Per the Northwest Power Act, “an analysis of reserve and reliability requirements and cost-effective methods of providing reserves designed to insure adequate electric power at the lowest probable cost” must be part of the consideration when looking at the viability of a resource strategy. Fundamentally, if reserves are held for uncertainty, whether it be about the future demand for or availability of power, then the provision of those reserves is inextricably linked with the overall resource strategy. If it is less expensive to use existing system resources more as reserves in a portfolio with new resources that are providing more of the energy than it is purchasing new resources to directly address both reserve and energy needs, then that could be the best overall resource strategy.
Further discussion of the reserve analysis supporting the plan is found in the material below:
Note on the Power Plan’s resource strategy, including cost-effective methods of providing system reserves – and the relevance under the statute of existing system resources
As the Council has noted many times in the past and in the draft 2021 Power Plan, and as the Ninth Circuit affirmed in the challenge to the Council’s Sixth Power Plan, the power plan resource strategy under the Northwest Power Act is a new resource strategy, that is, a plan for adding cost-effective new resources that are compatible with the existing power system. The point of the power plan is not to analyze the cost-effectiveness or the economic viability of the existing system resources or recommend that any be retired or retained.
The Council’s tasks under the Northwest Power Act also include developing – prior to the power plan - a fish and fish and wildlife program largely based on the recommendations of the region’s fish and wildlife agencies and Indian tribes that consists of onsite and offsite measures designed to protect, mitigate and enhance fish and wildlife adversely affected by the development and operation of one big element of the existing regional power system, the Columbia hydropower dams. The Act then tells the Council to include the fish and wildlife program in the power plan itself. The Council incorporates into the power plan analysis any operations required for the benefit of fish and wildlife (such as juvenile spill requirements) as part of the baseline operations that the existing system must implement. Our work as we understand it is to develop the best, most cost-effective fish and wildlife program and then new resource power plan possible compatible with the existing system.
Even so, the Council has received many comments during the work leading up the draft 2021 Power Plan stating that the Council must or should analyze as part of this power plan the removal of the four federal dams on the lower Snake River. The Council has addressed these comments in Section 10 of the draft power plan power plan and does so again here. Most of the comments have not been focused around particular provisions of the Act, but one comment focused in particular on the language of one of the required elements of the plan – that the plan contain “an analysis of reserve and reliability requirements and cost-effective methods of providing reserves designed to insure adequate electric power at the lowest probable cost” – to argue that this provision cannot be satisfied unless the Council analyzes and compares the cost of existing system resources to new resources in providing reserves and developing the resulting resource strategy.
This is not an accurate way to read this or any other provision of the Act. There is nothing particular about the language on the “reserves” element of the power plan that changes the fact that what the Act requires the Council to analyze and compare in the power plan are the costs of different new conservation and generating resources that might be added to the system to meet or reduce system needs, and to recommend the least-cost approach to adding new resources. This note provides a brief explanation of this key point.
The Power Act requires the Council to develop a regional conservation and electric power plan. The plan is to give priority to resources that are cost-effective, and also give priority to resources in a particular order, beginning with conservation measures. The Act then further elaborates that the Council is to include in the plan a scheme for “implementing conservation measures” and “developing resources” to reduce or meet Bonneville’s obligations under Section 6 of the Act, the section that authorizes Bonneville to “acquire” resources – that is, obtain the output or the energy savings of new conservation and generation measures. The Council is to develop this resource scheme for the power plan while providing “due consideration” not just to matters of environmental quality and fish and wildlife, but also to the compatibility of these new resources “with the existing regional power system.”
