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Regional approach, not 'top-down' approach, works better for PMAs, lawmakers and witnesses tell House hearing

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Directives imposed by the Obama administration on the power marketing administrations over the last two years are causing public power customers' electric rates to rise, and authorities in Washington, D.C., lately appear to be favoring a top-down approach that is not appreciated, two leaders of the House Committee on Natural Resources said June 26. They were backed up by four public power witnesses who voiced concern about Department of Energy directives, such as orders to the PMAs to carry out policies favoring wind and solar power over the inexpensive hydro power produced by the federal power system.

Ratepayers in the West and the Pacific Northwest, who "bought and paid for the great hydro power projects of the 20th century," are today "facing rapidly escalating surcharges and hidden costs to indulge policies imposed upon them by the federal government for programs they do not want and benefits they do not receive," said Rep. Tom McClintock, R-Calif., chairman of the Natural Resources Subcommittee on Water and Power. Families and businesses "deserve to know why their electricity bills are skyrocketing," he said. The hearing, called by McClintock, was entitled, "The Power Marketing Administrations: A Ratepayer's Perspective."

The March 2012 memorandum issued by former Energy Secretary Steven Chu "would use ratepayers as a piggy-bank for the pet projects of the left -- projects that offer no benefits to these customers, but imposed back-breaking new costs," McClintock said. He added that this "radical" government policy has "sought to subsidize wildly expensive and intermittent wind and solar energies and to hide their true costs from the public."

Government policy "is setting obstacles to cheaper power, while mandating the most expensive power," he said.

"As witnessed by the actions of the Department of Energy over the last two years, the power marketing administrations -- particularly the Western Area Power Administration -- are ripe for continued oversight," said Rep. Doc Hastings, R-Wash., chairman of the full House Resources committee, at the June 26 hearing. "While ratepayers typically recover all of the costs of these agencies, Congress must do its part to ensure that their electricity rates remain fair and at the lowest cost possible within sound business principles," he said.

For generations, the PMAs "have provided low-cost, affordable and renewable electricity to millions of consumers," Hastings said. "But, times are changing in the West, thanks to never-ending lawsuits by litigious groups, activist judges and 'Washington, D.C. knows best' policies." He noted that earlier in June, federal energy regulators rejected "a regional approach for transmission planning and cost allocation that has worked well for years in the Pacific Northwest."

"Top-down directives don't work as well as a regional solution would," said Scott Corwin, executive director of the Public Power Council, which represents consumer-owned electric utilities in the Northwest that buy power and transmission from the Bonneville Power Administration.

"Throughout its history, BPA has achieved its core mission, providing affordable power, by partnering with consumer-owned utilities in that region," Corwin said. "It is the local utilities that have the expertise and local knowledge to know what will work, and what will not, for the citizens that they serve in their areas. We have found that top-down directives from the outside rarely work as well as solutions crafted by regional parties who have knowledge of the unique nature of each power system."

Consumer-owned utilities in the Northwest "understand very well the need for a reliable electric grid," and they also "support the addition of cost-effective sources of renewable energy and energy efficiency," Corwin said. "The track record in these areas is very good in the Northwest, so it is difficult to understand the push within certain corners of the federal government to create top-down command and control over these topics."

"A striking example of a federal top-down approach came just last Thursday from the Federal Energy Regulatory Commission when it issued an order on filings submitted by some utilities in the Northwest, including the Bonneville Power Administration, on their transmission planning processes to comply with FERC Order No. 1000," he said. "In effect, FERC rejected key portions of the regional approach for transmission planning and cost allocation that has been working well in the Northwest."

"Our concern is a shift to a top-down approach," said Joel Bladow, senior vice president for transmission for Tri-State Generation and Transmission Association, a wholesale cooperative based in Colorado. Regional partnerships have been key for the Western Area Power Administration, a kind of "secret sauce as to why Western has been successful," he said. "Historically, the traditional approach of working with the customer has worked," Bladow said, adding that his testimony "reflects the views and concerns of many major customer groups that WAPA serves."

"Over the last five years, costs have escalated tremendously," in part because of former Energy Secretary Chu's March 2012 directives, said Barry Tippen, director of the city-owned electric utility in Redding, Calif. Costs "will be astronomical," compared to what had been planned, he said.

By statute, the Bonneville Power Administration's "core mission is to deliver to the region's nonprofit, consumer-owned electric utilities the clean, renewable hydro power that is generated at federal dams," said Craig W. Collar, assistant general manager of Snohomish County Public Utility District No. 1 in Everett, Wash. Snohomish PUD is Bonneville's single largest energy customer, he noted. "We believe it is essential that Bonneville focus squarely on the fundamentals of delivering on their statutory obligations [delivering preference power at cost] and to do so in the most equitable and cost-effective ways possible," Collar said.

Elements in the March 2012 Chu directive amounted to "mission creep" for the PMAs, said Ted Coombes, executive director of the Southwestern Power Resources Association, which represents the preference customers of the Southwestern Power Administration. "I worry that foisting a lot of new duties and responsibilities on the PMAs might take their focus away from their original, and what should be their primary, mission: the sale of federal hydro power to consumer-owned, not-for-profit electric utilities" at low cost, he said.

APPA applauded the Water and Power Subcommittee for holding the hearing, noting that some 600 public power utilities in 33 states purchase hydro power from the four PMAs.

"Public power utilities, as purchasers of significant quantities of wholesale power marketed by the PMAs, are directly impacted by changes to the federal power program," the association said in a June 26 press release. "APPA and its members have expressed concern over several recent Department of Energy initiatives that seek to overhaul the PMA partnership in favor of a more top-down approach."
"The historic collaboration and partnership between public power utilities and the PMAs has benefited millions of electric customers in 33 states, who use clean, reliable, low-cost hydro power to help power their homes and businesses, and whose electric bills pay for the costs of the hydro power deployment as well as contributing to other uses of the federal dams such as irrigation, flood control, and recreation," said APPA President and CEO Mark Crisson. "Hearings like the one convened today by Subcommittee Chairman McClintock allow this partnership to remain as vibrant as ever." —JEANNINE ANDERSON


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