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Analysis: We are well aware of limitations that are often imposed on funding SWPA and Corps capital improvements due to limited appropriations in times of budget deficits. While a revolving fund for SWPAs capital expenses might address that portion of the problem, it would reduce the role of Congress and the PMA customers in deciding which SWPA capital improvements should go forward and at what costs. It is likely that these decisions would not rest with the PMA Administrators, but rather be made by officials at DOE Headquarters and the Office of Management and Budget. Since appropriations earmarks are no longer allowed, Congressional input could be reduced to limiting the amount of borrowing authority granted to the revolving funds in annual appropriations bills, but not specifying which capital improvement projects should be dropped or trimmed. Implementing New PMA Transmission Authorities: Section 1222 of the Energy Policy Act of 2005 authorized SWPA to assist third parties to develop needed transmission, regardless of whether the transmission project would improve the delivery of federal power. Chus memo says the department will continue to work with SWPA to evaluate applications from third parties seeking assistance under Section 1222 authority with a critical eye toward achieving the transmission development goals that Congress intended. Analysis: Get ready for a bunch more proposals for SWPA to use its federal eminent domain authority to acquire rights-of-way for transmission lines that likely will provide little or no benefit to federal power delivery and could provide little or no benefit to interconnectivity of the grid another goal identified earlier in the Chu memo. There is no provision in the memo to seek changes in Section 1222 to shield PMA hydro customers from any of the costs or other liabilities associated with SWPAs participation in transmission construction for third parties. Improving PMA Rate Designs: Quoting from the Chu memo: While continuing to market and deliver federal hydropower at cost-based rates, to the extent allowed by their enabling statutes and existing contractual arrangements, I am directing the PMAs to create rate structures that incentivize energy efficiency programs, demand response programs, integration of variable resources [wind and solar], and preparation for electric vehicle deployment. Analysis: Note that the Secretarys memo did not state that SWPA will first have to determine that these rate incentives are economically efficient and that their costs exceed their benefits. Expect DOE Headquarters to insist that the green nature of these proposals is sufficient justification for their implementation, regardless of cost and without quantifying the financial benefits. Improving Collaboration with Other Owners and Operators of the Grid: Again quoting from the memo: The reliability of the grid depends on cooperation and collaboration among all owners of the grid. I direct the PMAs to continue to look for ways to strengthen relations with other owners and operators of the grid and grid components, which should include, but not be limited to, the following: coordinating operations with neighboring balancing authorities; increasing cooperation between public and private power; and participating more effectively in regional planning. I am also directing the PMAs to capture economies through partnering with others in planning, building, and operating the grid. Analysis: It is difficult to argue with Chus assumed objectives. It can certainly be argued that SWPA has already implemented this portion of the memo. However, without careful evaluation and limiting SWPAs cost of participation to the benefits received for delivery of federal hydropower, partnering with others for grid planning and improvements could very well mean improving the grid for others at our expense.