Detailed Information on the
Southeastern Power Administration Assessment

Pursue funding alternatives/proposals, i.e. net zero/receipt financing, to reduce Southeastern's appropriation requirements while creating a stable budgetary resource to provide for annual operating costs.

Adopt Consistent performance measures for use and reporting by PMAs to ensure opportunities to benchmark and identify best practices for program operation.

In 2005 Southeastern updated its long term goals and targets and uses them to evaluate agency performance and allocate budgetary resources. Long-term goals are subject to change in order to address evolution in the technological, regulatory, and political environment. In 2004 Southeastern developed an outcome goal to measure its cost of power in relation to industry which supports OMB requirement to measure key performance issues and identify directly with the Administration's mission.

Southeastern will continue to review its program by working with stakeholder groups and developing recommendations to improve its power marketing functions.

The Administration will develop and collect data on efficiency measures comparable to those used by private industry.

Southeastern's management team will develop recommendations designed to help the program recover its costs and fully repay its annual repayment responsibilities.

Southeastern has developed a plan to repay any purchase power and wheeling expenditures made through the Continuing Fund within one year.

Measure: Percent of total repayment on the cumulative Federal investment

Explanation:This measure tracks Southeastern's performance in reaching 47% repayment of the cumulative Federal Investment by 2017 based on average water conditions.

Measure: Repayment of Federal Power Investment

Explanation:Repay the Federal Investment within the required repayment period.

Measure: Regulatory Compliance

Explanation:Southeastern Power Administration (SEPA) complies with the North American Electric Reliability Council and the Southeastern Electric Reliability Council operating policies and standards as a foundation for its operations reliability program. Maintaining this status is a long term objective for SEPA.

Measure: System Reliability Performance

Explanation:CPS 1 and 2. Meet North American Electric Reliability Council (NERC) Control Performance Standards (CPS) of CPS1>100 and CPS2>90 and meet or exceed industry averages. CPS1 measures a generating systems performance at matching supply to changing demand requirements and supporting desired system frequency in one minute increments. CPS2 measures a generating systems performance at limiting the magnitude of generation and demand imbalances in ten minute increments.

Is the program purpose clear?

Explanation: Southeastern's mission is to market Federal hydroelectric power at the lowest possible cost, as widely as possible, giving preference to public bodies and covering all costs of producing and transmitting power including the repayment of principle and interest.

Evidence: Section 5 of the Flood Control Act of 1944 (16 U.S.C. 825s)

Does the program address a specific interest, problem or need?

Explanation: Southeastern is responsible for disposing of surplus power generated from Federal dams built for multiple purposes including navigation, flood control, fish and wildlife, recreation, and power. Power is marketed in 11 southeastern states --Georgia, South Carolina, North Carolina, Virginia, West Virginia, Tennessee, Kentucky, southern Illinois, Mississippi, Alabama, and Florida.

Evidence: Southeastern markets and delivers about 5 billion kilowatt-hours of energy and over 3 million kilowatts of capacity to 306 preference customers in 11 southeastern states. Southeastern's hydropower, combined with power from other suppliers, provides for the power needs to millions of consumers in the Southeast.

Is the program designed to have a significant impact in addressing the interest, problem or need?

Explanation: Southeastern provides peaking power delivered from 23 hydroelectric projects in four regional systems operated by the U.S. Army Corps of Engineers. The power is delivered through wheeling arrangements made with neighboring utilities.

Evidence: Southeastern's hydropower is an integral part of the regional power grid and has a significant impact on power supplies in the Southeast.

Is the program designed to make a unique contribution in addressing the interest, problem or need (i.e., not needlessly redundant of any other Federal, state, local or private efforts)?

Explanation: The generation and transmission of power is a well developed technology , largely provided by municipal and independently-owned utilities across the country. This federal function could be performed under contract or through non-federal ownership of generation capacity. Southeastern's program contributes to the regional energy supply, is marketed largely to rural entities and generally operates at times of peak load, to offset higher-cost alternative power. Reliability is enhanced due to instant operation of hydroelectric plants during peak load times.

Evidence: Hundreds of utilities across the country provide power to consumers.

Is the program optimally designed to address the interest, problem or need?

Explanation: Southeastern benefits from subsidized loans that place part of the cost of hydrosystem construction on the Treasury. In addition, application of preference in the sale of power creates inefficiencies and restricts market activity. Market pricing of power and use of auctions would improve opportunities for more efficient operations. Southeastern also conducts a purchase power and wheeling (buying power and transmitting it over leased transmission lines) program that, to some degree, duplicates available private sector services. Southeastern believes this program enhances the value of its power though it does not capture that value in its customer rates.

Evidence: Various GAO reports discuss the cost of the SEPA to the goverment. See GAO/RECD 97-48,GAO/AIMD97-110 and GAO/AIMD 00-114.

Does the program have a limited number of specific, ambitious long-term performance goals that focus on outcomes and meaningfully reflect the purpose of the program?

