Witnesses representing public power providers who testified before the House Committee on Natural Resources Thursday expressed grave concerns that Department of Energy proposals would increase costs and fundamentally alter the public power market.

The group was responding to a March 16 memorandum penned by Energy Secretary Steven Chu that proposed changes to the way the nation’s four Power Marketing Administrations transmit and price energy from federally owned hydroelectric dams. The memo also called for more “modern” oversight of the administrations. The PMAs distribute power to thousands of local utility companies in 20 states, accounting for about 42% of the power grid of the continental United States.

According to Chu’s memo, the PMAs operate under a “maze” of statutes, and the time is right to introduce greater integration while upgrading existing infrastructure.

Among Chu’s proposals were directives to “improve the PMAs’ rate designs by incentivizing energy efficiency programs” and to use the PMAs as “test beds” for cybersecurity technologies.

Chu’s proposals didn’t sit well with the witnesses, in some cases because they were vague.

Glenn English, chief executive officer of the National Rural Electric Cooperative Association in Arlington, Va., said the Chu memo could potentially destroy the decades-old “beneficiary pays” system, wherein the customers who directly benefit from infrastructure upgrades bear the cost in increased rates.

Chu’s proposal that PMA power subsidize other clean energy sources in the western United States is unfair to customers and likely to result in an increased cost of power, English asserted.

“The March 16 memo recognizes that the so-called modernization effort will likely be costly, and that costs will be 'phased in’ to minimize disruption. Phasing in expenses does not address the issue of increasing costs to consumers with no associated benefits,” he said.

Mark Crisson, president and CEO of the American Public Power Association, testified that Chu’s changes would represent a dangerous shift in financing practice for one PMA in particular, the Western Area Power Administration.

“Secretary Chu also seeks legislation to grant WAPA a new borrowing authority to finance capital expenses. Currently, WAPA finances construction activities through annual appropriations and some customer funding. By removing these established funding processes, which allow for both congressional and customer input, decisions regarding capital improvements to WAPA facilities also would be shifted to DOE headquarters,” he said.

The witnesses agreed that the six-page memo is vague, and added that the lack of detailed information about how the government would apply new cybersecurity policies makes it difficult for power officials to predict what the outcomes could be.

Committee chairman Doc Hastings, R-Wash., said the committee has not received a reply to a bipartisan letter sent to Chu’s office requesting additional information.

Rep. Edward Markey, D-Mass., the top Democrat on the committee, said he wasn’t happy that Hastings refused to allow an Energy Department official other than Chu to testify.

“It would have been nice to have the number two guy in the Department of Energy here, but no,” Markey lamented.

Witnesses concluded that Chu’s stated goals of increasing efficiency and modernizing the power grid are admirable, but refused to endorse his sweeping changes as the way to get it done.

“These plans for PMAs are untimely, unwise and unnecessary,” Crisson told the committee. “We are aware of the imperatives of the 21st century, but we need to find a better way forward.”

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.