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QUESTIONS SUBMITTED BY CHAIRMAN HATFIELD

FY 1987 Program Initiatives

Question: What new programs or initiatives are proposed in the 1987 budget which were not funded in 1986?

Answer: Western has no major new programs or initiatives proposed in FY 1987. However, Western will award construction contracts to continue to upgrade and rehabilitate the power systems. I would like to provide a list of facilities planned for construction contract awards in FY 1987.

(The information follows:)

Transmission Lines and Terminal Facilities :

Casper-Dave Johnston 230-kV Transmission Line (Wyoming)
Conrad-Shelby 230-kV Transmission Line (Montana)
Casper-Waltman 115-kV Transmission Line (Wyoming)
Liberty-Parker 230-kV Transmission Line (Arizona)
Curecanti-Montrose 115-kV Transmission Line (Colorado)

Substations and Buildings:

Dawson County Substation Additions (Montana)
Morris Substation Additions (Minnesota)
Sioux City Substation Additions (Iowa)
Cheyenne Substation Additions (Wyoming)
Bismarck Substation Additions (North Dakota)
Gering Service Center Additions (Nebraska)
Flandreau Substation Additions (South Dakota)
Casper Service Center Additions (Wyoming)
Wolf Point Substation Additions (Montana)
Power Marketing Operations Complex Warehouse Yard Paving
(Colorado)

Question: How would the proposed change in your repayment process effect your power rates?

Answer: I will provide a table for the record showing the effects of modified repayment reform on Western's power rates.

(The table follows:)

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NOTE: The data presented in this tabulation is based on recent information not available for earlier budget responses. 1 Computed periodically by formula. Effective rate as determined by dividing revenue by sales.

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Operating year (12 months ending May 31). Firm energy rate plus the generating charge (capacity). Study based rate approved by FERC to take effect on October 1, 1986. Assumes that the project integration is not in effect and that the FY 1986 Present Method rates will also be those for FY 1987. Lapact will be diffused when these projects are integrated, as currently planned. These Projects are not impacted. For the Colorado River Basin Project (Nava jo) the investment 1. for irrigation only: For the Palcon-Amistad Project, contractual restrictions govern repayment. These projects are repaying principal at a faster rate than would be required under straight line amortization, although repayment schedules may have to be adjusted for some features of the projects. Under the repayment proposal, some features may be repaid faster than currently planned, while other features may be repaid slower.

California-Oregon Transmission Project

Question: Please update the Committee on the status of negotiations and progress related to the California-Oregon Transmission Project.

Answer: The plan for constructing a new 500-kv transmission line from southern Oregon to California as described in the Memorandum of Understanding is moving forward. Two recent significant events are the completion of the Project Development Agreement and the allocation of the 3.125 percent of the Project transfer capability that was set aside by the Secretary of Energy in his Memorandum of Decision dated February 7, 1985.

The Project Development Agreement, which provides for up to $27 million for Project development work retroactive to September 30, 1985, went into effect when the last signature was obtained on February 26, 1986. This development work will take the Project to the decision point of whether or not to proceed with construction and covers such items as project management, environmental studies, technical studies, design, and specification preparation.

A good start on the environmental and power system studies work has already been made under the interim funding arrangements. A preliminary plan has been developed and a draft Environmental Impact Statement is expected to be published by November 1986. The projected inservice date of the Project is early 1991. The total estimated cost is $430 million (1991 price levels) excluding system additions or modifications in the Pacific Northwest.

One of the conditions the Secretary placed on his acceptance of the MOU was to set aside 3.125 percent of the Project transfer capability. This set-aside was to be allocated by Western among non-Federal public entities who were not participants in the original MOU. Western conducted public proceedings and completed allocations to all eligible applicants on October 22, 1985.

Question: Are negotiations proceeding in a satisfactory way?

