[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
H.R. 4857, TO BETTER INFORM CONSUMERS REGARDING COSTS ASSOCIATED WITH
COMPLIANCE FOR PROTECTING ENDANGERED AND THREATENED SPECIES UNDER THE
ENDANGERED SPECIES ACT OF 1973.
=======================================================================
LEGISLATIVE HEARING
before the
COMMITTEE ON RESOURCES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
__________
Thursday, March 16, 2006
__________
Serial No. 109-44
__________
Printed for the use of the Committee on Resources
Available via the World Wide Web: http://www.gpoaccess.gov/congress/
index.html
or
Committee address: http://resourcescommittee.house.gov
______
U.S. GOVERNMENT PRINTING OFFICE
26-653 WASHINGTON : 2006
_____________________________________________________________________________
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COMMITTEE ON RESOURCES
RICHARD W. POMBO, California, Chairman
NICK J. RAHALL II, West Virginia, Ranking Democrat Member
Don Young, Alaska Dale E. Kildee, Michigan
Jim Saxton, New Jersey Eni F.H. Faleomavaega, American
Elton Gallegly, California Samoa
John J. Duncan, Jr., Tennessee Neil Abercrombie, Hawaii
Wayne T. Gilchrest, Maryland Solomon P. Ortiz, Texas
Ken Calvert, California Frank Pallone, Jr., New Jersey
Barbara Cubin, Wyoming Donna M. Christensen, Virgin
Vice Chair Islands
George P. Radanovich, California Ron Kind, Wisconsin
Walter B. Jones, Jr., North Grace F. Napolitano, California
Carolina Tom Udall, New Mexico
Chris Cannon, Utah Raul M. Grijalva, Arizona
John E. Peterson, Pennsylvania Madeleine Z. Bordallo, Guam
Jim Gibbons, Nevada Jim Costa, California
Greg Walden, Oregon Charlie Melancon, Louisiana
Thomas G. Tancredo, Colorado Dan Boren, Oklahoma
J.D. Hayworth, Arizona George Miller, California
Jeff Flake, Arizona Edward J. Markey, Massachusetts
Rick Renzi, Arizona Peter A. DeFazio, Oregon
Stevan Pearce, New Mexico Jay Inslee, Washington
Henry Brown, Jr., South Carolina Mark Udall, Colorado
Thelma Drake, Virginia Dennis Cardoza, California
Luis G. Fortuno, Puerto Rico Stephanie Herseth, South Dakota
Cathy McMorris, Washington
Bobby Jindal, Louisiana
Louie Gohmert, Texas
Marilyn N. Musgrave, Colorado
Vacancy
Steven J. Ding, Chief of Staff
Lisa Pittman, Chief Counsel
James H. Zoia, Democrat Staff Director
Jeffrey P. Petrich, Democrat Chief Counsel
------
C O N T E N T S
----------
Page
Hearing held on Thursday, March 16, 2006......................... 1
Statement of Members:
Grijalva, Hon. Raul M., a Representative in Congress from the
State of Arizona, Prepared statement of.................... 36
McMorris, Hon. Cathy, a Representative in Congress from the
State of Washington........................................ 1
Prepared statement of.................................... 3
Otter, Hon. C.L. ``Butch,'' a Representative in Congress from
the State of Idaho......................................... 42
Prepared statement of.................................... 44
Statement of Witnesses:
Corwin, R. Scott, Vice President of Marketing and Public
Affairs, Pacific Northwest Generating Cooperative,
Portland, Oregon........................................... 30
Prepared statement of.................................... 32
Delwiche, Gregory K., Vice President for Environment, Fish
and Wildlife, Bonneville Power Administration, Portland,
Oregon..................................................... 13
Prepared statement of.................................... 15
Hacskaylo, Michael S., Administrator, Western Area Power
Administration, Lakewood, Colorado......................... 20
Prepared statement of.................................... 20
James, Leslie, Executive Director, Colorado River Energy
Distributors Association, Tempe, Arizona................... 8
Prepared statement of.................................... 9
Mikkelsen, Kris, Chief Executive Officer, Inland Power and
Light, Spokane, Washington................................. 4
Prepared statement of.................................... 5
Patton, Sara, Executive Director, NW Energy Coalition,
Seattle, Washington........................................ 22
Prepared statement of.................................... 23
LEGISLATIVE HEARING ON H.R. 4857, TO BETTER INFORM CONSUMERS REGARDING
COSTS ASSOCIATED WITH COMPLIANCE FOR PROTECTING ENDANGERED AND
THREATENED SPECIES UNDER THE ENDANGERED SPECIES ACT OF 1973.
----------
Thursday, March 16, 2006
U.S. House of Representatives
Committee on Resources
Washington, D.C.
----------
The Committee met, pursuant to call, at 9:00 a.m. in Room
1324, Longworth House Office Building, Hon. Cathy McMorris
[Chairwoman of the Committee] presiding.
Present: Representatives Calvert, McMorris, Walden,
Gibbons, Radanovich, Grijalva, Christensen, Otter, Fortuno,
Pearce, Inslee.
Mr. Calvert [presiding]. Good morning. I ask unanimous
consent that the remainder of the hearing be chaired by the
gentlewoman from Washington, Ms. McMorris. Hearing no
objection, so ordered. Good morning and good-bye.
STATEMENT OF THE HON. CATHY McMORRIS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF WASHINGTON
Ms. McMorris [presiding]. Good morning, everyone. Starting
at 10:30 this morning, the Subcommittee on Energy and Mineral
Resources will be holding a hearing in this room. We also have
a series of 10 votes on the Floor starting at that time.
Therefore, unlike the Rolling Stones song, time is not on our
side.
In order to ensure adequate time for the witness testimony
and Member questions, the Chair will use her discretion, under
Committee Rule 4[g], and limit opening statements to the
Chairwoman and Ranking Member. Any other Members with opening
statements may include them in the hearing record, and I ask
unanimous consent to do so. Without objection, so ordered. We
do expect more Members to arrive shortly.
Today's hearing represents an important step in giving
electricity consumers the right to know what they are paying
for. It is about disclosure and transparency. As many of the
citizens in eastern Washington know firsthand, the promise of
low-cost hydropower is key to our economy, whether it is impact
on agriculture, manufacturing, technology, or what is left of
our aluminum industry, yet over the years we have seen
significant increases in electricity cost for many reasons,
including the California energy crisis and drought. Even today,
the region's congressional delegation has banded together to
fight the Administration's back-door proposal to increase BPA
rates.
The Endangered Species Act, or should I add, a Federal
judge's ruling of the Act, has also increased Bonneville's
costs. Under law, the agency passes all of these costs to its
wholesale customers, including our neighborhood public utility
districts and rural co-ops. These entities are then forced to
pass these costs down to their 10 million retail customers.
This is also occurring in other regions served by power
marketing administrations.
No one can deny that the Endangered Species Act has
impacted recent Bonneville rates, yet many consumers do not
know how much they pay for these fish protections or whether
they are paying for them at all. In a May 2005 poll, Northwest
River Partners found that 70 percent of the respondents either
did not know how much they paid for salmon recovery or believed
that less than 5 percent of their monthly bills go to salmon
recovery, yet in 2004, the ESA components of BPA's fish and
wildlife program comprised approximately 23 percent of the
agency's wholesale rates. Clearly, this disparity shows that
there is a disconnect of what consumers know or have access to
versus what is real.
I commend the EPA for publishing the general ESA cost, but
as a witness recently told the Committee, ``We can do better
when it comes to electricity cost transparency.'' That is what
this legislation does. The Endangered Species Compliance and
Transparency Act requires the power marketing administrations
to estimate and report the direct and indirect ESA costs to
each wholesale power customer on a monthly billing basis.
Whether or not you agree with how the Endangered Species
Act is being implemented is not the point here. This bill
simply gives customers the right to know how much of the
Federal government's ESA costs are being passed on at the
wholesale level. This will empower consumers so that they make
an informed decision on these expenditures. Some may feel the
costs are excessive, fair, or inadequate, but they cannot make
the decision until we have the information.
My staff has worked with the representatives of the Power
Marketing Administration to ensure that this bill would not be
an overburdensome mandate on the agencies. This bill is a
direct result of other right-to-know bills that have been
introduced in the past. The legislation is also based upon
input by many customers who believe this transparency is
needed.
That is why we have customers here to testify on behalf of
the bill. I would especially like to welcome Kris Mikkelsen,
the CEO of Inland Power and Light in Spokane, Washington. Kris
is not only a constituent, but she is a respected leader in the
community, and we are fortunate to have her as well as the rest
of the witnesses here today.
In conclusion, our nation's forefathers rightly demanded
that our government be accountable and open to its people. This
bill embodies that notion. I look forward to hearing from
today's witnesses and working with my colleagues on this much-
needed legislation.
At this time, I would like to introduce our panel of
witnesses. I just mentioned Kris Mikkelsen, CEO of Inland Power
and Light, Spokane, Washington; Leslie James, Executive
Director, Colorado River Energy Distributors Association,
Tempe, Arizona; Greg Delwiche, Vice President for Environment,
Fish and Wildlife, Bonneville Power Administration, Portland,
Oregon; Michael Hacskaylo, Administrator--I should know this
one--Western Area Power Administration, Lakewood, Colorado;
Sara Patton, Executive Director, NW Energy Coalition, Seattle,
Washington; Scott Corwin, Vice President for Marketing and
Public Affairs, Pacific Northwest Generating Cooperative,
Portland, Oregon.
I ask unanimous consent that the gentleman from Idaho, Mr.
Otter, may join us on the dais and participate in today's
hearing. Hearing no objection, so ordered. I welcome our
colleague from Idaho.
All witness written statements will be submitted for the
hearing record, so please use the timer lights to limit your
oral comments to five minutes. I think we are ready. OK.
Kris, if you would start, please.
[The prepared statement of Ms. McMorris follows:]
Statement of The Honorable Cathy McMorris, a Representative in Congress
from the State of Washington
Today's hearing represents a major step in giving electricity
consumers the right to know what they're paying for.
As many of the citizens of Eastern Washington know firsthand, the
promise of low-cost hydropower is key to our economy whether the impact
on agriculture, manufacturing, technology, or what is left of our
aluminum industry. Yet, over the years, we have seen significant
increases in electricity costs for many reasons, including the
California energy crisis and drought. Even today, the region's
congressional delegation has banded together to fight the
Administration's back-door proposal to increase BPA's rates.
The Endangered Species Act--or should I add, a federal judge's
reading of the Act--has also increased Bonneville's costs. Under law,
the agency passes all of these costs to its wholesale customers,
including our neighborhood public utility districts and rural
cooperatives. These entities are then forced to pass these costs down
to their 10 million retail customers. This is also occurring in regions
served by other Power Marketing Administrations.
No one can deny that the ESA has impacted recent Bonneville rates.
Yet, many consumers don't know how much they pay for these fish
protections or whether they're paying for them at all. In a May 2005
poll, Northwest River Partners found that 70 percent of respondents
either didn't know how much they paid for salmon recovery or believe
that less than 5 percent of their monthly bills go to salmon recovery.
Yet, in 2004, the ESA components of BPA's fish and wildlife program
comprised approximately 23 percent of the agency's wholesale rates.
Clearly, this disparity show there's a disconnect of what consumers
know--or have access to--versus what's real. I commend BPA for
publishing the general ESA costs, but as a witness recently told the
Committee, ``we can do better'' when it comes to electricity cost
transparency.
That's what my legislation does. The Endangered Species Compliance
and Transparency Act requires the Power Marketing Administrations to
estimate and report the direct and indirect ESA costs to each wholesale
power customer on a monthly billing basis. Whether or not you agree
with how the ESA is being implemented is not the point here. This bill
simply gives customers the right to know how much of the federal
government's ESA costs are being passed on at the wholesale level. This
will empower consumers so they can make an informed decision on these
expenditures. Some may feel that the costs are excessive, fair, or
inadequate but they can't make that decision until they have the
information.
