
describes SNR's load obligations:

1. Project Use Loads

    Project Use loads have the highest priority to CVP generation. SNR 
has approximately 180 delivery points for the Project Use loads, the 
majority of which are located in the CAISO's Balancing Authority Area. 
These loads are first met with CVP and Washoe generation, and in hours 
when the loads exceed such generation, the shortfall is met either 
through a customer energy exchange account or from market purchases. 
Several of these loads, including the San Luis Pump/Generation Station 
(San Luis) and Dos Amigos Pumping Plant, are operated by the California 
Department of Water Resources (CDWR) as joint Federal/state facilities. 
CDWR serves as the SC. Occasionally, CVP project water is pumped at the 
State of California's Banks Pumping Plant which also is scheduled as 
Project Use load. A significant portion of these loads are served under 
an Existing Transmission Contract (ETC) on the PG&E system for which 
PG&E served as the SC. Under Settlement Agreement 06-SNR-00944, SNR and 
PG&E agreed to transfer the SC responsibility for a number of Project 
Use loads from PG&E to SNR. SNR began scheduling these loads under the 
SC ID WSLW in December 2006.

2. First Preference Loads

    SNR has four First Preference customers all of which are located in 
the CAISO Balancing Authority Area. Under the authorizing legislation 
for the New Melones and Trinity Projects, customers in Trinity, 
Tuolumne, and Calaveras Counties are entitled to have their entire load 
met from CVP generation, up to an amount not to exceed 25 percent of 
the

[[Page 41319]]

additional energy generated by the CVP as a result of the project 
facilities constructed in those counties.\32\ In Trinity County, TPUD 
has an allocation of First Preference power which currently meets its 
entire load. In Tuolumne and Calaveras Counties, the Tuolumne Public 
Power Agency, the Calaveras Public Power Agency, and the Sierra 
Conservation Center have allocations of First Preference power that 
meet their entire loads.
---------------------------------------------------------------------------

    \32\ 69 Stat. 719 (1955); 76 Stat. 1173, 1191-2 (1962).
---------------------------------------------------------------------------

3. Base Resource Loads

    BR power is served to BR Customers, VR Customers, and FLS 
Customers. SNR has preference customers in all three categories located 
both in SNR's SBA and the CAISO Balancing Authority Area. This RA Plan 
is only applicable to those customers located in the CAISO Balancing 
Authority Area. In accordance with Federal law and SNR's Marketing 
Plan, the BR power must be made available to these customers before it 
is sold to any other entity, and it cannot be resold by these 
customers.\33\ If a preference customer has load in any hour, it must 
first use the BR power it receives to meet that load before using other 
resources. Under the scheduling protocols developed for the Marketing 
Plan, BR energy schedules for all preference customers are firmed 2 
days ahead, and, on those days that CVP generation is modified after 
the final schedules are published, the SBA is balanced through day-
ahead and active-day transactions in the energy markets.
---------------------------------------------------------------------------

    \33\ See. e.g., 50 Stat. 844, 850 (1937); 43 U.S.C. Sec.  485h; 
64 FR 34417 (1999).
---------------------------------------------------------------------------

4. FLS Customer Loads

    SNR has several FLS Customers, and the majority of these customers 
are located in the CAISO Balancing Authority Area. SNR has entered into 
contracts with these FLS Customers under which SNR has agreed to meet 
the total loads of these customers at specified delivery points. The 
load not met by BR energy or TPP Contracts for these customers is 
served from the market under long-term contracts for CP, and the 
portfolio is balanced on an hourly basis by day-ahead purchases or 
sales.

5. DOE Laboratories Loads

    SNR serves four DOE Laboratory loads, three of which are located in 
the CAISO Balancing Authority Area. DOE has contracted with SNR for 
Portfolio Management service, which means SNR is responsible for 
balancing DOE's loads and resources. The portion of these loads not met 
by BR energy is served from the market under long-term TPP Contracts, 
and the portfolio is balanced on an hourly basis by day-ahead purchases 
or sales.

