April 01, 1998
WHICH NUCLEAR PLANTS WILL SURVIVE competition? To answer that question, senior managers at electric utilities must know a nuclear plant's true economic potential....
in the California PX. Does BPA's low-cost hydro resources give it undue market power over commodity prices in the California pool? On the other side, transmission congestion pricing under the California Independent System Operator agreement lies at odds with BPA's traditional pancaked transmission rates, forcing cost shifts in rates among BPA customers, producing winners and losers.
If arguments from both sides are any indication, some of these issues won't be resolved without a fight. Already Tucson Electric Power Co. has voiced extreme opposition to activities of the Salt River Project, particularly the use of SRP's New West Energy subsidiary, incorporated May 1 last year.
A Subsidiary for a Private Use?
"Electricity generated by federal projects is being sold by the Salt River Project, operator of a federal reclamation project in Arizona, on a competitive, retail basis in California's private electricity market," writes Thomas Jensen, attorney for Tucson Electric Power Co., in a letter to the Department of the Treasury and to the Executive Office of Management and Budget.
The letter, dated Feb. 18, claims SRP is acting through its wholly owned, for-profit subsidiary, New West Energy.
"As active participants in California and other state energy markets, we are concerned because retail sales of low-cost federal power distort private markets," Jensen writes, adding, "We believe that the sales are not in accord with federal reclamation, power marketing and property management law."
In a letter to the Department of the Interior and the Department of Energy, Jensen notes SRP "is engaging in private retail sales of federal power" and that profits from these sales are going to SRP's shareholders, not the U.S. Jensen, on behalf of TEP, requested that the Department of the Interior and the Department of Energy:
• Direct SRP to stop any transfer of hydro, fossil and nuclear power that is part of SRP, or the transfer of other federal power to New West Energy and any sales of such power by the subsidiary.
• Require SRP to notify New West Energy's current and potential customers that its legal authority to sell power on a competitive retail basis is in doubt and under federal review.
• Review SRP's records, including its affiliate transactions; determine what financial arrangements SRP and New West Energy have made with Mobil and other customers; determine whether SRP or its subsidiary are leveraging their position in the market with guarantees based on federally owned assets; and determine what disclosures of ownership New West Energy may have offered.
• Require SRP, if it wishes to compete in retail markets with federal assets and if its actions are legal and in the public interest, to offer its "surplus" power at public auction or auction off its generation assets. Profits from those sales should go to federal public purposes, Jensen writes.
The SRP claims it isn't violating any laws.
"Let us be very clear about TEP's false and irresponsible accusations about SRP's purchases of preference power," writes Kenneth Sundlof Jr., SRP counsel, in response. "The benefits of preference power do not flow through SRP to its subsidiary, New