My staff have worked with representatives of the Power Marketing
Administrations to ensure that this bill would not be over-burdensome
on these agencies. This bill is a direct result of other right-to-know
bills that have been introduced in the past. The legislation is also
based upon input by the many customers who believe this transparency is
needed.
That's why we have customers here today to testify on behalf of the
bill. I would especially like to welcome Kris Mikkelsen, the CEO of
Inland Power and Light in Spokane, Washington. Kris is not only a
constituent, but she's a proven leader in her community. We're
fortunate to have her and other witnesses here today.
In conclusion, our Nation's forefathers rightly demanded that our
government be accountable and open to its people. This bill embodies
that notion. I look forward to hearing from today's witnesses and
working with my colleagues on this much needed legislation.
______
STATEMENT OF KRIS MIKKELSEN, CHIEF EXECUTIVE OFFICER, INLAND
POWER AND LIGHT, SPOKANE, WASHINGTON
Ms. Mikkelsen. Good morning. I appreciate the opportunity
to appear before you today representing Inland Power and Light
and to share our views on the importance of having timely,
accurate, and easy-to-use information about ESA compliance
costs.
My name is Kris Mikkelsen, and I am the CEO of Inland Power
and Light, a cooperative utility that provides electricity to
35,000 consumers in 13 counties in eastern Washington and
northern Idaho. Inland is a full-requirements customer of the
Bonneville Power Administration, and BPA costs make up more
than half of our operating expenses. Inland is located
primarily in the Fifth Congressional District served by
Representative McMorris, and we greatly appreciate her ongoing
support of the issues facing our consumers.
Over the course of the last several years, I have regularly
participated in a variety of meetings that have been focused on
the examination of the Bonneville Power Administration's costs.
What became apparent almost immediately, and continues to this
day, is the widespread lack of understanding and outright
misconceptions associated with the costs of BPA's fish and
wildlife programs. It is not surprising that confusion exists.
More than 350 different programs are managed by a wide variety
of different parties. Undoubtedly, the combined programs
represent the most far-reaching and expensive environmental
undertaking in U.S. history. Over just the last 10 years, costs
for the fish program have totaled over $5 billion as expenses
have continually ramped upward and become increasingly
volatile.
Eventually, all of these costs end up in the monthly
electric bills of the ratepayers of 125 Northwest utilities.
Today, costs for fish measures are the single largest component
of BPA's costs and make up approximately 30 percent of the
agency's total cost of producing electricity, and very few
people in the Northwest understand that.
One of the other things that I developed a deeper
appreciation for during the Portland meetings is the constant
push and pull that the agency deals with as the various parties
in the Northwest advocate for their interests and agendas.
Bonneville serves many masters, and there will probably always
be differing opinions between the utilities, tribes, the
environmental community, and a variety of other special
interests. Providing clear direction to the agency about their
role in reporting ESA costs would be beneficial to the region,
and whatever a person's views, the public good will be best
served by open and transparent disclosure of the facts.
Several years ago, our utility decided that it was
important for Inland Power and Light customers to have a better
understanding of the impact of fish and wildlife programs and
the role they play in escalating energy prices. About this same
time, our utility hired a retired, high-level, BPA manager on a
part-time basis. One of his first assignments was to gather
information that would allow us to prepare individualized
customer bills showing the estimated cost of the BPA fish and
wildlife programs.
Some information about total program costs has become more
readily available in the last several years. However, making
these numbers meaningful for the average ratepayer is another
story. It is nearly impossible for an Inland Power and Light
consumer to understand what 600 or $700 million in BPA fish
expenditures might mean in terms of their own electric bill,
and we felt strongly that the people who were paying the bills
had a right to know what it was costing them.
Unraveling the numbers to get the data we needed to print
information on our bills was a challenge. To make a long story
short, it took many months, and it helped a lot that we had
someone working on the project that was familiar with the
agency. Bonneville was supportive, but one of the challenges
was that BPA itself did not always account for the costs in a
way that made them easy to identify or calculate what portion
of the wholesale power rate paid by utilities like Inland is
attributable to fish programs. We finally got sufficient data
on an informal basis and began including estimated fish cost
information on our monthly bills.
Court-ordered actions continue to create a significant
amount of volatility in BPA's wholesale rates, and utilities
are left with having to pass on costs with increasingly short
notice. From experience, I can tell you that ratepayers expect
clear answers about rising bills, and it is critical that
utilities have the information they need to adequately explain
increases. I might add that the Fiscal Year 2007 Federal budget
proposal for BPA surplus revenues has created the prospect of
yet even more uncertainty.
Having good numbers and easy access to ESA costs will go a
long way in helping the region's utilities, regardless of their
size or level of sophistication, to provide good information to
their consumers.
In closing, I would like to thank you for holding this
hearing today and providing Inland Power and Light with the
opportunity to express our views on this significant issue
affecting our utility and the consumers we serve. Thank you.
[The prepared statement of Ms. Mikkelsen follows:]
Statement of Kris M. Mikkelsen, CEO, Inland Power & Light
Chairman Pombo, Ranking Member Rahall, Representative McMorris and
members of the House Committee on Resources, I appreciate the
opportunity to appear before you today representing Inland Power &
Light and to share our views on the importance of having timely,
accurate and easy to use information about ESA compliance costs.
My name is Kris Mikkelsen, and I am the CEO of Inland Power &
Light, a cooperative utility that provides electricity to 35,000
consumers in thirteen counties in eastern Washington and northern
Idaho. Inland is a full requirements customer of the Bonneville Power
Administration and spends approximately $20 million per year for power
and transmission services. BPA related costs make up more than half of
our total cost of doing business. Inland is located primarily in the
5th congressional district served by Representative McMorris and we
appreciate her ongoing support of the issues facing our consumers.
Over the course of the last several years, I have regularly
participated in a variety of meetings that have been focused on the
examination of the Bonneville Power Administration's costs. The
meetings have had a series of different names including, Power Function
Review, Regional Dialogue, Customer Collaborative, but the purpose has
been much the same over time; to create a better understanding of
Bonneville's programs and related costs, and through that
understanding, to allow the region's various constituencies an
opportunity to provide informed recommendations and comments about
Bonneville's operations.
What became apparent almost immediately, and continues to this day,
is the widespread lack of understanding and outright misconceptions
associated with the costs of BPA's fish and wildlife programs. It's not
surprising that confusion exists. More than 350 different programs are
managed by a wide variety of different parties. Undoubtedly, the
combined programs represent the most far reaching and expensive
environmental undertaking in U.S. history. Over the last 10 years,
costs for the fish program have totaled over $5 billion as expenses
have continually ramped upward and become increasingly volatile.
Eventually all of these costs end up in the monthly electric bills
of the ratepayers of 125 Northwest utilities. Today, costs for fish
measures are the single largest component of BPA's costs and make up
approximately 30% of the Agency's total cost of producing electricity,
and very few people in the Northwest understand that.
One of the other things that I developed a deeper appreciation for
during the Portland meetings is the constant push and pull that the
Agency deals with as the various parties in the Northwest advocate for
their interests and agendas. Bonneville serves many masters and there
will probably always being differing opinions between the utilities,
tribes, environmental community and a variety of other special
interests. Providing clear direction to the agency about their role in
reporting ESA costs would be beneficial to the region, and whatever a
person's views, the public good will be best served by open and
transparent disclosure of the facts.
Several years ago, our utility decided that it was important for
Inland Power & Light customers to have a fundamental understanding of
the impact of fish and wildlife programs and the role they play in
escalating energy prices. About this same time, our utility hired a
retired high-level BPA manager on a part-time basis. One of his first
assignments was to gather information that would allow us to prepare
customer bills showing the estimated cost of the BPA's fish and
wildlife programs, individualized for each customer. We had attempted
to do this about a year earlier, but had not been successful.
In the last couple of years, when the Northwest Power and
Conservation Council started publishing a report on the cost of
Bonneville's fish and wildlife programs, there has been some
information about the total programs costs. However, making these
numbers meaningful for the average rate payer is another story. It's
nearly impossible for an Inland Power and Light consumer to understand
what $600 or $700 million in BPA fish expenditures might mean in terms
of their own electric bill. And we felt strongly that the people who
were paying the bills had a right to know what it was costing them.
Unraveling the numbers to get to the data we needed to print
information on our bills was a challenge. To make a long story short,
it took many months and it helped a lot that we had someone working on
the project that was familiar with the Agency. Bonneville was
supportive, but one of the challenges was that BPA itself didn't always
account for the costs in way that made them easy to identify or
calculate what portion of the wholesale power rate paid by utilities
like Inland were attributable to fish programs. We finally got
sufficient information on an informal basis and began including fish
cost information on our monthly bills.
Inland Power & Light has been very fortunate to have had a
presubscription contract with BPA that has insulated us the last four
plus years from the rising power costs most others in the region have
experienced. However that contract ends this year, and we expect our
cost of BPA wholesale power to increase by around 50%, but that is very
much a moving target. The uncertainty around ESA costs has made it
increasingly difficult to set rates.
Court-ordered ESA actions continue to create a significant amount
of volatility in BPA's wholesale rates, and utilities are left with
having to pass on costs with increasingly short notice. From
experience, I can tell you that ratepayers expect clear answers about
rising bills and it is critical that utilities have the information
they need to adequately explain increases. I might add that the FY 2007
federal budget proposal for BPA surplus revenues has created the
prospect of yet even more uncertainty.
Having good numbers and easy access to ESA costs will go a long way
in helping the region's utilities, regardless of their size, or level
of sophistication, to provide good information to their consumers. Mr.
Chairman, in closing, I would like to thank you for holding this
hearing today and providing Inland Power & Light with the opportunity
to express our views on this significant issue affecting our utility,
and the consumers we serve.
______
[An attachment to Ms. Mikkelsen's statement follows:]
[GRAPHIC] [TIFF OMITTED] T6653.004
Ms. McMorris. Thank you, Kris Mikkelsen.
Now, I would like to recognize Leslie James for five
minutes.
STATEMENT OF LESLIE JAMES, EXECUTIVE DIRECTOR, COLORADO RIVER
ENERGY DISTRIBUTORS ASSOCIATION, TEMPE, ARIZONA
Ms. James. Thank you, Madam Chairwoman and Members of the
Committee. I am Leslie James, Executive Director of the
Colorado River Energy Distributors Association [CREDA]. I am
honored to have been asked to speak with you today regarding
H.R. 4857 as it relates to the Federal Colorado River Storage
Project [CRSP.] CREDA is a nonprofit organization representing
consumer-owned electric systems that purchase Federal
hydropower from this project. Established back in 1978, our
members serve over 4 million consumers in six western states.
Since 1992, CREDA has been a party to a collaborative work
program process with the Federal agencies, Western Area Power
Administration and the Bureau of Reclamation. This process has
been a beneficial relationship and has provided transparency to
customers of the agencies work program elements. H.R. 4857 is
very consistent with that objective.
The environmental costs incurred by Western and the Bureau
of Reclamation in the CRSP are substantial, both in terms of
direct program costs, as well as indirect costs, such as
replacement power due to restricted generation. It is important
that the customers who are paying the bill are apprised of an
understand fully these costs. These costs should also include
the cost of mitigation and reasonable and prudent alternative
compliance. Cost transparency is a sound business practice, and
CREDA supports passage of this legislation.
CRSP customers have been ensuring repayment of the Federal
investment for 35 years. They have all entered into long-term,
cost-based contracts to ensure that all of the Federal
investment plus interest, including generation, transmission,
O&M, and environmental costs, are repaid. In addition, the CRSP
customers are paying over 95 percent of the costs of the
irrigation features of this project. There are no taxpayer
subsidies to the project.
