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Show Western Resources WRAP-UP Power marketing agencies-rates By HeleneC. Monberg "This is an end of an era of bountiful mv-cost hydroelectric energy for the Pacific Northwest,"--Chairman Mark Hatfield, R-Ore., of the Senate Appropriations Committee, 2-26-81 I Washington-Four federal power narketing agencies (PMA's) are pancaking" rate increases--that is, ?iskingfora new higher rate before the 'irst has been finally approved-to the ,cute displeasure of their rate payers. s The five federal power marketing uzencies are the Alaska Power Administration Ad-ministration (APA), Bonneville Power Administration (BPA), Southeastern ower Administration (SEPA), Southwestern South-western Power Administration SWPA), and Western Area Power idministration (WAPA). They market urplus power produced by 122 "ederally-owned multiple-purpose rater projects in 33 states thruout the ''Vest, most of the Midwest and the touth. "Pancaking" is occurring in PMA Nateapplications at the Federal Energy tegulatory Commission (FERC), fhich has had jurisdiction over PMA ates since Jan. 1, 1979. FERC has loved like a tortoise in acting on PMA ate applications to date. The PMA's tave submitted 24 rates to PERC for eview and approval since March of J79. But as of July 15, FERC had acted n only 13, approving 12 and disap-roving disap-roving 1. Four filed in 1979 are still ending FERC action. The PMA's are undated by law to peg their rates high nough to repay project costs. So they an't wait for FERC to act on earlier ate applications. Both APA and BPA i ave "pancaked" rate applications efore FERC, and both LAPA and WRA will too in the near future. RATE PAYERS DO SLOW BURN I Altho federal power is still a good buy jr those who can latch on to a block of ; the PMA's recent preoccupation f jith rate increases has their wholesale .'ate payers doing a slow burn. In addition ad-dition to 23 rate increases which the jMA's have sought since March 1979, Jixy plan seven more before the end of , ie year, according to the Department itJ Energy (DOE) Office of Power I Marketing Coordination. J:tSome members of Congress, particularly par-ticularly conservatives, look on the :aiMA's as keeping rates too low. The louse Appropriations Committee put . Jonneville on the griddle for this in its Report filed July 14 on the 1982 energy ",'nd water appropriations bill. (HR 1J44, HRetp. 97-177). It said, "The '.yommittee has been concerned for a umber of years that BPA is not harging rates sufficient to meet its Current operating and maintenance I y-osts as well as to meet its repayment Obligations to the federal government. govern-ment. ..The Regional Power Act, ic'acted Dec. 5, 1980, confirms BPA's ligation to establish rates that are adequate to recover costs and repay the ic-ederal government," it noted. fl BPA testified that it had sought rate increases to meet all of its "financial '''..ligations" at the hearings in March ,')n its 1982 budget, but a recent report V the General Accounting Office '! GAO) indicated BPA's repayments iehave fallen behind annual schedules, nflhe committee pointed out. The GAO it report "recommends that BPA adopt a -cost-based approach to repayment us rather than its current repayment nl Methodology," the committee stated, ild So it ordered Bonneville to report "to litthe Committees on Appropriations by 0ec. 31, 1981, on its assessment of a cost-based approach and whether or tl; not it plans to adopt the GAO proposal." Assistant BPA Administrator Georce ''Bell and Roger Seifert, his deputy, told Western Resources Wrap-up (WRW) on u July 20 Bonneville was already moving toward the repayment method recommended by GAO before the GAO isreport surfaced. "GAOgot the idea from rfcus," Seifert maintained. At issue is the id:ay that BPA repays capital costs. Gravely concerned about the skyrocketing costs of Washington Public Power Supply System (WP- ' eeiPSS) nuclear units soon to go into service on the BPA system, Bonneville iican, under its present repayment method, put all of its revenues toward btftne repayment of these high cost units f,(and not pay anything at all on any other ' ' T ln Bonneville system, Bell told itRW. It's a good way to hold down fates over the long haul, he said, and it 's sanctioned by law. "It's not illegal," Bell underscored. The committee and f t.Want Bonneville to repay a portion 01 the capital cost of each project each year. r J f Traditionally the power generated by aeral multiple-purpose water Projects has subsidized the irrigation mponent of such projects and also 't for its share of joint costs. Water nLof half built major water Riw cJ Such as the UPPer Colorado ver storage Project, are concerned entire project will not be built. A no-new-start!' poiicy has n in ef-i ef-i on funding new water projects for i inluding this year FunHin Reagan Administration, ending ,s scarCe for such projects. Color!0531 by Felix L- Sparks, c S s representative on the Upper dorado Rlver Commission, has recently surfaced. It would increase the rate on Colorado River Storage Project (CUSP) power from .about 8 to 20 mills per kilowatt hour. Under his proposal, the increasing power revenues would be turned over by WAPA to the Upper Colorado River Basin states (Colorado, New Mexico, Utah and Wyoming) to allow them to finish project units within their borders. Sparks sent in proposed language to change the 1956 authorization to Upper Colorado Basin Members of Congress. They were cool to it, primarily because CRSP power users are already griping about the current CRSP rate put into effect by WAPA this year. Neither the Members of Congress nor WAPA want to get in the middle of a battle between project water users on the one hand and project power users on the other, they have told WRW. PMA's are also finding themselves in a bind between environmentalists