MISCELLANEOUS HANDOUTS AT MEETING

FLUORESCENT LAMP BALLASTS WORKSHOP JUNE 20, 1996 COMMENT 0I
UNITED STATES OF AMERICA

BEFORE THE

DEPARTMENT OF ENERGY

Comments on the ) Public Workshop Convened

Fluorescent Lamp Ballast ) March 17, 1995

Engineering Analysis )

COMMENTS OF THE BALLAST SECTION OF THE

NATIONAL ELECTRICAL MANUFACTURERS ASSOCIATION

Submitted March 31, 1995

The Ballast Section of the National Electrical

Manufacturers Association ("NEMA") submits these written comments

on the Fluorescent Lamp Ballasts Engineering/Economic Analysis

Assumptions, prepared by the Lawrence Berkeley Laboratory

("LBL"), dated February 24, 1995, for eventual use in a Draft

Technical Support Document ("TSD") pertaining to reconsideration

of proposed fluorescent lamp ballast energy conservation

standards. These comments are intended to supplement comments

made by representatives of NEMA and its member-manufacturers at

the Public Workshop, convened on March 17, 1995. The NEMA

-Ballast Section represents manufacturers with over 90 percent of

the nation's sales of both energy-efficient electromagnetic and

electronic lamp balla..ts.

AMI PRO 05ENQ01 !. SAM PC DOCS 0252278

FLUORESCENT LAMP BALLASTS WORKSHOP JUNE 20, 1996 COMMENT 0I
Such analyses will reveal the level of uncertainty that attends

any conclusion regarding life cycle cost savings.

3. Data for Ballasts with

Energy-Saving Lamps

NEMA originally submitted ballast efficiency data for

ballasts operated with standard lamps. NEMA did not submit data

for ballasts operated with reduced-wattage, energy saving ("ES")

lamps, because such data was more limited compared to data

provided for standard lamps. However, LBL has relied on data

from other available sources, which NEMA manufacturers believe is

inaccurate in several respects. NEMA submits, in Appendix B,

ballast efficiency data for the relevant product classes with ES

lamps. The Tables in Appendix B are presented in the same format

as NEMA's original data point submissions to LBL.

NEMA believes that its data for energy savings lamps are

reliable and should be utilized by LBL in revising the

Engineering Analysis. The data in Appendix B has been

incorporated into NEMA's revised Series 1 Tables.

4. Cathode Cutout

NEMA makes corrections in the Series 4 Tables to the lamp

life assumed for cathode cutout ballasts for 2-lamp T8 and T12

ballasts. The lamp industry recognizes that cathode cutout

6

AMI PRO 45ENQ01!.SAM PC DOGS 0252278

FLUORESCENT LAMP BALLASTS WORKSHOP JUNE 20, 1996 COMMENT 0I
ballasts, like electronic instant start ballasts for T8 lamps,

reduce lamp life to 15 , 000 hours.'

5. Normalized Fixture Watts

LBL's Engineering Analysis made adjustments to wattage

for thermal fixture effects and for normalizing light output.

NEMA agrees that such adjustments should be made. However, NEMA

believes that LBL's Analysis contains errors in the thermal

fixture wattage adjustments and that LBL's normalization does not

take account of thermal fixture effects on light output. LBL

made its adjustments for fixture watts and normalized fixture

watts in two steps. Because thermal fixture effects. apply to

both wattage and light output, NEMA proposes an integrated method

for calculating normalized fixture watts.

LBL's errors in specifying the fixture watts adjustments

are evident from Table C.1 (Appendix C). Thermal effect

reductions in wattage should, in absolute size, vary with input

wattage. However, as shown on Table C.1, LBL's data for some

ballasts had adjustment factors that do not vary with the level

of input wattage. Thus, some ballasts with lower input wattage

had greater adjustments than other ballasts in the same product

class with higher input wattage. NEMA relies on input wattage

adjustment factors contained in the Advanced Lighting Guidelines

Lamp manufacturers' published life data show that cathode cutout

ballasts cause reduced lamp life of 15,000 hours, rather than the 20,000 hours

with energy efficient magnetic ballasts.