Let me talk first about the largest generating feature in
the CRSP, and that is the Glen Canyon Dam located near Page,
Arizona. In 1996, after many years of study and about a $104
million environmental impact statement, which was paid by power
revenues, operations were changed at Glen Canyon Dam, and
approximately one-third of the generating capacity has been
lost.
In 1991, the Department of the Interior estimated the
annual cost of the foregone generation to be $44 million. That
cost likely is much higher, though, given energy market
conditions. To date, over $179 million has been spent on
studies at Glen Canyon Dam and paid by CRSP power revenues.
In 2001, due to the requirements of a 1994 Fish and
Wildlife Service biological opinion, a low-flow experiment was
undertaken during the summer months. The experiment included
low, flat flows, which meant reduced generation during the
high-energy months of the summer, and restricted the ability to
follow load. The principal purpose of those flows was to gain
information regarding the endangered humpback chub conditions.
The low, flat flows and hydrology, along with the energy market
crisis, had a severe impact on costs, requiring CRSP customers
and Western to purchase replacement power. The cost incurred
over those months was about $32 million. The cost of the
experiment alone was over three and a half million dollars,
also paid by CRSP power revenues.
Since 2000, the expense from lost generation from Glen
Canyon has exceeded $355 million, and the direct program costs
of the adaptive management program have exceed $49 million,
also paid by CRSP power revenues.
Smaller generating features of the CRSP include the Flaming
Gorge Dam on the Green River, which is a major tributary of the
Colorado. Generation has been reduced from that facility due to
a biological opinion of about 17 percent.
The Aspinall Unit along the Gunnison River in Colorado is
in the process of undergoing an EIS. We expect the EIS to last
three to four years. Our concern there is the impact on
generation out of that unit, as it is about the last peaking
unit in the CRSP.
In summary, we would like to reiterate our support for this
legislation. With our work on the work program review process
and program elements, this fits very well with that. It
provides transparency, it provides information to the customers
who are paying the bill, and we thank you for the opportunity
of being here today.
[The prepared statement of Ms. James follows:]
Statement of Leslie James, Executive Director,
Colorado River Energy Distributors Association (CREDA)
Madam Chairwoman, members of the Committee, I am Leslie James,
Executive Director of the Colorado River Energy Distributors
Association (CREDA). I am pleased to have been asked to talk with you
today regarding H.R. 4857, the Endangered Species Compliance and
Transparency Act of 2006.
CREDA member utilities (contractors) have long-term, cost-based
contracts with the Western Area Power Administration (WAPA), an agency
within the Department of Energy, for purchase of federal hydropower
generation of the Colorado River Storage Project (CRSP). My purpose
today is to provide some background on the CRSP facilities, to describe
environment-related impacts on the CRSP federal facilities, and to
offer our support of H.R. 4857.
CREDA is a non-profit organization representing consumer-owned
electric systems that purchase federal hydropower generation of the
CRSP. CREDA was established in 1978, and serves as the ``voice'' of
CRSP contractors in dealing with resource availability and
affordability issues. CREDA represents its members in working with the
Bureau of Reclamation (Bureau), as the owner and operator of the CRSP,
and WAPA, as the marketing agency of the CRSP. CREDA members are all
non-profit organizations, serving over four million electric consumers
in the six western states of Arizona, Colorado, Nevada, New Mexico,
Utah and Wyoming. CREDA members purchase over 85% of the CRSP
hydropower generation.
Attached is a listing of current CREDA members. At the time CREDA
was formed, the key issue for its members was the continuing increase
in CRSP rates. CREDA members felt it would be more effective and
efficient to have a single organizational ``voice'' for them on rate,
federal legislative and environmental issues impacting the CRSP.
CRSP contractors have been ensuring repayment of the federal
investment for 35 years, by entering into long-term contracts to
purchase the CRSP hydropower generation and by paying all of the
federal investment in generation and transmission facilities (with
interest), all power-related operation and maintenance costs, and
associated environmental costs. In addition, the CRSP contractors are
paying over 95% of the cost of the irrigation features of the CRSP--the
costs that are determined to be beyond the irrigators' ``ability to
pay''. In fact, in the current CRSP rate, 25% of the total annual
revenue requirement is due to irrigation assistance!
It is important to note that the CRSP rate includes costs other
than those associated with generation of the hydropower. Specific
examples of the environmental-related costs assessed to the CRSP are
the program (i.e., ``direct'') costs of the Glen Canyon Adaptive
Management Program (AMP) and the Upper Basin Endangered Fish Recovery
Implementation Program (RIP). More detail on these costs and programs
will be provided below.
I. H.R. 4857 AND THE CRSP
The environment-related costs incurred by the Bureau and WAPA in
the CRSP are significant. Those costs are borne almost exclusively by
the power customers of the CRSP. By law, these customers are not-for-
profit entities; thus they have no option other than to pass those
costs on to their consumers.
H.R. 4857 provides a mechanism for the power customers to readily
receive information regarding the direct and indirect costs associated
with the federal agencies' compliance with the Endangered Species Act
and other environmental requirements. These costs should also include
those costs associated with mitigation and reasonable and prudent
alternative compliance. Each power customer then has the ability to
utilize that information in a manner that best fits its individual
needs. It is our understanding that this information is readily
available and can be provided at little or no incremental cost to the
agencies. CREDA supports the additional transparency of these costs as
a sound business practice.
In 1992, CREDA, the Bureau and WAPA entered into a contractual
arrangement that gives CREDA the ability to review agency work plans
and, through a defined process, provide customer input and perspective
to the agencies. This has been an invaluable partnership-type
relationship and has encouraged transparency in agency cost reporting.
H.R. 4857 is consistent with that objective; it provides more
information to the customers who ultimately are responsible for
``paying the bills''.
II. THE CRSP FACILITIES AND ENVIRONMENTAL IMPACTS
The Colorado River Storage Project (CRSP) was authorized in the
Colorado River Storage Project Act of 1956 (P.L. 485, 84th Cong., 70
Stat. 50), as a multi-purpose federal project that provides flood
control; water storage for irrigation, municipal and industrial
purposes, in addition to the generation of electricity. This testimony
will focus on the major generation features of the CRSP, although there
are several irrigation projects included in the Project. The CRSP power
features include five dams and associated generators, substations, and
transmission lines.
GLEN CANYON DAM
Glen Canyon Dam is located near Page, Arizona and is by far the
largest of the CRSP projects. Glen Canyon Dam began operation in 1964.
The water stored behind the dam is the key to full development by the
Upper Colorado River Basin states of their Colorado River Compact share
of Colorado River water. The Glen Canyon power plant consists of eight
generators for a total of about 1300 MW, which is more than 76% of
total CRSP generation. The ability of the Bureau to generate, and WAPA
to market, the total generating capability of Glen Canyon Dam has been
impacted over a period of many years, by various processes and laws. In
1978 the Bureau began evaluating the possibility of upgrading the eight
generating units at Glen Canyon. This was possible primarily due to
design characteristics of the generators and improved insulating
materials. This upgrade was completed, and the generation was increased
from about 1000 MW to 1300 MW. To fully utilize the unit upgrades would
require the maximum release of water from Glen Canyon to be increased
from 31,500 cubic feet per second (cfs) to about 33,200 cfs. The Bureau
also studied the possibility of adding new units on the outlet works to
provide additional peaking capacity. The possibility of increasing
maximum releases from Glen Canyon raised concerns with downstream
users. After discussion with stakeholders, the Secretary of the
Interior initiated the first phase of the Glen Canyon Environmental
Studies.
In 1982, the Bureau began Phase 1 of the Glen Canyon Environmental
Studies. These studies were primarily to analyze the impacts of raising
the maximum release from 31,500 cfs to 33,200 cfs on the transport of
sediment downstream from the dam, recreation (including fishing and
rafting), endangered species (including the humpback chub in the Lower
Colorado River), and the riparian habitat along the river banks. The
studies proceeded during the early 1980's and were concluded in 1987.
The general conclusion of the Glen Canyon Environmental Studies Phase 1
was that the dam had blocked much of the sediment coming down the
Colorado River and therefore beaches were not being replenished with
sand. However, the impact on power and water economics was not fully
explored.
After reviewing the Glen Canyon Environmental Studies Phase 1 and a
review by the National Academy of Science, the Secretary of the
Interior determined that the Glen Canyon Environmental Studies should
be continued to address the economic impacts, particularly as they
relate to power, and also to collect additional data to substantiate
some of the conclusions in the Phase 1 report. The Glen Canyon
Environmental Studies Phase 2 was initiated in 1989, which included a
series of test flows to evaluate the impact of different operating
conditions and to develop response curves for various conditions.
In July 1989, the Secretary of the Interior announced the start of
an environmental impact statement (EIS) on the operation of the Glen
Canyon Dam. No specific Federal action was identified for study.
Meetings were held during 1990 to seek input into alternatives that
should be considered, and the Bureau determined the nine alternatives
(including a ``no action'' alternative) to be studied. Meanwhile, in
1992, the Grand Canyon Protection Act (GCPA) (106 Stat. 4672) was
signed into law. Section 1804 of the Act required completion of the EIS
within two years. The EIS was completed and the Record of Decision
(ROD) signed in October 1996. The result was that Glen Canyon
operations were changed to reflect a revised flow regime; approximately
one-third of the generating capacity was lost (456 MW).
The cost of the Glen Canyon EIS was approximately $104 million, and
was funded by power revenues collected from the CRSP contractors. To
date, over $179 million has been spent on Glen studies, and paid by
CRSP power revenues. This figure does NOT include the nearly $10
million per year spent for the Adaptive Management Program. The GCPA
says that CRSP power revenues MAY be used to fund the Adaptive
Management Program (emphasis supplied). It is not a mandate, but a
permissive use of power revenues, which will be addressed in more
detail below. In 1991, the Department of the Interior estimated the
expense from lost generation due to the changes in Glen Canyon Dam
operation to be $44.2 million annually (adjusted for inflation). Given
what has occurred in the energy markets since that time, the cost is
probably much higher. The cost of replacing that power is borne by the
CRSP customers.
In April of 2000, it was determined that due to hydrologic
conditions and requirements of a 1994 USFWS biological opinion, a low
flow summer experiment would be undertaken. The experiment included
high spike flows in May and September, with low flat flows (8,000 cfs)
all summer. The purpose was to gain information regarding endangered
humpback chub conditions. The low, flat flows and hydrology, along with
western energy market prices, had a severe impact on power generation,
requiring CRSP customers and WAPA to purchase replacement power to meet
their resource needs. The cost incurred by WAPA (and to be recovered
from CRSP contractors) for this replacement power was $32 million, just
for that summer. The cost of the experiment alone was over $3.5
million, funded by CRSP power revenues. These figures do NOT include
additional costs to CRSP contractors who had to purchase or supplement
their CRSP resource with purchases from the energy market.
ASPINALL UNIT
The Aspinall Unit includes three dams and generating plants along
the Gunnison River near Gunnison, Colorado. Blue Mesa is the first dam
on the river and has two units producing about 97 MW. Morrow Point is
the second dam in the series and consists of two generators producing a
total of 146 MW. Crystal is the final dam and has one 32 MW generator.
Morrow Point and Crystal Reservoirs allow some regulation of the river
flow so that releases from Crystal can be used to regulate downstream
flows as necessary.
Since the early 1990's as part of the Upper Colorado River
Endangered Fish Recovery Implementation Program, or RIP, studies have
been undertaken to determine fish needs in this region. In November
2004, the Bureau held the first Cooperating Agency meeting, which they
have opened to the public. One of CREDA's members, Platte River Power
Authority (Colorado), is a cooperating agency in the process. It is
anticipated this EIS process will take 3-4 years. CREDA's view is that,
while maintaining authorized project purposes, the Bureau may operate
the facilities to benefit fish and wildlife and recreation resources.
