Viewpoints: Proposed DOE power policy ignores goals of SMUD, others ...

http://www.sacbee.com/2012/07/29/v-print/4668357/proposed-doe-pow...

Viewpoints: Proposed DOE power policy ignores goals of SMUD, others

Special to The Bee
Published Sunday, Jul. 29, 2012

In 1923 the citizens of Sacramento voted to create their own electric utility a utility that would operate in the local interest. Because of this decision, Sacramento has saved billions in electricity costs, benefiting the local economy. SMUD's electric system has been expertly built and properly maintained, as witnessed by high reliability and few outages. Environmental matters and decisions have been focused on our most pressing regional issues, namely local air quality. This compact is now at risk from a new federal policy proposal issued by Department of Energy Secretary Steven Chu that proposes to change how, when and where power is produced and moved across the West. DOE's desired goal to update the national grid is fine. However, the DOE directives on how to achieve this outcome ignore the policies and shared goals of other federal, state, regional and local organizations. The proposed directives lack congressional authority and clearly fall outside DOE's statutory authority and mission. If enacted, the proposed policies will be duplicative at best, but will more likely increase cost, lessen reliability and focus environmental efforts on broad objectives rather than solving problems critical to local communities. The impacts to SMUD and Sacramento consumers could be staggering. Repurposing federal assets that have already been paid for, in part, by SMUD customers would have a starting price tag of an additional $1 billion to our community. Today those assets are funded on a "beneficiary pays" model, meaning those that benefit from and receive the power pay for the power and associated costs. This current model ensures economic discipline and accountability to consumers. It also prevents unnecessary construction, increases transparency and avoids unnecessary subsidies. All of this has a direct and favorable impact on affordability. SMUD contributed significantly to the Central Valley Project's regional transmission improvements and has helped fund without federal appropriations more than $127 million in transmission improvements. These improvements have significantly enhanced reliability and strengthened the region's ability to meet high electric loads during our hot summers. The proposed policy would unfairly ask SMUD customers to pay twice in order to fund assets elsewhere, even though the need has not been established. Electric reliability, a very complex task, is the real-time art of balancing electric demand with generation while maintaining adequate reserves. The directives in the DOE memo would lessen reliability, all in the name of efficiency. It's akin to increasing the number of airplanes that can land on a runway in a given hour in the name of efficiency, without taking into consideration unintended side effects such as a reduction in safety. SMUD is already doing all the things the proposed policy is designed to promote. Renewable sources already provide 24 percent of our electricity, not counting large hydropower, which for political reasons is not treated as a renewable resource. Including large hydropower, our supply portfolio is nearly 50 percent carbon-free. We recently doubled our use of wind power, and solar

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Viewpoints: Proposed DOE power policy ignores goals of SMUD, others ...

http://www.sacbee.com/2012/07/29/v-print/4668357/proposed-doe-pow...

will double by the end of 2013. The new proposal asks us to pay for federal priorities and their associated costs elsewhere in the country without any direct benefit to SMUD customers. This would force us to raise rates. In terms of reliability, SMUD already coordinates with all regional partners. The Western Area Power Administration, a federal organization, is also a partner. This coordination includes a series of initiatives, inside and outside of California, aimed at increasing regional reliability, keeping rates low, and increasing the import and integration of renewable resources. The DOE proposal would move the interests of SMUD customers to the last consideration and all but eliminate local decision-making. More than 160 members of Congress have signed a bipartisan letter to Secretary Chu expressing their support for local decision-making. I want to thank Reps. Doris Matsui and Dan Lungren for their continued support. To date, the DOE is resolute in pressing forward despite the lack of congressional approval and over the protests of the federal power marketing administration customers across the West. SMUD has enjoyed a very good working relationship with the Department of Energy and we have great respect for Secretary Chu; however, this proposal is ill-conceived, poorly scoped and looks to be a solution in search of a problem. It has significant negative ramifications for SMUD customers. The federal government needs to better understand how the system currently works and why, before it sets out to change it. It also needs to be responsive to the congressional delegation from the West as well as the local governing bodies that are elected and directly accountable to the communities they serve.
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John DiStasio is the general manager and CEO of the Sacramento Municipal Utility District. Read more articles by John DiStasio

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