Explanation: Southeastern's statements of goals, in sections II and IV, do not focus on outcomes and are of insufficient quality to rate a yes. Southeasrtern has only extended its short-term goals to the long-term. Southeasterns justification is noted below. In accordance with FERC regulations, Southeastern's long-term goals and performance is reviewed annually and compared to its mission. Southeastern also works closely with the Corps of Engineers on developing a 10-Year Maintenance Plan for the hydroelectric projects. The plan is based on input from numerous sources. Southeastern stays abreast of the changing utility industry by participating in the Tri-state Water Compacts, the regional Transmission Organizations, and FERC's Open Access Transmission Orders. This participation, compliance, and communication helps Southeastern meet long-term goals and requirements.

Evidence: Southeastern Power Administration Strategic Plan, DOE Energy Resources Strategic Objective ER-9. FY 2004 Congressional Budget Request, various FERC orders

Does the program have a limited number of annual performance goals that demonstrate progress toward achieving the long-term goals?

Explanation: Southeastern is committed to maintaining reliability by meeting or exceeding the North Amerncan Electric Reliability Council's (NAERC) compliance ratings, and establishing and meeting annual planned cost payment targets for each Federal Power System.

Evidence: FY 2004 Congressional Budget Request, DOE Energy Resources Strategic Objective ER-9-2, Southeastern Power Administration Strategic Plan. Southeastern did not meet its FY 2002 debt repayment target.

Do all partners (grantees, sub-grantees, contractors, etc.) support program planning efforts by committing to the annual and/or long-term goals of the program?

Explanation: Southeastern works closely with the U. S. Army Corps of Engineers and customers to ensure as much reliable power as possible is generated at the hydroelectric projects and delivered to customers and to work toward the repayment of Federal investment with interest. Southeastern also coordinates with other Federal and State agencies and stakeholders to address the competing uses of water issues.

Evidence: U. S. Army Corps of Engineers, Preference Customers, Hydropower Conferences, Quarterly Customer Meetings, Meetings with competing water users

Does the program collaborate and coordinate effectively with related programs that share similar goals and objectives?

Explanation: Southeastern works closely with the other Power Marketing Administrations, the Corps of Engineers, the National Electric Reliability Council, Southeastern Electric Reliability Council, Virginias Carolinas Electric Reliability Council, the Southeastern Federal Power Customers, Southeastern Federal Power Alliance, and Team Cumberland regarding initiatives and other pertinent issues that impact SEPA's customer organizations and goals to market power and ensure reliability of the power grid.

Evidence: PMA Washington Liaison Office, the Southwestern Power Administration, the Western Area Power Administration, NERC, and other regionsal reliability councils, the Corps of Engineers, Southeastern Federal Power Customers, Inc., Southeastern Federal Power Alliance, Team Cumberland.

Are independent and quality evaluations of sufficient scope conducted on a regular basis or as needed to fill gaps in performance information to support program improvements and evaluate effectiveness?

Explanation: Southeastern's financial statements, along with the power portion of the U. S. Army Corps of Engineers' are independently reviewed annually by a contract auditing firm. Southeastern's rate actions are independently reviewed and approved by FERC. Southeastern also participates with the other PMAs in a cyber security peer review to ensure computer systems comply with the Government Information Security Reform Act. In addition, Southeastern receives periodic management reviews from the General Services Administration, the Department of Energy, and the General Accounting Office.

Evidence: Independent audit of the Southeastern Federal Power Program for FY 2002 and FY 2001, dated January 15, 2002, Information Security Reform Act/Peer Review of Cyber Security, Department of Energy, General Services Administration, General Accounting Office, Control Area Reviews, NERC, SERC, Office of Personnel Management, Summary Management Review, FERC filings, Inspector General Reviews

Is the program budget aligned with the program goals in such a way that the impact of funding, policy, and legislative changes on performance is readily known?

Explanation: Southeastern's budget supports Southeastern's long and short-term performance goals and is based on Southeastern's best estimate of its program needs. Funding changes could substantially alter Southeastern's ability to meet its performance goals and objectives.

Evidence: FY 2004 Budget Request

Has the program taken meaningful steps to address its strategic planning deficiencies?

Explanation: Southeastern annually prepares a Strategic Plan under the guidelines of the Government Performance and Results Act. Also, power rates are reviewed and re-evaluated on an annual basis in order to meet repayment goals. Unforeseen deficiencies are identified from reviews of prior year operations and corrected by Southeastern in order to meet performance goals and objectives. Southeastern publishes Strategic Plan updates that show its performance goals and lists all other agency goals and objectives.

Evidence: FY 2002 Strategic Plan

Does the agency regularly collect timely and credible performance information, including information from key program partners, and use it to manage the program and improve performance?

Explanation: Southeastern collects data on water conditions, market conditions, generation, load unit maintenance, power schedules, power outages, budget execution, financial management, and other project management tools used to direct Southeastern's activities.

Evidence: Various reporting and data collection studies, including NERC and SERC

Are Federal managers and program partners (grantees, subgrantees, contractors, etc.) held accountable for cost, schedule and performance results?

Explanation: Individual Employee Performance Agreements are completed annually, reviewed semi-annually by management, and signed by Southeastern's Administrator. Southeastern has formed teams to achieve goals and to accomplish its mission. These teams establish goals that are reviewed and evaluated by senior management. In addition, Southeastern's Administrator signs his own Individual Performance Agreement with the Secretary of Energy. Southeastern's Strategic Plan is evaluated annually and signed by the Core Team and the Administrator.

