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BPA Hoping Spill, Turbine Changes Help Meet Revenue Goals by CBB Staff Columbia Basin Bulletin - March 19, 2004

Hydro system revenue enhancements -- such as those produced potentially through a reduction in fish passage spill and changes in turbine operations -- appear to be key to Bonneville Power Administration meeting its goal of holding down wholesale power rates in 2005.

The agency, working internally and with its utility customers and other stakeholders, says it has found about $87.4 million in cost savings in fiscal years 2004 and 2005 from what it expected to spend when a rate increase was being developed last year. The increase, a safety net cost reduction adjustment clause, was imposed last fall for 2004. The SNCRAC is triggered if BPA has missed a payment to Treasury or other creditors, or if BPA forecasts a 50 percent probability that it will miss such a payment during the current fiscal year.

The Net Revenue Improvement Sounding Board was formed recently by BPA to involve utility interests, conservation groups and others in the task of finding $100 million or more in reduced costs to assure the SNCRAC won't have to be imposed again.

That decision will be made in August, BPA CEO Steve Wright told the board Tuesday.

The $100 million goal was part of a proposed settlement agreement with the region's utilities in lawsuits over the level of BPA benefits going to the residential and small-farm consumers of the region's investor-owned utilities. That settlement agreement foundered in January, but BPA retains the goal. Paul Norman, BPA senior vice president, Power Business Line, told the board his agency would like to exceed that $100 million target.

The agency has focused on 10 categories of costs and revenues. The largest single project savings from costs estimated for the 2004 SNCRAC rate case is $10.8 million for the ongoing Trojan nuclear plant decommissioning.

The largest category is an estimated $35.7 million reduction in interest expense in 2004 and another $30 million in 2005. The largest part of the savings in both years (nearly $20 million in 2004) is because the "service date" for numerous Columbia River Fish Mitigation program projects have been pushed into out years. Most of those "mitigation analysis" or research projects won't be officially in service until 2010.

Bonneville does not begin paying the interest or principal on those capitalized projects until they are in service. During the rate case for the 2004 SNCRAC it was estimated that the interest on CRFM projects would total $234 million. The estimated for 2004 has now dropped to $214 million. CRFM funding for research and capital construction at eight mainstem Columbia/Snake river federal dams is appropriated by Congress. BPA repays that "loan" from the U.S. Treasury as part of its obligation to mitigate for hydrosystem impacts to fish and wildlife.

Most of the other interest savings, $13 million in 2004, represent borrowing at interest rates that were lower than anticipated during the SNCRAC proceedings.

The spill and turbine operational issues are two fish related operations that Bonneville hopes will push it past its $100 million savings goal.

BPA and the Corps of Engineers are working on a plan that would reduce the level of spill during the July-August period this summer at four mainstem hydro projects. The project is being undertaken to see if a similar level of survival can be achieved with reduced spill. It is intended that certain "off-set" actions will be implemented that will produced fish survival gains that counterbalance any losses caused by the spill reduction.

Federal officials say the final summer spill plan is still being crafted. It was announced last week that the plan will be unveiled March 26. A final decision on whether to implement the plan is expected in April.

BPA has estimated that a total elimination of the summer spill program would gain, on average, $77 million in revenues if the Corps, which operates the dams, channels the water through power generating turbines instead of over spill gates. The spill is mandated by NOAA Fisheries to help in-river migrations of salmon and steelhead listed under the Endangered Species Act. NOAA would have to sign on to any spill reduction plan.

The proposal will specify what level of spill reduction would be implemented, according to BPA's Greg Delwiche. Even something less than a total cessation of summer spill would help BPA's bottom line considerably.

Regional executives for BPA and other federal agencies endorse a plan to test the operation of turbines at McNary Dam at levels other than the "within 1 percent of peak efficiency" requirement of the BiOp. BPA does not believe the shift, which will allow the Corps to push more water through the turbines, will have an impact on the survival of fish that pass the dam via the turbines. And it would bring on average about $7-10 million in additional revenue to BPA's coffers if a spring-early summer operation is implemented.

Delwiche said the turbine operational shift is a controversial issue. But that a review of available research done by the University of Washington's John Skalski shows "unequivocally" that maximum turbine survival could well be outside that 1-percent band. A limited Corps study in 2002 did indicate that peak survival was outside the 1 percent of peak efficiency range.

Related Pages:
UW Prof Debunks Turbine Efficiency/Fish Survival Assumption Mike O'Bryant, Columbia Basin Bulletin, 2/21/3
New Fish Studies Suggest Cheap Survival Boost Possible at Some Dams Bill Rudolph, NW Fishletter, 11/26/2
Fish Managers Challenge Change in McNary Operation Mike O'Bryant, Columbia Basin Bulletin, 3/19/4