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Economic and dam related articles

BPA Finalizes Allocation of $500M in
Power Reserves Distribution Clause Funds

by Stephen Ernst
NW Fishletter, January 13, 2023

"BPA is nickel-and-diming the Northwest's iconic fish to extinction,
profiting off of the very dams that are killing the fish..."

-- Mitch Cutter, Idaho Conservation League

Table of Bonneville Power Administration Secondary Revenue, or Surplus Sales (2007-2022) reveals a huge windfall profit in 2022, somewhat related to Putin's invasion of Ukraine. The Bonneville Power Administration announced Jan. 6 that it will stick to the terms of a settlement reached with customers over how to distribute $500 million in overcollected revenues from fiscal year 2022 that triggered BPA's Power division reserves distribution clause.

The decision drew harsh criticism from wild-fish advocates.

In September, the power-marketing agency announced it had reached a settlement in its power and transmission rate cases on how to divvy up $500 million in overcollected revenue from the fiscal year.

The distribution of the RDC is left to the discretion of BPA Administrator and CEO John Hairston, who explained the reasoning behind the RDC allocation in a 56-page letter to the region on Jan. 6.

BPA will distribute $350 million of the $500 million to customers for reducing FY 2023 power rates, while $100 million will go toward debt reduction and revenue financing.

The remaining $50 million will help finance "certain non-recurring maintenance needs of existing fish and wildlife mitigation assets."

The allocation of the $350 million from the Power division RDC to customers for rate relief drew praise from public-power customers, but was harshly rebuked by wild-salmon advocates.

The Idaho Conservation League in a statement described the $50 million for fish as a "meager share" and "a serious failure, as urgently needed salmon and steelhead recovery projects continue to go underfunded and most wild populations of these fish in the Northwest slide closer to extinction."

"Today's decision by BPA and the Biden administration is a failure," ICL Salmon and Steelhead Associate Mitch Cutter said in the statement. "This year, the Administration committed to effective, creative solutions to begin restoring salmon and steelhead to abundance. What we've seen today is more business as usual. BPA is nickel-and-diming the Northwest's iconic fish to extinction, profiting off of the very dams that are killing the fish, and the Administration is letting them get away with it."

The ICL, Great Old Broads for Wilderness and Idaho Rivers United contend that BPA should devote "the entire $500 million" to fish and wildlife mitigation efforts.

National Wildlife Federation plaintiffs suggested that "at least 50" percent of the Power RDC should go to fish mitigation, while the Yakama Nation called for 40 percent of the overcollection to be invested in fish.

Bill Arthur, chair of Sierra Club's Snake/Columbia River Salmon Campaign, said his group was "surprised and disappointed that the Biden administration did not require more of BPA given the commitments made to break from its costly, failed approach that has helped to drive our region's emblematic fish to the brink of extinction."

"BPA continues its historic approach to short-changing imperiled Northwest salmon as they slide toward extinction in no small part due to the fish-killing dams that BPA operates that generated this huge surplus of funds," Arthur said in a prepared statement.

In October, the Public Power Council warned the White House and the State of Oregon to keep their hands off of the $500 million in overcollection revenues.

PNGC Power, PPC, Northern Wasco County People's Utility District, Emerald People's Utility District and Hood River Electric Cooperative said in public comments that adopting staff's proposal is essential to maintain faith and trust between BPA and its customers.

PPC argued in public comments that "single-issue advocates are asking BPA customers to accept a 'lose-lose' dynamic on the inherently variable output of the hydro system."

It added that customers "must receive the benefits of rare good years in order to truly achieve BPA's statutory construct of delivering power at cost for non-profit preference customers."

PNGC said "if customer money is used it should have a clear long-term benefit to customers such as directly reducing our long-term obligations (e.g., lowering long-term debt including [Columbia Generating Station] debt and CGS decommissioning) or creating short-term benefits (e.g., immediate rate relief) or being used for express purposes to preserve and enhance the value of assets such as the [Federal Columbia River Power System] and [Federal Columbia River Transmission System]."

Klickitat Public Utility District said it supported the settlement, "even though we do not in fact agree any funds should be used for fish and wildlife," saying that customers "have paid all fish and wildlife costs as mandated. We paid the rates necessary for Bonneville to be financially sound when costs were increasing and surplus funds were low."

The NW Energy Coalition and the Natural Resources Defense Council argued for at least $50 million to be invested in energy efficiency and conservation programs, saying "BPA is not currently meeting its energy efficiency obligations to the region."

The Northwest Power and Conservation Council has indicated BPA's conservation was 30 percent (150 aMW) below the council's 2016-2020 Seventh Power Plan targets, while investor-owned utilities exceeded their target by 10 percent.

The "RDC application is inconsistent with the [Northwest] Power Act because it does not reinvest any of the revenues in the resource that made the windfall possible: energy efficiency," NWEC and NRDC said in public comments on the proposed decision.

BPA's Hairston said in the administrator's letter to the region that additional investment in conservation could be a "high-value purpose," but is not required.

"BPA has a robust Energy Efficiency program and allocates on average $129 million annually to develop and acquire conservation savings across the region. That program is fully funded and BPA's power rates are set to recover this program's projected costs over the rate period," according to Hairston's response to public comments on the RDC.

Hairston also defended distributing the bulk of $500 million in excess revenues back to customers to help with rates.

BPA's "additional revenue did not change BPA's underlying fish and wildlife obligations," he wrote. "Revenues and costs are not interdependent, and a change in revenue does not create a corresponding change in the agency's underlying obligation to fish and wildlife."

Stated another way, Hairston said because BPA has money to spend does not mean BPA's fish and wildlife mitigation obligations should (or must) also increase.

"While BPA uses funding to address its fish and wildlife mitigation obligations, the availability of revenue does not determine the extent of BPA's fish and wildlife mitigation obligations. Just as a lack of revenue would not decrease those obligations, an influx of revenue does not increase those obligations," he said.

Related Sites:
BPA Response to Comments

Stephen Ernst
BPA Finalizes Allocation of $500M in Power Reserves Distribution Clause Funds
NW Fishletter, January 13, 2023

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