[Federal Register Volume 75, Number 1 (Monday, January 4, 2010)]
[Notices]
[Pages 181-184]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-31128]


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TENNESSEE VALLEY AUTHORITY


Notice of Determinations on the PURPA Standards Set Forth in the 
Energy Independence and Security Act of 2007

AGENCY: Tennessee Valley Authority.

ACTION: Notice of Determinations on the PURPA Standards set forth in 
the Energy Independence and Security Act of 2007.

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SUMMARY: At its meeting on November 19, 2009, in Bowling Green, 
Kentucky, the TVA Board made its determinations on the PURPA Standards 
set forth in the Public Utility Regulatory Policies Act of 1978 (Pub. 
L. 95-617) (PURPA), as amended by the Energy Independence and Security 
Act of 2007 (Pub. L. 110-140) (EISA). The standards considered are 
listed in subsections 111(d)(16) through (19) of PURPA, as amended by 
EISA. The TVA Board considered the standards in accordance with PURPA 
and the objectives and requirements of the Tennessee Valley Authority 
Act of 1933, as amended, 16 U.S.C. 831-831ee (2006 & Supp. I 2007) (TVA 
Act).

FOR FURTHER INFORMATION CONTACT: Veenita Bisaria, Tennessee Valley 
Authority, 400 West Summit Hill Drive, Knoxville, TN 37902, (865) 632-
3939.

SUPPLEMENTARY INFORMATION: PURPA, as amended by EISA, requires TVA to 
consider adopting for itself and the distributors of TVA power four new 
PURPA standards. These four standards are identified as Integrated 
Resource Planning, Rate Design Modifications to

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Promote Energy Efficiency Resources, Consideration of Smart Grid 
Investments, and Smart Grid Information. The TVA Board is charged with 
considering and making determinations on whether or not it is 
appropriate to implement each standard.
    Data, views, and comments were requested from the public as to the 
need and desirability of adopting the standards. In addition to posting 
notices in the Federal Register on December 16, 2008, and June 25, 
2009, which described the standards and solicited public input on the 
standards, TVA also provided a PURPA Web site (http://www.tva.com/purpa) for purposes of educating the public on the standards and 
soliciting public input. All public input received on the standards has 
been included in the official record and made available to the public 
through the Web site.
    TVA's process for considering and making determinations on the new 
PURPA standards was carried out pursuant to the provisions of (a) 
PURPA, under which TVA is identified as the regulatory authority for 
electric utilities over which TVA has ratemaking authority, and (b) the 
TVA Act. After consideration of the initial comments and materials 
received, TVA staff developed recommendations on each of the standards. 
TVA subsequently requested public comment on these staff 
recommendations, as well as any additional comments the public might 
have on the four standards. All comments from the public, as well as 
the TVA staff recommendations, have been made a part of the official 
record and have been made available to the public through the Web site.
    The TVA Board considered these standards on the basis of the PURPA 
purposes, which are the (1) Conservation of energy, (2) efficient use 
of facilities and resources, and (3) equity among electric consumers, 
and the objectives and requirements of the TVA Act. The Board took into 
account these considerations as well as the official record developed 
during the consideration process in reaching the determinations below.
    The TVA Board's determinations follow.

TVA Board Determinations

Standard 16: Integrated Resource Planning

I. Standard Under Consideration

    Each electric utility shall
    (A) Integrate energy efficiency resources into utility, State, 
and regional plans; and
    (B) Adopt policies establishing cost-effective energy efficiency 
as a priority resource.