Answer: Negotiations have been completed between the original participants and the allottees to bring the allottees into the Project. The document used to achieve this is an agreement called the MOU Annex. The MOU Annex modifies the MOU and the Project Development Agreement to recognize the allottees as additional participants. As of February 22, 1986, all six allottees had signed the MOU Annex and paid their share of Project expenses incurred to date. All participants are expected to sign the MOU Annex in the very near future. There have been a few problems to overcome from time to time in the various negotiations, as one might expect with each of the

18 participants involved having different interests and needs. However, these problems have eventually been worked out and the project has continued to move ahead.

Question:

Do you foresee any problems ahead?

Answer: With continued cooperation of the participants, the only major problem that I foresee at this time is the possibility that if one or more of the participants with significant project shares is unable to proceed with construction due to insufficient economic justification, then it could become very difficult for the remaining participants to proceed with the Project.

Question: What were the results of the transmission tower test WAPA has conducted ?

Answer: Western removed an existing tower from service, modified it in accordance with designs and subjected it to loadings expected on the new line. In December 1985, the modified tower passed all tests confirming Western's expectation that the existing CVP double circuit 230-kV towers could be economically converted to single circuit 500-kV towers in the 200-mile uprate section of the 330-nile project.

Question: Your statement mentions the need for additional Project facilities and the potential for delays in the Project. What are your views on this change?

Answer: The additional facilities I mentioned in my statement are not needed to integrate the project into the transmission grid, but Pacific Gas and Electric Company has determined that they are needed so that PG&E can fulfill their wheeling obligations as described in the Project Memorandum of Understanding. PG&E has indicated that approximately 85 miles of new 500-kV line would be required between the Los Banos and Gates substations in Merced and Fresno Counties in California.

Question: What are the potential impacts on the Project?

Answer: Expansion of the environmental studies to address these facilities will likely delay completion of the environmental work by about 5 months. However, this is not expected to delay the inservice date of the Project, since the critical path item in the Project schedule at this point is the California Public Utility Commission certification process for participation by Investor-Owned Utilities.

Manitoba Hydro Project

Question: Discuss WAPA's involvement in the proposal for possible long-term power supply from a proposed hydroelectric powerplant in Manitoba. How much has WAPA spent on this effort to date?

Answer: Western has been involved in discussions and negotiations with the Provincial Government of Manitoba for a possible long-term power supply arrangement from a proposed Canadian hydroelectric powerplant on the Nelson River. Based on our customers' requests and letters of interest in such an arrangement, Western and Manitoba have signed a letter of intent which outlines the basic sales principles. These principles state that Manitoba will build and sell the entire output of the proposed hydroelectric powerplant for 35 years at a negotiated percentage of the average cost of the next two coal-fired thermal powerplants to be built in the Missouri River area. The proposed powerplant in Manitoba is scheduled to be placed in service between 1995 and 1998. Before the final contractual arrangements can be executed, Manitoba and Western's customers must agree upon the detailed costs and purchase percentage of the proposed thermal alternative. Conceptual studies to identify the costs and needed transmission facilities south of the Canadian border have already been completed. Since general planning activities began several years ago, Western has expended about 5 work years of effort on this project amounting to approximately $225,000.

Question: How will the power be transmitted to WAPA's system?

Answer: The power would be transmitted from the powerplant site on the Nelson River in northern Manitoba to Winnepeg, Manitoba, by means of a +500-kV direct-current transmission system. From Winnepeg, power would be transmitted across the international border to a point of interconnection on WAPA's system by either a +500-kV direct-current or a 500-kV alternating-current transmission line. From this point of interconnection, approximately 180 miles of new 345-kV line would be required to integrate the project with WAPA's transmission system. Manitoba would construct the facilities in Canada, and the United States participants would construct the facilities in the United States.

Question: What is the potential Federal financial commitment?

Answer: WAPA has not committed any Federal funding to the proposed Manitoba purchase. The agreed sale principles indicate that the hydropower, transmission, and related facilities within Manitoba would be owned, financed, and constructed by Manitoba. The participating utilities in the United States would be responsible for the power costs and transmission costs in the United States. The cost of transmission facilities located in the United States is estimated at between $250 and $330 million. Whether the Federal Government would finance and own all or a portion of the United States transmission facilities has not been determined. However, if Federal financing is required, funds would not be required for some

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