6. NASA-Ames Loads

    NASA-Ames is a VR Customer that is located in the CAISO Balancing 
Authority Area. In addition to receiving its BR power, NASA-Ames has 
contracted with SNR to have SNR make supplemental power purchases on 
behalf of NASA-Ames.

7. VR Customer Loads

    SNR sells supplemental power to two preference customers located in 
the SBA that is currently delivered over PACI. Since the loads are 
located in the SBA, and the only CAISO transactions are the schedules 
on the PACI, which result in an import into the SBA, the CAISO-
established RA requirements do not apply to these schedules.

Qualifying Capacity Criteria

    The criteria for calculating Qualifying Capacity may be established 
by the CPUC or other applicable LRA and provided to the CAISO. For 
purposes of this RA Plan, Qualifying Capacity is defined as resources 
used to meet load requirements. In this RA Plan, SNR has established 
the criteria for calculating the Qualifying Capacity. Net Qualifying 
Capacity is Qualifying Capacity reduced by the CAISO based on (1) 
testing and verification; (2) application of performance criteria; and 
(3) deliverability restrictions.
    A few facts about the availability of CVP generation are relevant 
to the determination of Qualifying Capacity. The CVP consists of a 
dozen integrated, large, multi-purpose, Federal water and power 
projects with many dams and reservoirs in northern California.\34\ 
Although the CVP is a hydroelectric resource, the generation that can 
reasonably be expected is significantly less variable than typical 
hydroelectric projects. The CVP is not a run-of-the-river-system. The 
considerable storage in CVP reservoirs enables Reclamation to meet 
water demands through dry and critical years at reduced, but reasonably 
predictable, levels. The generation from the CVP is, therefore, 
considerably less variable on an annual and seasonal basis than most 
other hydroelectric projects. Another factor which reduces variability 
is the fact that the CVP is an integrated multi-reservoir project. 
Reclamation can, thus, frequently meet its water demands from several 
different reservoirs. As an example, if there is a pumping requirement 
in the Delta for agricultural demands in the San Joaquin Valley, these 
water export demands may be met from releases at Shasta, Folsom, San 
Luis, or New Melones. Finally, all major CVP dams have reregulation 
reservoirs, which provide considerable flexibility to shape generation 
from the major power plants during the day without affecting downstream 
releases. A reregulation reservoir is a secondary smaller reservoir 
located adjacent to and downstream from the primary reservoir, with 
sufficient storage to allow a peaking operation out of the primary 
reservoir while maintaining a constant release down the river. This 
increased flexibility enhances the predictability to meet power 
demands. The firmness and predictability of the CVP power resource is, 
therefore, significantly greater than most other hydroelectric projects 
in California and elsewhere.
---------------------------------------------------------------------------

    \34\ See, e.g., 50 Stat. 844, 850 (1937); 63 Stat. 852 (1949); 
64 Stat. 1036 (1950); 69 Stat. 719 (1955); 76 Stat. 1191-2 (1962).
---------------------------------------------------------------------------

    Forecasts of CVP generation are posted every month on SNR's Web 
site. SNR, in coordination with Reclamation, prepares an estimate of a 
rolling 12-month forecast of generation for the CVP on a monthly basis. 
Two forecasts are normally provided, one at 50 percent and one at 90 
percent inflow exceedance levels. The 50-percent forecast assumes 
average inflows into CVP reservoirs for the upcoming water year, while 
the 90-percent forecast assumes critically dry year inflows. The 50- 
and 90-percent forecasts are very similar for the summer and fall 
periods when water releases from the CVP are provided primarily from 
reservoir storage. This is also true for the first few months of the 
winter season before rainfall starts to influence release schedules. 
The biggest difference between the two forecasts occurs in the January 
through April period when weather is a direct factor in determining 
water release schedules. The difference in energy generation from the 
CVP available for delivery to preference customers is about 20 percent 
between an average year and a dry year based on long-term studies of 
CVP operations. In contrast, the difference in energy generation 
between the 50 and 90 percent rolling 12-month forecasts that are 
published for preference customers every month is usually about 10 
percent. This relatively small difference is explained by the fact that 
the rolling 12-month forecasts take current reservoir storage levels 
into account as the starting point, whereas long-term studies calculate 
reservoir storage levels based on sequential historical years. As a 
result, for purposes of Qualifying Capacity for the CVP, SNR has

