A number of significant developments for the public power community occurred in March including President Trump’s signing into law a spending bill that has several key items for public power utilities and a large group of Senators and House members voicing their opposition to a Trump Administration plan to divest the transmission assets held by the Tennessee Valley Authority and three of the Power Marketing Administrations.
President Trump on March 23 signed into law a $1.3 trillion Fiscal Year 2018 spending bill that includes language on vegetation management and funding for an American Public Power Association cybersecurity and cyber-resiliency cooperative agreement with the Department of Energy. In addition, the measure boosts annual funding for the Low-Income Home Energy Assistance Program (LIHEAP).
Prior to Trump’s action, the Association was joined by the Edison Electric Institute, the National Rural Electric Cooperative Association and the Northwest Public Power Association in a March 22 letter to members of the House and Senate voicing support for the vegetation management language included in the Fiscal Year 2018 Omnibus Appropriations Act.
The language included in the omnibus appropriations bill “will enhance energy grid reliability, improve grid and system resiliency, and reduce wildfire risks by providing an improved framework for vegetation management and other maintenance of electricity infrastructure that crosses federal lands,” the groups said.
The law also matches last year’s appropriation of $5 million for cyber and cyber-physical solutions for electric power utility companies. This appropriation has helped fund a cooperative agreement with the Association and the Department of Energy’s Office of Electricity Delivery and Energy Reliability.
Under this agreement the Association is working to develop security tools, educational resources, cybersecurity and cyber-resiliency guidelines, and training on common strategies that member utilities can use to improve their cyber and physical security.
“We are in the middle of just the second year of this agreement and already more than 400 public power utilities have participated,” noted Desmarie Waterhouse, Vice-President of Government Relations and Counsel at the Association. “This is exactly the sort of smart, targeted federal investment in cyber security that will deliver significant results for millions of public power customers nationwide.”
In addition, the law increases annual funding for LIHEAP by $250 million to $3.6 billion. “LIHEAP is greatly valuable to lower-income public power customers in meeting their home energy costs, particularly those in regions that struggle with extreme temperatures in the winter and summer months,” said Waterhouse. “We hope that as Congress turns to the Fiscal Year 2019 budget, it maintains this funding increase.”
Senators, House members voice opposition to PMA, TVA proposals
Meanwhile, opposition continues to grow to a proposal in the Trump Administration’s Fiscal Year 2019 budget to divest the transmission assets held by TVA and three of the Power Marketing Administrations– the Southwestern Power Administration, Western Area Power Administration and Bonneville Power Administration.
A total of 23 senators and 59 House members in March voiced their opposition to the transmission asset proposal, as well as plans to shift the current cost-based structure for the PMAs to market-based rates.
The senators weighed in on the Trump Administration proposals in a March 22 letter to Mick Mulvaney, director of the Office of Management and Budget, while the House members sent a letter on March 23 to House Budget Committee Chairman Steve Womack, R-Ariz., and Ranking Member John Yarmuth, D-Ky.
“We believe divesting over 33,000 circuit-miles of transmission – transmission that was built specifically to connect federal electric generation to load – will not improve our nation’s infrastructure,” the senators said in their letter to Mulvaney. “Instead, it will destabilize the balance sheets of” BPA, WAPA and SWPA, the senators said.
The House members said that the proposal to sell off PMA assets “appears to be based on two misguided notions – the first being the expectation of reduced costs with the private transmission and delivery of energy, and the second relating to which kinds of programs and assets serve as the proper targets for deficit reduction.”
“We fully support efforts to improve infrastructure across the nation,” the House members noted. “However, we do not believe that the agenda should come at the expense of existing infrastructure – infrastructure that successfully fills a public niche where market-based pricing would not be sustainable.”
They said that privatized versions of the PMAs and TVA would not provide power at cost, “resulting in higher prices for preference customers, which include rural communities and tribes, while eliminating dependable annual sources of government revenue.”
Groups outline wholesale power market principles to FERC
In other developments that occurred in March, the Association and a diverse group of energy industry stakeholders on March 5 sent a letter to the Federal Energy Regulatory Commission detailing several principles the groups say are needed to “maximize the benefits of organized wholesale electricity markets.”
“We support competitive wholesale electricity markets, and we also recognize that this is a time of significant change and re-examination of the role of these markets in a transforming power system,” the letter said. “In view of the ongoing changes, we are writing to communicate the principles necessary to maximize the benefits of organized wholesale electricity markets.”
The letter was sent to Kevin McIntyre, chairman of FERC, and Commissioners Neil Chatterjee, Richard Glick, Cheryl LaFleur and Robert Powelson.
The groups encouraged the Commission to support wholesale electricity market designs consistent with a set of principles outlined in the letter.
“These design principles work together; individual signatories do not necessarily support every principle if other principles are not also honored,” the letter said.
The principles, as outlined in the letter, are:
* “Wholesale tariffs and market rules should be technology-neutral. All resource and technology types should have the opportunity to offer the services that they can provide and are needed to ensure grid reliability and (if appropriately defined and measured) resilience, and should be compensated for the value of such services. The wholesale market rules should not establish discriminatory criteria that provide an advantage to certain types of resources or technologies relative to other types of resources or technologies that are providing the same services;”
* “Wholesale market rules should respect state and locally governed utility policies and resource choices without making customers pay twice for the same service. ‘Accommodating’ state and local utility policies by forcing customers to pay once for the capacity obtained pursuant to state and local policies and again for resources allowed to clear in wholesale markets does not result in just and reasonable rates;”
* “For true market competition to occur, wholesale customers and suppliers should be able to come together and transact as they choose through bilateral contracts. It is not the RTO/ISO’s job to second-guess the resource and contracting decisions of eligible wholesale electric customers to buy or self-supply the types of resources and services they select, and for their chosen length of time. Long-term bilateral contracts can be beneficial for both wholesale customers and energy suppliers and should be fully accommodated inside and outside regions with organized markets. Bilateral contracts are a key part of competitive wholesale electricity markets, as they are in every other competitive sector of the economy;”
* “Prices in the organized wholesale energy markets should be driven by market forces and provide appropriate compensation to dispatched resources for the value of the services they provide, including the support of grid reliability and (if appropriately defined and measured) resilience. Energy markets should not necessarily guarantee recovery of investment costs for particular resources or technologies. Investment cost risk should remain on investors and bilateral purchasers that commit to purchasing the output and benefit from the services being provided. Wholesale energy markets were designed to and are reasonably achieving their primary goal of efficiently dispatching existing resources;”
* “Wholesale markets should benefit customers and reduce barriers to entry and exit. Markets should be allowed to function and stabilize before new solutions are deemed necessary to be implemented. Continual modifications of market structure and foundational rules should be avoided, as every market change could create new uncertainty and risk (which can result in increased costs for consumers).”
Along with the Association, other groups signing on to the letter are the American Council on Renewable Energy, American Wind Energy Association, Electricity Consumers Resource Council, Large Public Power Council, National Association of State Utility Consumer Advocates, Natural Resources Defense Council, National Rural Electric Cooperative Association, Solar Energy Industries Association, and the Transmission Access Policy Study Group.