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Congressional Hearing Focuses on Power Rates, Fish Costs by Staff Columbia Basin Bulletin, July 14, 2006

The Endangered Species Act is often "used as a tool to drive up costs for our electricity ratepayers," U.S. Rep. Cathy McMorris said during a July 7 congressional oversight field hearing in Pasco, Wash.

The hearing, titled "Electricity Costs and Salmon: Finding the Balance," drew a crowd of nearly 100 people. It was held to take testimony on a bill introduced in Congress by McMorris that would require the Bonneville Power Administration to report direct and indirect ESA costs to each wholesale power customer on a monthly billing basis. BPA markets power generated in the federal Columbia River basin hydrosystem.

BPA has incurred an estimated $7.8 billion in costs for fish and wildlife mitigation activities over the past 20 years and expects costs to be $700 million next year, said Steve Wright, the federal agency's CEO.

Roughly half of the 2007 projection is actual expenditure with the balance including foregone revenues. Hydro operations designed specifically to improve salmon survival, such as spill for fish passage, take away power-generating opportunities and sales.

BPA uses revenues from out-of-region sales of surplus generation to counter costs. The federal power is sold at cost to Northwest utilities and other wholesale buyers.

BPA is obligated under the ESA and the Northwest Power Act to fund Columbia River basin fish and wildlife costs. Wright said the Bush Administration has not yet formulated its position on McMorris' legislation but shared the lawmakers' interest in accountability.

The agency recommendation is a joint reporting of ESA and NWPA costs as a percentage of total power bills. BPA officials have said that it is difficult to assign a particular ESA cost to projects or operations that benefit both listed and non-listed fish.

The fish and wildlife costs "represent more than 30 percent of the rate we charge our 130 public utility customers for federal power," Wright told Eastern Washington Republican Reps. McMorris and Doc Hastings, who co-hosted the hearing. McMorris is vice chair of the House Water and Power Subcommittee.

Wright and 10 others were invited to testify at the hearing. He and the U.S. Army Corps of Engineers' Karen Durham-Aguilera updated McMorris and Hastings on federal efforts to improve the lot of salmon and steelhead listed under the ESA.

Representatives of agriculture, business, education and charitable interests spoke of the burden they bear because of BPA's fish and wildlife costs, which are ultimately passed on to customers. The Nez Perce Tribe's Rebecca Miles and Nancy Hirsh of the Northwest Energy Coalition called the expenditures an investment well worth making.

Eastern Washington's McMorris and Hastings called the ESA an unsuccessful and unreasonable attempt at protecting and restoring imperiled fish stocks.

"No one disagrees with protecting truly endangered species, but the ESA has been misinterpreted and stretched to put species before people at any cost," McMorris said. She said ESA requirements have thrown the regional economic system out of balance. An ESA reform bill that has been passed in the House attempts to restore that balance "through a reasonable approach that makes this process air for all involved."

The region's economic vitality has been built over the past 70 years on the backs of the federal hydrosystem, which affords a reliable energy source, inland navigation, irrigation, flood control and recreation, Hastings said.

"You ratepayers repay the federal Treasury, with interest, for the construction and maintenance of these facilities," Hastings said. "These are our dams."

But the ESA, and judicial interpretations of it, have eroded those benefits. He said he was particularly irked by the rulings of U.S. District Court Judge James A. Redden, who last year ordered summer spill at Columbia/Snake mainstem that was not required under federal agencies' plan for improving salmon and steelhead survivals. The spill, intended to facilitate fishes' downstream migration, cost an estimated $75 million in foregone revenues.

And the spill helped very few fish, Hastings said. He and McMorris quoted a Washington Post article that said the spill operation would ultimately enhance the returning ESA salmon run by only 20 adult fish.

"Is that really the most efficient way to recover salmon? In my view it is not," Hastings said. He urged an approach that focused more on reducing predation and harvest of listed fish, and bolstering their populations through hatchery "supplementation" programs.

(See Salmon River Chinook Season Ends in Idaho which suggests that supplementation is to provide harvest opportunities. "Harvest of listed fish" is illegal. Some incidental mortality occurs to unmarked listed fish that are returned to the river. This comment is by bluefish who wonders why Congressman Hastings still does not understand this.)

It is difficult to get a man to understand something when his job depends on not understanding it. -- Upton Sinclair

Southeast Washington farmer Ron Reimann told the lawmakers that his family has invested heavily over the past 30 years to create a state-of-the-art operation. Technical innovations have allowed a more efficient use of both water and power. Since 1979 the farm has reduced power usage by 46 percent per acre and water usage by 33 percent, he said, while increasing crop yields.

But power rates have increased by 280 percent since 1975, including an 81 percent jump in 2001. With commodities prices generally down over that period, the farm is having trouble make ends meet, Reimann said. To save power this year, Reimann shut down an irrigation "circle" that had allowed the conversion of acreage to cropland. With irrigation it was assessed at a value of $1,147 per acre; without it, it has a value of $8, he said.

"We need to put some common sense into the Endangered Species act. We cannot continue to leave families such as mine out of the equation," Riemann said.

Gary Chandler of the Association of Washington Business said that rising electricity costs have put the future of many farms and other businesses in doubt. The association has 600 members that provide 600,000 jobs in the state.