[[Page 41320]]

determined that it will utilize the 50 percent rolling 12-month 
forecast as the basis for forecasting Qualifying Capacity and Net 
Qualifying Capacity from the CVP for its monthly and annual forecasts.
    SNR has several generation projects in the SMUD's Balancing 
Authority Area, which comprise the bulk of the CVP generation 
facilities. With the exceptions of the New Melones Power Plant and the 
San Luis and O'Neill Pump/Generation Plants (O'Neill), which are 
addressed separately below, all CVP generation plants reside in the 
SMUD Balancing Authority Area. SNR operates its SBA, which includes the 
Modesto Irrigation District's facilities and the COTP, within SMUD's 
Balancing Authority Area. In addition to being adjacent to the CAISO 
Balancing Authority Area, SNR's SBA is adjacent to the Turlock 
Irrigation District's Balancing Authority Area. SNR also has a direct 
tie to the Bonneville Power Administration's Balancing Authority Area 
through its firm transmission rights on the COTP and additional access 
to the Pacific Northwest through its firm transmission rights on the 
PACI.
    Under Reclamation Law and the Marketing Plan, SNR's resources must 
first be utilized to serve Project Use, First Preference, and Federal 
preference loads. To the extent there is surplus energy, SNR markets 
such surplus at its discretion.

CVP Hydroelectric Facilities in the SMUD Balancing Authority Area--
Designation of Qualifying Capacity

    SNR designates its hydroelectric facilities in the SMUD Balancing 
Authority Area as a system resource with 100 percent of its forecasted 
capacity as Qualifying Capacity. SNR will determine its forecasted 
capacity by utilizing SNR's 50 percent rolling 12-month forecast for 
the appropriate month. The rolling 12-month forecast is discussed in 
detail above. This import into the CAISO Balancing Authority Area is 
backed with reserves as required under WECC standards from SNR's CVP 
resources in SMUD's Balancing Authority Area.
    In designating the CVP facilities as a system resource, SNR notes 
that these facilities appear to be consistent with the definition of a 
system resource set forth in the MRTU Tariff filed on February 9, 2006, 
in FERC Docket ER06-615:

    A group of resources, single resource, or a portion of a 
resource located outside of the CAISO Control Area, or an allocated 
portion of a Control Area's portfolio of generating resources that 
are directly responsive to that Control Area's Automatic Generation 
Control (AGC) capable of providing Energy and/or Ancillary Services 
to the ISO.

1. New Melones Power Plant--Designation of Qualifying Capacity

    The New Melones Power Plant physically resides in the CAISO 
Balancing Authority Area. SNR and the CAISO have agreed to pseudo-tie 
the generation from New Melones into the SMUD Balancing Authority Area. 
For all intents and purposes, this allows New Melones to be 
electronically and operationally included as part of the SMUD Balancing 
Authority Area. For purposes of Qualifying Capacity, SNR is designating 
the New Melones Power Plant as part of the CVP resource in the SMUD 
Balancing Authority Area. The ETC for delivery of New Melones 
generation into SNR's SBA is noted below.