II. Observations

    The standard promotes the PURPA purpose of encouraging 
conservation of energy supplied by electric utilities. Energy 
efficiency refers to efforts that allow consumers to use less 
energy. On the supply or utility side, energy efficiency is 
accomplished through improving heat rates, reducing losses on the 
grid, etc. On the demand side, energy efficiency is accomplished 
through deployment of newer technologies, energy efficient 
appliances, bulbs, etc. TVA strives to secure reliable and cost 
effective electricity with an emphasis on energy efficiency by using 
a diverse resource portfolio.
    TVA and distributors already have many programs that encourage 
energy efficiency. TVA has begun an updated and expanded integrated 
resource planning process (IRP) in 2009. TVA will look at cost-
effective energy efficiency measures in the list of options to 
consider for sustainable resources, which includes renewable 
generation, conservation, and energy efficiency. TVA also uses a 
Power Supply Plan (PSP) as TVA's internal comprehensive generation 
and capacity planning process. The goals, tools, methodologies, and 
processes by which the PSP is developed support the IRP. TVA's goal 
is to achieve a balance between supply side and demand side 
alternatives to meet customer electric needs. TVA and distributors 
are taking steps to increase the opportunities to use energy 
efficiency measures to reduce peak load requirements and change end-
users' load patterns in a manner that is cost effective. TVA's and 
distributors' efforts in energy efficiency are consistent with what 
is required by the proposed integrated resource planning standard.

III. Determination by the TVA Board

    The standard under consideration is adopted as written.

Standard 17: Rate Design Modifications To Promote Energy Efficiency 
Investments

I. Standard Under Consideration

    (A) In General. The rates allowed to be charged by any electric 
utility shall--
    (i) align utility incentives with the delivery of cost-effective 
energy efficiency; and
    (ii) promote energy efficiency investments.
    (B) Policy Options. In complying with subparagraph (A), each 
State regulatory authority and each nonregulated utility shall 
consider--
    (i) Removing the throughput incentive and other regulatory and 
management disincentives to energy efficiency;
    (ii) Providing utility incentives for the successful management 
of energy efficiency programs;
    (iii) Including the impact on adoption of energy efficiency as 
one of the goals of retail rate design, recognizing that energy 
efficiency must be balanced with other objectives;
    (iv) Adopting rate designs that encourage energy efficiency for 
each customer class;
    (v) Allowing timely recovery of energy efficiency-related costs; 
and
    (vi) Offering home energy audits, offering demand response 
programs, publicizing the financial and environmental benefits 
associated with making home energy efficiency improvements, and 
educating homeowners about all the Federal and State incentives, 
including the availability of low-cost loans, that make energy 
efficiency improvements more affordable.

II. Observations

    A cost-effective energy efficiency activity is defined as one in 
which the cost to implement the energy efficiency (either 
conservation of energy or shift of energy use to a lower-cost time 
period) is less than or equal to the cost of continued energy use on 
the current basis (the status quo). The standard focuses on the role 
of electric rates and rate setting processes in promoting energy 
efficiency and energy efficient investments. In general, electric 
rates that accurately reflect the cost of providing electric 
services will incentivize cost-effective energy efficiency. If 
electric rates do not accurately reflect the cost of providing 
services, energy efficiency activities that are cost-effective in 
terms of real resources use may not be pursued.
    The objective of public power is to minimize cost to the 
customers, rather than to maximize profit, so TVA and municipal and 
cooperative distributors of TVA power do not require incentives to 
pursue energy efficiency. Similarly, it may not be necessary to 
provide added financial incentives for TVA or for distributors of 
TVA power (such as higher rates of return) beyond what TVA is called 
upon to do under the TVA Act, which is to keep customer rates as low 
as feasible. However, lost revenue from a reduction in demand will 
need to be recovered.
    Promotion of energy efficiency is a current ratemaking goal that 
TVA and distributors have set out in their current rate discussions. 
Time-of-use rates are being discussed by TVA and the distributors in 
current rate discussions. TVA and distributors currently have 
programs in this area and are also considering what non-rate 
programs may best incentivize cost-effective energy efficiency and 
demand response in the Valley. A balanced approach to cost-effective 
energy efficiency investments should be employed. TVA will work with 
distributors to develop mechanisms to ensure that distributors 
recover their fixed costs when cost-effective energy efficiency 
occurs. All policy options will be considered for applicability. 
TVA's efforts in promoting energy efficiency are consistent with the 
proposed Rate Design Modifications to Promote Energy Efficiency 
Investments standard.

