Appendix II-Additional Material Submitted for the Record SENATE COMMITTEE ON ENERGY AND NATURAL RESOURCES WASHINGTON, D.C. - STATEMENT IN SUPPORT OF THE HYDROPOWER PROVISIONS OF S. 341 BY GREGORY M. RUEGER SENIOR VICE PRESIDENT AND GENERAL MANAGER, ELECTRIC SUPPLY As the nation's largest investor-owned operator of hydroelectric generating facilities, PG&E firmly believes that the hydropower provisions of S. 341 offer important improvements to the present regulatory scheme for hydropower. These provisions are found in Title IV--Renewable Energy, under Subtitle C--Hydropower. These provisions would do much to strengthen the ability of the Federal Energy Regulatory Commission (FERC), as the responsible administrative agency in this area, to integrate the diverse considerations involved in licensing hydroelectric generation and to produce timely and comprehensive decisions. Hydropower is the most readily available renewable energy resource in the nation today. As the nation embarks on establishing a sound national energy strategy to carry us into the 21st century, it is vital that government support efforts to enhance the ability of both the private and public sectors to preserve and expand this clean, renewable domestic resource. S. 341 will make a major contribution towards these efforts. The hydropower provisions of S. 341 represent sound environmental and regulatory policy. All current environmental reviews and considerations in hydropower licensing will be preserved. However, overlapping environmental reviews and the possibility of conflicting agency license requirements will be eliminated. The single agency with the greatest expertise in hydropower licensing will be reaffirmed as having administrative responsibility for finding the balance among all competing concerns which best serves the public interest. Congress designated the Federal Power Commission, FERC's predecessor, to be the agency principally responsible for hydropower. FERC still has that role, but with the expansion of factors affecting the licensing and operation of hydroelectric projects, clarification of the statute has become necessary to avoid growing regulatory inefficiencies, delays, and conflicts. As proposed, the hydropower provisions of S. 341 would do these important things: . Consolidate all provisions in the Federal Power Act for protecting non-power interests on hydropower licenses. Specifically, protection of resources on Federal reservations, presently addressed in Section 4(e) of the Act, would be combined with the existing protection for fish and wildlife, recreation, flood control, and other concerns of Federal and State agencies contained in Section 10(a) of the Act. Inclusion in Section 10(a) makes sense because this section requires FERC to consider agency (and Indian tribe) recommendations on all these topics as part of FERC's key responsibility to assure that hydropower projects are best adapted to comprehensively use and protect the varied resources affected by hydropower. . Clarify the purpose and scope of the State water quality certification required for hydropower projects under It Section 401 of the Clean Water Act to insure that discharges from these projects do not adversely affect water quality. would prevent the use of this statute to regulate matters which have nothing to do with water quality. Eliminate the ability of the Secretaries of Commerce and the Interior to require the installation of fishways (fish passage facilities) at hydropower projects, leaving this to the discretion of FERC in the licensing process. . Direct several departments to identify cost-effective opportunities to increase hydropower production at existing federally owned or operated dams and similar facilities. Attached to this statement is a background document summarizing the importance of hydroelectric power to PG&E and regulatory problems which S. 341 could help remedy. Attachment Attachment The Importance of Hydroelectric Power to PG&E Hydroelectric power is a significant part of the U.S. electric generation mix, providing about 12 percent of the capacity and 10 percent of the energy needs, nationwide. At PG&E, hydro is a very substantial component of our resource mix, at about 4 million kW. Hydro provides about 25 percent of our capacity and roughly 20 percent of our energy production, in a normal precipitation year. Even in a dry year (and California is now in the fifth year of drought conditions), hydro can still generally be counted on for 8 to 10 percent of our energy production. Hydro potential nationwide was estimated by the Federal Energy Regulatory Commission (FERC) in 1988 at perhaps double (an additional 95 million kW) the hydro capacity currently existing nationwide (88 million kW). About one-fourth of this potential is estimated to be pumped storage. We believe that simplifying and streamlining the regulatory process is essential to helping these estimates to be realized. Hydro's economic benefits to electric consumers are significant. Average hydro production costs are significantly lower than most thermal alternatives. As a significant component of our resource mix, hydro buffers swings in the cost of other resources. Hydro's operational benefits include the ability to start, change load, and stop rapidly when compared with other resources. These features are valuable during normal operation as "spinning reserve" and also during emergencies when quick response is even more valuable. Pumped storage