February 7, 2000


US DOE Proposes $36 Mln In Grid-Reliability Spending

WASHINGTON -- The U.S. Department of Energy's proposed budget for fiscal year 2001 calls for spending $36.1 million on research and development of technologies for ensuring power grid reliability.

The spending is to support an industry-government effort "that will help protect against potential new market failures and promote reliability through system flexibility, efficiency and security," DOE said in its budget proposal.

The program aims to develop technologies for system simulation, power storage, real-time energy monitoring and controls, and distributed power options, DOE said.

The $36.1 million, represents a nearly three-fold increase over current year spending.

Energy Secretary Bill Richardson said the spending boost is a reflection of DOE's concerns about maintaining grid reliability, as outlined in a recent task force report.

The DOE task force's interim report, released last month, looked at outages that occurred in the U.S. Northeast and Midwest last summer.

It concluded that grid investments have not kept pace with the economic changes promoting increased competition in wholesale and retail power markets.

"While the electricity industry is undergoing fundamental change, the necessary operating practices, regulatory policies and technological tools for dealing with those changes are not yet in place to assure an acceptable level of reliability," said the report, slated to be finalized next month.

Elsewhere, DOE's budget proposes that federal power marketing administrations phase out federal financing of transportation costs for the federally produced power the agencies market.

So-called "preference" customers - the municipal and state-owned utilities that under law get preferred access to low-cost federal hydropower - would need to arrange their own transportation to deliver power purchased from the PMAs.

"Authority to spend power revenues to pay for purchase of power and wheeling activities will end after (fiscal year) 2004," the DOE budget proposes.

"Industry restructuring and resulting competition now make it attractive for (PMA) customers to shop for power and transmission services," DOE said, re-proposing a change that met with resistance when first broached last year.

The budget proposal also calls for reducing the Tennessee Valley Authority's debt by more than $750 million in fiscal-year 2001. TVA, a federally owned utility and the nation's largest power producer, has reduced its debt by $1.3 billion over the past three years.

Still, the agency has a massive debt of some $26 billion.

The Agriculture Department's proposed budget calls for $1.6 billion for the Rural Utilities Service's direct loan program for rural electric cooperatives.

Within that amount is $40 million for private-sector guarantees to help rural utility borrowers "position themselves to be viable in a competitive, deregulated environment," the budget proposal to Congress states.