Their obligation, however, is to avoid jeopardy to endangered species.
FLAMING GORGE DAM
Flaming Gorge Dam is on the Green River, a major tributary of the
Colorado River, and is located near Vernal, Utah. Flaming Gorge has
three units producing about 152 MW of generation. In 1992, the USFWS
issued a Biological Opinion on the operation of Flaming Gorge Dam.
Approximately 26 MW have been lost to date due to changed operations to
benefit endangered fish, estimated at approximately $2 million per
year. The Record of Decision on the operation of Flaming Gorge Dam was
signed in February 2006. The cost of the EIS was approximately $4.3
million. Two CREDA members from Utah were ``cooperating agencies''
through this process. We expect the same level of operational expense
to be incurred following issuance of the ROD.
III. THE ENVIRONMENTAL PROGRAMS IN THE CRSP
GLEN CANYON DAM ADAPTIVE MANAGEMENT PROGRAM
CREDA participates on the Federal Advisory Committee charged with
making recommendations to the Secretary of the Interior as to
operations of Glen Canyon Dam pursuant to the Record of Decision and
underlying laws. Funding for the program (Adaptive Management Program)
is provided through CRSP power revenues. Proposed funding for this
year's program is over $10 million. On October 27, 2000, President
Clinton signed the FY 2001 Energy and Water Development Appropriations
Act, which includes language (Section 204) capping the amount of CRSP
power revenues that can be used for the Adaptive Management Program at
$7,850,000, subject to inflation. Without this cap, the annual program
costs would have continued to increase more rapidly, with power
revenues being the primary funding source.
Science findings over the past 12 years indicate that some of the
premises on which the EIS/ROD were based may be in error and that the
current flow restrictions may not be beneficial to downstream resources
(primarily humpback chub and sediment). It is imperative that these
science findings be incorporated into recommendations to the Secretary
of the Interior to implement flow changes and management actions to
benefit the downstream resources and to maximize power production. On
February 15, 2006, ESA-related litigation was filed in Arizona District
Court by the Center for Biological Diversity, Sierra Club, Living
Rivers and Arizona Wildlife Federation against the Department of the
Interior and the Bureau. This litigation could have program and cost
implications for the Adaptive Management Program.
CRSP contractors have paid, and continue to pay, the majority of
costs at Glen Canyon, even while the dam's generating capacity has been
depleted by about one-third, and there are significant operating
constraints on the remaining available capability, as required by the
1996 ROD. Just since 2000, the replacement power cost (i.e.,
``indirect'' cost) incurred by WAPA (and borne by CRSP power customers)
totals $355 million. This amount does not include costs borne by each
CRSP power customer to ``make up'' any additional resource not provided
by WAPA. Also since 2000, the program costs (i.e., ``direct'' costs)
incurred by WAPA total $49 million. These costs are significant and
H.R. 4857 enhances the ability of the power customers to be aware of
the environmental costs associated with these programs.
UPPER COLORADO RIVER ENDANGERED FISH RECOVERY IMPLEMENTATION PROGRAM
(RIP)
The RIP was established through cooperative agreements among States
and federal agencies in 1988 for a 15-year period to help recover four
endangered fish in the Upper Colorado Basin. Power revenues currently
fund about 60% of the base research / study program. Federal
legislation was passed in October 2000, which authorized a $100 million
capital improvements program. CREDA testified in support of this
legislation in both House and Senate hearings. The legislation provides
matching funds for the capital program so that, in the event State
funding for the program ceases, power revenue funding also ceases.
The legislation requires CRSP power revenue funding for monitoring
and research of up to $6 million per year. In addition, the Upper Basin
States and CRSP power customers each contributed $17 million toward
capital features. The legislation recognized that changes in operation
of Flaming Gorge and Aspinall generation as a result of Biological
Opinions cost CRSP contractors $2 to $5 million per year.
IV. RECOMMENDATION
CREDA encourages passage of H.R. 4857 as a sound business practice
and an important measure, which will provide transparency and cost
information to the customers of the federal Power Marketing
Administrations.
Thank you for the opportunity of appearing today.
______
COLORADO RIVER ENERGY DISTRIBUTORS ASSOCIATION (CREDA) MEMBERSHIP
ARIZONA
Arizona Municipal Power Users Association
Arizona Power Authority
Arizona Power Pooling Association
Irrigation and Electrical Districts Association of Arizona, Inc.
Navajo Tribal Utility Authority (also New Mexico, Utah)
Salt River Project
COLORADO
Colorado Springs Utilities
Intermountain Rural Electric Association
Platte River Power Authority
Tri-State Generation & Transmission Cooperative
(also Nebraska, Wyoming and New Mexico)
Yampa Valley Electric Association, Inc.
NEVADA
Colorado River Commission of Nevada
Silver State Power Association
NEW MEXICO
Farmington Electric Utility System
Los Alamos County
Tri-State Generation & Transmission Cooperative
City of Truth or Consequences
UTAH
City of Provo
City of St. George
Strawberry Electric
Utah Associated Municipal Power Systems
Utah Municipal Power Agency
WYOMING
Wyoming Municipal Power Agency
______
Ms. McMorris. Thank you, Ms. James.
I would like to now recognize Greg Delwiche for five
minutes.
STATEMENT OF GREG DELWICHE, VICE PRESIDENT FOR ENVIRONMENT,
FISH AND WILDLIFE, BONNEVILLE POWER ADMINISTRATION, PORTLAND,
OREGON
Mr. Delwiche. Good morning. Madam Chair and Members of the
Committee, I appreciate the opportunity to be here today to I
had House Bill 4857, which, if enacted, would direct the
administrators of the Federal Power Marketing Agencies to
include on customers' monthly bills information about the costs
the PMAs are incurring to comply with the Endanger Species Act.
My name is Greg Delwiche, and I am Bonneville's Vice
President for Environment, Fish and Wildlife. The Endangered
Species Act compliance costs incurred by Bonneville include the
power share debt service and operations and maintenance
expenses for fish passage facilities at Federal dams on the
Columbia and Snake Rivers, the economic effects of operational
changes at those dams to benefit fish, such as flow and spill;
and offsite mitigation costs for both hatcheries and habitat
restoration.
In the proposed legislation, we would consider ``direct
costs'' to have three components, those being debt service,
operations and maintenance expenses, and offsite mitigation
costs, and indirect costs to include the economic effects of
flow and spill changes. Many of Bonneville's fish and wildlife
mitigation costs relate to actions undertaken to comply with
both the Endangered Species Act, as well as the Pacific
Northwest Electric Power Planning and Conservation Act of 1980,
otherwise known as ``Northwest Power Act.'' Because of this, it
would be our preference to report the combined total of these
costs rather than reporting on the ESA-only compliance costs,
which only partially represent our fish and wildlife recovery
and mitigation efforts. For Fiscal Year 2007, Bonneville
estimates that these combined costs will total approximately
$700 million.
In my testimony today, I will discuss two approaches that
Bonneville could employ for providing ESA and Power Act-related
cost information.
The first approach, which is our preference, would be to
provide ESA and Power Act-related costs on customer bills as a
percentage of customers' overall power costs. We believe this
approach would be consistent with the bill's requirement that
monthly customer billings include estimates and reports of the
customers' share of direct and indirect costs for fish and
wildlife mitigation. The information necessary to report these
costs as a percentage is much more readily available and
efficiently calculated than that needed to specify these costs
in dollars and cents for each type of service and specific
product or products purchased by a customer. Therefore, this
would be the approach that Bonneville would propose to follow
if this bill was enacted into law.
The alternative approach would be for us to develop a
specific calculation in dollars and cents for each power
customer. This, however, would be extremely difficult and
complicated to put into practical because unlike a retail
utility bill, many of our customers' bills our based on
services provided under more than one contract, and each
contract often involves more than one rate schedule and applies
to a variety of services. Consequently, calculating these costs
for each customer, given their unique and individual mix of
products, would require development of some very complicated
algorithms.
So our preferred approach would be to clearly show
customers what percentage of their bill is attributed to direct
and indirect costs for fish and wildlife recovery. This level
of information would be system specific but not customer
specific and could be shown on the summary page of each
customer's bill, immediately under the line showing their total
bill. Application of the percentage to the customers' monthly
bill would tell the customer its estimated cost responsibility
that month for fish and wildlife mitigation actions.
As noted earlier, the reported costs would include both
direct and indirect costs, the latter of which, per Section
2[c] of the proposed legislation, include foregone generation
and replacement power costs. In economic terms, these costs are
often called ``opportunity'' costs. While these costs are real
costs, in that they directly impact Bonneville's rates, we
recognize there is substantial debate in the region as to how
water in the system should be allocated between competing uses.
In conclusion, the Administration shares the interest in
accountability that prompts this legislation. Power bills
result from complicated calculations, and the public debate
about what affects power rates often strays from hard numbers.
This bill would take a step toward clarifying the matter.
There are many ideas in the legislation that are feasible
and many concepts that are in line with the overall
Administration policy in terms of properly reflecting the costs
of regulation to ratepayers. The Administration has no position
on this legislation at this time, but there are many concepts
in the legislation which the Administration would not oppose.
The Administration is still studying the legislation as a whole
and looks forward to participating in the broader debate as it
unfolds. Thank you very much.
[The prepared statement of Mr. Delwiche follows:]
Statement of Gregory K. Delwiche, Vice President, Environment, Fish and
Wildlife, Bonneville Power Administration, United States Department of
Energy
Madam Chairwoman and Members of the Committee, I appreciate the
opportunity to be here today to discuss H.R. 4857 which would, if
enacted, direct the Administrators of the Federal Power Marketing
Administrations (PMA) to include on customers' monthly bills
information about the costs the PMAs are incurring to comply with the
Endangered Species Act (ESA).
ESA compliance costs incurred by Bonneville Power Administration
(Bonneville) include the power share of debt service and operations and
maintenance expense for fish passage facilities at Federal Columbia and
Snake River Dams; the economic effects of operational changes at those
dams to benefit fish, such as flow and spill; and off-site mitigation
costs for hatcheries and habitat restoration. These costs are far
easier to report as a percentage of BPA's total costs than as a
specific amount borne by each customer; therefore, it would be BPA's
preference to display that percentage on each power bill.
In the proposed legislation, we would consider ``direct costs'' to
include debt service and operations and maintenance costs for fish
facilities and off-site mitigation costs; and ``indirect costs'' to
include the economic effects of flow and spill changes. Many of
Bonneville's fish and wildlife mitigation costs relate to actions
undertaken for both ESA compliance and for fish and wildlife mitigation
under the Pacific Northwest Electric Power Planning and Conservation
Act of 1980 (NWPA). Because of this, it would be Bonneville's
preference to report the combined total of these costs, rather than
reporting on the ESA-only compliance costs, which only partially
represent the fish and wildlife mitigation recovery efforts funded by
Bonneville. For Fiscal Year 2007, Bonneville estimates that these costs
will total approximately $700 million, or about 30 percent of
Bonneville's power rates.
In my testimony today, I will discuss the approach Bonneville would
intend to use for providing ESA-related cost information.
APPROACH FOR PROVIDING COST INFORMATION
Bonneville believes that providing ESA- and NWPA-related cost
information on customer bills as a percentage of Bonneville's overall
power service costs would be consistent with the bill's requirement
that monthly customer billings include estimates and reports of the
customer's share of the direct and indirect costs incurred by the
Administrator related to fish and wildlife mitigation. The information
necessary to report these costs as a percentage is much more readily
available and efficiently calculated than that needed to specify costs
applicable to each type of service and specific product(s) purchased by
a customer. It is therefore the approach that Bonneville proposes to
follow if the bill is enacted into law.