"Salmon programs strike at the very heart of our state's economy because they target hydropower -- the main reason for our competitive advantage," Chandler said. In 1999 rates in the state for residential and industrial customers were the lowest in the nation and commercial rates were second lowest. By 2003 18 other states had lower industrial rates and 12 others had lower commercial rates, he said

The aluminum industry is a notable casualty with five of seven plants in the state closed since 1998 because of upward spiraling costs, Chandler said. The closures represented 6,000 jobs.

Miles of the Nez Perce Tribe said that the blame for rising power rates is unfairly heaped on fish and wildlife. Nuclear power costs and BPA's contractual over-commitment of power to utilities and direct service industries prior to 2001's energy crisis are the culprits, she said.

"Based on BPA's own estimate, their 2001 decision to over-commit to utilities and direct service industries added $3.9 billion in costs over the current five-year rate period," Miles said. BPA also incurs $828 million in costs annually to operate a nuclear plant and repay the debt for its construction, and to repay debt on two other plants that were never completed.

She also called foregone revenue calculations "accounting fiction."

"No entity, public or private, should be able to convert potential revenue to a cost if they were allowed to violate federal law," Miles said. She noted that BPA does not report foregone revenue associated with other constrictions on power generation, such as providing irrigation water, flood control, transportation or recreation.

Miles said the tribal economy -- rooted in salmon fishing -- was virtually destroyed when dams were constructed and salmon numbers dwindled.

"Just as we protect farming and timber communities, we also must protect the historic salmon economy," Miles said. That will require more money, not less.

"I ask you to consider salmon recovery as an investment and not just a cost," Miles told Hastings and McMorris. "If we were to fully implement the subbasin plans as recommended by the work group of the region's fish and wildlife co-managers, we would inject approximately $2 billion in eastern Washington, eastern Oregon, Idaho and western Montana over the next 10 years. This funding supports jobs in rural communities by implementing on-the-ground efforts." She said that infusion would still leave BPA rates at 29 to 38 percent below markets rates and cost the average household only about $1 more per month in extra electricity costs.

Hirsh of the Northwest Energy Coalition said her organization too seeks a better balance between hydroelectric operations and salmon recovery.

"But unlike many on today's panel, I believe it is on the salmon side where more, not less, should be done to balance the scales," Hirsh said. Often forgotten, she said, is that salmon are also a linchpin of the Northwest economy. Salmon recovery will boost fishing and the many industries that support it.

"We have reasonable electricity rates," Hirsh said, noting BPA estimates that its firm wholesale power rates during the next rate period would be 41 percent below projected market-based rates.

"What we do not have is healthy, self-sustaining wild salmon and we have a long way to go before reaching that goal," Hirsh said.

BPA power rates have generally jumped by more than 50 percent since 2000 with much of that spike triggered by the 2001 drought and "energy crisis." Power availability and market conditions were main drivers behind that spike.

Those increased costs have a direct and negative impact on public education, according to Ricardo Espinoza, president of the Pasco School District Board of Directors. The district has paid about $5.7 million in electrical costs over the past five years with an estimated $1.1 million of that amount used to fund salmon recovery, he said. That $1.1 million could have paid four to five teachers or bought 226 computers in each of those five years. It also could have purchased 2,600 math and science textbooks each year, he said.

"The point of my testimony can be summed up in one sentence: the further out a school district's dollars move away from the classroom, the more difficult the task of educating our children becomes," Espinoza said.

Salmon recovery is an important goal, he said, but "any increase in electricity dollars going to the recovery of schools of fish adversely affects the schools of our children."

Likewise, rate hikes put a crimp in charitable efforts, and put additional pressure on low-income families, according to Scott Cooper, direct of Parish Social Ministries for Catholic Charities in Spokane.

"In other words, we are spending more money to help more families with utility needs than with any other class of needs -- such as housing, transportation, food or prescriptions," Cooper said. As electric rates have risen, the level of public and private support for the needy has remained static.

"That is to say that increases in utility rates have the greatest proportional impact on the budgets of low-income households, even if those households have comparatively modest overall bills," he said. That means in many cases that other needs go unmet. Cooper urged creative solutions "that safeguard both our low-income neighbors and the natural world while continuing to provide energy resources for economic needs."

Terry Flores of Northwest RiverPartners said that group is as concerned about how the money is spent on salmon recovery as it is with how much is spent. A court-ordered summer spill program last year cost an estimated $75 million in foregone power, and revenue, generating opportunity. Intended to help juvenile salmon pass the federal dams, the spill came at a time when few listed fish were in the river.

"Summer spill clearly is a good example of a bad policy: it was very expensive and did little or nothing to help endangered fish," Flores said. RiverPartners represents agricultural interests, utilities, industries and ports.

The rising power rates have driven Northwest businesses to the edge, she said.

"Many are just hanging on," Flores said.

Related Pages:
Some Blame Power Rates on Salmon by Andrew Sirocchi, Tri-City Herald, 7/8/6
Hearing Covers Debate on Detailing Fish Costs by Jim Camden, Spokesman Review, 7/8/6
Power Users, Salmon Advocates Square Off Again in Hearing by Shannon Dininny, Seattle Post-Intelligencer, 7/5/6
Dam Debate Heads to Pascoby Jim Camden, Spokesman Review, 7/5/6