7

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FLUORESCENT LAMP BALLASTS WORKSHOP JUNE 20, 1996 COMMENT 0I
California Energy Commission

Building and Appliance Efficiency Office

nt" 1

Core

With coils,

transforms current

to control lamps

Case

Protects ballast

components

Figure 1

Typical Electromagnetic Fluorescent Ballast

Contents

Capacitor

Corrects power factor

and limits current

(for high power

ballasts only)

Introduction ...................................................................................... i

Technology Description ................................................................... 2

Current Products .............................................................................. 9

Application Guidelines .................................................................... 11

Guideline Specifications ................................................................. 13

Manufacturer/Product References ................................................. 14

Introduction

Recent advances in fluorescent

lamp ballast technology have

created opportunities for

improved lamp performance and

increased energy efficiency.

Relatively new products, such as

electronic high-frequency and

heater cutout ballasts, are now

widely available and accepted in

the marketplace. The recent

trend toward more competitive

pricing of these products should

continue, due to an expansion of

manufacturing facilities and more

competition between manufacturers. Energy-efficient ballasts

are an excellent energy-saving

strategy that should not be

overlooked by anyone who is

interested in saving money

through the use of efficient

lighting products.

The most prevalent fluorescent

lamps for general commercial

lighting today continue to be the

rapid start 4-foot lamp (F40T12)

and the instant start, 8-foot,

"slimline" (F96T12). However, the

more efficacious, smaller diameter

F32T8 lamp is gaining in

popularity in general lighting

applications and as an energyefficient replacement for standard

lamps. This guideline mainly

addresses electronic ballasts that

operate full-size fluorescent lamps

FLUORESCENT LAMP BALLASTS WORKSHOP JUNE 20, 1996 COMMENT 0I
ENERGY-EFFICIENT FLUORESCENT BALLASTS

identified occurs in libraries

equipped with magnetic detectors

used to prevent theft. However,

as long as electronic ballasts are

at least 10 to 15 feet away from

the detector units, problems with

the detectors are unlikely to

occur.

A second potential system

compatibility problem with

electronic ballasts may occur in

conjunction with high-frequency

power line carrier (PLC) control

systems. The carrier frequency

for PLCs usually ranges from 50

kHz to 200 kHz. These

frequencies may be affected by

one of the harmonic currents

generated by electronic ballasts.

The extent of this potential

problem has not as yet been fully

researched. However, in simple

PLC systems for residential

applications when lighting and

other appliances share the same

distribution network, electronic

ballasts may not be compatible.

This may be resolved by the

selection of a more appropriate

frequency for the PLC system. In

commercial systems where the

PLC is isolated from the lighting

circuits, problems may be

minimal. If, however, the PLC is

used to control the lighting

system, the probability of

problems occurring will increase.

It is important to realize that the

possible compatibility problems

posed by the use of electronic

ballasts arise only on rare

occasions. The above

incompatibilities can be resolved

or avoided, and they should not

be used to disqualify the use of

electronic ballasts in other

applications.

option to consider when a project

budget does not permit electronic

ballasts. Heater cutout ballasts

can be used in any non-dimming

situation involving straight 40-watt

F40T12 and F40T10 lamps, and a

heater cutout ballast for F32T8

lamps is now available. Typical

applications include offices,

schools, retail and wholesale

stores, health care facilities, and

general industrial and commercial

lighting. Because of their lower

initial cost they are especially

appropriate for use as

replacement ballasts in retrofit

applications. Some heater cutout

ballasts may have a problem

starting very high-voltage F40T10

lamps when the line voltage is

below the rated center voltage

(120/277V). In addition, some

lamp manufacturers derate lamp

life when lamps are operated by

heater cutout ballasts.