III. Determination by the TVA Board

    The standard under consideration is adopted as written.

Standard 18: Smart Grid Investments

I. Standard Under Consideration

    (A) In General. Each State shall consider requiring that, prior 
to undertaking investments in nonadvanced grid technologies, an 
electric utility of the State shall demonstrate to the State that 
the electric utility considered an investment in a qualified smart 
grid system based on appropriate factors, including-

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    (i) Total costs;
    (ii) Cost-effectiveness;
    (iii) Improved reliability;
    (iv) Security;
    (v) System performance; and
    (vi) Societal benefit.
    (B) Rate Recovery. Each State shall consider authorizing each 
electric utility of the State to recover from ratepayers any 
capital, operating expenditure, or other costs of the electric 
utility relating to the deployment of a qualified smart grid system, 
including a reasonable rate of return on the capital expenditures of 
the electric utility for the deployment of the qualified smart grid 
system.
    (C) Obsolete Equipment. Each State shall consider authorizing 
any electric utility or other party of the State to deploy a 
qualified smart grid system to recover in a timely manner the 
remaining book-value costs of any equipment rendered obsolete by the 
deployment of the qualified smart grid system, based on the 
remaining depreciable life of the obsolete equipment.

II. Observations

    Smart Grid is not defined by EISA but generally refers to the 
electric grid and the intelligence behind the grid. It consists of 
the intelligent electronic devices (IEDs) and communications between 
the devices for feedback to achieve a self-healing, performance 
optimized electric grid.
    The Customer Resources Energy Efficiency and Demand Response 
Group is coordinating the overall smart grid program at TVA and is 
partnering with Electric Power Research Institute (EPRI) and 
Tennessee Valley Public Power Association (TVPPA). Leadership teams 
will recommend the optimal approach for smart grid. The teams will 
also coordinate communication about smart grid activities at TVA as 
well as promote general education about Tennessee Valley Smart Grid 
Vision (TVSGV) and smart grid strategies. TVA Business Units 
planning smart grid projects are each responsible and accountable 
for developing their own business cases and cost/benefit analyses in 
accordance with TVA corporate guidelines. TVA is also working 
collaboratively with its distributors and directly-served customers 
to implement smart grid investments in the TVA region. TVA kicked 
off its TVSGV to the TVPPA Technology Application committee on 
January 22, 2009.
    Due to smart grid's many components, it will be built 
incrementally. Distributors have primary responsibility to implement 
smart grid at the distribution level, and TVA has primary 
responsibility for smart grid implementation at the transmission 
level. The consideration and selection of smart grid investments 
will involve many stakeholders. Costs for smart grid will have to be 
recovered through rates (charged by TVA and the Distributors). The 
total benefits of smart grid can only be realized if suitable rate 
structures are in place. TVA and distributors are currently working 
on the rate redesign efforts.
    Current TVA and distributor practices are consistent with the 
intent of this standard. The smart grid investment evaluation 
factors outlined in subsection A of the proposed standard should be 
employed by TVA and distributors in their consideration of smart 
grid investments. The Rate Recovery provisions contained in 
subsection B and the Obsolete Equipment provisions in subsection C 
employ a rate of return perspective that applies to investor-owned 
utilities. Recovering costs and dealing with obsolete equipment are 
the Board's responsibility to handle under the TVA Act and in 
accordance with TVA's objective of keeping rates as low as feasible. 
Accordingly, the proposed consideration of the smart grid 
investments standard was revised to better fit TVA's circumstances.

