Southeastern Power Administration (2020 Presidential transition)

Book 3 - Organization Overview
Entire 2020 DOE Transition book As of October 2020

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Seal of DOE, Parent Organization

The Southeastern Power Administration (SEPA) supports the Department of Energy strategic plan by continuing the core mission to market and deliver clean, renewable, reliable, cost-based Federal hydroelectric power and related services. Specifically, SEPA contributes to the Department of Energy Strategic Plan Goal 1; Objective 2: to support a more economically competitive, environmentally responsible, secure, and resilient U.S. energy infrastructure. This ensures the reliability of service delivery and contributes to the stability of the national electricity grid in the specific area of power and transmission service and energy infrastructure.

Mission Statement

SEPA’s mission is to market and deliver Federal hydroelectric power, at the lowest possible cost to public bodies and cooperatives in the Southeastern United States.

Budget

SEPA’s total program budget is fully offset by Congressionally authorized use-of-receipts. No funding comes from traditional annual appropriations. All program costs are repaid through power sale revenues with no costs borne by the taxpayer.

Fiscal Year	Budget (Total Program)	Appropriations
FY 2019 enacted	$75,324,000	$0
FY 2020 enacted	$77,301,000	$0
FY 2021 request	$96,647,000	$0

History

SEPA was established in 1950 by the Secretary of the Interior as a Federal agency that today operates within the Department of Energy (Department, DOE), as authorized by Section 5 of the Flood Control Act of 1944 . Like the other Power Marketing Administrations (PMAs), SEPA must give preference to public utilities and rural electric cooperatives. Unlike other PMAs, SEPA does not own or operate transmission assets. This is due to private utility opposition and the political climate of the 1950’s. SEPA was transferred from the DOE in 1977 when the Department was created.

SEPA is one of four PMAs managed by DOE to market the electric power and energy generated by Federal reservoir projects across the United States.

SEPA recovers 100 percent of costs through the rates charged to customers. In Water Resources Development Act of 2000 Section 212, Congress responded to dwindling appropriations for United States Army Corps of Engineers (USACE) hydropower infrastructure funding and authorized “customer funding” for major USACE hydropower investment. Annual appropriations for these investments are no longer needed. Today, USACE primarily only requests routine operations & maintenance appropriations from Congress for regional hydropower costs, as nearly all capital hydropower infrastructure projects are customer- funded.

In 2001, Congress responded to dwindling appropriations for SEPA by allowing the purchase power and wheeling (PPW) portion of the budget to be funded using offsetting collection from power sale revenue up to an annually authorized ceiling amount. This amount changes year to year. In FY 2020, the Congressionally approved ceiling amount was $56 million. This was the third consecutive year the enacted PPW level fell short of the request level due to Congressional Budget Office scoring issues.

In 2010, Congress authorized net zero appropriations to allow annual authorized program direction (PD) expenses to be offset through revenue.

Functions

SEPA’s primary functions are:

Market 3,392 megawatts of hydroelectric capacity from 22 Federal multipurpose projects, operated by the USACE at cost-based rates.
Serve 474 public power customers across an 11-State service area.
Arrange wheeling (transmission) contracts for the delivery of Federal power.
Dispatch power from three plants on the Savannah River as an approved energy Balancing Authority in accordance with current North American Electric Reliability Corporation (NERC) standards and criteria
Conduct annual repayment studies to determine if power rates will produce sufficient revenue

to reimburse all generation, transmission, and marketing expenses.

Establish and effect interim five-year term power rates for four regional electric systems which Federal Energy Regulatory Commission (FERC) approves on a final basis.

Recent Organization Accomplishments

SEPA markets nearly 3,400 megawatts of hydroelectric capacity, averaging 7.7 billion kilowatt hours of hydroelectric energy annually. This is “clean power” without carbon emissions, and annually reduces emission of carbon dioxide by 6 million tons, sulfur dioxide by 3,080 tons, and nitrogen oxides by 2,700 tons. Without this SEPA power, 13 million barrels of fuel oil, 3 million tons of coal, or 25 billion cubic feet of natural gas would be depleted annually to account for SEPA customers’ electricity demands.

In 2020, SEPA finalized a Renewable Energy Certificate (REC) component of the Kerr-Philpott Power Marketing Policy to allow distribution of PJM regional transmission organization generated credits to be distributed to the preference customers in the PJM footprint. SEPA anticipates exploring the value of adding REC components to the Cumberland marketing policy in 2021.

In 2020, SEPA transitioned 11 power system operators from a General Service (GS) to an Administratively Determined (AD) pay scale based on division C, title III, Public Law 116-94. This will allow operators to be paid according to industry standards and will help with recruitment and retention

SEPA is constantly working both internally and with the USACE to manage the program costs recovered in power rates. As put forward in the FY 2021 budget, SEPA is pursuing the purchase or build of a headquarters building using alternative funding authority in Elberton, Georgia, which will save considerable costs over leasing.

SEPA successfully repays the Federal investment in the hydropower facilities, as well as a significant portion of joint costs shared with flood control, navigation, recreation, and other project purposes.

SEPA consistently meets system reliability targets for the NERC Control Performance Standards (CPS) to meet or exceed industry averages. CPS1 measures a generating system’s performance to match supply to changing demand requirements and support desired system frequency. CPS2 measures a generating system’s performance to limit the magnitude of generation and demand imbalances.

SEPA has established Memoranda of Agreements with preference customers and the four regional USACE Districts to provide funding to rehabilitate hydroelectric generating equipment. This enhances reliability and lessens future budget impacts. Customers have committed to provide over $1.7 billion over the next 20 years.

Leadership Challenges

The Nation’s electricity landscape continues to change. Many utilities have excess power due to slow economic growth, behind the meter generation, and energy conservation efforts, and impacts from the COVID-19 pandemic. Natural gas prices and prices incentivized renewable options offer low-cost alternatives to the Federal power products. In addition to changes in fuel and use profiles, the structured electricity markets are evolving and impacting conditions for generating, purchasing, selling, and transferring energy within those markets. Structured markets also direct transmission investment cost recovery and reliability guidelines. While many structured market efforts intend to lower prices, the reality is higher prices for some customers of Federal power which is not always recognized as a renewable energy source SEPA works closely with their customers and generation partner, USACE, to find ways to improve the value and cost of Federal Hydropower. This is done through regional partnerships as well as National level efforts such as the Federal Hydropower Council and support for the DOE- led Federal Hydropower R&D Memorandum of Agreement. Leadership engagement and support of the initiatives underway will be important to their success.

In 2020, USACE withdrew a Proposed Rulemaking on Municipal and Industrial Water Supply from 2016 but is continuing to make water supply policy changes through administrative processes where possible. These changes will affect water storage at Federal dams which could negatively impact Federal hydropower production through diminished storage availability, generation capability, and increased power rates. Since FY 2018, Congress has not approved SEPA’s requested level for PPW use-of-receipt authority due to CBO scoring issues. This authority is necessary to ensure SEPA has access to funding to meet contractual obligations. If congressionally enacted levels of PPW fall short of need, SEPA will activate the continuing fund to ensure access to funds to meet contractual obligation for power purchase and transmission wheeling agreements. Solutions to address the PPW scoring issue continues to be discussed with the effected PMAs, DOE, OMB, and appropriators.