Montana’s Legislative Response to Secretary Chu’s Use of Power Marketing Administrations to Upgrade the Electric Grid

Last Saturday, the Montana Senate unanimously adopted Senate Resolution (SR) 2 in response to the Department of Energy (DOE) Secretary Steven Chu’s March 16, 2012, memorandum that outlined his plan to upgrade the electric grid using power marketing administrations. The plan would utilize the nation’s four power marketing administrations (PMAs) – the Bonneville Power Administration, Western Area Power Administration (WAPA), Southeastern Power Administration and Southwestern Power Administration to transition to “… a more resilient and flexible grid”  (Joint Outreach Team Draft Recommendations, pg. 4) and to create more cooperation among system users. As envisioned in the 3/16 memorandum, this would be achieved by:

1. WAPA and Southwestern joining with third parties to develop needed transmission,

2. The PMAs creating rate structures that provide incentives for energy efficiency, demand response, integration of renewables, and prepare the grid for electric vehicle deployment,

3.The PMAs partnering with all owners and operators of the grid to improve grid reliability, and

4. The PMAs working with Congress to help streamline the complex regulatory system that governs them.

The Chu memorandum has generated much controversy. The National Rural Electric Cooperative Association (NRECA) quickly jumped into the fray and contended that under Chu’s plan, most of the upgrade costs would be borne by local energy users. Thus, customers’ power bills could dramatically increase to pay for the new grid system.

NRECA’s concerns hit home in Montana because WAPA is taking the lead in Chu’s plan and WAPA is a primary PMA for that part of Montana east of the continental divide. This means that several of the Montana electric cooperatives get their federal allocations from WAPA and utilize WAPA transmission. Consequently, the cooperatives have been very vocal about the potential negative impact of the Chu plan on their customers’ future rates.

DOE and WAPA formed an initiative called “Defining the Future” and a Joint Outreach Team (JOT – a joint team of experts from WAPA and DOE) in response to Chu’s grid upgrade plan. Hearings about the initiative were held in six locations throughout WAPA’s territory during the past summer. Rural electric cooperative reps showed up at the Billings, Montana hearing, and all expressed apprehension about the potential of increased rates. The JOT draft recommendations were published in late November 2012. Of note are some changes that the JOT made from the Chu plan –  … “the JOT decided not to pursue any recommendations specifically targeted at energy efficiency, demand response, or electric vehicles. Further, a number of the areas addressed through the recommendations are considered on a regional basis…” (JOT Draft Recommendations, pg. 5).

This brings us to the start of the 2013 Montana legislative session. JOT representatives gave a brief summary of their draft recommendations to a combined Senate Committee on Energy and Telecommunications and the House Federal Relations, Energy, and Telecommunications Committee during the session’s first week. This allayed some concerns, but SR 2 was still introduced the next week, which according to Montana Senator Olson at the 1/17 SR 2 hearing, “stems from communications between the Montana Legislative Interim Energy and Telecommunications Committee and DOE”.  Senator Olson further noted during the hearing that WAPA and DOE had recent meetings regarding the future of transmission needs in this part of country, but that none of the policy was communicated to the Montana legislature. A letter from the Senate Energy and Telecommunications Committee was sent to DOE about the lack of communication, but Senator Olson characterized DOE’s response as “snarky”. Thus, SR 2 was crafted in order to make sure that DOE received the Senate’s remarks on the initiative by the close of the comment period on 1/22/2013.

It will be interesting to see what happens with the initiative and SR 2, but this all is reminiscent of the last Montana legislative session and the hearings on HB 198 (the bill that granted the power of eminent domain to many a corporation). Several of the same concerns, including increased power rates and lack of notification, were raised during these hearings. What goes around comes around.