2. San Luis and O'Neill Pump/Generating Plants--Designation of 
Qualifying Capacity

    San Luis is operated by CDWR, and O'Neill is owned and operated by 
Reclamation. Both plants are operated to meet both Federal Project Use 
loads and to comply with Federal/state guidelines for the coordination 
of the Federal and state water projects. By contract and operation of 
law, project operations for the CVP and State Water Project are 
coordinated in order to assure that water quality standards in the San 
Francisco Bay/Sacramento-San Joaquin Delta and Estuary, as well as 
other applicable environmental operating criteria, are achieved.\35\
---------------------------------------------------------------------------

    \35\ See the Coordinated Operations Agreement Amendments Act, 
Act of October 27, 1986, Public Law 99-546, 100 Stat. 3050.
---------------------------------------------------------------------------

    For San Luis, SNR is deferring designation of Qualifying Capacity 
pending CDWR's submittal on how its capacity in this facility will be 
determined. Once that submittal is made, SNR, in consultation with 
Reclamation, will determine if the methodology is consistent with 
Reclamation's contractual framework with CDWR and also if the 
designation is consistent with Federal laws and SNR's policies. If 
CDWR's RA determinations are acceptable to SNR, the capacity associated 
with the Federal share of this facility will be treated in the same 
manner as the state's share. If CDWR's LRA determinations are not 
consistent with Federal law or the contractual framework, SNR will 
submit alternate criteria in an addendum to this document to address 
Qualifying Capacity at San Luis. Prior to SNR's determination as to 
whether CDWR's RA designation criteria is consistent with Federal law, 
SNR designates the forecasted capacity of the Federal share of San Luis 
as Qualifying Capacity. For O'Neill, SNR designates 100 percent of the 
forecasted capacity as Qualifying Capacity.
    Under Reclamation Law, the capacity, as well as the energy 
generated from these plants, must be made available to meet Project Use 
loads and Federal preference loads.\36\ The ETC for delivery of 
generation from these plants is noted below.
---------------------------------------------------------------------------

    \36\ See e.g., 50 Stat. 844, 850 (1937); 43 U.S.C. 485h; 64 FR 
34417 (1999).
---------------------------------------------------------------------------

3. Existing SNR Contracts--Designation of Qualifying Capacity

    As noted above, SNR has several classes of customers on the CAISO-
controlled grid. These customers include FLS Customers comprised 
primarily of municipal utility districts and Federal end-use preference 
customers and Project Use loads. Many of these customers and loads 
receive their power at transmission and distribution levels via the 
PG&E transmission and distribution facilities. Transmission level 
delivery to these loads is over the CAISO-controlled grid.
    To meet its statutory and contractual obligations to serve the 
above customers and loads, SNR has entered into a number of long-term 
contracts, both import contracts into the CAISO Balancing Authority 
Area and LD Contracts within the CAISO Balancing Authority Area. These 
are firm energy contracts as generally reflected in Service Schedule C 
of the WSPP Agreement. The terms of current SNR contracts range from 1 
month to 5 years. The contract with the longest term was entered into 
in late 2004 on behalf of the DOE Laboratories and extends through 
2009. In total, for the period from January 2006 through 2009, to meet 
FLS Customer obligations, SNR has entered into 40 contracts with 
varying terms. In addition, SNR has entered into four contracts to meet 
Project Use obligations. To the extent that these contracts are used to 
serve loads in the CAISO Balancing Authority Area, the designation in 
this section shall be applicable. The energy schedules from these 
contracts that meet SBA loads are not addressed here.
    Imports--The contracts that SNR has entered into that are imported 
into the CAISO Balancing Authority Area are considered firm under 
current industry standards and are backed by reserves in the balancing 
authority area where the generation originates. SNR will require that 
such contracts must have the appropriate operating reserves as required 
by NERC and WECC. SNR has