Nowhere in the power plan provisions of the Act is the Council directed to analyze the costs of existing system resources or the economic viability of existing system resources or compare the costs of existing resources to the cost of new resources in making resource choices for the power plan’s resource strategy or recommend that certain existing system resources be retired and replaced with new resources (or not retired or replaced). And such a statement in the plan would be meaningless, as nothing in Section 6 of the Act authorizes Bonneville to retire or remove existing resources in the federal base system, and instead is wholly directed at new resource acquisitions. Also, as noted above, the Council is to include in the power plan the measures for fish and wildlife that have been included in the recent fish and wildlife program based on the recommendations of the agencies and tribes, not use the power plan for an independent analysis and decision on the appropriate actions for fish and wildlife. In short, the Council’s task under the Act is not to analyze or decide whether elements of the current system should remain or be retired, for environmental or economic or other reasons. Instead, the Council’s task is to is analyze and recommend what new resources to add that are cost-effective when compared to other new resource alternatives, that are compatible with the existing regional power system, that can help assure the implementation of the system operations in the fish and wildlife program, and that assure the region can continue to enjoy an adequate, efficient, economical and reliable power supply.
Decisions may be made by others to retire or reduce the output of existing resources or constrain what types of new resources may be added, such as the current set of decisions by utilities to retire coal generation units for reasons of economics and state law, as well as the new state law requirements requiring the addition of renewable or clean resources, both part of a policy effort to reduce the output greenhouse gas emissions from the existing system. In those situations, the Council needs to analyze the effects of those plant retirements or forced plant choices on the existing power system during the power plan process, as part of being able to analyze and decide what resources in what amounts need to be added to assure the region retains an adequate, efficient, economical and reliable power supply. But no decisions have been made or dates set by the federal government for the retirement of mainstem dams on the Columbia and Snake rivers, so the Council has nothing in that way that it must analyze to understand the effects on the plan’s new resource strategy.
The specific provision on “reserves” in the Act does not change or affect this conclusion – instead it is consistent with this conclusion. Section 4(e)(3)(E) of the Act provides that one of the required elements of the power plan is “an analysis of reserve and reliability requirements and cost-effective methods of providing reserves designed to insure adequate electric power at the lowest probable cost.” The Act defines “reserves” as the “electric power needed to avert particular planning or operating shortages” and available to Bonneville “from resources or from rights to interrupt, curtail, or otherwise withdraw … portions of electric power supplied to customers.” Section 3(17).
The argument made in these comments is that, in their view, the regional power system is more expensive with the federal dams on the lower Snake River in place and operating than the system would be if those dams were removed, and if so, any strategy for providing reserves that includes a system with these dams in it cannot, by definition, be considered to be “designed to insure adequate electric power at the lowest possible cost.” Thus, the Council must analyze the economics of the existing system in providing reserves and, if the analysis is as he believes, must recommend the retirement of those resources if the end result is to insure adequate electric power at the lowest possible cost. [1]
This is not what the provision says or requires – either as a matter of law or as a matter of how system reserves are planned, provided, or analyzed.
Analyzing and providing for system reserve and reliability requirements is not somehow different from analyzing the system needs in general for energy and capacity and overall adequacy, and then deciding on a resource strategy that meets or reduces those needs and leaves the system adequate and reliable and as economic as it can be even with added costs. Establishing, planning for, and meeting reserve requirements is just one aspect of overall planning for an adequate and reliable system that meets the region’s energy and peak capacity needs.
In other words, analyzing new resources for adequacy and new resources for reserves are not independent efforts. The Council identifies whether the system is inadequate and needs new resources. Those new resources may be used for reserves at times or not; we also may shift reserves onto existing resources that would have otherwise not held reserves without adding new resources. The need for new resources may show up as a reserve issue or a capacity issue or an energy issue, or some combination. If our analysis shows that the system is inadequate, resolving that inadequacy can be done in many ways. The cost-effective way to provide reserves is the same thing as identifying the least-cost additions to the system so that it is adequate and reliable.
Consistent with this point, and with the overarching approach to the power plan in the statute, the “reserves” element of the plan requires a two-step analysis. First comes “an analysis of reserve and reliability requirements.” If the analysis shows the system in adequate – that is, existing system resources provide adequate reserves on a planning and an operating basis - there are no unmet reserve and reliability “requirements,” and this particular analysis and element can be at an end.