Guideline

Specifications

The following ballast

specifications may be used as a

guideline for full-size fluorescent

lamp ballasts. In general, for

important applications, detailed

specifications should be included

for ballasts. The specification

may include acceptable

manufacturers and model

numbers, especially when using

electronic ballasts.

Electronic Ballasts

1. UL Listed Class P

2. Sound Rated A

3. Total harmonic distortion <_

32% (<20% for rebates) with

input current third harmonic

not to exceed ANSI

recommendation

5. Power factor >_ 0.90

6. Enclosure size and wiring in

same color as magnetic

ballast (for retrofit

applications)

7. Ballast factor of (see

chart or manufacturer's

literature, or as required)

8. Light regulation ±10% with

±10% input voltage variation

Heater Cutout Ballasts

Heater cutout ballasts are less

expensive than electronic ballasts

and are a viable energy-efficient 4. Ballast shall conform to ANSI

specification C. 82,11-19XX

9. Lamp current crest f

10. Flicker 10% or less v

lamp suitable for the

11. Lamps shall be opei

(instant start) (rapid

(rapid start, steppec

(rapid start, continu(

adjustable output) n

12. Shall be designed t

withstand line transi

IEEE 587, category

13. Shall meet FCC Rul

Regulations, Part 11

14. Circuit diagrams ar

ballast connection=

displayed on all ba

packages

15. Three year warrant

$10 labor allowanc

Heater Cutout Ballast

1. UL listed class P

2. Sound rated A

3. Energy-efficient bE

heater cutout circt

require restrike period

4. Standard ballast enclosure

size and wiring

5. Light regulation ±10% with

±10% input voltage variation

7. Power factor >_ 0.90

8. Lamp current crest factor <_1.7

13

FLUORESCENT LAMP BALLASTS WORKSHOP JUNE 20, 1996 COMMENT 0I
Hybrid Ballasts III

Life Test Results

and

System Performance Data

By

Glenn D . Garbowicz

and

Beth R. Jug

Advance Transformer Co.

June 5, 1995

FLUORESCENT LAMP BALLASTS WORKSHOP JUNE 20, 1996 COMMENT 0I
f- I

Lifetime: 5000 10000 20000 50000

Shape (beta): 5.514 95% Cl: ( 4.291, 7.085) MTTF: 19827 Welbuli -

Scale (63.2%): 21474 95% Cl: (20154. 22879) 95% CI -

Location: 0 Sample Size: 36 Failures: 34

FLUORESCENT LAMP BALLASTS WORKSHOP JUNE 20, 1996 COMMENT 0I
Figure 2 -Reduced light output hybrid ball astwith 34W-T12 lamps

Weibull: Distribution Survival

.1

1

10

30

50

80

iE

95

0

99.5

99.9

Lifetime: 5000 10000

Shape (beta): 6.927 95% Cl: ( 5.335, 8.994) MTTF: 19598

Scale (63.2%): 20962 95% Cl: (19944, 22032)

Location: 0 Sample Size: 36 Failures: 36

20000 w rU

Waibull -

95% CI -

FLUORESCENT LAMP BALLASTS WORKSHOP JUNE 20, 1996 COMMENT 0I
Lifetime: 5000 10000 20000 aria

Shape (beta): 9.945 95% Cl: (7.617, 12.99) MTTF: 23501 Welbull -

Scale (63.2%): 24708 95% Cl: ( 23859, 25588

) 95% Cl -

Location: 0 Sample Size: 36 Failures: 34

FLUORESCENT LAMP BALLASTS WORKSHOP JUNE 20, 1996 COMMENT 0I
High Energy Price Forecasts

That Are Borne by Consumers, Taxpayers,

and Shareholders

By

Glenn R. Schleede*

March 17, 1996

*Energy Market & Policy Analysis, Inc., P.O. Box 3875, Reston, Virginia. Phone: 703, 709-2213

