Power administrations must lead in grid upgrades — Chu

Source: Hannah Northey, E&E reporter • Posted: Monday, March 19, 2012

The Obama administration announced plans today to use federal power marketing administrations to lead the way in upgrading the transmission grid, bolster renewables and serve as “test beds” for new cybersecurity technologies.

Energy Secretary Steven Chu outlined the strategy in a memo on how the organizations can leverage partnerships, rate-making power and financing to upgrade transmission and install new technologies to make the system more reliable, secure and accessible for renewable power generators.

“As the grid becomes smarter, it is also imperative to address its vulnerabilities and protect critical infrastructure,” Chu wrote. “The PMAs are uniquely positioned to serve as test beds for innovative cyber-security technologies, and we should take advantage of that opportunity.”

The PMAs — the Bonneville, Western Area, Southeastern and Southwestern power administrations — are independent companies within the Energy Department that market wholesale electricity, mainly from federal hydropower projects. The entities are critical to the administration’s clean-power efforts because their electric systems overlay thousands of miles of transmission and distribution lines in 20 states and cover about 42 percent of the land area of the continental United States.

Chu outlined four main avenues through which the administrations can meet these goals.

First, Western Area and Southwestern should use their authority under the Energy Policy Act of 2005 — which has never been used — to join with third parties to develop needed transmission. That provision would allow the Energy secretary to act through the federal marketing administration to build and operate new transmission projects if the project meets certain criteria, including reducing congestion or meeting electricity demand.

Second, Chu directed the administrations to craft rate structures that provide incentives for energy efficiency, demand response, integration of renewables and preparing the grid for electric vehicle deployment.

Third, he said, administrations should begin partnering with neighboring grid operators and owners and private companies to plan, build and operate the grid going forward.

Lastly, the administrations should work with Congress to help streamline a complex regulatory system that includes “hundreds of different statutes” that date back to 1902 and affect power sales, reliability and environmental laws, Chu said. The “maze of statutes,” he added, diverts attention from building the grid and competing in the global economy.

Chu also pointed out that only Bonneville has a revolving fund to pay for its capital improvements, while other administrations must obtain congressional approval to “invest in even modest capital improvement.” That situation can limit reliability of the transmission grid and should be changed, he said.

Chu’s memo is getting heat from House Natural Resources Chairman Doc Hastings (R-Wash.).

Hastings said in a statement that DOE’s strategy will increase energy costs for millions of American families and small businesses and possibly violate the administration’s traditional mission of providing the lowest-cost energy possible to customers.

“While some of the secretary’s goals may be laudable, the statutory basis of some of these proposed actions is at best unclear and the impact on consumers potentially significant,” Hastings said. “At a time of economic malaise, the last thing we need is another Obama Administration mandate that could only serve to increase energy rates and shift costs to consumers that receive no benefit.”

Hastings said the memo is sure to be a topic of conversation next week when the power administrations appear before his committee to discuss the Obama administration’s fiscal 2013 budget request.