Public Power Magazine

Post Script

From the November 2013 issue (Vol. 71, No. 8) of Public Power

Originally published October 2, 2013

October 2, 2013

Mark Gabriel is the new administrator of Western Area Power Administration. Gabriel took some time to share his perspective on Western and its current initiatives with Public Power’s Jeanne LaBella on Sept. 23, 2013.

You have been Western’s Administrator for about six months now, and you arrived in the midst of a tense time for the agency, especially for preference customer relations. What challenges are you encountering? What is your focus for Western?

My orientation is to focus on the future.  What do we have to do to maintain and rebuild the critical trust with our preference customers? To serve, which we must do by law, our open access transmission customers? How are we going to support powering the energy frontier?

When I walked in six months ago, the conversation was all about Secretary Chu’s memo, the Joint Outreach Team recommendations and access to capital, and we continue to work on these issues with customers while also focusing on the future.  We are incorporating the JOT recommendations under our implementation plan, which we have shared with customers and is available publically on our website. We are moving down the path to really make sure we continue to meet and serve the mission of Western in support of its customers.

The JOT recommendations are things we should be looking at anyways, just as part of doing good business.  For example, we have to look at things like consolidating the OASIS sites. Western has four open access information sites for transmission.  Does that make sense in this era – sending people to four websites? There are improvements to be made to Western’s Large Generator Interconnection Procedures—improvements that Western and its industry peers identified but Western has not yet implemented.  We need to look at how we do some things and see if we can tweak them to be a little better.   Along the same line, intra-hour scheduling is a Federal Energy Regulatory Commission requirement, which industry is complying with anyway.

Western’s goal is to determine how we can help continue to keep costs low, how we can operate more efficiently, how we can help serve all of our customers across a 15-state, 1.5 million-square-mile service territory with 17,000 miles of transmission, more than 300 substations, 177,000 structures now and in the future. Our goal continues to be focusing on making sure we are operating in the most effective and reliable way possible.

You mentioned several of the key recommendations that were in the Joint Outreach Team’s set of recommendations that were issued last March.  Is the work in progress? 

Much of this work is in progress and part of Western’s day-to-day business.  Intra-hour scheduling is scheduled to begin in November. That is a FERC requirement.  We are having conversations with neighboring utilities, some of whom are public power entities, and looking at combined transmission system opportunities and common tariffs.  These are large-scale longer-term activities that really came out of an excellent example of collaboration and cooperation through the JOT process.

We all have to be prepared for a more distributed future—one that has more regulating capability in it and certainly operating in more complex markets. It really is going to require working together.

For example, one of what we called the tier two JOT recommendations was to evaluate the possibility of, over time, transitioning from contract paths to flow-based paths, and we realize that requires a larger effort by a much broader transmission community.  We are trying to figure out the appropriate forum for this and are looking at what we need to do going forward.

Your customers have asserted that the relationship with Western is not as strong as it used to be and that the agency is not listening to them. How do you respond to that?

The Public Power article in September highlighted the challenges Western and its customers have been experiencing. I have been in the business for 25 years.  One thing I bring to the table is my experience in collaborative efforts from my days at the Electric Power Research Institute and consulting with large numbers of, interestingly enough, Western’s customers, in my consulting days at both Black & Veatch and R. W. Beck.

Part of what we are trying to do is to make sure that all of our customers are heard, that we recognize the challenges that they are facing and make sure that Western’s path forward recognizes those challenges, but also recognizes the changes we are going through as an industry, particularly in the western United States.

We operate in large parts of the country without centralized markets and to some extent the Southeast is somewhat in that boat.  We span thousands of miles of transmission across places that are not served with lots of alternatives, but that are really the focal point for much of the renewable development in the United States.  In an era of decreasing hydro, both due to drought conditions as well as environmental regulation, we have to work collaboratively to help define and divine a future that continues to support preference customers at the lowest possible costs, consistent with sound business principles. Western is focused on the future. All we can do is be very cognizant about our customers’ views and wishes. Western has a role that is anchored around the preference customers, but that also has other accountabilities and responsibilities.

The reality is we are an open access transmission provider. We are a central player in a huge swath of the United States.  We have to recognize that our role will clearly focus on the preference customers, but we also have to handle and manage a variety of other stakeholders.

We do not have a choice, for example, about what we need to do about cybersecurity.  We do not have a choice about what we need to do for physical security or for meeting NERC reliability requirements or a whole host of other regulations, which have cascading impacts across all of our customer base.

Your preference customers are worried that your transmission system, which you said is open access, is going to be used increasingly to deliver very intermittent wind power and that somehow the preference customers will be required to pay for upgrades to the transmission system and the wind generators could be gone next year.  Have you addressed this issue with your customers?

Western has operated and will always operate under the “beneficiary pays” rule.  That is clearly at the core of our operations and how we think about the world.  So, if somebody is going to gain from a system upgrade, they are certainly going to pay for that system upgrade, and we do not expect or anticipate the preference customers to be paying for a benefit that they do not receive.  We need to be very clear on that.  I have expressed that over and over again.  That is one of our mantras.

