Statement of Bill McDonald

Acting Commissioner, Bureau of Reclamation

Department of the Interior

before the

Subcommittee on Energy Policy, Natural Resources & Regulatory Affairs

Committee on Government Reform

U.S. House of Representatives

April 10, 2001

Before I discuss Reclamation's current activities as they relate to the generation of hydroelectric power, I would like to give the Subcommittee some background on Reclamation's hydroelectric power activities. This should provide important context as we discuss the current situation and Reclamation's role and activities.

Background

The Bureau of Reclamation is the nation's second largest producer of hydroelectric power. It ranks as the 11^th largest generator of electric power in the United States with 58 hydroelectric powerplants, 194 generating units in operation and an installed capacity of 14,744 megawatts (MW).  In addition, Reclamation has a 547 MW share of the installed capacity of the coal-fired Navajo Steam Powerplant. The power produced at such projects that is available for commercial sale is marketed by the Western Area Power Administration (Western) and the Bonneville Power Administration.

Reclamation powerplants annually generate about 49 billion kilowatt hours (kWh) of hydroelectric energy--enough to meet the annual residential needs of over 14 million people or the electrical energy equivalent of over 80 million barrels of crude oil. Currently Reclamation's Central Valley Project accounts for about 5 percent of California's installed capacity in state. Westwide, Reclamation helps to maintain the stability and reliability of the overall power grid through the Western Systems Coordinating Council (WSCC) - a voluntary system reliability organization in which Reclamation, the California utilities and 13 other western states participate.

Over the past 25 years, Reclamation has done a great deal to increase the generation capacity of its hydroelectric facilities throughout the west. In 1976, Reclamation had 50 powerplants with a total capacity of 9,111 MW. Today, Reclamation's 58 powerplants have an installed capacity of 14,744 MW for a 62 percent increase. It is important to note that Reclamation's aggressive uprating and rewind program at existing power plants accounts for more than 1,783 MW of that increase, which represents 12 percent of Reclamation's total generation capacity.

Legal and Operational Issues: While Reclamation's installed nameplate capacity is significant, there are a number of legal and operational factors that limit energy generation.

1) Power is Secondary Purpose: Reclamation's hydroelectric power facilities are part of specifically authorized multipurpose water projects which provide benefits such as irrigation, municipal and industrial water supply, flood control, fish and wildlife protection and recreation. Power is, by statute for most projects, a secondary project function to delivery of irrigation and municipal and industrial water supplies. This means that water deliveries, pursuant to contracts, take precedence over electric power generation. Furthermore, many projects are required to schedule water deliveries in accordance with interstate apportionment decrees and compacts and with international treaties. Therefore, water may not be available to generate power, as it may be committed to a primary project function such as flood control, or agricultural or municipal and industrial deliveries. In some cases, Reclamation may be required to release more water from its reservoirs than can be accommodated using only the power plant turbines.

2) Only Surplus Power is Marketed: Under Reclamation law, the first priority for the use of power generated by Reclamation's projects is to meet the needs of that project. This includes power for pumping water for delivery to our water users. On a Reclamation-wide basis, about 5 to 7 percent of the power we generate each year is used for project purposes. Within parts of the Central Valley Project (CVP) in California, however, there are times of the year - particularly during the irrigation season - when our generation does not even produce enough power to meet the project's pumping needs. In response, Western must buy power to serve irrigation needs on the spot market just like any other power user.

When there is power surplus to a project's needs, it is provided to Western or the Bonneville Power Administration (Bonneville) in the Pacific Northwest. Reclamation manages only the generation of power at its facilities. These Federal agencies in turn market this power to customers who are primarily preference customers, such as municipal utilities, as required by statute. Portions of the revenues derived from such sales are used to repay their investment costs that are the responsibility of the irrigators but exceed their ability to repay.

3) Power is Already Committed by Contract: As the marketers for Reclamation's power, Bonneville and Western have entered into contracts with preference customers for all of the anticipated available generation. The only time that additional power may be available to non-contracted entities is when there is excess water in the system that can produce more power than is already obligated or expected. All power generated at Hoover Dam is committed even when there is excess water in the system. In a dry year, however, Western and Bonneville have to buy power from other sources to make up the difference in their existing contracts. In a normal or dry year, there is little or no power produced that is not already under contract through Western or Bonneville.