FLUORESCENT LAMP BALLASTS WORKSHOP JUNE 20, 1996 COMMENT 0I
Illustrations of Costs Resulting from High Energy Price Forecasts

that are Borne by Consumers, Taxpayers, and Shareholders

- Contents -

PAe

Introduction ...............................................................1

A. Electric industry ..........................................................1

1. The role of faulty energy price forecasts .................................... 2

2. High estimates of avoided costs led to high cost power purchases , costly commitments to "renewables," and heavy subsidization of "demand-side" measures ........ 2

3. Over-investment in generating facilities .................................... 2

4. Long-term fuel contracts with prices above market levels .. ..................... 3

5. Magnitude of the extra costs now faced by electric industry customers,

shareholders, and creditors and, in some cases, taxpayers ....................... 3

6. Who will pay? ....................................................... 4

B. Natural gas industry ...................................................... 4

1. High cost gas purchase contracts signed by gas pipelines ....................... 4

2. Existing and potential excess pipeline capacity ............................... 4

C. Investments in oil and gas exploration ......................................... 5

D. Bank failures resulting from non-performing loans to energy companies .............. 5

E. Government spending for energy research, development, demonstration, and

commercialization projects ................................................. 5

F. Overbuilding of nuclear generating plants by TVA and in the Pacific Northwest ......... 5

G. Bonneville Power Administration's contract to purchase power from an IPP ............ 6

H. Overestimating the value of leases and lease revenues ............................. 6

Biased analyses based on high energy price forecasts ............................. 7

1. DOE's biased analysis of the costs and benefits of alternatives for the

future of the Naval Petroleum Reserves .................................... 7

2. Federal agency estimates of savings from potential Federal Energy

Management Program (FEMP) projects .................................... 7

3. Questionable claim of "energy cost savings " by a lobbying organization ............ 7

FLUORESCENT LAMP BALLASTS WORKSHOP JUNE 20, 1996 COMMENT 0I
March 17, 1996

Illustrations of Costs Resulting From High Energy Price Forecasts

Undoubtedly, there is no complete accounting of the huge costs that have been incurred by

consumers, t ayers, shareholders, and investors as a result of decisions that were based on high

energy price forecasts that have proven to be faulty.

However, it is possible to identify key categories of extra costs and, in some cases , estimates of the

dollar magnitude of the costs that have been and still are being incurred because the Energy

Information Administration (EIA) and other forecasters drastically overestimated energy prices and/or

energy demand. This paper provides illustrations involving:

® The electric industry

® The natural gas industry

® Investments in oil and gas exploration in the late 1970s and early 1980s

® Bank failures resulting from non -performing loans to some energy companies

® Tax dollars wasted on impractical energy R&D projects

® Overbuilding of nuclear capacity by TVA and in the Pacific Northwest

® Bonneville Power Administration's contract to purchase power from a NUG

® Minerals Management Service (MMS) over estimating the value of oil and gas leases

® Biased analyses by DOE and lobbying organizations -- based on high price forecasts

A. Electric industry

A large share of the extra costs resulting from high energy price forecasts will be borne by

electric industry consumers, shareholders, and other investors -- and potentially by taxpayers --

because of

® Faulty estimates by utilities and PUCs of "avoided costsi1 because of high forecasts of

energy prices and/or demand.

® Heavy investments in long-lived capital intensive assets such as electric generating plants.

® Federal government and/or state PUC requirements that utilities sign long-term contracts

to buy power from non-utility generating firms (NUGs).

® Independent power producers' (IPPs) decisions to build electric generating plants and

electric utilities' decisions to sign power purchase contracts with IPPs.

® PUC requirements or encouragement that utilities invest in or buy power from generating

units that use "renewable " energy.

® PUC requirements or encouragement that electric utilities subsidize actions by customers

to reduce electricity use or shift uses to low demand periods ("demand-side" measures).

Long-term fuel supply contracts with prices that proved to be above market.

1 "Avoided costs" are estimates of the cost that an electric utility would incur if it produced electricity with its own facilities

rather than buying from others or rather than subsidizing conservation.

