371 



Mr. Carr. It is one of the pieces of it. My feeling is the reserves 

 are very valuable to the federal system. They have been there for 

 a lot of years; they make the federal system more efficient. 



Mr. DeFazio. I know we have got the first quartile interrupted. 

 We have got the short-term stability reserves which are an hour or 

 something like that. 



Mr. Carr. And sometimes even less. The companies are hooked 

 close enough into the transmission system that they can actually 

 be cut, you know, just like that. 



Mr. DeFazio. Uh-huh. 



Mr. Carr. They are about the only load that is available to do 

 that, to shore up the transmission system that fast, because of 

 their size. There is also forced outage reserves that allows up to 

 three quartiles to be interrupted at any time to shore up the loss 

 of generation. And depending upon the length of the restriction and 

 how much is accrued over a period of time, those are available to 

 the system. 



Mr. DeFazio. But is this that process where you go first quartile, 

 second quartile, and you have to notify in June that you may go 

 into the second quartile and you have to go out and ask for vol- 

 untary curtailment? You are talking about shorter term or less pre- 

 dictable; as opposed to the hydro-based system problems; you are 

 talking about outages essentially. 



Mr. Carr. Well both, both. It could be a hydro-system problem. 

 I think we ran into that with losing one of the Grand Coulee tur- 

 bines about a year and a half ago, where it caused instability in 

 the system. The loads are able to respond quickly by a cycle. They 

 are able to respond and cut back, and they have that ability be- 

 cause of their electrolytic processes. I guess to follow on that path, 

 I certainly support what Bob Myers was sajdng earlier. I think 

 there are probably a lot of other reserves we have not explored as 

 closely as we could in some sense because there has not been a 

 market for them. But with capacity becoming much more valuable 

 to the system, I think everybody in the system recognizes that, 

 then we have a chance to take advantage of probably some other 

 valued reserves. But I think the bottom line is we cannot have it 

 as a unilateral debate. We need to talk about it in terms of com- 

 petitive market, and if it is true that some of the utilities, you 

 know, carry through, they are really the ones that decide this, and 

 only want to pay a small amount for those reserves, and other peo- 

 ple are willing to pay a lot more, that is where the reserves ought 

 to flow. 



Mr. DeFazio. Okay. Would the people who raised this issue ear- 

 lier care to respond? 



Mr. Scarborough. Mr. Chairman, I would like to talk about the 

 value of reserves. This is just my understanding and research that 

 I have had my stsiff do. But from my understanding, basically the 

 components that make up how we price the value of reserve is 

 based upon the load and based upon the interest charged that 

 would be necessary to finance a gas turbine. Now granted the gas 

 turbine was never, ever built and probably was never intended to 

 be built, but it was at least a way of determining what the cost was 

 going to be to have a plant in place. 