III. Determination by the TVA Board

    The standard under consideration is revised and adopted as 
follows:
    (A) In General. Prior to undertaking investments in nonadvanced 
grid technologies, TVA and distributors shall consider an investment 
in a qualified smart grid system based on appropriate factors, 
including-
    (i) Total costs;
    (ii) Cost-effectiveness;
    (iii) Improved reliability;
    (iv) Security;
    (v) System performance; and
    (vi) Societal benefit.
    (B) Rate Recovery and Obsolete Equipment. The cost of capital, 
operating expenditures, or other costs related to the deployment of 
a qualified smart grid system and equipment rendered obsolete by 
such deployment, as power system costs, should be recovered through 
the application of TVA's power rates in a manner determined by the 
TVA Board pursuant to the TVA Act.

Standard 19: Smart Grid Information

I. Standard Under Consideration

    (A) Standard. All electricity purchasers shall be provided 
direct access, in written or electronic machine-readable form as 
appropriate, to information from their electricity provider as 
provided in subparagraph (B).
    (B) Information. Information provided under this section, to the 
extent practicable, should include:
    (i) Prices. Purchasers and other interested persons shall be 
provided with information on
    (I) time-based electricity prices in the wholesale electricity 
market; and
    (II) time-based electricity retail prices or rates that are 
available to the purchasers.
    (ii) Usage. Purchasers shall be provided with the number of 
electricity units, expressed in kilowatt hours (kWh), purchased by 
them.
    (iii) Intervals and Projections. Updates of information on 
prices and usage shall be offered on not less than a daily basis, 
shall include hourly price and usage information, where available, 
and shall include a day-ahead projection of such price information 
to the extent available.
    (iv) Sources. Purchasers and other interested persons shall be 
provided annually with written information on the sources of the 
power provided by the utility, to the extent it can be determined, 
by type of generation, including greenhouse gas emissions associated 
with each type of generation, for intervals during which such 
information is available on a cost-effective basis.
    (C) Access. Purchasers shall be able to access their own 
information at any time through the Internet and on other means of 
communication elected by that utility for Smart Grid applications. 
Other interested persons shall be able to access information not 
specific to any purchaser through the Internet. Information specific 
to any purchaser shall be provided solely to that purchaser.

II. Observations

    There are two major benefits to providing smart grid 
information. First, it helps customers better manage their usage, 
which reduces their overall electricity costs and helps TVA reduce 
its peak demand. Second, the price and usage information provides 
detailed electric market and system information to the public. 
Researchers and other interested parties can learn more about demand 
elasticity, income response, and other factors influencing energy 
markets over time. This information can also be used by policymakers 
to make better decisions. The intent of the standard is consistent 
with TVA's objective to provide power at the lowest feasible rates. 
However, TVA and distributors do not currently have all elements of 
smart grid investments in place. The details regarding how smart 
grid information will be made available and the timing of its 
implementation across the Valley cannot be specified at this time 
and, as such, will evolve as these programs mature. It is important 
that cost-effectiveness tests be applied in making decisions on what 
information is made available to consumers. The trade-offs between 
security and ease of providing this information should also be 
evaluated.
    In addition, due to TVA's unique structure, its relationship 
with 158 distributors, and the different stages of implementation of 
smart grid by distributors, TVA staff does not believe it is 
appropriate for TVA to apply a uniform customer information standard 
to its power distributors. Accordingly, the standard was revised to 
account for such circumstances.

 III. Determination by the TVA Board

    The standard under consideration is revised and adopted as 
follows:
    TVA will endeavor to provide power distributors and directly 
served customers with appropriate price and usage information to 
facilitate cost-effective smart grid and other energy efficiency 
activities in the Valley. TVA also will work with power distributors 
on a cooperative basis to make available information systems and 
data that will facilitate cost-effective smart grid and energy 
efficiency activities at the distributor retail level. TVA will 
prepare and present to distributor and directly served customers on 
an annual basis information on sources of generation by fuel type 
and estimated greenhouse gas emissions. TVA recommends that this 
information be shared with the distributors' retail customers where 
possible.


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    Dated: December 23, 2009.
Maureen H. Dunn,
Executive Vice President and General Counsel.
[FR Doc. E9-31128 Filed 12-31-09; 8:45 am]
BILLING CODE 8120-08-P