An alternative approach of developing a specific calculation of
mitigation costs for each power customer would be extremely complicated
to put into practice. This is because, unlike a retail utility bill,
many of Bonneville's customer bills are based on services provided
under more than one contract, and each contract often involves more
than one rate schedule and applies to a variety of services. Each
service is billed on the basis of what is called a ``billing
determinant.'' A billing determinant is a measure of electric power
usage at a customer's metered point of delivery used in the computation
of a customer's bill for the particular service for which they are
being charged. Consequently, calculating these costs for each customer,
given their unique and individual mix of products, would require
development of very complicated algorithms. We do not believe this is
intended by the bill.
Therefore, in order to clearly show customers what percentage of
their bill is attributable to direct and indirect ESA-related costs,
Bonneville would calculate the percentage of its overall power costs
attributable to ESA-and NWPA-related activities and investments, and
specify that percentage on the customer's bill. This level of
information would be system-specific, but not customer-specific, and
could be shown on the summary page on each customer's bill, immediately
under the line showing the total (see Attachment 1). Application of the
percentage to the customer's monthly bill would tell the customer its
estimated cost responsibility that month for fish and wildlife
mitigation actions. As noted earlier, the reported costs would include
both direct and indirect costs, the latter of which, per Section 2(c)
of the proposed legislation, include foregone generation and
replacement power costs and associated transmission costs. In economic
terms, such costs are often called ``opportunity'' costs. While these
are real costs, in that they impact Bonneville rates, we recognize
there is substantial debate as to how water in the system should be
allocated between competing uses.
CONCLUSION
In conclusion, the Administration shares the interest in
accountability that prompts this legislation. Power bills result from
complicated calculations and the public debate about what affects power
rates often strays from hard numbers. H.R. 4857 would take a step
toward clarifying the matter. There are many ideas in the legislation
that are feasible and many concepts that are in line with the overall
Administration policy in terms of properly reflecting the costs of
regulation to the ratepayers. The Administration has no position on the
legislation at this time, but there are many concepts in the
legislation which the Administration would not oppose. The
Administration is still studying the legislation as a whole and looks
forward to participating in the broader debate as it unfolds.
Bonneville believes that the approach of specifying Bonneville's
ESA-and NWPA-related costs as a percentage of Bonneville's overall
power service costs in monthly customer billings would be consistent
with the bill's requirement that those billings include estimates and
reports of the customer's share of the direct and indirect costs
incurred by the Administrator related to ESA compliance. It is an
approach that is readily and efficiently calculated, and it is the
approach that Bonneville proposes to follow if the bill is enacted into
law. Bonneville recommends the approach of reporting its combined ESA-
related and NWPA fish and wildlife mitigation costs assigned to power
as a percentage of total power costs. While this would be an
approximation of the actual amount of cost recovered from each
individual customer, it would seem to be consistent with the intent
behind this proposed legislation and the information would be more
readily available and efficiently calculated.
I thank the members of the Committee for the opportunity to offer
this testimony and welcome any questions you may have at this time.
ATTACHMENT 1
SAMPLE BONNEVILLE POWER ADMINISTRATION CUSTOMER POWER BILL
[GRAPHIC] [TIFF OMITTED] T6653.005
[GRAPHIC] [TIFF OMITTED] T6653.006
[GRAPHIC] [TIFF OMITTED] T6653.007
[GRAPHIC] [TIFF OMITTED] T6653.008
[GRAPHIC] [TIFF OMITTED] T6653.009
______
Ms. McMorris. Thank you, Mr. Delwiche.
At this time, I will recognize Michael Hacskaylo for five
minutes.
STATEMENT OF MICHAEL S. HACSKAYLO, ADMINISTRATOR, WESTERN AREA
POWER ADMINISTRATION, LAKEWOOD, COLORADO
Mr. Hacskaylo. Thank you very much, Madam Chair and Members
of the Committee, for the opportunity to testify today on H.R.
4857. I am Michael Hacskaylo, Administrator of the Western Area
Power Administration, headquartered in Lakewood, Colorado.
Western is one of four Federal Power Marketing Agencies
under the Department of Energy. We market and transmit about
10,000 megawatts of electricity generated from 56 federally
owned, hydropower plants located primarily on the Missouri and
Colorado Rivers and the Central Valley Project in California.
In any given year, Western sells about 40 percent of the
regional hydropower in our 1.3 million-square-mile service
territory that spans 15 western and midwestern states. Western
has allocated this Federal power to more than 750 customers,
including cities and towns, rural electric cooperatives, public
utility and irrigation districts, Native American tribes, and
Federal and state agencies.
The Western Area Power Administration and its generation
partners, the Bureau of Reclamation and the Army Corps of
Engineers, incur a variety of expenses related to complying
with the Endangered Species Act. Some of these expenses are
direct costs, such as personnel, operations and maintenance,
and capital projects. Others are indirect costs, including
replacement power purchases and lost sales revenues.
Since Fiscal Year 2000, Western has incurred, on average,
approximately $96 million per year in Endangered Species Act-
related expenses. Of this amount, approximately 85 percent goes
to the Colorado River Storage Project because of the extensive
remediation and compliance programs on that river.
Western will be able to meet the requirements of this bill
with no additional staff and with minimal effort in terms of
providing more information on the bill to customers, and as Mr.
Delwiche has testified, the Administration has taken no
position on this legislation at this time, but there are many
concepts in the legislation which the Administration would not
oppose. The Administration is still studying the legislation as
a whole and looks forward to participating in the broader
debate as it unfolds.
That concludes my testimony. Thank you.
[The prepared statement of Mr. Hacskaylo follows:]
Statement of Michael S. Hacskaylo, Administrator,
Western Area Power Administration, United States Department of Energy
Thank you, Madam Chairwoman and other members for inviting me here
today to speak on H.R. 4857 and more specifically about the costs
Western and its power customers incur as part of our responsibilities
to protect and recover plant and animal species covered under the
Endangered Species Act of 1973 and Western's role in working with the
Fish and Wildlife Service and the generating agencies to mitigate
impacts to and restore habitat used by threatened and endangered
species.
Western is one of four Federal Power Marketing Agencies under the
Department of Energy. We market and transmit about 10,000 megawatts of
electricity generated from 56 Federally-owned hydropower plants located
primarily on the Missouri and Colorado rivers and from the Central
Valley Project in California. Western also markets the United States'
entitlement from the coal-fired Navajo Generating Station near Page,
Arizona. Western sells power from these 15 separately authorized and
managed projects at cost-based rates and delivers it using our 17,000-
mile transmission system and the transmission systems of other
utilities to consumers across the West.
In any given year, Western sells about 40 percent of regional
hydropower in our 1.3 million square mile service territory that spans
15 western states. Western has allocated this Federal power to more
than 750 customers including cities and towns, rural electric
cooperatives, public utility and irrigation districts, Native American
tribes and Federal and state agencies.
The Western Area Power Administration, the Bureau of Reclamation,
and the Army Corps of Engineers incur various expenses related to
complying with the Endangered Species Act (ESA). Such expenses include
direct expenditures for personnel, operations & maintenance, capital
projects, and studies related to the preservation and restoration of
threatened and endangered species. An example is the temperature
control device at Shasta Dam. This device is used to regulate
downstream water temperature for the benefit of salmon and steelhead in
the Sacramento River.
Western also incurs indirect costs attributable to the Endangered
Species Act. Two types of indirect costs are: (1) replacement power
purchases that Western buys to meet its contractual commitments when
the Federal hydropower operations are constrained for ESA reasons, and
(2) lost sales revenue when ESA operating constraints prevent the
generation of hydropower when it is most valuable. For example, if on-
peak water releases are limited for ESA reasons, hydropower that could
have sold for a higher price during on-peak hours must, instead, be
shifted to off-peak hours when power prices are lower, reducing the
project's revenue.
Since FY 2000, Western has incurred on average approximately $96
million per year in ESA-related expenses. Western's ESA costs, and the
generating agencies' ESA costs related to power generation, are repaid
by Western's customers through their power rates, unless Congress
directs that such costs be nonreimbursable. The Colorado River Storage
Project (CRSP) makes up roughly 85 percent of that estimate. In the
case of the CRSP, which operates using a revolving fund,
nonreimbursable costs affect the cash flow of the revolving fund even
though such costs are not included in customers' power rates. This
feature is unique to the CRSP; for other projects ESA costs assigned to
power are fully reimbursable.
Since 1983, the CRSP Basin Fund has provided nearly $275 million of
non-reimbursable funding for environmental programs and compliance
activities including increased purchase power to meet our contractual
obligations. Non-reimbursable costs are funded from CRSP revolving fund
cash flow. Since 1983, CRSP has also spent approximately $46 million on
reimbursable compliance activities. In addition, CRSP power customers
bear the burden of additional power purchases for lost generation due
to environmental activities.
Not all of the generating agency ESA compliance costs included in
Western's rates are related to the Bureau of Reclamation and the
Colorado River. For example, efforts to recover the pallid sturgeon,
the least tern and the piping plover on the Missouri River are related
to Corps of Engineers generation. Costs for ESA efforts on the Missouri
River are in transition with the implementation of a new Master River
Operations Manual and implementation of an adaptive management program
for recovery of the species. Costs are expected to increase in the
future. The EIS is not yet final on the Platte River which is facing
similar recovery efforts on the same species and will see increased ESA
costs in the future.
Costs related to wildlife habitat restoration, outside the scope of
the ESA, may also be paid by Western's customers. For example, since
the passage of the Central Valley Project Improvement Act in 1992,
power beneficiaries have contributed over $120 million to environmental
habitat improvement. These costs are not always included in Western's
power rates; they may be paid through direct assessments to customers.
In the case of the Central Valley Project Improvement Act,
environmental funding is accomplished through a monthly restoration
fund bill.
Western also incurs ESA-related costs through the construction of
transmission lines and related power delivery infrastructure. These
costs might be an obligation of transmission customers, in which case
they would not be fully recovered through bills to power customers.
It is my understanding that H.R. 4857 would require only
reimbursable costs included in the monthly billing to the customers.
Even though an ESA line item on our power customer's bill would not
report the total cost of ESA compliance, our annual report to the
Committee on Resources of the House of Representatives and the
Committee on Environment and Public Works of the Senate, would include
an estimate of all costs as described above for each of Western's
projects.
In conclusion, the Administration shares the interest in
accountability that prompts this legislation. Power bills result from
complicated calculations and the public debate about what affects power
rates often strays from hard numbers. H.R. 4857 would take a step
toward clarifying the matter. There are many ideas in the legislation
that are feasible and many concepts that are in line with the overall
Administration policy in terms of properly reflecting the costs of
regulation to the ratepayers. The Administration has no position on the
legislation at this time, but there are many concepts in the
legislation which the Administration would not oppose. The
Administration is still studying the legislation as a whole and looks
forward to participating in the broader debate as it unfolds.
Thank you, Madam Chairwoman. I would be pleased to answer any
questions that you or the members may have.
______
Ms. McMorris. Thank you very much.
Ms. Patton?
STATEMENT OF SARA PATTON, EXECUTIVE DIRECTOR,
NW ENERGY COALITION, SEATTLE, WASHINGTON
Ms. Patton. Thank you, Ms. Chairwoman and Members of the
Committee. I appreciate the opportunity to be here. My name is
Sara Patton. I am the Executive Director of the NW Energy
Coalition. We are a coalition of more than 100 consumer,
environmental, faith-based, and low-income groups, unions,
clean energy businesses, and progressive utilities in the four
Northwest states and British Columbia working together for a
clean and affordable energy future. I am testifying today to
address concerns about H.R. 4857, and my remarks will focus on
the Bonneville Power Administration because that is our area of
expertise and concern. I have already submitted some written
comments, so I will be brief, and I will be happy to answer
questions.