[[Page 41321]]

existing firm transmission rights on the COTP and PACI for the 
contracts originating in the Pacific Northwest. Consistent with the 
Commission's Order in Docket ER06-615, for purposes of this RA Plan, 
SNR designates the contracted capacity from these existing contracts as 
Qualifying Capacity. Unless otherwise specified in a subsequent RA Plan 
filing by SNR, SNR also designates as Qualifying Capacity the 
contracted capacity from any future firm power contracts that are 
imported into the CAISO Balancing Authority Area.
    LD Contracts--SNR has entered into several LD Contracts with 
varying terms in the CAISO Balancing Authority Area and will continue 
to use these existing LD Contracts to meet SNR's Qualifying Capacity 
obligations in the CAISO Balancing Authority Area. However, to address 
the CAISO's concern regarding the use of LD Contracts in the future, 
SNR has determined at this time that it will begin to phase out its 
procurement of LD Contracts in the CAISO Balancing Authority Area. SNR 
does reserve the right to revisit this decision and may opt to use LD 
Contracts procured in the CAISO Balancing Authority Area in the future 
to meet its RA requirements if the CAISO's scheduling and accounting 
protocols are modified so that the CAISO's concerns about 
deliverability and double-counting can be properly addressed. If, in 
the future, SNR is able to use LD Contracts procured in the CAISO 
Balancing Authority Area to meet its RA requirements, SNR will modify 
this RA Plan accordingly and such modification will not be considered 
significant. Consistent with the Commission's Order in Docket ER06-615, 
for purposes of this RA Plan, SNR designates the contracted capacity 
from these existing LD Contracts as Qualifying Capacity.

Deliverability Considerations

    Net Qualifying Capacity is Qualifying Capacity determined under the 
criteria provided by an LRA and subject to testing and verification by 
the CAISO and deliverability restrictions.
    For imports into the CAISO Balancing Authority Area, which include 
both CVP generation and contract imports, SNR notes that it has 
sufficient ETC and/or transmission ownership rights reserved on its and 
others systems to deliver imports to the CAISO Balancing Authority 
Area. Specifically, SNR has the following rights:
    1. SNR has a priority scheduling right on the PACI of 400 MW, which 
is not curtailable under the terms of Contract No. 04-SNR-00788-A 
unless the California-Oregon Intertie is derated below 3,000 of its 
4,800 MW of capacity.
    2. SNR is the operator and is also a participant in the COTP and 
has 177 MW of firm transmission rights into its SBA from the northwest 
(north to south) and 136 MW from its SBA to the northwest (south to 
north) over this 500-kilovolt line. The COTP is interconnected to the 
CAISO grid near the Tesla Substation.
    3. SNR's ETC with PG&E for delivery of New Melones generation to 
its SBA is Contract No. 8-07-200-P0004. It provides firm transmission 
capacity for the delivery of New Melones power until 2032.
    4. SNR's ETC for delivery of San Luis and O'Neill generation to its 
loads or SBA is Contract No. 14-06-200-2207A. It provides firm 
transmission and delivery service from PG&E for the San Luis Unit 
generation and loads until 2016.
    5. SNR owns the Path 15 Transmission Line upgrade and has 150 MW of 
transmission system rights on Path 15 pursuant to Contract No. 03-SNR-
00605. SNR has turned over the operational control of Path 15 to the 
CAISO.
    The determination of Net Qualifying Capacity for deliverability 
within the CAISO Balancing Authority Area and for deliverability of 
imports will be subject to the terms and conditions in Section 40 of 
the CAISO Tariff and the proposed MRTU Tariff.

Demand Forecasts and Protocols

1. Loads in the SBA

    The loads in SNR's SBA are not within the scope of this RA Plan. 
This RA Plan deals with SNR's loads in the CAISO Balancing Authority 
Area.

2. Loads in the CAISO Balancing Authority Area

    1. For its loads under the SC IDs WPUL, WSLW, WFLS, WDOE, and WTRN 
in the CAISO Balancing Authority Area, SNR will determine its demand 
forecasts based on the criteria set forth in Section 40 of the CAISO 
Tariff and the proposed MRTU Tariff.
    2. NASA-Ames will determine the average demand for a month 
consistent with current arrangements with the CAISO for forecasting 
this very unique load. As the SC for NASA-Ames, SNR will submit this 
data in accordance with the CAISO Tariff and the proposed MRTU Tariff.
    3. Eastside Power Authority will determine its demand forecast 
based upon the criteria set forth in Section 40 of the CAISO Tariff and 
the proposed MRTU Tariff. As the SC for Eastside Power Authority, SNR 
will submit this data in accordance with the CAISO Tariff and the 
proposed MRTU Tariff.

