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Bonneville Explains Last Year's Billion-Dollar Fish Costs by Bill Rudolph NW Fishletter, September 13, 2002

It's now official: BPA spent about $1.5 billion last year on power purchases to make up for fish-related actions. The figure is going into an annual report on fish and wildlife spending that was unveiled at this week's meeting of the Power Planning Council in Spokane.

Sky-high market prices for power accounted for the huge expenditure. If average prices were at early 2000 levels, the agency would have spent about $106 million on the fish-related costs, according to a Sept. 4 NWPPC memo.

Since 1978, the draft report documents $6 billion in BPA fish and wildlife spending, with more than half, about $3.4 billion, spent on a combination of foregone revenues and power purchases to satisfy hydro operations required by NMFS to help migrating stocks of endangered salmon and steelhead. The document says only about $116 million was attributable to foregone revenues from fish-related actions last year.

BPA hydraulic engineer Roger Schiewe told council members how the agency estimated its costs using its monthly computer model. The estimates are required by terms of the 1996 MOA on fish and wildlife spending and is also necessary for BPA to get credit for power purchases.

The model was run two ways, said Schiewe, with and without fish measures. Fish measures change reservoir elevations from normal operating limits and reduce generation through spill at projects to aid fish migrations.

Due to last year's drought, spill was limited after BPA declared a power emergency, which suspended BiOp mandates to ensure the power system's reliability. In May 2001, about 270 MW-months' worth of water was actually spilled for fish; the BiOp would have required 1844 MW-months' worth. Over the migration season, the system only spilled about 20 percent of the BiOp requirement. BPA had earlier estimated that it would have cost the agency over $700 million to satisfy BiOp spill requirements last year.

Using a series of graphs, Schiewe showed how holding scarce water in storage for fish measures affected last year's power operations. He said the 2001-2002 water year began with the federal hydro system at about 85 percent of full capacity, which didn't help matters as the drought worsened.

The system produced about 7000 aMW each month last winter--about 1000 aMW less than it could have if it had not been constrained by fish mandates. By the spring of 2001, when firm energy prices were averaging nearly $300/MWh , the agency was spending millions daily to make up for it.

By June 2001, when prices declined after FERC slapped on the West Coast price caps, fish measures had little to do with actual operations. By September, Dow Jones Mid-C average prices had declined to about $24/MWh.

The draft report to the Council also says that BPA has spent more than $1 billion to implement the Council's fish and wildlife plan. Other costs include debt service on federal bonds to pay for fish passage projects ($957.7 million) and repayment of part of other agencies' fish and wildlife expenses ($582.9 million), primarily the Corps of Engineers.

Since a recent GAO study on fish costs did not include power purchases and foregone revenues for fish-related actions, it pegged Columbia Basin fish recovery costs at significantly less than the draft report discussed last week at the council meeting. The GAO said it could not relate those power costs to any particular activity. But BPA has said the GAO study "grossly" understated the magnitude of its costs and expenditures.

In talking points related to the issue, BPA points out that the GAO's accounting method failed to consider the power agency's unique circumstances as a self-financing entity "that meets its obligations using ratepayer funds, through a combination of direct expenditures, reimbursements, and the costs of replacement power purchases and lost revenues."