For the groups that I represent, H.R. 4857 raises a number
of concerns, but first I would like to emphasize that the
environmental and consumer public interest groups
enthusiastically support transparency in economic analyses. I
would be surprised to find anybody who did not support
transparency, but we definitely strongly support it, and we
would support H.R. 4857 if it mandated a full and thorough
accounting of the costs and benefits of Federal dam operations
on fish, anglers and fishing communities, irrigators,
recreation businesses, and other users of the river along with
power consumers. Only by looking at the whole picture can in
any particular cost category be put into perspective. H.R. 4857
looks at only a small part of how the Columbia River System is
shared and paid for.
My next concern is that the bill is unnecessary in the
Northwest. Information on fish and wildlife restoration costs
is already readily available from BPA and the Northwest Power
and Conservation Council, and utilities such as Inland Power
and Light and others are free to inform their customers of this
service, and many of them already do. Further, it must be noted
that BPA's fish and wildlife restoration is required by a
number of Federal laws and treaties dating back to 1855, so
separating ESA costs is fairly difficult. H.R. 4857 proposes no
way to separate them, and that may not be possible.
Fourth, H.R. 4857 should not count the cost of foregone
revenue as an ESA-compliance cost. Including foregone revenues
as a cost implies that BPA can claim savings for violating
Federal laws or that BPA owns the river. BPA does not own the
river. It shares the river with all of the other users,
including fish and wildlife. BPA is not entitled to all of the
possible revenue it can squeeze out of the river; only its
share.
An analogy will help. Trucking companies must obey a number
of safety regulations. These include providing seat belts and
equipment at inspections. Equipment costs should be counted as
a cost of compliance with the regulations. However, we do not
count as a cost the foregone revenue that the company could
have utilized if its drivers could drive over the speed limits
or ignore weight limits. Trucking companies do not own the
highways, and the cost of sharing them with other users is not
revenue somehow owed to them.
Similarly, the various uses and users of the river do not
owe each other money; they are all simply sharing this great
resource. In fact, when the Northwest Power and Conservation
Council recently reported that irrigation water withdrawals
account for about $250 million per year in foregone revenues,
does that mean that BPA ratepayers are subsidizing farmers? Of
course, not. Farmers and power users are sharing the river with
recreation, flood control, navigation, and, of course, fish and
wildlife. However, if Congress believes it is important to
report such costs, then it should require a calculation of all
of the costs of the Federal river system and report all of them
on a consistent basis.
Furthermore, true transparency will look at both costs and
benefits. A real examination of ESA impacts must include the
economic benefits to the region of salmon restoration in terms
of jobs and revenue. This legislation would only identify costs
and, therefore, would not give the public or utilities a clear
and complete picture of Federal and regional investments in
salmon recovery unless it includes the enormous benefits these
expenditures provide. In fact, we believe that a truly
transparent economic analysis would show that removal of the
four lower Snake dams is the lowest-cost and most effective way
to recover these salmon.
Finally, if we accept foregone revenues for ESA compliance
as a cost, BPA rates will still be more than 40 percent below
market prices, and we do not think it is a good idea to
jeopardize the low-cost hydropower the Northwest depends on by
failing to meet our legal and stewardship responsibilities for
God's creation.
In conclusion, the NW Energy Coalition supports objective
and transparent accounting of BPA's fish and wildlife-related
costs, but H.R. 4857 introduces a number of concerns and
difficult issues which need to be resolved before we could
support it. Thank you.
[The prepared statement of Ms. Patton follows:]
Statement of Sara Patton, Executive Director,
NW Energy Coalition
The NW Energy Coalition is a coalition of more than one hundred
consumer, environmental, faith-based and low-income groups, unions and
progressive utilities from the four Northwest states and British
Columbia, working toward a clean and affordable energy future. I am
testifying today in opposition to H.R. 4857. Although H.R. 4857 applies
equally to all Federal Power Marketing Agencies (PMAs), this testimony
is focused mainly on the Bonneville Power Administration (BPA) because
that is our area of expertise and concern. However, in most cases, we
believe the intent of these comments is applicable to the other PMAs.
Summary
The proposal in H.R. 4857 to require the Bonneville Power
Administration (BPA) to report the costs of compliance with the
Endangered Species Act (ESA) raises a number of concerns:
Transparency of BPA's costs is a laudable goal, if there
is full and honest accounting to inform the public of the whole story.
This bill is unnecessary: the information is already
readily available from BPA, and utilities are free to inform their
customers if they wish.
BPA's fish and wildlife funding is required by a number
of federal laws and treaties; separating out ESA costs is difficult or
impossible.
Proposals to include foregone revenues in these costs
imply that BPA can claim savings for violating federal laws, and that
BPA owns the river.
Meaningful economic transparency should address both
costs and benefits.
The definition of the firm customers' share of BPA's ESA
costs can be interpreted in different ways, leading to starkly
different conclusions. If not done correctly such accounting fosters
more confusion than transparency.
This issue is likely to focus national attention on the
fact that BPA's rates are currently about 60 percent below market
rates.
The NW Energy Coalition Supports Real Transparency
Environmental and consumer public interest groups would
enthusiastically support H.R. 4857 if it mandated honest accounting of
the costs and benefits of federal dam operations on fish, anglers and
fishing communities, irrigators, recreation businesses and other users
of the river--along with power consumers. Only by looking at the whole
picture can any particular cost category be put into perspective. H.R.
4857 looks at only a small part of how the Columbia River system is
shared and paid for. This issue will be addressed in detail later in
this testimony.
H.R. 4857 is Unnecessary
H.R. 4857 does not compel the production of any information that is
not already available to the public, electricity utilities, or anyone
else who seeks it. BPA currently provides information to the region
regarding the costs of its fish and wildlife programs (including so-
called ``indirect costs''). \1\ Bonneville also provides a detailed
walk through of all of its costs as part of its Power Function Review
preparatory to its rate case. Any utility wishing to provide this
information to its retail consumers may do so; some do this now. This
bill is not needed and would not change current practice at all.
---------------------------------------------------------------------------
\1\ See, e.g., Bonneville Power Administration, Financial Data for
Fish and Wildlife Projects at http://www.efw.bpa.gov/Integrated--Fish--
and--Wildlife--Program/financialdata.aspx
---------------------------------------------------------------------------
Salmon Recovery Actions Meet a Myriad of Federal Responsibilities
BPA's investments in rebuilding fish and wildlife populations are
required by a number of federal laws and treaties, including the
Endangered Species Act, the Northwest Power Act, the Fish and Wildlife
Coordination Act, the Clean Water Act and United States treaties with
Indian Tribes and Canada. It is not possible to categorize which of the
costs are related solely to the ESA.
Even without an ESA, Bonneville and the federal family have
obligations to recover these valuable fish. H.R. 4857's mandate to
isolate ESA costs is impossible, since most of the actions being taken
for endangered and threatened fish and habitat overlap or are also
required by these other laws and treaties.
For example, The Pacific Northwest Electric Power Planning and
Conservation Act (Northwest Power Act), Section 16 U.S.C.
839b(h)(6)(E), requires the Northwest Power and Conservation Council
(NPCC) to include measures in its Fish and Wildlife Program (Program)
that:
(i) provide for improved survival of such fish at hydroelectric
facilities located in the Columbia River system; and
(ii) provide flows of sufficient quality and quantity between such
facilities To improve production, migration, and survival of such fish
as necessary to meet sound biological objectives. (emphasis added)
More generally, the Northwest Power Act requires the Administrator
and other Federal agencies to exercise their responsibilities ``in a
manner that provides equitable treatment for such fish and wildlife
with the other purposes for which such system and facilities are
managed and operated.'' (Section 16 U.S.C. 839b(h)(11)(A); emphasis
added). BPA's obligation ``to adequately protect, mitigate, and enhance
fish and wildlife...'' (ibid.) is not a secondary ``cost'' of the power
system, it is a coequal purpose along with irrigation, navigation,
recreation and flood control.
Similarly, there are numerous treaty obligations to Native American
Tribes that require BPA and the Federal agencies to restore and enhance
their native fisheries. At the same time, the Federal Columbia River
Power System (FCRPS) Biological Opinion requires specific flow and
spill operations to ensure that the operation of the FCRPS does not
jeopardize the continued existence of listed species under the ESA. \2\
It is evident that these various obligations overlap and cannot be
separated into ESA and non-ESA obligations.
---------------------------------------------------------------------------
\2\ It is important to note that the flow targets in the Program
and Biological Opinion are constrained by the current configuration of
the hydroelectric system. Average spring flows in the Columbia before
the dams were 450,000 cubic feet per second. The current target is
200,000 cubic feet per second--less than half the historical average.
Unfortunately, the federal agencies have not been successful in meeting
the Columbia and Snake River flow targets 53 percent of the time
between 1995 and 2005.
---------------------------------------------------------------------------
Adding ``Indirect Costs'' is Improper and Obscures The Actual Monetary
Contribution BPA Makes to Salmon Recovery
H.R. 4857 requires PMAs to include ``foregone generation and
replacement power costs'' as indirect costs in their ESA-compliance
calculations (Sec. 2 (c)). As explained below, it is false and highly
misleading to include these items as ``costs.'' It also improperly
distorts the actual monetary contribution BPA makes to salmon recovery.
H.R. 4857 would set a dangerous precedent by codifying this type of
accounting. BPA states that its combined net costs include more than
$300 million for fish and wildlife related hydrosystem operations,
which accounts for over 50% of BPA's total fish and wildlife
``investments'' (if one assumes that such indirect costs can properly
be deemed ``investments''). \3\ BPA counts the revenue foregone and the
cost of replacement power from operating the FCRPS to meet the
requirements of the Endangered Species Act, the Northwest Power Act,
the Clean Water Act, and other laws and regulations as a part of these
costs.
---------------------------------------------------------------------------
\3\ See, for example the presentation from BPA's Power Function
Review: http://www.bpa.gov/power/pl/review/meetings.shtml, slide 38,
which estimates indirect costs averaging $356.9 million per year for
the FY2007-09 period.
---------------------------------------------------------------------------
Foregone Revenue
``Foregone revenue'' is the cost of foregone generation; that is,
the money BPA speculates it could have made if it did not have to
operate the river to assist salmon migration. It is the lost generation
from water spilled over the dams plus the difference in prices BPA
forecasts it might have received if it could shift timing of generation
into higher priced periods rather than when salmon need a push out to
sea. Considering as a ``cost'' the revenues or profits that a business
or agency could have made if it had violated federal laws, regulations,
or court orders is a curious accounting concept, to say the least.
An example is illustrative. Trucking companies must obey a number
of safety regulations. These include providing seat belts, equipment
inspections and rest breaks for drivers. These are all proper costs of
compliance with these regulations. However, we do not count as a cost
\4\ or even ``indirect cost'' the foregone revenue that the company
could have realized if it did not have to give its drivers rest breaks,
or if those drivers could drive over the speed limits or ignore weight
limits. On the contrary, it is understood that the trucking companies
do not own the highways, and the ``cost'' of sharing it with other
users is not revenue somehow owed to them.
---------------------------------------------------------------------------
\4\ No tax deduction is provided for these costs, for example.
---------------------------------------------------------------------------
Given its practice of reporting foregone revenue for fish and
wildlife protection, it is important to note that BPA does not report
the foregone revenue associated with meeting other legal constraints on
power generation such as providing irrigation water, flood control,
maintaining minimum flow depths for river transportation, limiting
rapid variations (``ramping''--which can damage streambeds and banks)
in flow rates, or recreation. All of these other federally-mandated
purposes limit the ability to generate electricity and reduce BPA's
potential revenue. Hence, to be consistent, BPA would need to count
them as ``costs'' as well.
For example, the NPCC has calculated that the 14.4 million acre-
feet withdrawn for irrigation could generate an additional 625 average
megawatts if the water remained in the river--about five percent of the
total output of the BPA system. \5\ (For comparison, the same study
estimated the impact of fish operations at 9% of the output of BPA's
system.) Analysis by the NPCC calculated that at average market rates,
the foregone revenue of this irrigation would be $250 million per year.
