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Senate Panel Hears Testimony on BPA Finances, Obligations by CBB Staff Columbia Basin Bulletin - June 6, 2003

Northwest tribal officials this week asked members of Congress for greater oversight and accountability of the Bonneville Power Administration's finances and performance in meeting salmon recovery and other fish and wildlife obligations.

The head of the federal power marketing agency defended its decision to reduce the budget for fish and wildlife mitigation projects by tribes and others but promised to improve consultation with affected tribes in the future.

The exchange took place Wednesday at a Senate Indian Affairs Committee hearing on Northwest tribal fish and wildlife programs. At the request of the Columbia River Inter-Tribal Fish Commission and the Northwest Indian Fisheries Commission, committee leaders have asked the General Accounting Office, which audits federal agencies for Congress, to investigate BPA's finances and fish and wildlife funding.

GAO's preliminary report said BPA must sometimes juggle conflicting power and fish needs with an unpredictable water resource that varies from year to year. But it also faulted BPA for creating some of its own financial problems by over-subscribing power customers and being forced to buy electricity at high rates and sell it cheaply.

During the past two low-water years, BPA and the Northwest Power Planning Council have failed to fulfill the mandates of the Northwest Power Act for salmon restoration and fish and wildlife mitigation for the Columbia-Snake hydropower system, CRITFC executive director Olney Patt Jr. told the committee at Wednesday's hearing.

"Bonneville continues to provide the cheapest electricity in the United States in part because it has not internalized the full cost of its fish and wildlife responsibilities that are normally borne by power plant operators," Patt said. An analysis by CRITFC shows that BPA could meet funding levels for high priority fish and wildlife projects and remain 6 to 14 percent below market prices for electricity.

Patt said the additional funding would add only about $1.90 per month for the average Northwest electricity customer.

"In order to provide the impetus for BPA to recognize and fund its obligations, our tribes believe that greater oversight at the national level is essential," he said. The agency should stop using fish and wildlife funding "as a shock absorber for bad water years or bad management."

Patt said BPA's increase of $4 million to $8 million in its own Fish and Wildlife Division budget resulted in "new impediments to efficient fish and wildlife funding" and emphasizing certain federal agency funding needs in the name of endangered salmon recovery "at the expense of successful tribal fish and wildlife programs that address both watershed and systemwide needs."

Tribal officials also asked for congressional investigation of BPA's failure to provide all the funds promised to the tribes under a 1996"salmon budget" agreement, which has expired. Also, Patt said BPA was not using efficient contracting procedures and not providing prompt expense reimbursement, "resulting in missed opportunities and unnecessary costs to the tribes."

BPA Administrator Stephen Wright insisted the agency has consistently met its fish and wildlife obligations and presented a chart showing that spending on the program has increased every year, including the last three years. "We have not decreased (actual) funding levels," he said.

Costs now exceed $600 million a year, with half of that for "on the ground activities," and the expenditures have produced "substantial results," including high returns of adult salmon in 2001 and 2002 and, likely, 2003, Wright said. Of the total, $139 million goes for off-site mitigation, including habitat improvements and hatcheries.

Wright said BPA was also obligated to keep its power rates low. While the GAO's report on the conflicting needs held "a great deal of truth," he said the two purposes are not necessarily mutually exclusive.

Wright admitted the agency had to make a "rather abrupt decision" early this year when it asked the power council, tribes and others to reduce projects to meet that $139 million limit. BPA is dealing with a "financial hangover" from the 2001 Western energy crisis and drought and revisited the budgets of every program.

He said the agency "can and will do better with respect to working with the region's tribes," but also asked them to agree to more informal consultations because of the great number of requests for formal consultations. BPA has agreements with 13 tribes but there are 54 tribes in its service area.

Wright said BPA has not and does not intend to breach any contracts and is instituting contract reforms to make the process more cost-effective and speed up reimbursements.

Sen. Gordon Smith, R-Ore., a committee member, suggested that expectations about annual fish and wildlife funding and the 1996 salmon budget were too high and that caused difficulties for BPA.

Wright agreed, but added that the agency and tribes disagree about its obligations under the 1996 agreement, which expired in 2001. He said BPA believes it has complied and provided all the required funding, while tribes believe substantial amounts of money were unspent and should have been carried over.

Under the fish and wildlife mitigation program, Wright said the power council raised expectations by approving more projects than the $139 million annual budget would allow.

Jim Wells, GAO director of natural resource and environment, agreed that BPA's finances were hurt by the energy crisis and drought. At the same time, "we must point out that they did some of this to themselves," he said. BPA entered into power contracts and obligations that forced them to buy at high cost and sell at a low price. "They took some risks, and they lost, and now they're working themselves out of it," Wells said.

GAO's preliminary report said recent BPA actions "appear to have adversely affected fish and wildlife program enhancement efforts." Specifically cited was an October 2002 change in Bonneville's approach to budgeting for fish and wildlife expenditures that caused the loss of about $40 million in planned funding for 2003.

The report warned that BPA may be overcommitted and faces potentially painful decisions in the future as fish and wildlife programs compete with power needs for an uncertain supply of water.