• Secretary Chu Issues Memorandum Directing PMAs to Modernize
  • March 28, 2012 | Authors: Kevin C. Fitzgerald; Peter S. Glaser; Kevin C. Greene; Clifford S. Sikora
  • Law Firms: Troutman Sanders LLP - Washington Office ; Troutman Sanders LLP - Atlanta Office ; Troutman Sanders LLP - Washington Office
  • On March 16, 2012, the Secretary of Energy, Steven Chu, issued a memorandum to the four federal Power Marketing Agencies (“PMAs”) directing them to modernize the way that they do business.  Secretary Chu has called for the PMAs to take a leadership role in the Department of Energy’s (”DOE”) goal of creating a more secure and sustainable electric sector nationwide.  According to Chu, the nation must “transition to a more flexible and resilient electric grid” and have “much greater coordination among system operators.”  More specifically, the memo is intended to provide a framework to the overarching goals of the DOE, as each PMA crafts an individual improvement plan.  The DOE plans on issuing subsequent memos focused on individual PMAs, addressing issues one PMA at a time, until each is up to the same standards, an effort that is expected to take several years.

    The PMAs are instructed to include NERC reliability standards, integrating variable resources, scheduling on an intra-hour basis, centralizing dispatch, responding to solar flares and minimizing cyber-security vulnerabilities in their strategic and capital improvement plans.  Chu called on each PMA to improve existing infrastructure, and for WAPA and SWPA to implement their new 2005 Energy Policy Act and 2009 American Reinvestment and Recovery Act transmission authorities which allow the development of new transmission. Chu directed the PMAs to create rate structures that incentivize energy efficiency programs, demand response programs, integration of variable resources, and preparation for electric-vehicle deployment, to minimize rate pancaking and to improve collaboration with other owners and operators of the grid.  Additionally, the DOE will be asking Congress to modernize oversight of the PMAs and to provide the PMAs with the financial rights and responsibilities needed to facilitate their ultimate purpose.

    The federal power marketing agencies—the Bonneville Power Administration (“BPA”), Southeastern Power Administration (“SEPA”), Southwestern Power Administration (“SWPA”) and Western Area Power Administration (“WAPA”)—are each United States federal agencies within the Department of Energy with the responsibility for marketing hydropower.  Each agency operates under different enabling statutes, and handles the power marketing for multi-purpose water projects operated by the Bureau of Reclamation, the Army Corps of Engineers, and/or the International Boundary and Water Commission.  The PMAs are owners and operators of significant portion of the nation’s electrical infrastructure.  Combined they have 38.4 GW of installed capacity and they, with the exception of SEPA which does not own transmission, oversee 33,700 miles of transmission lines.

    While some support the DOE’s focus on modernizing the PMAs as a necessary and timely step forward, not all are in agreement.  One such critic is the House Natural Resources Committee Chairman, Doc Hastings (R), who issued a scathing press release the same day, stating that “The Secretary should remember that the traditional mission of the PMAs is to provide the lowest-cost energy possible to their customers within sound business principles . . . As Chairman of the House Natural Resources Committee, which has jurisdiction over BPA and all other PMAs, I will examine these proposals through this lens.”