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Power Pays by Lee Hochberg Newshour with Jim Lehrer, July 16, 2001

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LEE HOCHBERG: The Columbia River plateau in Washington State is high desert country, hot and dry, fields of sagebrush and parched hills. There hasn't been much there to fuel an economy... Until now. As California has starved for power, its utilities have come begging for the excess electricity generated by the Columbia's public hydropower dams. There are 29 of them along the Columbia River, from Portland, Oregon, to British Columbia. This one has become a huge moneymaker for Washington's Grant County. Utility district commissioner Tom Flint:

TOM FLINT: We just happened to be at the right place at the right time with surplus power. We're still a little bit in shell shock from that. It's like the ultimate Christmas present.

LEE HOCHBERG: The small county utility that runs the dam was able to sell enough power last year to generate $88 million in profits, that in a sparsely populated county with only 75,000 people.

SPOKESMAN: What are the real-time prices doing?

SPOKESMAN: Up $2.50.

LEE HOCHBERG: Some in the area have gotten wealthy beyond their dreams. Energy traders in neighboring Chelan County work on commission. Two of them earned $285,000 last year, in a place where average income is only $25,000. Grant county trader Jeff Atkinson and his colleagues traded $600 million of electricity for the county in the first four months of this year.

JEFF ATKINSON: You step away from the phone for half an hour and you could've, you know, lost a million dollars or gained a million dollars.

LEE HOCHBERG: What to do with all of the money? Grant County has invested some of it on 20 new diesel power generators. They'll guard against local power shortages, but also give the county even more electricity to sell, with potential profits as much as another $50 million this year. New fiber optic lines are going up across Grant County, partially funded by the power sales. Moses Lake, an outpost of 15,000 known locally for its hot sunshine, plans to have a $70 million fiber network up within seven years-- all of which has unleashed giddiness and unabashed optimism about what the Columbia Plateau could become.

G. J. PIERMAN: I envision Moses Lake, with our power... Low cost and available power, we can ultimately be a sort of digital oasis in an environment not dissimilar to Silicon Valley.

LEE HOCHBERG: 40-year-old G.J. Pierman, together with his father and the golfer Jack Nicklaus, purchased this five- story concrete, windowless building, a former North American aerospace defense command and control facility in Moses Lake. They're turning the site, which Pierman says could withstand a ten-megaton nuclear hit within a quarter mile, into a huge electronic data storage facility. Already, 12 companies have located in the structure, with more expected.

G. J. PIERMAN: Here we are in the war room.

LEE HOCHBERG: The key, Pierman says, is cheap power.

G. J. PIERMAN: We have power, and we have the ability to generate more power. Than opportunity the likes of which history has not seen before. Grant County, in the middle of Central Washington, has the opportunity again to be the Saudi Arabia of electricity.

LEE HOCHBERG: So great is the newfound value of power that with a drought looming, grant county and the Bonneville Power Administration, which markets power from the Columbia's federal dams, are doing whatever they can to keep river water spinning the turbines. They've even asked farmers, who use some of that water to irrigate their fields, to instead let some of their fields run dry. Under western water law, farmers have a property right to Columbia River water. It's pumped through canals. Farmers pay a fee to use it for irrigation. This year, Grant County and the Bonneville Power Administration, or BPA, offered to buy that water back from the farmers so it could spill through the dams and produce more power.

TOM FLINT: We realized that there was more benefit to using the water for power production than there was for growing crops this year.

LEE HOCHBERG: Of the 650,000 acres of irrigated farmland in Central Washington, about 15% is sitting dry this summer. The BPA is paying 700 farmers about $30 million not to farm. The water saved could produce electricity worth $130 million.

SPOKESMAN: You're not in the buyout, are you?

LEE HOCHBERG: Gathering every day at the Martha Inn Cafe in the town of George, Washington, some farmers say the $410 per acre they're getting not to farm helps, because market prices for the crops they would have grown are depressed. Arnie Omlin took the money and let one-third of his sweet corn fields go dry.

ARNIE OMLIN: I like it.

SPOKESMAN: It beats it because the commodity prices are so crappy.

ARNIE OMLIN: I can't go out and go through the motions and pay all these bills and everything and still make anything.

LEE HOCHBERG: But other farmers are leery of the deal.

DON FANCHER: I would no more give up my water rights or water supply than anything. I mean, that's a dangerous, dangerous precedent, and there is so much demand on water today that agriculture better hang on to every drop of it that they've got.

WOMAN: That's right.

LEE HOCHBERG: Some fear turning the local economy upside down to take advantage of power's sudden value will hurt the area in the long run. Erwin Albrecht grows 270 acres of alfalfa just up the road from the cafe. He didn't take the buyback, choosing instead to keep farming.

ERWIN ALBRECHT: If everybody wants to take $400, none of us will be here. Maybe they'll buy the power every year from more and more farmers, and then somebody gets a hold of this and says, "okay, we don't really need the Columbia Basin to farm; we can farm dry land in the Midwest or wherever, or China or wherever."

LEE HOCHBERG: Even Utility Commissioner Flint, himself a farmer, wonders if selling water to cash in on the power gold rush is the start of a slippery slope.

TOM FLINT: I feel bad about the long- range implications this may have for agriculture; that the money is more important than the agriculture, and that's not where I'm at.

LEE HOCHBERG: Ironically, money already has become more important than one other key product of Columbia hydropower: Washington State's $4 billion aluminum industry. For two generations, the river and its dams have been celebrated in song for powering ten aluminum smelters along its shores, smelters that have provided 9,000 of the region's best blue-collar jobs.

PERSON SINGING: While you're a ramblin' river you can do some work for me roll, Columbia won't you roll, roll, roll.

LEE HOCHBERG: Reporter: But now, several companies have shut the smelters down, figuring they can make more money reselling their power than selling aluminum. Kaiser Aluminum laid off more than 1,200 workers at its Spokane and Tacoma plants, paying partial wages while selling its power for a $350 million profit. Company CEO Ray Milchovich says his company didn't do anything wrong.

RAY MILCHOVICH: We think that's good business for our shareholders. We looked at the situation, and it seemed to us that it made no sense to be making aluminum when we could sell power on the open market and obviously do much better doing so.

LEE HOCHBERG: Employees and ratepayer advocates are furious. Jerry Leone manages the Northwest Public Power Council.

JERRY LEONE: Kaiser saw a buck, and it chased it right down, and the devil take the hindermost. They're being a robber baron, is what they are being.

LEE HOCHBERG: In small aluminum towns like Goldendale, Washington, with its own shutdown smelter, some downtown businesses have closed, and hundreds of homes in the community of 3,500 are for sale. It's a far cry from the optimism and promise in river towns nearby that are producing power, and vivid example of the difference in the energy climate between those who have power and those who don't.

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