4) Transmission System Constraints: Map #1 attached to my testimony, shows a multitude of power facilities - albeit small ones - on the east side of the Continental divide. These facilities currently serve customers in the regions in which they are located. Map #2 shows that the Federal transmission system is not designed to move power from these units long distance to California. Also, within California, the capacity to move electricity, particularly from the south to the north, is limited. Thus, although Reclamation through Western, delivers power from Hoover, Parker and Davis Dams on the Lower Colorado River to Los Angeles and Southern California, there is at times insufficient transmission capacity to get that power to northern California - where much of the recent need has been.

There is also no Federal transmission line to get electricity from Glen Canyon Dam, on the Colorado River, to either southern or northern California. Power from Glen Canyon Dam can be sent to Arizona, but there is usually insufficient transmission capacity to get electricity through Arizona to California. To do so would displace other power that is also intended for California, unless Western is able to exchange power with some other entity.

5) Hydrologic Conditions: Water is the fuel for a hydropower system. While water is an annually renewable fuel, its availability varies considerably from year to year.

In California, water supply forecast is now about 40 percent below normal. As a result, Reclamation's hydro generation is below average. Reclamation's CVP power facilities, in an average summer, generates 5,000 gigawatt hours(GWh). This summer, however, due to low river and reservoir levels, CVP facilities are expected to generated only about 4,100 GWh - which is 18% below average.

In the Pacific Northwest, the runoff forecast is for a near record drought. While the average annual flow of the Columbia River at the Dalles is about 106 million acre feet, flows this year will be only half that amount.

6) California/Northwest Exchange: Historically, the Pacific Northwest and California have exchanged power during their respective high demand seasons - winter in the Pacific Northwest and summer in California. In the summer, when the Northwest's demand is lower, the Pacific Northwest exports power to California - during its high demand season. Then, in winter, when California's demand is - on average -- lower, California exports power to the northwest - where the winter months are colder and demand is higher. This relationship has served both regions well.

Unfortunately, it is not working that way this year. As we saw this past winter, California was only able to export power to the north, as they were not able to meet their own winter needs. In fact, California found itself in need of imported power (at a time when they usually export it). This meant that Bonneville, which usually depends upon California's imports, did not have imported power available to meet its customers' load. In response, Bonneville needed to increase the output of the facilities of the Federal Columbia River Power System (FCRPS), as well as buy power on the spot market. It also meant that there was significant draw down of the reservoirs in the FCRPS. This year, with the dry weather, there is little prospect that these reservoirs will be able to refill this summer. To California, this means that the Pacific Northwest may not be able to export power during the upcoming summer months. Bonneville will continue to exchange energy whenever possible to help California with peaking problems while providing the Northwest with much needed energy.

7) Environmental Considerations: Reclamation must also operate its projects consistent with environmental laws, such as the Endangered Species Act. In any hydropower system there can be significant fluctuations in flow that may have impacts on the environment and recreation. Since most Reclamation hydropower facilities are located on rivers inhabited by threatened and endangered fish species, operations are constrained to ensure that these fish and their habitat are not jeopardized by adverse flow schedules or pulsed flows. We are coordinating with National Marine Fisheries Service and the U.S. Fish and Wildlife Service to identify opportunities to provide additional assistance for power generation that will not adversely affect these fishery resources.

System Reliability: Mr. Chairman, one of the significant benefits of hydropower, in general, and Reclamation's system, in particular, is the flexibility it affords. Hydro generation can be ramped up or down very quickly to respond to changes in demand and to the needs of the regional transmission system to remain stable. (A caveat here is that rapid changes may have detrimental fish and wildlife impacts.) Because of the size of Reclamation's system, along with its capacity and the large number and diversity of units available, Reclamation serves as a mainstay for ensuring the reliability of the Western Interconnected System. In the event of a WSCC system emergency, Reclamation hydro power can be brought on-line quickly to meet system emergency demands. Reclamation hydro power also provides voltage control, load following, spinning reserves, and black start capability- all of which provide stability to the western power grid.