FLUORESCENT LAMP BALLASTS WORKSHOP JUNE 20, 1996 COMMENT 0I
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1. The role of faulty energy price forecasts. Faulty, high energy price forecasts contributed

in a major way to the extra costs because utilities have been using large amounts of oil, coal,

and natural gas to fuel electric generating units and EIA and other forecasters drastically

overestimated the prices for these fuels. The high fuel prices led to high PUC and utility

estimates of "avoided costs." For example:

® California Public Utility Commission (CPUC) President Daniel Fessler recently

reported2 that the CPUC assumed that oil prices would be $118 per barrel when they

calculated avoided costs.

® A Commissioner from the Maine PUC has reported that Central Maine Power

Company's avoided cost calculations assumed oil would cost $100 per barrel.3

2. High avoided costs led to high cost of power purchases, commitments to

"renewables," and heavy subsidization of "demand-side" measures. The high estimates

of avoided costs were then used by PUCs and/or electric utilities as the basis for:

® Prices in contracts that electricity that utilities:

® Were required to sign with owners of "qualifying facilities" (QFs) pursuant to the

Public Utility Regulatory Policy Act (PURPA), and

® Agreed to sign with IPPs and other non-utility generators (NUGs).

® Commitments that some utilities were required to make to invest in or buy power from

generating facilities fuel by "renewable" energy.

® Economic analyses that helped determine the level of subsidies that utilities would

provide to encourage customers to avoid use of electricity or other forms of energy or

to shift uses to periods of low demand.

3. Over-investment in generating facilities. Faulty forecasts of high energy prices and rapid

growth in electricity demand also contributed to over-investment in generating facilities.

For example:

Investments in nuclear generating plants that were justified in part by forecasts of high

oil prices. No nuclear plants were ordered after 1973 and some ordered before 1973

were canceled. However, construction continued on some nuclear plants because

owners assumed the plants would be an economical way of avoiding the use of oil that

was forecast to cost $100 per barrel or more. Lower oil price forecasts probably would

have led to cancellation of more nuclear plants -- with the result that utilities would be

facing less "stranded costs" than they now face.

® Investments in IPP-owned generating units and utilities' decisions to sign contracts with

IPPs were often predicated on forecasts of rapid growth in electricity demand. The

prices for power from IPPs were often based on high energy price estimates and

decisions by IPPs to build, and financial institutions to finance projects were also based

on expectations of high electricity demand and high fuel prices. In most cases, electric

2 Seminar on February 27, 1996 -- Johns Hopkins University's Strategic and International Studies (SAIS)

3 NARUC Bulletin No. 49-1993 , December 6, 1993, p.2.

FLUORESCENT LAMP BALLASTS WORKSHOP JUNE 20, 1996 COMMENT 0I
-3-

utilities and their customers bear the high costs. However, in some cases (e.g., in

California) the price that is paid for electricity will drop to market levels after the

contracts have been in effect for 10 years. At that point the IPP owners and/or their

creditors will bear the cost risk.

As electricity demand growth slowed and it became obvious that many proposed QF

and IPP generating units would not be needed, some electric utilities have "bought their

way out" of contracts -- resulting in rather high costs for customers in the short term

but savings in the longer term.

4. Long-term fuel contracts with prices above market levels. Some electric utilities and

non-utility generators have entered into long-term contracts for fuel (usually natural gas,

coal, or oil) for their generating facilities. (Non-utility generators were often required to

sign long-term fuel supply contracts in order to get financing for their facilities.) The price

for fuel in these contracts was often based on high fuel price forecasts. These contracts also

add extra, potentially stranded, costs.

5. Magnitude of the extra costs now faced by electric industry customers, shareholders,

and creditors, and, in some cases, by taxpayers. Many estimates have been made of the

magnitude of the high costs that are now being faced -- some of which may become

"stranded costs." The exact amounts of these costs can only be estimated since they

depend, in many cases, on the future market price for electricity. If the market price for

electricity drops as most observers expect, "stranded" costs will increase. Examples of

estimates of the extra costs and "stranded" costs now being faced include the following:

® An official of Southern California Edison (SCE) reported in 19944 that SCE's

customers had already incurred above market costs of $2 billion during the period from

1985 through 1993 and face an additional $5.9 billion in the years ahead (with annual

costs peaking at $900 million in 1996). These extra costs were attributed to CPUC

requirements that SCE enter into power purchase contracts with PURPA "qualifying

facilities" and generators using renewable energy.