Planning Reserve Margins

    SNR will prepare its annual RA Plan and its monthly RA Plans and 
will include as part of those plans the PRM adopted by SNR. SNR's PRM 
shall be that amount of capacity in MW that exceeds the Demand Forecast 
for SNR's loads as determined under Section 40 of the CAISO Tariff and 
the proposed MRTU Tariff.
    SNR has determined that, for the purposes of this RA Plan, it will 
provide a PRM to the CAISO consistent with Section 40 of the CAISO 
Tariff, as amended and modified, including any modifications set forth 
in the MRTU Tariff as follows:
    For June through September, SNR will make a year-ahead showing that 
it will carry a PRM of 10 percent for all imports into the CAISO 
Balancing Authority Area and a PRM of 15 percent for all LD Contracts 
procured in the CAISO Balancing Authority Area.
    For January through May and October through December, SNR will make 
a year-ahead showing that it will carry a PRM of 5 percent for all 
imports into the CAISO Balancing Authority Area and a PRM of 15 percent 
for all LD Contracts procured in the CAISO Balancing Authority Area.
    For its month-ahead showing, SNR will demonstrate that it is 
prepared to meet 100 percent of its forecasted monthly peak load 
consistent with the terms of Section 40 of the MRTU Tariff.

Types of Resources for RA Requirements

1. Resources Used To Meet Load Obligations

    The resources that SNR currently uses are generation from CVP and 
Washoe hydroelectric facilities, long-term contracts, day-ahead 
transactions and real-time transactions to meet its load obligations.
    Under the Marketing Plan, SNR markets generation from the CVP and 
Washoe Projects to First Preference customers and any remaining power 
is then marketed as BR to preference customers on an as-available 
basis. The term ``as-available'' reflects the fact that CVP and Washoe 
energy generation is dependent on weather and water release criteria as 
determined by Reclamation and, during flood control events, the Corps 
of Engineers.
    SNR will not use the CVP and Washoe Projects to meet its PRM 
obligations for its RA requirements.

2. Resources Used To Meet PRM Obligations

    SNR will use capacity procured from qualifying resources either 
inside or

[[Page 41322]]

outside the CAISO Balancing Authority Area to meet its PRM obligations 
to the extent there are resources available to purchase. In order to 
qualify, a resource must meet the requirements set forth in Section 40 
of the CAISO Tariff and proposed in the MRTU Tariff. For imports, SNR 
will follow the requirements of Section 40 of the CAISO Tariff and 
proposed in the MRTU Tariff.

Local Resource Requirements

    Section 43 of the CAISO Tariff and Section 40 of the MRTU Tariff 
require that a certain amount of Local Capacity Area Resources be 
available to the CAISO within each Local Capacity Area identified in a 
technical study performed by the CAISO. The CAISO will allocate 
responsibility for Local Capacity Area Resources to SCs for LSEs using 
the methodology set forth in Section 43 of the CAISO Tariff while the 
CAISO Tariff is in effect and in Section 40 of the MRTU Tariff when it 
becomes effective. When notified by the CAISO of its share of the Local 
Capacity Area Resource obligation, SNR plans to comply with its 
requirement to procure such Local Capacity Area Resources to the extent 
there are resources available to purchase.

Future Modifications to This RA Plan

    SNR reserves the right to make changes to this RA Plan, as needed, 
as a result of: (1) Changes to the CAISO Tariff including any changes 
to incorporate MRTU; (2) changes to SNR's RA Program; (3) changes 
required to comply with the applicable electricity reliability 
organization standards; or (4) as otherwise determined by Western at 
its discretion. In the event SNR modifies this RA plan, SNR shall 
submit the modified RA Plan to the CAISO.