\6\ At the market prices for the summer of 2005, \7\ the lost revenue
associated with irrigation withdrawals was over $380 million. Neither
BPA nor H.R. 4857 counts this ``cost.''
---------------------------------------------------------------------------
\5\ ``Multiple Use Memorandum,'' NPCC, February 7, 2006, p.5 6
\6\ Ibid.
\7\ Averaging over $75/MWhr.
---------------------------------------------------------------------------
All of this begs the important question of whose costs these are.
Are irrigation foregone revenues a ``cost'' for BPA's ratepayers? Is a
requirement to keep rivers flowing at minimum levels for navigation
another ``cost''? If so, then one would conclude that the irrigators
and barge and boat operators are being subsidized by Bonneville.
This logic is absurd. Bonneville does not own the river, it shares
the river with all the other uses, including fish and wildlife. BPA is
not entitled to all of the possible revenue it can squeeze out of the
river, only its share. NW Energy Coalition recommends that Sec. 2(c) be
deleted from the bill. The various uses and users of the river do not
owe each other money, they are all simply sharing in this great
resource.
However, if Congress believes it is important to report such costs,
then it should require BPA to calculate the costs of each of the other
purposes of the dams and report all of them on a consistent basis.
After all, every use of the river, from navigation to flood control to
irrigation, reduces BPA's revenues, and its ability to fund its
obligations.
Foregone salmon
We should also note, if the Committee wants to continue down the
road of assigning indirect costs, that the NPCC found that 5 to 11
million salmon lost each year (compared to the period prior to dam
construction) were attributable to damage caused by the hydroelectric
system. Based on this estimate, the Columbia River Indian tribes,
anglers and fishing businesses have ``foregone'' 340 to 750 million
salmon and steelhead since the dams were built.
Salmon and steelhead are invaluable to tribal culture and
religion--the tribes would not put a price on this loss. Non-tribal
economists, on the other hand, would value the annual losses in the
hundreds of millions of dollars.
Replacement Power Costs
H.R. 4857 also requires that BPA include ``power purchases'' due to
fish and wildlife operations in its estimate of indirect costs. These
costs can vary dramatically depending on water availability, market
energy prices, and load demand--none of which can be properly
attributed to salmon recovery.
This problem was made very clear in 2001 when BPA's power purchase
costs alone exceeded $1 billion. \8\ But that was a year when the
agency eliminated ``spill'' for salmon, so it would be fair to say that
Bonneville's salmon restoration efforts were reduced because the impact
of fish operations on generation was even less than in previous years.
Instead, BPA counts that as a year when its indirect costs skyrocketed.
It is bad public policy to pin power purchase costs that could arise
for any number of non-salmon-related reasons on salmon recovery. In
fact, the reason power purchase costs were so high that year had
nothing to do with fish and everything to do with energy deregulation
problems, BPA's failure to foresee or control its subscription process
that resulted in having to serve about 3,000 MWs of unexpected load in
a very short period of time, and a drought in the Columbia Basin. BPA's
own studies estimate that its decision to serve more load than it had
power to provide cost it $3.9 billion over the FY2002-06 period! \9\
---------------------------------------------------------------------------
\8\ Bonneville Power Administration, Fact Sheet on Fish and
Wildlife Investments (January 2006). Available at: http://
www.efw.bpa.gov/Integrated_Fish_and_Wildlife_Program/FWCosts primer.pdf
(viewed on March 13, 2006).
\9\ What led to the current BPA financial crisis? A BPA report to
the region, April 2003, p. iii. ``The cost of augmenting the Federal
Base System--including both power purchases and load reductions--makes
up about three-fourths of the increase in costs over the last rate
period. This increase in costs of $3.9 billion occurred because BPA
assumed responsibility for serving about 3,300 average megawatts (aMW)
of load beyond the firm generating capability of the Federal Base
System.''
---------------------------------------------------------------------------
Costs Must be Balanced with Benefits
Any meaningful effort to provide real transparency should include
both the cost and the benefits of actions to recover salmon. H.R. 4857
would require that only costs be reported, and therefore would fail to
provide the public a complete picture. The economic benefits of salmon
recovery efforts come in at least two forms: the economic benefit from
increased fishing opportunities and the impact of actually implementing
recovery measures.
Economic Impact of Implementing Salmon Recovery Measures
BPA funds implementation of habitat improvements and other
restoration measures through its ``Integrated Program.'' Most of these
fish and wildlife activities are implemented in rural areas east of the
Cascade Mountains (Figures 1). \10\
---------------------------------------------------------------------------
\10\ APPENDIX 1: CBFWA Workgroup Analysis of Future Fish and
Wildlife Budget Needs in Support of the BPA Rate Case for FY2007--
FY2009, April 25, 2005
---------------------------------------------------------------------------
Figure 1 shows the geographic distribution of BPA average annual
fish and wildlife spending from its Integrated Program budget for the
Fiscal Years 2001 through 2004. These investments pay salaries and
purchase materials creating additional jobs and economic activity. The
effects of these investments over the next several years can be
expected to ripple through tribal and rural economies, creating
thousands of additional jobs and significant economic activity. If this
work is implemented over the next ten years at the level recommended by
state and tribal scientists, the annual funding would support more than
5,000 jobs over the next ten years (assuming $40,000 per job). \11\
---------------------------------------------------------------------------
\11\ Ibid, p.2.
[GRAPHIC] [TIFF OMITTED] T6653.001
Economic Benefits of Commercial and Recreational Fishing Opportunities
If fish and wildlife populations increase, the Pacific Northwest
will experience increased spending by fishers, hunters, and
recreationalists creating additional jobs and economic benefits.
Increased fishing opportunities for the commercial fishing industry
will also have a ripple effect on local coastal communities.
To illustrate the economic benefit of increased fishing
opportunities, one need not look further than 2001, when the region
experienced better-than-average adult salmon returns due to improved
ocean conditions. In that year, salmon runs increased sufficiently for
Idaho to open a recreational fishing season on salmon. A report by
credentialed independent economists examined the economic impact of the
2001 salmon season and found that the increased fish opportunity was
responsible for almost $90 million in angler expenditures. \12\ These
expenditures were split evenly between the local river communities and
the rest of the state. However, impacts were more significant in the
smaller local economies. Angler expenditures in Riggins, Idaho (on the
Salmon River) during the salmon fishing season stimulated 23 percent of
the town's annual sales. \13\
---------------------------------------------------------------------------
\12\ Ben Johnson Associates, Inc. The Economic Impact of the 2001
Salmon Season in Idaho (Prepared for the Idaho Fish and Wildlife
Foundation), April 2003.
\13\ Id.
---------------------------------------------------------------------------
Any presentation of economic costs must also provide the important
benefits to local economies of investments in fish and wildlife while
considering the costs of the actions.
BPA's Firm Customers' ``Share'' of Fish Costs is not Well-Defined.
H.R. 4857 requires that PMAs report each firm power customer's
``share'' of ESA compliance costs, but leaves the determination of what
constitutes a share to the PMAs (in coordination with other Federal
agencies). How shares are calculated, and what constitutes a firm
customer, is left open in the legislation, but these issues are highly
contentious. How shares are calculated can vary tremendously, depending
on various assumptions. Statements we have seen in the press over the
past year on the proportion of fish restoration costs in Bonneville's
rates, for example, have ranged from less than 5% to 30%, using the
same basic information!
While this information is extremely important, we all know that
statistics can be presented or ``spun'' in different ways depending on
the desired outcome. It is important that this information be fair and
objective.
There are several reasons why this calculation is not
straightforward and will most likely foster confusion rather than
transparency. First, Bonneville cannot make a profit, being cost-based,
so its total sales must equal its total costs. But that is in
aggregate. To recover its costs, the agency sells to many different
types of firm customers at different rates. Some of these rates are
determined by BPA, some by the market. Some rates to firm customers are
fixed for many years, while others can vary periodically. An important
and large group of customers, the investor-owned utilities, receives
monetary benefits linked to the price of preference power.
This complicated web of arrangements can lead to confusion and
misinterpretations of what, at first, seem easy questions. For example,
BPA has stated that its power rates could go down 30% if it didn't have
any fish costs. \14\ This was reported by the press and electricity
utility representatives as a statement that 30% of electric bills go
for fish costs. This deductive leap is incorrect and troubling for
several reasons:
---------------------------------------------------------------------------
\14\ Second Declaration of Paul, E. Norman, Sr. VP of BPA, in
National Wildlife Fed'n, et al, v. NMFS, et al., p.6, Nov. 21, 2005,
---------------------------------------------------------------------------
1. All of BPA's sales help pay its fish costs, but many of BPA's
firm customers' rates are fixed or set by the market. Therefore, if
costs are reduced, only a subset of BPA's customers would get all the
benefit of the reduction. How much those customers' rates would be
reduced is not the same as how much of BPA's rates go to fish.
2. BPA was referring to its power rates only. But almost a quarter
of BPA's budget is transmission, whose costs are recovered through a
separate rate. Those rates were not included in the calculation, but
all customers have to pay for transmission.
3. BPA was referring to its wholesale rate, but consumers pay
retail bills. Retail bills contain all the other costs of delivering
electricity, such as meter reading, distribution wires, billing, etc.
Only about 50-60% of a homeowner's bill is due to the actual wholesale
cost of power.
4. Finally most consumers in the region are served by utilities
that buy only some of their power from BPA, if any. These consumers'
bill-impacts would be proportionally less.
The attached table shows that actual rate impacts are more like 3-
12% (Attachment A)
The Congressional Research Service also looked at this question and
calculated that on a per kilowatt-hour (kwhr) basis (assuming that each
kwhr sale helps pay for fish equally--though one could argue that since
some kwh sell for twice the price of others, a fairer calculation would
be an equal contribution from each dollar of revenue,) BPA's fish costs
are about 15-17% of BPA's total costs. \15\ But even this result is
inflated, because the analysis failed to account for the fact that
about 2,200 megawatts (MW) of power that BPA provides to investor-owned
utility residential and small-farm customers is monetized instead of
delivered as power. But those customers' monetary benefits are reduced
or increased if fish costs are increased or decreased, as well, so they
share in all of BPA's expenses. Adding them into the equation reduces
the cost to closer to 12% on a per kwhr basis.
---------------------------------------------------------------------------
\15\ Memorandum, April 29, 2005 from Pervaze Sheikh and Larry
Parker to the House Committee on Resources. Endangered Species Costs
for Power Marketing Agencies.
---------------------------------------------------------------------------
This discussion is not meant to argue the ``correct'' number, but
to emphasize how controversial and complicated this issue is--and how
open to misinterpretation it will be.
There are less costly, and more effective ways to restore wild salmon
and steelhead.
Public interest groups, fishing based businesses, taxpayer
advocates and others support a full and honest accounting of BPA's
fish-restoration costs. This is because we know that the public
supports the goal of restoring wild salmon and steelhead to the
Columbia Basin, but only if that effort is successful. That is why we
believe that there is a better way: the removal of the four lower Snake
River Dams; replacing their modest amount of power with energy
efficiency and renewables; extending irrigation pumps to continue
irrigation to the 13 or so affected farms; and refurbishing the rail
and highway system to ensure farmers can economically ship their goods
to market.
As the true costs of the expensive and ineffective path we are
currently on becomes clear, the region will realize that removing those
four dams is a less-expensive option. Every day these dams continue to
exist, the federal government is wasting money and holding back the
quality of life for people in the region.
The federal government can act responsibly by taking down these
four dams. Eliminating them will be less costly than allowing them to
exist, and will create a more reliable energy source in the Pacific
Northwest that is paid for by people in the region. Taking down these
dams will also reverse the decline of an important natural resource,
Pacific salmon.
