GOP, Obama admin at odds over system upgrades

Source: Hannah Northey, E&E reporter • Posted: Wednesday, March 21, 2012

House Republicans and the Obama administration are at odds over whether investments into the electric grid to bolster reliability, renewables and security are necessary for the public or an unnecessary burden for ratepayers.

At issue is Energy Secretary Steven Chu’s ordering Friday of four power marketing administrations to use a mixture of financial mechanisms, partnerships and existing regulatory authority to build up the grid and support clean energy and electric vehicles (E&E Daily, March 19).

Energy Department senior adviser Lauren Azar said in an interview that the initiative will “capture the economies of scale” in the electric sector and eventually decrease costs for customers through energy efficiency and demand response.

“We have to invest in our future, and in order to do that, the power marketing administrations need to build new infrastructure,” she said.

The DOE entities — the Bonneville Power Administration, Western Area Power Administration, Southeastern Power Administration and Southwestern Power Administration — are independent companies within the department that market wholesale electricity, mainly from federal hydropower projects.

But Republicans at a House Natural Resources Subcommittee on Water and Power hearing yesterday said the effort is likely to trigger a sharp increase in costs for ratepayers and dramatically alter the way the power marketing administrations do business.

“Mandating [the administrations] to change their rate structure to integrate even more wind and to provide power for electric vehicles will only increase energy rates, further straining the transmission system, and shift costs to consumers for little or no benefit,” said House Natural Resources Chairman Doc Hastings (R-Wash.).

But officials from the power administrations that testified before the subcommittee yesterday rejected Republicans’ arguments.

Stephen Wright, administrator of the Bonneville Power Administration, said he does not expect costs to increase and that much of what Chu called for in the memo plays into ongoing activities currently under way. “At this point, I have no reason to believe that rates will go up,” Wright said.

Timothy Meeks, administrator for the Western Area Power Administration, said people who benefit from any upgrades or changes to the system would pay. He also said investments are needed because the transmission system is aging.

‘Backdoor move

The conservative Heritage Foundation said Chu’s directives make sense for the private sector, but not using taxpayer dollars. The memo, the group said, seems like a “backdoor move to work toward the administration’s agenda of incorporating more alternative energy sources in the power grid” that could increase electricity rates and subsidize smart grid and cybersecurity technology.

“Chu’s directing the [power marketing administrations] to help carry out this Administration’s green energy aspirations on taxpayers’ and ratepayers’ dime is bad policy,” wrote Romina Boccia, the group’s research coordinator, in a blog post yesterday.

The American Public Power Association also said it has concerns about Chu’s proposal and said it is “highly unlikely” the power administrations can satisfy the secretary’s orders while reducing costs for customers.

“On the contrary, we believe that these proposals will raise the costs to consumers considerably,” said Mark Crisson, APPA’s president and CEO, in a statement.

Chu’s call for the DOE entities to implement rate designs to incentivize renewables, demand response and energy efficiency is “in reality a euphemism for shifting costs from one market participant to another,” he said.

Concerns over financing, cost overruns

And Republicans are also still seething from cost overruns associated with the Western Area Power Administration’s $3.25 billion in loan authority. Rep. Tom McClintock (R-Calif.), the Water and Power Subcommittee chairman, introduced legislation to repeal WAPA’s authority, which the House Natural Resources Committee passed.

DOE’s inspector general released a report last year that found the program lacked internal controls to protect taxpayers and prevent cost overruns (Greenwire, Nov. 9, 2011).

“This mismanagement is troubling and the oversight is sorely needed,” Hastings said, adding that the administration has yet to provide information on how the program was implemented. “We’re sending another letter today, and it should serve as a stern warning we intend to follow through with vigorous oversight.”

DOE’s Azar said most of the criticism surrounding WAPA’s loan authority stemmed from delays associated with the $161 million in financing that WAPA provided Montana Alberta Tie Line LLP in October 2009 to develop a transmission line that would support proposed wind power generation farms in Montana. Those delays have since been resolved, and the line is on schedule to be operational soon, she added.

DOE now wants to provide revolving funds — which Bonneville currently has — for other administrations so they can build needed transmission projects to meet reliability standards.

“Given their responsibilities, for instance, under the NERC reliability standards, we think it’s appropriate for those two entities to be able to finance the kind of projects that are needed to comply with the reliability rules,” Azar said.

DOE also wants to advance permitting of lines if they meet certain criteria, including decreasing congestion. Chu in his memo called on the Western Area and Southwestern power administrations to use their authority under the Energy Policy Act of 2005 — which has never been used — to join with third parties to develop needed transmission.

If proposed transmission projects show they will meet actual or projected electricity demand, DOE could build or own part of the line, Azar said. And “to the extent that they could not get the voluntary easements, they would use federal eminent domain on those parcels they could not get by voluntary agreements,” she added.