® Cambridge Energy Associates estimated in March 1995 that California utilities face

stranded costs in the range of $13 billion to $26 billion -- depending upon the market

price of electricity in the years ahead.'

4 Presentation by L. D. Hamlin, Southern California Edison to a Conference on State Trends in Energy and the Environment,

Santa Fe, New Mexico, June 14, 1994.

' Cambridge Energy Associates, Decision Brief, Shedding Light on Stranded Costs by Gary Simon and Aldyn Hoekstra,

March 1995, pp. 2-3.

FLUORESCENT LAMP BALLASTS WORKSHOP JUNE 20, 1996 COMMENT 0I
-4-

Moody's Investor Service estimated in August 1995 that total stranded costs for U.S.

investor owned utility companies at "$50 to $300 billion, depending upon on market

price assumptions."'

6. Who will pay? As indicated by the above sources, the actions by state PUCs and electric

utilities, often based on faulty energy price forecasts, have resulted in huge costs -- some

of which may become "stranded costs" as the electric industry becomes more competitive.

These extra costs will eventually:

® Be paid by electric customers through their monthly bills;

® Be bome by investors in electric utilities or IPPs in the form of write-downs if the costs

can be recovered from customers; or

® Be borne by creditors if the utilities and/or IPPs become bankrupt.

In some cases, some of the costs may be shifted to taxpayers. This will occur if

® Electric utilities are permitted to accelerate the depreciation of their assets, thus

reducing their tax payments to federal, state and local governments;

® Lower profits, losses, or bankruptcies result in reduced corporate income tax payments

to federal or state governments; or

® Tax-paying utilities' assets are sold off to entities that can finance the purchases with

tax-exempt bonds. This approach is contemplated in the proposed sale of certain assets

of the Long Island Lighting Company to the Long Island Power Authority (LIPA).

B. Natural Gas Industry

Decisions based on high estimates of energy prices and demand have also added extra costs for

natural gas industry customers, shareholders, and creditors, and for taxpayers. The causes and

the effects are somewhat less complex in the gas industry than in the electric industry. Examples

of extra costs in the gas industry include:

1. High cost gas purchase contracts signed by gas pipelines. Many gas pipeline companies

signed "take or pay" contracts for natural gas supplies during the late 1970s and early 1980s

based on forecasts that gas supplies were running out and the prices would increase rapidly.

However, market prices for natural gas at the wellhead decreased in the early 1980s

(particularly after the ill-effects of the Natural Gas Policy Act of 1978 had passed). This left

pipelines with large commitments for gas at prices well above market-clearing levels.

2. Existing and potential excess pipeline capacity. Changes in regulation, including open

access to interstate pipelines (FERC Order 436) and unbundling of pipeline services (FERC

Order 636), has resulted in major changes in the natural gas industry. Slower than

forecasted increases in natural gas demand in California has resulted in excess pipeline

capacity in the West. Further, as local gas distributing companies (LDCs) across the nation

6 Moody's Investors Service, Stranded Costs will Threaten Credit Quality of U.S. Electrics, by Paul Fremont and Robijn

Hornstra, August 1995, p.1.

FLUORESCENT LAMP BALLASTS WORKSHOP JUNE 20, 1996 COMMENT 0I
-5-

give up firm capacity commitments that they no longer need under the new market structure

(when contracts expire), interstate pipelines in other regions may be faced with excess

capacity. Such developments may lead to further financial strains in the industry and to

costs that will have to be borne by consumers, shareholders, creditors, or taxpayers.