If the analysis indicates that current system resources do not satisfy what is now needed for system reserves and or reliability, then this section of the power plan tells the Council to go on to identify “cost-effective methods of providing reserves designed to insure adequate electric power at the lowest probable cost.” Given the Act’s definition of reserves, this means identifying the most cost-effective methods for providing reserves from new generating resources, new conservation resources, new rights to interrupt or curtail loads, or some combination of these three and also including the possibility of shifting how reserves are provided between existing system and new system resources– whatever new resources represent the lowest-cost added path to meeting or reducing the identified reserve and reliability needs.
So, in short, the task under this provision of the Act – and thus this element of the power plan –is to analyze the existing system to determine if the system – including system reserves – is adequate in meeting total energy and peak capacity requirements. And only if the answer is no, then the task is about analyzing and comparing the costs of different methods for providing an adequate system, including providing reserves from new and existing resources, and choosing the least cost set of new resources. The analysis and conclusions required by this element of the power plan are no different than the overarching task for the Council in developing the new resource strategy as described above.[2] And that consistency in approach under the statute matches the reality of the system analysis.
For the purposes of providing information to other decisionmakers, the Council has at times explored scenarios in which we test what will happen to the system and thus to the new resource strategy if other existing generating plants are removed. The Council has done so both as part of a power plan analytical exercise and outside the power plan.
And so, for example, at a point in the 1990s outside of any power plan, the Council’s power staff analyzed the system impacts of removing one or more mainstem dams at the request of the members and others in the region. Also, in the Sixth and Seventh Power Plans the Council evaluated power planning scenarios that included, for example, possible removal of the lower Snake dams; planned and unplanned loss of a generic large carbon-free resource; and removal or significant reductions in the output of coal plants not yet scheduled for retirement. In this current power planning effort, we included a scenario to assess what would happen if coal plant retirements accelerate, a real possibility given the trends in the last few years, and one that would affect the plan even within its first few years.
These have not always been comprehensive analyses, and we do not have to do them for the power plan. But sometimes the Council has done a less-than-comprehensive analysis in a scenario just to let others have some sense of the direction and magnitude of effects from resource retirement on the new resource strategy. The Council may very well choose after this power plan at the request of others to analyze what might be the effects on the power system and the new resource strategy if mainstem hydropower dams are removed, in order to provide information of value to the region. That consideration is for another day. And doing so is not the same as reading the Act to require the Council to do that kind of analysis as part of this or any other power plan, or to provide recommendations on whether to retire existing system resources for economic or other reasons as part of the power plan.
[1] The Council has not analyzed the costs and the economic status of the four federal dams in the lower Snake River. The Council notes only that this view is contested by others, including Bonneville and the other federal agencies involved in system operations and by Bonneville’s utility customers. (For example, in the 2020 Columbia River System Operations Environmental Impact Statement, the relevant federal agencies estimated the effects of dam removal would add hundreds of millions in dollars to the region’s power system costs compared to the no action alternative. See e.g., CRSO EIS, https://www.nwd.usace.army.mil/CRSO/Final-EIS/#top; Chapter 3, pgs. 3-10, 3-960, 3-977 (Table 3-181), Appendix H, pgs. H-1-10 to H-1-12, H-4-14 (Table 4-12), H-4-17 (Table 4-15)). Even so, the point here is that the Act does not require or contemplate the Council analyzing the economic viability of existing system resources as part of the power plan; instead, the power plan resource strategy is to contain cost-effective new resources to add in a compatible way to the existing system; and any conclusions the Council would make in the power plan about whether to continue or retire existing resources would have no meaning under the power plan provisions of the Act.
[2] It would seem highly unusual to say the least to read the Act in a way that meant Congress used the tail-end clause of one element of the power plan to completely change the fundamental approach to the power plan effort set forth by all the other provisions.