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Lower Than Expected Hydro Revenues, Higher Fish/Wildlife Project Spending has BPA Seeking Cutbacks by Staff Columbia Basin Bulletin, September 14, 2012

The Bonneville Power Administration this week, in a continuing saga, pressed forward with its call for frugality amidst unexpectedly high invoice totals for fish and wildlife work and, by its projections, lower than expected returns from the hydro power generated in the Federal Columbia River Power System.

"We're way over on the expense side of things," BPA vice president for Environment, Fish and Wildlife Lorri Bodi told the Northwest Power and Conservation Council Tuesday. The Council invited those involved -- Bonneville, fish and wildlife project sponsors and BPA customers to Astoria, Ore., Tuesday to discuss a budget situation that has seen spending above what was anticipated and lower than expected revenues.

BPA, which markets power generated in the Northwest's federal power system, has obligations under a variety of statutes and treaties to fund with ratepayer revenues mitigation for hydro impacts to fish and wildlife in the region.

The power marketing agency says that fish and wildlife spending will overshoot budget levels prescribed in rate-setting proceedings by as much as $30 million for fiscal years 2012 and 2013 combined.

The fish and wildlife spending is in response to Northwest Power Act, Endangered Species Act, treaty and other obligations. BPA is also obligated to deliver energy to Northwest customers at cost, which includes fish and wildlife expenditures.

BPA officials are now in discussions with project sponsors -- states, tribes and other entities -- regarding cutbacks in work now under contract through the NPCC's Fish and Wildlife Program.

BPA earlier this summer sent letters to all of its contract holders asking them to hold the line. The so-called "Big 6" has been asked to target from 10 to 15 percent reductions in budgets they hold for 2012-2013.

The Big 6 includes "non-accord" entities with the largest combined monetary commitment from BPA for the period -- the states of Oregon and Washington, the Nez Perce Tribe, the Kootenai Tribes of Idaho, the Pacific States Marine Fisheries Commission and the U.S. Fish and Wildlife Service.

"Accords" signed in 2008 by other states and tribes carry promises of certain levels of fish and wildlife funding above what is obligated through the NPCC program in exchange for promises that the contractors will not buck federal agencies overall plan for assuring that the hydro system does not jeopardize the survival of salmon and steelhead that are protected under the Endangered Species Act.

Bodi stressed that the agency was in discussions with Accord partners (such as the states of Idaho and Montana, Colville, Shoshone-Bannock, Umatilla, Warm Springs and Yakama tribes) as well about spending reductions necessary to bring overall 2012-2013 spending into line. Smaller contract holders are also being asked to reduce spending, and Bonneville itself has reduced program overhead by at least 5 percent so far, Bodi said.

The heightened spending so far in Fiscal Year 2012 (which ends Sept. 30) likely involves a planned ramp up that has more than caught up with itself. That ramp up includes implementation of fish and wildlife work outlined in NOAA Fisheries' 2008 ESA biological opinion for the Federal Columbia River Power System and in memorandums of agreement (Accords). The Accords themselves represented $100 million in additional spending over their 10-year lifespan.

"It started slower than expected," BPA Fish and Wildlife Program Director Bill Maslen said of accord implementation and implementation of additional fish recovery measures called for in the FCRPS BiOp. Now more of that work is on the ground.

Overall the "expense" budget, with a recent $13 million increase approved by BPA, is set at an average of about $246 million per year in 2012 and 2013.

Adding to the budget urgency is the fact that revenues derived from the sale of excess energy to customers outside the region is much diminished. An estimate made earlier this year is for surplus sales that would be nearly $160 million below projections. That variable has improved a bit but is still well below expectations when revenue-cost estimates were made for the current power rate period, said BPA's Bryan Mercier.

"Honestly, we saw this coming but not as fast as it came upon us," Bodi told the Council. Spending for fiscal years 2012-2013 are expected to be $30 million more than budgeted.

Spending in any given year has spending historically has been 7 to 10 percent less than contracted, with some projects getting bogged down along the way and not spending their full allotment. The 2012-2013 budgets relied on that history.

"It worked… until this year," Bodi said. "We see the pattern of increased spending across all components of the fish and wildlife program."

Project sponsors "are using more of their contract budgets" than they have in the past, she said.

BPA has been in discussions through the summer with project sponsors in an effort to find projects that might be deferred, or reduced in scope.

"Overall we're having pretty positive discussions with project sponsors," Bodi said.

