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BPA Mid-Columbia Customers Favor Montana/Idaho Plan by Mike O'Bryant Columbia Basin Bulletin - October 18, 2002

Support for a Montana/Idaho-led plan to alter dam operations that was approved for public comment this week by the Northwest Power Planning Council has been evident during the Bonneville Power Administration's Financial Choices public process this spring and summer.

Mid-Columbia irrigators and a handful of BPA public utility customers began raising the issue that providing higher flows and spilling water at dams to aid juvenile salmon migration might be taking water from crops and reducing the amount of electricity the federal hydroelectric system produces with little benefit for salmon.

This spring and summer, BPA held a series of public meetings to discuss the financial choices it identified to correct a projected revenue deficit that Bonneville estimated would exceed $1.2 billion through fiscal year 2006. At the time, BPA said its financial problem was caused by reduced demand, low wholesale prices and power purchase contracts with Enron at high prices, among other causes. It asked its customers and other parties to comment on five potential financial paths

As early as April, a few of the power marketing agency's public utility customers had begun questioning the value of continued spill at federal dams and calling for BPA to look for ways to aid salmon without cutting energy production. That would result in cuts to BPA's salmon recovery budget, as well as an increase in power production, both measures designed to pull BPA out of its apparent financial quagmire.

In testimony delivered to BPA June 11, the Columbia-Snake River Irrigators Association said much of the cost of salmon recovery operations at dams "cannot produce measurable or moderate benefits."

"It is no longer acceptable to sacrifice hundreds of millions-of-dollars simply to honor the gods of the "salmon recovery industry," rather than to identify and pay for the costs of prudent salmon recovery measures," the irrigators said. "BPA should be actively supporting a plan to optimize mainstem hydro operations to benefit both people and fish."

The testimony noted that the current hydro operations not only impact BPA's revenues, they also cost local communities money when those communities are prevented from "acquiring new water rights due to the scientifically groundless flow targets."

In testimony it delivered to BPA in September, the irrigators contrasted the $1.5 billion the agency said it spent for fish and wildlife in fiscal year 2001-2002 to the agency's projected deficit through 2006.

"In 2001 alone, the agency allowed fish operations costs to exceed the forecast 2002-2006 revenue deficit by almost a factor of two," the irrigators said. "This level of cost -- regardless of any conceivable ESA obligations -- is totally unacceptable." They said that under a power emergency declaration, those costs should not have been allowed.

To avoid further rate increases, they suggested that Bonneville notify both the Council and the National Marine Fisheries Service that they have 60 days to provide BPA with a list of priority funding measures for Columbia River dam operations.

Steve Eldrige, chief executive officer at the Umatilla Electric Cooperative in Oregon, said in his written testimony that BPA should restore foregone hydropower revenue by "acting on the growing scientific evidence that spill and flow augmentation does not help salmon."

He said BPA could restore as much as 1,000 MW to the power system if it "aggressively" ramps down flow augmentation to restore as much water to generation, "while not reducing fish passage survival." In addition, he suggested that BPA moderate spill levels by installing surface collectors like those tested this summer at Lower Granite Dam on the Snake River.

"There is a growing body of evidence that fish recovery measures, like spill, is not effective," Eldrige said at a Portland Financial Choices meeting in August. "In the last rate case, you included all salmon recovery measures and breaching of dams: that was ridiculous. When you made those promises, you also promised public power that you wouldn't raise their rates. That's the promise I want you to keep." He added that the fish and wildlife program was costing jobs in northeast Oregon where irrigation is needed to produce crops.

Dan Gunkel, president of the Klickitat County PUD Board of Directors in Washington, echoed that BPA's financial woes are contributing to high unemployment and a heavy reliance on the "strained social safety net." He said BPA should consider the Montana and Idaho proposals as a way to address the "politically charged issue of the rate impacts of fish and wildlife endeavors."

Roberta Weller, manager of Public Utility District No. 1 of Ferry County in Washington, pointed to BPA expenses on fish and wildlife programs and said in her testimony: "Good grief! Cut that in half and you'll still be doing a good job. The waste is astronomical in those programs and we all know it."

However, while most public utilities that testified in the Financial Choices process recommended internal cost controls and deep cuts to BPA's expenditures, they did not go so far as to push the Montana and Idaho agenda. Instead, their general message was that fish and wildlife programs are a BPA obligation, but like all BPA programs, efficiencies should be sought.

Late August comments by Northwest Requirements Utilities, an organization that includes both public and privately owned utilities, specifically pointed to the Montana and Idaho proposal that "would substantially reduce the economic impact of flow augmentation and spills." Without "impacting on overall life-cycle survival for listed salmon and steelhead populations," they estimated such a strategy would reduce power costs or increase revenues by about $50 million in a normal water year while resulting in increased survival.

However, NRU goes on its testimony to say that it does not support cuts to program measures based on "good science, and that are included as mitigation measures in the biological opinion," but it does suggest a review of overhead costs for such programs.

One program would likely see cuts is the power marketing agency's fish and wildlife obligations, but Paul Norman, BPA's Vice President of the Power Business Line, said at the agency's August meeting that those cuts would come from efficiencies, while BPA still would plan to meet the performance standards outlined in the National Marine Fisheries Service 2000 biological opinion.

During its Financial Choices meetings, BPA officials outlined five alternatives or financial tools for the public to consider, none of which would be used in whole and some which the agency would resist. They are:

• Let the rate mechanisms play out over the remaining years of the agency's rate period (through FY2006), including cutting costs.
• Cut costs to the bone, including costs that would put programs at risk and let rate adjustment mechanisms (CRACs) make up any difference.
• Increase the risk the agency would not make its annual U.S. Treasury payment.
• Borrow to push the problem into the future.
• Make a one-time rate adjustment that would amount to about a 38 percent rate increase.

According to BPA's Mike Hansen, the agency is reviewing all the comments it received during the Financial Choices process and will make a decision Nov. 15 about how much of each one of the five financial tools it can use.

"That will give us a strong indicator of where we are financially," Hansen said. However, he doubted that BPA would announce at the same time whether a safety net CRAC would be needed. That would more likely be decided after more analysis in mid- to late December. "If we decide we need to trigger the safety net CRAC, we would begin a public process in January."

That process, he said, would last a minimum of 40 days. A final decision on the CRAC would occur in May 2003.

Related Sites:
Bonneville Power Administration: www.bpa.gov

Related Pages:
Power Council Plan Calls for Releasing Less Water for Fish by Jonathan Brinckman, The Oregonian, 10/19/2
ID & MT Seek Reduced Water Spills for Columbia Salmon by Jonathan Brinckman, The Oregonian, 10/16/2
Power Council Votes on Proposals for Changing Mainstem Operations by Bill Rudolph, NW Fishletter, 10/22/2
Council Proposes Changes to Mainstem Operations by Barry Espenson, Columbia Basin Bulletin, 10/18/2
Dam Operators Propose Changes in Fish Spill by Mike O'Bryant, Columbia Basin Bulletin, 10/25/2