Current Activities in Response to Power Crisis: Reclamation works closely with Bonneville, Western, the WSCC and the California Independent System Operator (ISO) to provide whatever assistance it can to California.

1) Adjustments to Increase "Peaking Power": Reclamation continues to work on flexible power generation schedules to support the needs of the western power grid. Western, on behalf of the California ISO, routinely asks Reclamation to rearrange its power generation schedule to help with the morning and afternoon peaks. In many cases, Reclamation has asked its project pumping customers to shift the timing of their deliveries to off-peak times to make more peaking power available to the market. At Grand Coulee Dam in eastern Washington, we have been able to shift more than 300 megawatts of pumping load to off peak times - making it available to Bonneville for peaking purposes. This summer in the CVP, Reclamation anticipates that significant project pumping loads can be shifted to off-peaking, making that power available to Western to help meet the demand for peaking power in California.

2) Conservation: Reclamation continues to maximize power production and minimize consumption to reduce projects needs and make power available. We have also facilitated the purchase of water that would otherwise need to be pumped or diverted upstream of the generators. This makes both more water available for generation and makes some "project use power" available to the market.

3) Maintenance Schedules: Over the past year, Reclamation has worked very closely with Bonneville and Western to coordinate scheduled maintenance activities to maximize the number of facilities on line to respond to the energy needs of the western United States. In many instances scheduled maintenance that requires outages, has been delayed or rescheduled to accommodate system needs. Where maintenance cannot be delayed, Reclamation has resorted to double shifting at some facilities, and a greater use of overtime, to shorten the time that facilities will be out of service.

4) Responses to Stage 3 Emergencies: While Reclamation's ability to generate power sometimes is limited by the factors identified above, we have been able to respond to requests from Western and Bonneville on behalf of the California ISO during many of the recent emergencies to provide additional power to California. Within the CVP, for example, Reclamation placed all its CVP generating units into production for the duration of the emergency. In the Pacific Northwest, Reclamation, in consultation with Bonneville, reshaped the water releases to assist California during Stage 3 events. In addition, the following chart indicates the specific increases from Hoover and Glen Canyon dams as of March 20, 2001.

Future Activities and Opportunities: As stated above, Reclamation has over the past 25 years undertaken an aggressive uprating and efficiency improvement program, which has significantly expanded the capacity of our hydropower system. While most of the significant benefits have already been realized, Reclamation has identified and will continue to explore additional opportunities to further expand our capacity and efficiency.

1) Increase Efficiency and Reliability: In partnership with Bonneville, Western and some of our power customers, Reclamation is working to replace the turbine runner blades in some of our facilities. The on-going runner replacement work at Grand Coulee, for example, can increase the efficiency of the facility and will result in 45-50 MW of additional energy at the facility. Reclamation is exploring the feasibility of other investments such as a similar effort at Shasta Dam in California which could result in an additional 51 MW of power. We estimate that by doing this at other Reclamation facilities, Reclamation could realize an additional gain of as much as 350 MW over the next 5 to 10 years.

2) Additional Uprates and Rewinds: While most of the significant increases in capacity have already been realized by our long standing uprating and rewind efforts, we can see that over the next 5 to 10 years, an additional 200 MW gain is possible across all of Reclamation's power system.

3) Increased Focus on Power Facility Reliability - Reclamation hydropower plants are an average of 44 years old. Given this aging infrastructure, Reclamation is placing an increasing emphasis on the reliability of our plants in our operation and maintenance activities. Additionally, we are exploring the possibility of Reliability Centered Maintenance and Life Extensions in order to assure continued reliability of our plants.

Conclusion

In summary, Mr. Chairman, Reclamation's hydropower projects play a significant role in addressing California's power needs - both in terms of supply and in terms of maintaining the stability of the system. In the summer of 2000, and so far in 2001, the below normal water supplies have limited and will continue to limit our ability to generate hydropower.

This concludes my testimony. I would be glad to answer any questions.