Evidence: Individual Performance Agreements, Team Performance Evaluations, Strategic Plan

Are all funds (Federal and partners') obligated in a timely manner and spent for the intended purpose?

Explanation: Southeastern's funds are obligated in a timely manner. Unobligated and uncosted balances are minimal, and fund controls are in place to ensure all funds are spent for their intended purposes. Fund control procedures are independently reviewed on an annual basis.

Evidence: Independent audit of the Southeastern Federal Power Program for FY 2002 and FY 2001, dated January 15, 2002

Does the program have incentives and procedures (e.g., competitive sourcing/cost comparisons, IT improvements) to measure and achieve efficiencies and cost effectiveness in program execution?

Explanation: Southeastern uses cost comparisons and competitive bidding procedures following the Federal Procurement Regulations for all program purchases and improvements. Southeastern carefully reviews and prioritizes all purchases in order to successfully accomplish the agency's goals and objectives.

Evidence: Federal Procurement Regulations, Budget formulation reports

Does the agency estimate and budget for the full annual costs of operating the program (including all administrative costs and allocated overhead) so that program performance changes are identified with changes in funding levels?

Explanation: Southeastern's budget includes most annual costs required for operating its program but assumes some debt subsidies. Southeastern's funding for staffing and overhead-related costs are included in Program Direction. Purchase Power and Wheeling costs are funded through the use of revenues and alternative funding mechanisms. Repayment studies are reconciled to financial statements annually in order to ensure all administrative costs are included.

Evidence: Budget formulation reports, Rate Studies See also GAO/AIMD Reports 96-145 and 97-110

Does the program use strong financial management practices?

Explanation: Southeastern's financial statements are independently reviewed on an annual basis. No material internal control weaknesses were reported by the auditing firm in FY 2001. Southeastern uses audit reports and its own internal reviews to make improvements to financial operations.

Evidence: Audit of the Southeastern Federal Power Program financial statements for FY 2001 and FY 2000, dated January 15, 2002

Has the program taken meaningful steps to address its management deficiencies?

Explanation: Southeastern recruits and maintains highly qualified employees. Business systems are continuously reviewed, improved, and upgraded to ensure all goals and objectives are met. For example, Oracle Financials are used to maintain Southeastern's accounting system. All business systems are reviewed at Southeastern to ensure sound business practices are followed.

Evidence: DOE Order 3335.1C, Oracle Financials, various other business systems

Has the program demonstrated adequate progress in achieving its long-term outcome goal(s)?

Explanation: Southeastern has been unable to describe long term goals. The goals identified below, that Southeastern has proposed, are not long term goals, but rather are extensions of short term goals. Southeastern needs to continue its effort to define long-term output oriented goals.

Evidence:  

Does the program (including program partners) achieve its annual performance goals?

Explanation: Southeastern's annual performance objectives are met through its mission to market Federal hydroelectric power at the lowest possible cost. Southeastern also meets its repayment requirements in a timely manner.

Evidence: Of the $1.6 billion power investment, Southeastern has repaid $632 million. Audit of the Southeastern Federal Power Program financial statements for FY 2001 and FY 2000, dated January 15, 2002.

Does the program demonstrate improved efficiencies and cost effectiveness in achieving program goals each year?

Explanation: In order to meet goals, Southeastern must continue to improve its standards in the ever-changing utility environment. The Southeastern Power Administration continues to meet its goals to market hydroelectric power by adjusting to severe drought conditions, adverse market conditions, and/or unit outages. Preference customer contract requirements and obligations are continually met. Southeastern continues to meet or exceed NERC standards for power reliability requirements, and continues to be below the industry average for safety performance standards.

Evidence: Annual Performance Standards, NERC Standards, Customer Contract Reviews

Does the performance of this program compare favorably to other programs with similar purpose and goals?

Explanation: Southeastern is comparable to the other PMAs in its ability to meet long and short-term power marketing obligations to market and deliver reliable hydroelectric power at the lowest cost possible, even in adverse water conditions. In addition, Southeastern and the Corps compare its hydroelectric facilities to privately-owned facilites throughout the Nation, focusing on operations, maintenance, and reliability issues.

Evidence: Annual Performance Plan for PMAs, Rate Payment Schedules, Customer Contracts, Southeastern/Corps Benchmarking Program

Do independent and quality evaluations of this program indicate that the program is effective and achieving results?

Explanation: Southeastern's activities are reviewed annually by an independent audit firm with no adverse findings reported. The annual audited financial statements and operating performance information is made available to all interested parties. Southeastern's rate-setting activities are open to public participation, and are reviewed and approved by FERC. FERC approves private and public sector rates and would not approve either unless it judged the programs effective and efficient. Recent annual repayment performance has been impacted by drought and abnormal market conditions; however, the long-term repayment progress complies with that which is required by law.

Evidence: Audited Financial Statements, Repayment Studies and Reports, Federal Register Announcements, Annual Performance Plan, FERC