units provide unique flexibility to system dispatchers because they can swing from full power to full pump in a relatively short time period. PG&E's Helms Pumped Storage Project combines the ability to generate 1.2 million kW of electricity to help meet peak electrical demand, with the ability to absorb a comparable amount of electric output during non-peak periods by switching to its pumping mode. This enables efficient baseload generation sources to operate around the clock, even during the otherwise low-load off-peak periods. In addition, the Helms Project can go to full load in just 5 minutes. Another significant operating benefit of hydro systems is their ability to store water for hours, days, months or for years in reservoirs for power use when it is of highest economic benefit. Hydro provides societal benefits at its reservoirs which provide flood control, aesthetic, and recreational appeal to millions of Americans. PG&E has been in the hydropower business since the late 1800's. Our oldest operating hydro unit was commissioned in 1900 and our newest in 1986. We have over 80 public recreation facilities at hydro projects, with about 400,000 visitor-days of use annually. -2 Hydro provides these benefits without producing air pollution or many of the other waste products characteristic of other resources. To illustrate, if the electrical output of PG&E's hydroelectric system in an average precipitation year were provided instead by a typical coal-fired generation system, it would produce in excess of 100,000 tons per year of sulfur oxides (SOX); PG&E's hydro resources contribute zero SOX. Hydro does have some environmental impacts. Design and operational attention can minimize them but not eliminate them all. They are, however, fundamentally different, and thus not directly additive, with other resources' impacts. We view this as a desirable attribute of hydroelectric resources. Regulatory Problems Which S. 341 Could Help Remedy The current and future benefits of hydro are in jeopardy because of the regulatory process for hydro licensing. The process is inefficient, with considerable duplication of effort. Each state and federal regulatory agency pursues the goals it perceives to be its responsibility. The current regulatory process fails to clearly establish a single agency as the responsible decision maker. While FERC has the authority to issue licenses for hydroelectric projects, other federal and state agencies and single purpose special interest groups attempt to elevate the importance of their goals in the FERC licensing process. With multiple agencies having multiple opportunities to push their differing goals, we are concerned with the possibility of requirements for studies and mitigation which exceed project impacts and whose costs exceed the benefits of hydro generation. If this results in hydro projects being rendered uneconomical, existing generation may be lost and the growth of this desirable generating resource would certainly be slowed. Difficult decisions must be made in balancing energy needs, consumer economics, and resource protection. A regulatory framework in which a single agency is clearly entrusted with overall jurisdiction and the responsibility to make those difficult decisions is the best way to ensure that a proper balance is struck. We support a re-affirmation of the Federal Energy Regulatory Commission as that jurisdictional agency. S. 341 will make a major contribution toward this goal. Here is one example of a current regulatory jurisdictional conflict. The federal land management agencies, including the Department of the Interior's Bureau of Land Management and the Department of Agriculture's Forest Service, are actively promoting their position that they can regulate all aspects of hydro projects and supersede FERC's best comprehensive planning authority via their mandatory conditioning authority under Section 4(e) of the Federal Power Act. S. 341 would address this 4(e) jurisdictional conflict between federal agencies. 43-268-91 - 16 A STATEMENT BY THE NATIONAL RURAL ELECTRIC COOPERATIVE ASSOCIATION NATIONAL ENERGY SECURITY ACT OF 1991 Mr. Chairman, my name is Morgan Dubrow, Chief Engineer of the National Rural Electric Cooperative Association (NRECA). NRECA is the national association of more than 1,000 rural cooperatives which supply central station electricity to some 25 million people in the rural areas of 46 states. - This statement sets forth NRECA's positions on S. 341, Subtitle C Sections 4201, 4202 and 4203 of the "National Energy Security Act of 1991." Hydropower Mr. Chairman, since its enactment in 1920 the Federal Power Act [and subsequently the Federal Energy Regulatory Commission (FERC)] has provided for the licensing of hydroelectric power projects, customarily for a term of 50 years. Such licenses include stipulations to require the licensees to provide for minimum flows; fish and wildlife protection; provisions for recreation; some conservation measures, and other requirements to maximize the overall benefits of the project. Further, in many instances such projects provide some flood control and navigation benefits. Having accounted for these things, the FERC provides assurances, or guarantees, to licensees warranting that the project can be operated in such a way that the electric power can be produced and marketed at rates that repay all project costs. Such a provision is essential -- otherwise the project would not be built. |