For example, our TIP, or transmission infrastructure program, is really fire-walled off completely from our preference customers’ funding and rates.  It is very important to recognize that.   We were granted that authority in the Recovery Act of 2009, and we keep that program separate. 

Many of your preference customers are also worried that an energy imbalance market will be established in the West and that, as a result, electricity costs will increase.

I believe, for right or for wrong, we will have some kind of market form in the western United States. That is not Western’s doing; there is just a significant amount of pressure, as we know from the proposals we have seen between the California Independent System Operator and PacifiCorp.  There have been other discussions involving the Northwest Power Pool on what a market could look like.  Certainly, we have preference customers who are themselves adding significant amounts of renewable energy to their portfolios.  That leaves us, Western, as well as all of our customers to understand what a market looks like in the western United States. We are neither proponents nor opponents of a market.

We have to understand, for our customers’ own protection, what is going to happen in the marketplace.  If we will see an EIM in the future, it is critical to be involved now so we can shape its direction rather than have to live with whatever is ultimately formed.  We have to participate in this conversation.

We are not out here proposing an energy imbalance market.  We are trying to help--with our customers’ understanding and guidance and involvement--what does a market look like in the West? What should our role be? Then again, jointly making a decision on a financial basis, on a business-case basis, if and what our participation should be in the market.

Do you have a formal strategic planning effort in place right now?

We do. Knowing what we know about the markets, increasing regulatory requirements, decreasing hydro, increasing intermittency, how do we best position Western to support its customers going forward? We have been working hard, internally and externally. We have done customer surveys. We have had a number of customer face-to-face meetings. We are creating a Western roadmap for the future.  That roadmap really has what I will describe as four destinations.

The first and foremost--and it is one that I know really resonates with our preference customers--is around business and organizational excellence. That, to me, is the underpinning of what we have to do. How do we face all of these opportunities in the future?

The second destination is how do we maintain and expand the benefits of partnerships that have served Western and its customers so well for the past 35 years? Expanding customer partnerships are key to the future.

The third destination we are looking at in our strategic roadmap is the evolution of services we need to provide.  I think that is important to recognize and may not always be understood.  We have very large customers all the way down to municipalities with 1,000 meters, Native American tribes and irrigation districts – a total of 690 preference customers. Their needs from Western all vary along a continuum, from those who just want the low-cost hydro to those who need a complete range of services from us. They may have a little bit of transmission, but they cannot manage all of the North American Electric Reliability Corporation requirements. Or they are full-service customers of ours where we provide 100 percent of their power needs, hydro or otherwise. So we need to think out over the next 10 years:  How do we have to evolve our services?

Finally, if I look out 10 years, how do we power the energy frontier?  If we can all agree that we are going to have more intermittent resources, more renewables, probably less hydro due to environmental conditions and regulation, and an expanded transmission system – what does that look like?  What do we need to do?  What are the things we need to put into place today to make sure we establish a future that is as positive as the path has been for Western?

What are you doing around asset management?

In Fiscal Year 2014, we are making a significant effort around asset management.  From our perspective, some of the disconnection between the perception of where Western is and its assets are came because our asset management program was not as robust or defined as it should be.  I put some of my very top resources on making sure that we have a robust, risk-informed asset management program that we are using that in every region.

We are rolling up each of the region’s 10-year plans to make sure we have a really well-defined, tactical vision for the future.  We are extremely mindful of the fact that the majority of our funding comes through participation by our preference customers.  I think it is only good business practice to have a robust asset management program, where we really know and understand what the investments we and our customers are going to make over the next 10 years.  Fully understanding, by the way, that once your vision gets past two, three and four years, it is kind of hard to figure out. At least you have a plan; at least you have a roadmap to move forward into the future.

I think that will be extremely valuable in helping to answer the question:  Is Western making the right investments alongside of its preference customers?  Are its customers making the right investments of their precious capital to continue to build and maintain this terrific system, the assets that have been entrusted to Western and certainly to me as the administrator? I want us to be a data-driven organization, to make sure that what we are doing makes good, logical business sense to be really focused on investing in the right things at the right time.

We can do that.  A lot of the questions that have been asked in the past are not going away.  .  We presented this asset management plan at three customer meetings thus far to what I would describe as a very positive response. It is important because it is both regionally based, which is critical to how Western operates, and yet it rolls up into the big picture.

At the risk of putting words into your mouth:  there has been controversy in the past, but it sounds like there was a silver lining to it because it perhaps improved the dialogue between Western and its customers. Is that a fair assessment?

It created a forum to have a dialogue on critical issues.  I think it really raised the awareness on things that are very important on the energy frontier.  Some of the things were problematic, and they were pointed out and people moved on from that. That is really my main message here. Bottom line:  We have moved into implementation and have rolled it into our day-to-day business. We need to understand the future.  Again, more intermittency, potentially different players, the need to reinvest in a very stout system in an era of more regulation and increasing challenges when it comes to both cyber and physical security.  We are clearly focused on how we help maintain a great legacy and prepare for the future.


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