Invited panels representing project sponsors, and BPA power customers, acknowledged cuts are necessary in order to balance budgets this year and next. Fish and wildlife project sponsors stressed, however, that cuts must be made carefully so as not to compromise long-term biological goals.

Oregon Council member Bill Bradbury protested that while Oregon Department and Fish and Wildlife cuts seemed to be "required reductions" of 10-15 percent, while sponsors of Accord projects had no such mandate.

Bodi said, given discussions to date, that BPA expected reductions about 10 percent overall from Accord projects while allowing the agency to stay within the legal parameters of the agreement.

"We are trying to be fair and equitable," Bodi said, adding all of the project sponsors, and BPA itself, must contribute to the spending reduction effort.

Pacific States Marine Fisheries Commission Executive Director Randy Fisher stressed that cuts, which are described by Bonneville as temporary, must be made carefully to assure the long-term viability of work products. The PSMFC is involved with fishery managers in a number of projects aimed at better utilization and protection of fishery resources, including the PIT tag and coded wire tag information systems, the Columbia pikeminnow management program, the Streamnet data center, smolt monitoring and other programs.

All are labor intensive, with about 70 percent of costs on average for personnel, Fisher said.

Budget cuts could have "direct effects on any of these programs," Fisher said.

The USFWS' Mike Carrier said that BPA's partners, the project sponsors, must be allowed to determine where they can achieve savings while avoiding cuts that cause long-term, negative impacts on the Council's fish and wildlife program.

The Idaho Department of Fish and Game's Paul Kline also said that cuts might be necessary now, but care should be taken to limit long-term impacts.

The Washington Department of Fish and Wildlife's Guy Norman told the Council and BPA officials that his agency has been involved in a self-assessment in search of the temporary savings. The goal is to find savings without compromising the biological integrity of projects aimed at meeting Council program and BiOp goals.

Like involved states, tribes, PSMFC and other sponsors, WDFW wants to find areas to save without forcing staff reductions or stopping critical projects and research. Like other sponsors, WDFW plans to reduce travel and training costs, defer equipment purchases when possible and perhaps delay analysis and reporting of research data (rather than delay the actual collection of data that might be critical to project outcomes).

The Oregon Department of Fish and Wildlife has likewise gone through an internal process to identify savings and efficiencies, according to the state agency's Tom Rein.

The aim is identify "work that can be deferred without long-term consequences," he said.

The Nez Perce Tribe's Dave Johnson said "we're committed to doing what we can. It's a tough situation."

"We will try to shape what comes out," he said, while adding that it is BPA's process, not the tribes', that is at fault. The "flurry" of Accord and BiOp activity caught Bonneville short.

"We followed the process. Every one of our projects has been approved, in some cases many times," Johnson said.

"We have abided by the process" and have never overspent, he said.

Bo Downen said that in five years he has been working for the Public Power Council, which represents BPA power customers, he has seen the fish and wildlife budget jump from $140 million per year to almost $250 million per year.

"These are big numbers," he said. The NPCC "needs to take some hard looks at the fish and wildlife program" and try to better control increases. The NPCC and staff, and its Independent Scientific Review Panel, evaluate all proposed projects and make funding recommendations to Bonneville. The PPC represents the interests of municipal utilities, public and people's utility districts, and rural electric cooperatives.

Northwest RiverPartners' Terry Flores said her organization and its members endorsed the funding increases for the Accord and BiOp work because of a belief in the potential biological benefits and because of the collaborative spirit achieved during the development of those products.

"That wasn't easy, said Flores, whose organization represents power customer groups ranging from utilities to business to the agriculture industry.

"We see a lot of commitments on the table that have yet to be implemented," she said. That said, her organization agrees with the need to make cuts to solve the current budget crisis, and assure efficient and fruitful expenditures in the future.

"We need to do it in a manner that allows us to look customers in the eye," she said.

PNGC Power's Dan James said that the NPCC and BPA must assure that all funded projects have a nexus with the FCRPS, i.e. help solve problems directly attributable to the power system. His organization too supports the collaborative effort to find savings for fiscal years 2012 and 2013.

Bonneville "must abide by its budget," James said. PNGC Power is a Portland-based electric generation and transmission cooperative owned by 14 Northwest electric distribution cooperative utilities with service territory in seven western states (Oregon, Washington, Idaho, Montana, Utah, Nevada and Wyoming).