who want them to build more expensive transmission lines to protect wildlife and rate payers who bridle at such costs, particularly if they are materially higher than the customary alternative. BPA is in such a bind now. To try to ward off a law suit in 1980, BPA negotiated with the U. S. Fish and Wildlife Service (F&WS) to get F&WS to agree to the issuance of a right-of-way permit across the Umatilla National Wildlife Refuge at Crow Butte Island in Oregon. For such a agreement, BPA agreed to build a underground line. It would be a 4,700-foot 4,700-foot line built under the Columbia River at a cost of $8.7 million, according to a BPA study. An over head line to close the gap in the double-circuit 500 KV line in the area would cost, by contract $700,000. Local rate payers objected to the high-cost line and also threatened to sue BPA. Rep. Tom Bevill, D-Ala., chairman of the Energy and Water Subcommittee of the House Appropriations Ap-propriations Committee, in December 1980 told BPA not to make a firm commitment on the line pending hearings this year. The hearings this year indicated "the maximum number of ducks that would be killed by colliding with a (overhead) transmission tran-smission line is 400 per year, compared to a total wintering population of 100,000 and hunter kills of 8,000-10,000. , , . "Using BPA's current cost of money at 13 percent, an estimated service life of 25 years for the (underground) cable and the budgeted cost of $8.7 million we determined that saving 400 ducks per year would cost the ratepayers of the region $2,967.26 per duck," a BPA audit report submitted to the Subcommittee states. The House Appropriations Committee July 14 directed BPA to build the overhead line. It said the underground-underwater line would "be a waste of electric ratepayer funds." SWPA IN FERC BIND No power marketing agency is in a greater bind that the SWPA headquartered in Tulsa, Okla. Southwestern South-western markets power generated by U.S. Army Corps of Engineer dams in a six-state area, Oklahoma, Texas, Arkansas, Kansas, Missouri and Louisiana. SWPA applied to FERC for a power rate increase, the first since 1957, on March 1, 1979. FERC didn't act on it until June 1, 1981, 27 months later. Then FERC turned down the SWPA application on grounds the proposed new rates were too low. In effect, FERC directed SWPA to present revised rates to it, with necessary backup back-up data, within four months. John J. DiNucci, a rate expert in the DOE office of Power Marketing Coordination, told WRW on July 20 SWPA had gotten a bum rap from FERC. "I went over the Southwestern repayment studies myself, and they were well done," he said. DiNucci emphasized that the rate application had been submitted in 1979, and a lot of inflation had taken place in the interim before FERC got around to acting on the SWPA application on June 1. SWPA Administrator James B. Hammett told the Senate Appropriations Ap-propriations Committee Feb. 26, "The lack of action on our rate increase has caused a considerable problem for Southwestern, resulting in four law suits and withholding of amounts due us under the interim rate" by two major purchasers of federal power. "We may be looking at 'pancaking' further rate increases down the line if we don't get final action on this," Hammett told the Subcommittee. Sure enough, another SWPA rate increase is scheduled for submission to FERC on Aug. 31, according ac-cording to the DOE Coordinating office. Whatever the reason for "pancaking, federal power users think it's for the birds. "We favor legislation which would prevent the PMA's from applying ap-plying for new rate increases until FERC has acted on their earlier rate requests," Charles Robinson of the National Rural Electric Cooperative Association told WRW on July 21. As of July 15, WAPA had five rate applications pending before FERC and expected to file three more-Rio Grande in New Mexico, Collbran in Colorado and a split rate on sale of power-before the end of the year. BPA had four before FERC and a resubmittal due to go to FERC in August. SWPA had one pending, another upcoming (Kerr-Phippott) (Kerr-Phippott) on August 31, and the resubmittal ordered by FERC on Oct. 1. APA had one pending and another upcoming on Eklutna transmission on Oct. 1 SEPA plans to submit a rate boost for the Georgia-Alabama area on Oct. 1. Dr. Daniel M. Ogden, Jr., director of the DOE office of Power Marketing Coordination, told the House Appropriations Ap-propriations Committee his staff had had conferences with their counterparts coun-terparts at FERC to try to speed up FERC action on the PMA rate applications. ap-plications. Ogden said he told FERC. We would be sending them this year 12 more cases and pointed out that they would 'pancake' on existing cases, Ogden told the Committee on March 16. FERC clearly does not have its act together. Richard Faubel, chief of the FERC federal rate branch, told WRW July 21 that "we hope to get all of the backlog cleaned up by the end of the summer." But on July 22 the five-member five-member commission cancelled all August meetings "for lack of a quorum" as three commissioners have left or are about to leave and only a new chairman, C. M. (Mike) Butler, III, of Midland, Texas has been named. So there will be no more meetings until September at the earliest. FERC has never drafted proposed rules for PMA rate submissions, according ac-cording to Faubel. It is mandated to put such rules into effect for Bonneville by Dec. 5, 1981, under the 1980 Northwest Power Act. But Faubel told WRW July 21 it won't get out the proposed rules until August, so FERC is likely to miss that deadline. It will take another year for FERC to get around to rule making for the other PMA's, he told WRW on July 22. The House Appropriations Committee has denied FERC more staff, on the basis of its poor record. |