C. Investments in Oil and Gas Exploration

During the late 1970s and early 1980s, hundreds of millions of dollars were invested in oil and

gas exploration based on forecasts that oil and gas prices would increase rapidly. Many of these

investments have had to be written off at tremendous cost to investors.

D. Bank Failures Resulting from Non-performing Loans to Energy Companies

During the 1980s, many commercial banks and savings and loan (S&Ls) institutions experienced

non-performing loans to oil and gas exploration companies and other energy firms that had made

investments based on forecasts of high oil and gas prices. In some cases, the costs of nonperforming loans were borne by owners and shareholders of the banks and S&Ls. In other cases,

the costs have been borne by taxpayers who have paid the costs of the S&L bailouts.

E. Government Spending for Energy Research, Devel opment, Demonstration and

Commercialization Projects

Federal agencies (Atomic Energy Commission, Energy Research and Development

Administration, Federal Energy Administration, U. S. Synthetic Fuels Corporation, and

Department of Energy) have spent some $100 billion tax dollars on energy supply and

conservation technologies since 1955 -- with the vast majority spent since 1975. Many of the

projects that were subsidized were "justified" on the basis of high energy price and energy

demand forecasts that have proven to be faulty. A large share of this money has been wasted

because the projects proved to be technically infeasible or impractical, or to have no realistic

chance of producing or conserving energy competitively in the marketplace. In short, much of

the money was wasted. The projects on which the large dollars were wasted included the

proposed Liquid Metal Fast Breeder Reactor (LMFBR), oil shale projects, synthetic fuels form

coal projects (including SRC-1 and SRC-2, the "solvent refined coal" projects; and the Great

Plains Gasification Project).

Overbuilding of Nuclear Generating Plants by TVA and in the Pacific Northwest

High forecasts of electricity demand contributed to the overbuilding of nuclear generating

capacity by the Tennessee Valley Authority (TVA) and in the Pacific Northwest:

FLUORESCENT LAMP BALLASTS WORKSHOP JUNE 20, 1996 COMMENT 0I
-6-

According to the GAO, "TVA is $26 billion in debt and has invested $14 billion in

nonproducing nuclear assets..."'

® Commitments to build nuclear generating plants in the Pacific Northwest that were not

needed led to the largest municipal bond default in U.S. history.

Apparently only the interest expense for TVA's $14 billion in nonproducing nuclear assets is

being passed through to TVA's customers. Eventually, of course, someone will have to stand

the cost of the $14 billion principal.

GAO has concluded that TVA's financial condition puts it at a competitive disadvantage for the

future when the electric industry will be more competitive.

G. Bonneville Power Administration's Contract to Purchase Power from an IPP

DOE's Inspector General has concluded that Bonneville Power Administration erred in using

high gas price forecasts when deciding to sign a contract to purchase power from a privately

owned gas-fired electric generating plant . 8 This contract has far reaching implications for

Bonneville's customers and, potentially, for U. S. taxpayers. BPA's attempt to withdraw from

the arrangement apparently is being challenged by the plant developer in a $1 + billion lawsuit.

H. Overestimating the value of Leases and Lease Revenues

The Department of the Interior's Minerals Management Service (MMS) estimates the value of

blocks of public lands that are offered for lease. Also, for federal budget purposes, MMS must

develop estimates of the revenue that will be received from lease bonus payments and royalties

received by the Federal Government. All these estimates depend to some extent on future energy

price expectations, but information on the price forecasts used by MMS is not readily available.

During the balanced budget discussions of 1995, it became clear that MMS estimates of the

potential value of leasing of ANWR was based on outdated fuel price forecasts. Whether MMS

has developed new estimates is unknown.

MMS' over-estimate of the value of one lease block in the Western Gulf of Mexico (Brazos A52) led to a loss of approximately $11 million during the 1980s. The instance involved a bid of

approximately $26 million by an oil and gas exploration company for the lease. MMS turned

down the bid as inadequate. The following year, the same company submitted a lower bid and

it was again turned down. In the third year, the same company bid approximately $15 million

for the same lease block. The bid was then accepted. Apparently, MMS had overvalued the

' General Accounting Office, Tennessee Valley Authority - Financial Problems Raise Questions About Long-Term

Viability, August 1995, p. 3.