Appendix A

SNR Customers Included Under This RA Plan

SCID--WFLS

    City of Avenal.
    Calaveras Public Power Agency.
    City and County of San Francisco, Hetch Hetchy Water and Power.
    State of California, Department of Corrections and 
Rehabilitation, California Medical Facility.
    State of California, Department of Corrections and 
Rehabilitation, Deuel Vocational Institution.
    State of California, Department of Corrections and 
Rehabilitation, Sierra Conservation Center.
    East Bay Municipal Utility District.
    East Contra Costa Irrigation District.
    Lassen Municipal Utility District.
    National Aeronautics and Space Administration, Eastside 
Airfield.
    Northern California Youth Correctional Center.
    Pittsburg Power Company.
    Reclamation District 2035.
    Shelter Cove Resort, Improvement District No. 1.
    Tuolumne Public Power Agency.
    University of California, Davis.
    U.S. Defense Logistics Agency, Sharpe and Tracy Facilities.
    U.S. Department of the Air Force, Beale Air Force Base.
    U.S. Department of the Air Force, Onizuka Air Force Base.
    U.S. Department of the Air Force, Travis Air Force Base.
    U.S. Department of the Navy, Naval Air Station, Lemoore.
    U.S. Department of the Navy, Naval Radio Station, Dixon.

SCID--WDOE

    U.S. Department of Energy, Stanford Linear Accelerator Center.
    U.S. Department of Energy, Lawrence Berkeley National 
Laboratory.
    U.S. Department of Energy, Site 300.

SCIDs--WPUL and WSLW

    U.S. Department of the Interior, Bureau of Reclamation, Mid 
Pacific Region.

SCID--WEPA

    Eastside Power Authority.

SCID--WNAS

    National Aeronautics and Space Administration, Ames Research 
Center.

SCID--WTRN

    Trinity Public Utilities District.
    Normally, the final plan would be effective 30 days after 
Administrator approval. For the reasons identified below, in this 
instance, the effective date of the Final RA Plan will be August 1, 
2007. Western's Final RA Plan must be in place by this date to align 
Western's procurement process with the CAISO's required annual 
showing for calendar year 2008 by September 30, 2007. This allows 
Western to be competitive in the RA market. An effective date after 
August 1, 2007, would impact Western's ability to procure 
competitively priced RA.
    On the effective date, the Final RA Plan will replace the 
Current RA Plan. As discussed in the body of this notice, the Final 
RA Plan may differ from the CPUC's or other LRA's RA Plans. 
Western's Final RA Plan is being developed by Western as an LRA and 
is intended to only apply to Western, acting as an LSE in the CAISO 
Balancing Authority Area. It is not meant to apply to other LSEs in 
the CAISO Balancing Authority Area. Those LSEs are subject to the 
authority of the CPUC or other LRAs and, as such, are outside of 
Western's jurisdiction.

Availability of Information

    All studies, comments, letters, memorandums, or other documents 
made or kept by Western for developing the final plan, will be made 
available for inspection and copying at Western's Sierra Nevada 
Region Office, located at 114 Parkshore Drive, Folsom, CA 95630-
4710.

Environmental Compliance

    In compliance with the National Environmental Policy Act (NEPA) 
of 1969 (42 U.S.C. 4321, et seq.); the Council on Environmental 
Quality Regulations for implementing NEPA (40 CFR parts 1500 through 
1508); and the Integrated DOE NEPA Implementing Procedures (10 CFR 
part 1021), Western has determined that this action is categorically 
excluded from the preparation of an environmental assessment or an 
environmental impact statement.

Determination Under Executive Order 12866

    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 is required.

    Dated: July 13, 2007.
Timothy J. Meeks,
Administrator.

[FR Doc. E7-14533 Filed 7-26-07; 8:45 am]
BILLING CODE 6450-01-P