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ments over Western's FY 1986 request is attributable to the
continuing shift of Western's administrative and general
expenses from the construction activity to the O&M activity,
price increases for goods and services, higher costs of maintaining a power system at an acceptable industry-wide level of reliability and safety, and replacement and addition of equipment and transmission lines.
of the FY 1987 program total, $68.5 million or 79 percent is for regular transmission system operation and maintenance expenses. This includes classified and wage board employee salaries, travel and transportation, rents, communications, utilities, materials and supplies, data processing, and administrative and general expenses.
In addition, $16.1 million or 19 percent is requested for power system replacements and additions necessary to maintain and improve system reliability, stability, and operational efficiency. This includes the purchase of telemetering, supervisory control, microwave, radio and protective relaying
equipment, circuit breakers and transformers; the replacement
and disposal of equipment containing polychlorinated biphenyls; the inspection of wood poles and the replacement of wood-pole transmission structures that have exceeded their useful lives; and the replacement of the telephone and data systems at
Western's Headquarters and the Montrose District Office.
The Hoover Power Plant Act of 1984 authorized the uprating
program at the Hoover Power Plant and modified the provisions of
the General Consolidated Power Marketing Criteria or Regulations for Boulder City Area Projects. In order to meet these criteria, the existing Hoover Switchyard facilities will be modified and/or removed where possible so that the Hoover Power Plant units will tie directly to Mead Substation. Mead Substation will then
become the delivery point for Hoover power. Pield data, design, and circuit breaker and transformer procurement will be initiated
during FY 1987 for Mead Substation and for transmission line
Public participation continues in developing the general regulations for the charges for the sale of power from the Boulder Canyon Project.
Marketing Plan Status
Considerable progress was made in the development of several marketing plans during this past year. I am pleased to report that criteria for two major marketing efforts have recently become final, and allocations pursuant to a third marketing effort have also been completed.
Final marketing criteria have been completed for the Western Division of the Pick-Sloan Missouri Basin Program and the Fryingpan-Arkansas Project, as well as for the colorado River Storage Project, which will be integrated with the collbran and Rio Grande Projects.
Contingent capacity and associated energy available from the uprate of existing Boulder Canyon Project generating units has been allocated to the State of Arizona, the State of Nevada, and to nine cities in the State of California. The final allocation, published in the Federal Register on November 20, 1985, will serve as a basis for contract negotiations with allottees in the
months to come.
Fuel Displacement Activity
Western's fuel displacement activity (previously called the oil Conservation Program) resulted in the displacement of the equivalent of approximately 7,701,810 megawatthours of energy in 1985. This is an increase of over 500,000 equivalent barrels of
oil compared to 1984.
Through this program, Western sells energy
to utilities which would otherwise generate with more expensive nonrenewable resources, such as coal or oil.
Conservation and Renewable Energy
Western's customer conservation and renewable energy (C&RE)
program was amended in FY 1985 to comply with title II of the Hoover Power Plant Act of 1984. This action placed increased
emphasis on the responsibility of Western's long-term firm-power
customers to develop and implement effective C&RE programs as
a condition of the firm power sales contract. Conversely, the need for technical assistance by our customers has also risen
and has placed a greater emphasis on Western's customer service function as it relates to the changing conservation and renewable energy technologies. The customers' needs are being served in the form of equipment loans, cost-shared developmental studies, direct technical assistance, technical workshops, and C&RE-related technical resource publications.
The total C&RE budget to administer the contractual provisions and facilitate the development of effective customer programs for FY 1987 remains at $3 million (including $1.6 million of new budget authority). Western's customer C&RE program is based upon a strategy of cost-effective energy conservation measures combined with the development of renew
able energy resources where economically feasible.
Status of Water Conditions in Western's Marketing Area
Based on the February 1986 "Water Supply Outlook for
the Western United States" published by the Departments
The current 1986 supply outlook is for above-normal runoff
in California in the Sacramento, San Joaquin, and North Coastal (i.e., Trinity) River Basins. Although precipitation since October was below normal, recent storms have increased reservoir storage and runoff projections. The projected water conditions should result in above-normal energy output from the CVP hydropower facilities.
The Missouri River Basin can generally expect slightly below-normal inflows and normal releases during water year 1986. The North and South Platte River Basins are forecast to have above-normal runoff. The Yellowstone River Basin is forecast to have near normal runoff. The combined annual runoff for the Missouri River Basin is expected to be near the long-term normal runoff. Current mainstem Missouri River storage remains about 5 million acre-feet below the desirable carryover storage target at this time of the year.
The water supply outlook for the Colorado River Basin is for above-normal runoff for the fourth consecutive year. Reservoir storage remains high. The April to July inflow forecast for Lake Powell, made early in February, was 9.5 million acre-feet or 127 percent of the 20-year average inflow. Subsequent February precipitation was above normal and, as a result, Colorado River Storage Project revenues again should sufficiently exceed expenses to allow substantial returns to the u.s. Treasury to repay investments.
PURCHASE POWER AND WHEELING
The total FY 1987 purchase power and wheeling program
request is $113.7 million, including $76.7 million of new budget authority and application of prior balances of $37 million. In addition, Western has other financing amounting to $91.2 million from net billing, bill crediting, and nonappropriation transfers. This request provides for the purchase and wheeling of
power to meet existing contractual commitments and for Western's participation in the Fuel Displacement Activity.
The increase of $41.2 million in the total program request
is primarily due to Western's purchase of additional power from
Basin Electric Power Cooperative (Basin) in FY 1987 to help meet CVP power delivery obligations. This will be the first full year of implementing the contract between Western and Basin for
delivery of 185 MW of power. Western will reduce purchases from
the Bonneville Power Administration (BPA) in FY 1987 due to transmission limitations and BPA policy with regard to Northwest. power sales. This will decrease nonappropriation transfers with BPA that have offset appropriation requirements in the past.
Western is implementing a bill crediting process that reduces the amount of appropriated funds needed to meet the CVP purchase power and wheeling requirements. Under contracts negotiated with several major CVP customers, Western will determine each month the amounts those customers will pay directly to Western's power suppliers. In return, Western will credit the customers' CUP power bills in an amount equal to the customers' payment to the suppliers. The amount which can be bill credited is limited to the amount of revenue which Western would otherwise receive from those customers and by the amount of the bills received from
Western's power suppliers.
When the FY 1987 budget was prepared, we assumed bill crediting of $33 million in FY 1986 and $36 million in FY 1987.
However, higher levels of bill crediting may be achievable, possibly as high as $50-60 million a year. Although annual appropriation requirements are reduced under this process, a corresponding portion of customer receipts that would normally