8 Office of Inspector General, U.S. Department of Energy, Audit of Bonneville Power Administration's Energy Resource

Programs, DOE/IG-0379, September 1995.

FLUORESCENT LAMP BALLASTS WORKSHOP JUNE 20, 1996 COMMENT 0I
-7-

lease initially largely because it was using a high forecast of natural gas prices. As natural gas

prices continued their downward trend, MMS apparently realized that it had overestimated the

value of the lease. Meanwhile, the U. S. Treasury received some $11 million less in lease bonus

revenue than it would have received had a more realistic natural gas price forecast been used and

the initial bid been accepted.

I. Biased Analyses Based on High Price Forecasts

In addition to the above cases where high price forecasts have resulted in demonstrable costs to

consumers, taxpayers, and investors, there are other instances where the use of energy price

forecasts raises important public policy issues. Instances such as the following should not be

overlooked as the Congress considers problems caused by faulty forecasts.

1. DOE's biased analysis of the costs and benefits of alternatives for the future of the

Naval Petroleum Reserves (NPRs). In April 1994, DOE prepared an unusually biased

analysis of the value of the NPRs using questionable price forecast data and even more

suspect analytical procedures.' DOE's gas price assumption for 1995 was some 30% above

the actual U. S. average and even further above prices in California where most of the NPR's

gas reserves are located. The highly suspect analytical technique involved the use of one

set of price forecasts to analyze two of three alternatives for the future handling of the

NPRs. DOE then used higher price assumptions when evaluating a third alternative.

Apparently the third alternative -- creation of a government corporation to take over the

NPRs -- was the alternative favored by those preparing the report. It is quite amazing that

the DOE leadership would allow such an biased analysis to be issued.

2. Federal agency estimates of savings from potential Federal Energy Management

Program (FEMP) projects. DOE issued a price forecast in November 1995 10 that Federal

agencies and certain private sector organizations apparently are required to use during the

next year to evaluate FEMP projects. The forecast was rendered obsolete by EIA's energy

price forecast issued in January -- two months after the DOE/Commerce forecast.

3. Questionable claim of "energy cost savings " by a lobbying organization. A November

1995 report by American Council for an Energy Efficient Economy includes a claim that

"appliance standards already adopted will save consumers $132 billion (i.e., energy cost

savings minus the increased first cost) over the lifetime of products purchased by 2030.»11

Any estimate of "energy savings" during such a long period of time (some 40 to 55 years,

including the life of the appliances) is unlikely to be valid. Information in the report suggest

9 U.S. Department of Energy, Organizational Alternatives for the Naval Petroleum and Oil Shale Reserves, April 1994.

10 Energy Price Indices and Discount Factors for Life-Cycle Cost Analysis 1996, NISTIR 85-3273-10 (1095), prepared

by the U.S. Department of Commerce for U.S. DOE, Federal Energy Management Program.

11 American Council for an Energy Efficient Economy, National Appliance Efficiency Standards: Cost-Effective Federal

Regulations, November 1995, p. 6.

FLUORESCENT LAMP BALLASTS WORKSHOP JUNE 20, 1996 COMMENT 0I
-8-

that the estimate was based on energy price expectations that are at least three years old.

The $132 billion energy cost savings estimate undoubtedly would be much lower if it were

based on ETA's latest, sharply reduced energy price forecast. The estimate would be even

lower if EIA had reflected in its forecast that reductions in electric rates that are almost

certain to occur as the electric industry becomes more competitive.

These three examples illustrate the need for the Congress to be very wary of analyses, claims and

justifications presented by the DOE/Contractor Complex.

FLUORESCENT LAMP BALLASTS WORKSHOP JUNE 20, 1996 COMMENT 0I