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Draft Report on Columbia Basin Fish/Wildlife Costs in 2017 Out for Review; $450.4 Million by Staff Columbia Basin Bulletin, May 18, 2018

"Cost of fish operations" were lower in 2017 -- The value of that generation more than offset the fact that
Bonneville lost approximately 210 average megawatts of generation due to operations for fish in 2017.

A draft report to northwest governors on Columbia Basin Fish and Wildlife Program costs in 2017 was released last week for review by the public, with the total program costs coming in at $450.4 million, about 18 percent of the Bonneville Power Administration's power business line costs of $2.465 billion, and accounting for about one-third of the agency's wholesale power rate.

The Northwest Power and Conservation Council at its meeting in Boise last week agreed to release the "2017 Columbia River Basin Fish and Wildlife Program Costs Report" for public review. It is the 17th such report released by the Council and covers the period Oct. 1, 2016 to Sept. 30, 2017, fiscal year 2017. Comments are due by June 29.

Of the total, the cost for the direct-funded program was $254.7 million. That money pays for projects such as habitat improvements, research, and some fish hatchery costs, the Council said in the draft report.

Some $85.2 million were reimbursements to the federal Treasury for expenditures of appropriated funds by the U.S. Army Corps of Engineers, Bureau of Reclamation, and the U.S. Fish and Wildlife Service for investments in fish passage and fish production, including direct funding of operations and maintenance expenses of federal fish hatcheries. The cost of half of Council expenses ($10.8 million) is also included in this category, the report says. The other half of Council expenses is assigned to the Bonneville Power Administration's power business line.

Debt service (interest, amortization, and depreciation) of capital investments for facilities was $121.4 million. This is for facilities such as hatcheries, fish passage facilities at dams and some land purchases for fish and wildlife habitat.

Foregone hydropower revenue -- dam operations that benefit fish but reduce power production and sales -- was $9.6 million. Bonneville's Fish and Wildlife Division considers forgone revenue a result of spill at dams to benefit fish passage, a cost attributable to fish and wildlife mitigation. Without forgone revenue, fish and wildlife costs comprise 17.8 percent of Bonneville's $2.465 billion in total power-related costs.

Not all numbers were additive. In 2017, planned power purchases were down $20.5 million. According to the draft report, BPA buys power in the wholesale market during periods when dam operations to protect migrating fish reduce hydropower generation, such as by spilling water over dams in the spring or storing it behind dams in winter months in anticipation of required spring spill. The negative number for 2017 is an anomaly, the report says.

"Power purchases and forgone revenue have a wide variance from year to year which is caused, in part, by the fact that they are estimated from a model," the report says. "The 2017 Fiscal Year exhibited an unusual and unintuitive result for both replacement power purchases (which are a part of the 4h10C calculation) and forgone revenues. According to Bonneville, one of the reasons these 'cost of fish operations' were lower in 2017 can be attributed to the modeled reservoir operations in the previous year as well as an unusual runoff. Bonneville's calculations show that operations for fish pushed some generation into months with higher power prices, and the value of that generation more than offset the fact that Bonneville lost approximately 210 average megawatts of generation due to operations for fish in 2017."

The $450.4 million does not include the $65.6 million BPA borrowed from the U.S. Treasury in 2017. That includes $5.4 million for program-related (capital) projects, $1.4 million for software development costs, and the $58.9 million appropriated by Congress for associated federal projects as part of the Columbia River Fish Mitigation Program. The costs are all repaid by BPA, so including them in the total F&W costs would double count some investments.

The total also does not reflect a credit of $53.7 million from the federal Treasury related to fish and wildlife costs in 2017 that Bonneville is required to take under Section 4(h)(10)(C) of the Northwest Power Act. The annual credit comprises the obligations of other federal agencies for dam purposes other than hydropower, which Bonneville pays in full. The credit is applied to Bonneville's federal Treasury debt. Subtracting the credit reduces the total FY2017 fish and wildlife costs to $396.7 million.

Fish and wildlife costs account for a significant portion of the rate Bonneville charges its wholesale power customers, the report says. Approximately one third of Bonneville's 2017-2019 wholesale rate of $35.57 per megawatt hour is estimated to be associated with its fish and wildlife program. This includes the estimate of forgone revenue.

The Council is careful to say that BPA provided the cost numbers for FY2017 and that the Council has not independently verified the numbers.

In addition, looking forward to FY2019 and FY2020, the Council said it has found cost savings in its own budget of $206,000 and $428,000 respectively. It did this recognizing BPA's difficult financial situation, it said in a blog by the Council's John Harrison.

The current realities of the West Coast electricity system with inexpensive natural gas, an abundance of renewable power, low prices will challenge BPA in the future, perhaps as never before, the agency's administrator, Elliott Mainzer, told the Council in March. The proliferation of surplus renewable energy, particularly solar power from California, has pushed West Coast wholesale market prices down, often to below the cost of power from Bonneville and many other power wholesalers in the Northwest.

"The Bonneville budget over the next 10 years is somewhat precarious," said Tom Karier, Eastern Washington Council member, at the Council's May meeting in Boise. "We've heard there could be cuts of up to 10 percent in the fish and wildlife budget. So we should think about how we might meet those cuts. If our budget was cut by 5 percent, for example, how would we deal with that?"

Council Chair Jim Yost of Idaho said Council members should examine their own state office budgets "and determine whether we can do more or do better," adding "it's something we need to look at."

The Council's FY2019 revised budget is $11,708,000 and the proposed FY2020 budget is $11,725,000. Both are below the maximum set for the Council in the Northwest Power Act. In past years the Council and Bonneville staff have entered into multi-year budget agreements in order to better plan and stabilize funding levels needed to perform the Council's work. In January 2017, the Council entered into a three-year budget agreement with Bonneville for FY2017-2019, Harrison's blog says. See the FY2019 revised budget

The Council will take comments on the Fish and Wildlife costs report through June 29. Email comments to comments@nwcouncil.org

Related Sites:
Bonneville Power Releases Five Year Strategic Plan, 2018-2023 by Staff, Columbia Basin Bulletin 2/2/18