BPA Electricity Rates--Shining a Spotlight
Bonneville's wholesale preference power rates are currently 59
percent below the market rates that Bonneville has assumed for FY 2006
in the current BPA rate case. On average, Bonneville would be 41
percent below the lower market rates it projects during the rate
period. (Figure 2) \16\
---------------------------------------------------------------------------
\16\ Declaration of Roger Schiewe of BPA, in National Wildlife
Fed'n, et al, v. NMFS, et al., spreadsheet entitled ``River Ops,
Genesys'', November, 2005,
---------------------------------------------------------------------------
These comparisons include all of the current fish and wildlife
costs and impacts on BPA power operations. Even with those costs
included, BPA power is significantly below market rates.
[GRAPHIC] [TIFF OMITTED] T6653.002
While NW Energy Coalition supports full transparency, it is
important to note that even with BPA's large fish obligations, BPA's
rates are the envy of other regions. If BPA's customers want to avoid
these fish costs, they are free to get their power elsewhere--at about
twice the price! We are concerned that shining a spotlight on BPA's
rates will only renew calls by some outside the region who believe our
rates are heavily subsidized as it is.
Conclusion
Although the NW Energy Coalition supports objective accounting of
BPA's fish and wildlife-related costs, indirect costs are not
appropriate to assign to one party in a shared system that is put to
multiple uses. However, if Congress believes it is important to attempt
to quantify these costs, it should insist that the impacts from other
users such as irrigation and navigation are also accounted for.
Unfortunately, H.R. 4857 introduces a number of difficult issues that
need to be resolved before our Coalition could support it.
Thank you for this opportunity to provide these comments.
[GRAPHIC] [TIFF OMITTED] T6653.003
______
Ms. McMorris. Thank you very much.
Next, Mr. Corwin.
STATEMENT OF R. SCOTT CORWIN, VICE PRESIDENT FOR MARKETING AND
PUBLIC AFFAIRS, PACIFIC NORTHWEST GENERATING COOPERATIVE,
PORTLAND, OREGON
Mr. Corwin. Good morning. On behalf of PNGC Power, my name
is Scott Corwin. I thank you for the opportunity to be here
today.
PNGC Power is a cooperative of 15 consumer-owned utilities
in the Northwest. They have a population base of those
utilities of about 300,000 customers, and these are utilities
that banded together to meet their power and transmission
needs. It is Bonneville's fourth largest customer.
H.R. 4857 is a bill that is short and to the point, and so
I will attempt to do the same with my testimony. PNGC Power
supports H.R. 4857. We appreciate the initiative of
Representative McMorris and the co-sponsors in raising the
issue before us. We support the bill because it offers an
opportunity for ratepayers to be better-informed consumers.
Consumers often ask about the nature of costs in their rates,
but they know little about the level of fish and wildlife costs
affecting those rates.
In fact, we were surprised at the results of some research
just last year conducted. Most respondents did not know there
were any costs in their rates related to fish and wildlife. Of
course, in the case of BPA, there are significant costs. You
heard something about that already. Thirty percent of the rates
are charged to cover fish and wildlife.
But we are not just focused on costs. What we want to see
is real success, and attention to costs can actually lead to
benefits for fish as well as ratepayers in the case of salmon
recovery in the Northwest. There are good examples and bad
examples of the focus on costs in the Northwest right now.
A good example is the focus on costs of spill which loses
generation off the hydropower system which led to the
development of something called a ``removal spillway,'' where,
in tests, these devices actually passed fish with a 98 percent
survival rate using about one-fifth of the water that would
otherwise be used in a normal spill operation. The Army Corps
of Engineers is to be commended for that one example.
On the negative side, the Army Corps of Engineers is
currently proposing to spend $30 million on a feasibility study
regarding the effects of different flow regimes for fish. We do
not think that is likely to lead to any useful results for the
region, but it is likely to lead to a large cost for
ratepayers.
Regardless of what you think about the costs of particular
efforts or the level of spending in general, the issue here is
information, and I would like to take a minute to respond to a
couple of the comments made. We think getting better
information is useful on many levels.
Some argue that utilities and ratepayers could gain this
information without this bill. That is not the case. Some would
argue that these particular costs should not be displayed or
that other costs should be displayed instead. There are not
other costs in Bonneville's rates that are of this magnitude or
of this volatility. In addition, these are costs particularly
driven by Federal laws that do not relate to the business of
creating power, as most of the other costs do.
Some argue about whether the number that the power market
agency would come up with is the correct number. I think that
debate is a reason to pass this bill. There are plenty of
things in the region for all of us to voice our concerns about
what the right number is, and we will argue that back and
forth, but that discussion should not inhibit a power marketing
administration from creating the final determination and
getting that information to consumers.
Also, on the issue of indirect costs, I think this bill
correctly includes those costs, as well as direct costs,
because, to a ratepayer, they are one and the same. Water
spilled over a dam, rather than creating electricity, creates
impacts on ratepayers just as much as direct projects or
capital expenditures or operations and maintenance. The
question is, without that set of actions, would the power rates
be lower?
Also, on defining ESA costs, particularly, versus other
fish and wildlife costs, I was glad to hear Bonneville suggest
that they would include all fish and wildlife costs in their
calculations for purposes of this bill because the ESA does
have such broad implications in the Northwest that most, if not
all, fish and wildlife mitigation could be defined as related
to implementation of that Act.
To sum up, we support H.R. 4857 because it is a
straightforward approach to providing more information about a
major factor in our power rates of consumer-owned utilities.
Timely release of useful information is a worthy goal in and of
itself. But just as important is the potential that this
information may create incentives for better management of our
natural resources that would benefit endangered species and
ratepayers alike. Thank you.
[The prepared statement of Mr. Corwin follows:]
Statement of R. Scott Corwin, Vice President of
Marketing and Public Affairs, PNGC Power
Mr. Chairman, members of the committee, on behalf of PNGC Power, I
thank you for the opportunity to testify today. PNGC Power is a
cooperative of fifteen consumer-owned utilities who banded together to
meet their power and transmission needs. Member utilities have service
territory in portions of seven western states. We are committed not
only to preserving the economic value of the Columbia River system, but
also to ensuring effective recovery of salmon and steelhead listed
under the Endangered Species Act.
Filling the Knowledge Gap
PNGC Power supports H.R. 4857, the Endangered Species Compliance
and Transparency Act of 2006. We appreciate the initiative of
Representative McMorris and the cosponsors in raising the issue before
us. H.R. 4857 is narrowly tailored to require the power marketing
administrations to display these costs on the monthly wholesale power
bill sent to utilities. It is then up to the local utility to decide
what to do with that information. Local control over management of the
utility is a fundamental priority of each consumer-owned utility in the
Northwest.
We support this bill because it offers the opportunity for
ratepayers to be better informed consumers. PNGC Power provides
electricity to retail utilities that have about 159,000 accounts
serving a population of over 300,000 citizens of the Northwest. While
these consumers often ask about the nature of the costs that make up
their electricity rates, they have little knowledge about the level of
fish and wildlife costs affecting those rates.
In fact, we were surprised at the results of research that was
conducted last year on behalf of Northwest RiverPartners
(www.nwriverpartners.org), a consortium of river users and utilities
who support a balanced approach to the multiple uses of the Columbia
and Snake River system. The polling found that about 60% of respondents
did not know there were any costs in their rates related to
implementation of the Endangered Species Act.
Fish and Wildlife Costs
Of course, in the case of the Bonneville Power Administration
(BPA), there are significant fish and wildlife costs in the rates the
agency charges for wholesale power. According to BPA, the fish and
wildlife category will account for about 30 percent of the rates
charged for the upcoming rate period. The total BPA ratepayer cost
since 1980 is well over $7 billion. That does not count the amounts
contributed through other federal, state, and local taxing entities.
Are all of these costs warranted? Are they effective? Those are
questions with which the region has struggled significantly over the
last two decades as the underlying science slowly develops. We have
offered our testimony on some of those issues before, and would be
happy to do so again in depth. I will only touch upon a couple of
points today.
It is difficult to know the extent to which highlighting the costs
on power bills will lead to more scrutiny over the effectiveness of
salmon mitigation measures. If it does, then that would be a useful
byproduct of H.R. 4857 that would benefit fish as well as ratepayers.
We saw a good example of the ability to do things better for fish
in a more efficient way earlier this month. Hatchery fish were passed
by Bonneville Dam using a new method that avoided spilling water that
would have lost $1.3 million worth of power generation. The so-called
``corner collector'' device passed 7.6 million fish from the Spring
Creek Hatchery at a fraction of the cost seen in prior years. Used in
conjunction with the screened bypass system at the dam, this method
passes fish with a survival rate of over 99 percent.
Another new technology aimed at improving fish passage around the
dams is called the removable spillway weir. This device enabled
juvenile fish to pass with a 98% survival rate in tests at both Lower
Granite Dam and Ice Harbor Dam. This creates better fish passage while
only using one-fifth of the water used in normal spill operations. The
Army Corps of Engineers (ACOE) is to be commended for these
improvements to fish survival and cost effectiveness.
On the negative side, the ACOE is currently proposing to spend $30
million on a feasibility study regarding the effects of different flow
regimes for fish. The faulty assumptions behind this effort lack any
real scientific basis, and threaten a loss of focus from the ACOE's
mission of preserving important flood control capability. If similar
studies in the past are any guide, this ``Columbia River Fish
Mitigation System Flood Control Review'' is likely to lead to very
certain and large costs to ratepayers without any certainty that so-
called results will serve to inform important scientific and policy
questions.
Clearly, a survey of expenditures for salmon includes some good and
some not so good models. More knowledge about fish and wildlife costs
is not an impetus to do less for fish. Rather, it can create ownership
in the efforts underway and serve as an inducement to create better,
more effective means of assisting fish in the future. And, it should be
noted that any approach to salmon recovery that will be successful
long-term must take into account all aspects of the salmon lifecycle
including impacts from hatcheries, harvest, and all areas of habitat
whether inside the hydropower system or not.
Providing Valuable Information
Support for this bill should not depend upon whether you believe
these expenditures in the name of salmon should be lower, higher, or
are just about right. The issue here is information. Certainly, it
would make the understanding of these costs clearer if they were
displayed directly on the power bill each month. What happens to the
information after that, or to the opinions of consumers receiving that
information, will vary greatly from utility to utility and from
customer to customer.
Some may argue that a utility and its ratepayers could gain this
information without this bill. This is not necessarily the case. Only
federal agencies are in a position to determine with accuracy the costs
they expend on fish and wildlife. The processes in place to determine
those costs and inform customers about them are lengthy and complex.
Utilities would benefit from having one official estimate that is
produced by the agency and disclosed on the actual power bill.
Some might question why these particular costs should be displayed
and not other costs. There are very few costs in BPA's power rates that
are of this magnitude and this level of volatility. In addition, these
costs are particularly driven by federal laws that do not directly
relate to the business of producing power. This distinguishes them from
many of the cost categories that flow into the rates of power marketing
administrations.
Defining ESA Costs
Under H.R. 4857, some may argue about whether the number that a
power marketing agency displays is the correct reflection of fish and
wildlife cost. Those arguments are inevitable, and there are plenty of
venues in the region for all of us to voice our concerns to the agency.
But, that discussion should not inhibit the agency from making a final
determination and getting that information to customers.
For example, H.R. 4857 correctly includes the indirect costs as
well as the direct costs of ESA implementation. To a ratepayer they are
one and the same. Water spilled over a dam rather than creating
electricity impacts ratepayers just as much as direct projects, capital
costs, or operations and maintenance. The pertinent question is:
without the set of actions in question would the power rate be lower?
Whether the action causes a loss of generation or whether it is a
direct expenditure, the impact is pressure on rates to be higher than
they otherwise would be.
In addition, we would hope that BPA would administer this provision
by including all fish and wildlife costs in its calculation of cost for
purposes of this bill. While the bill refers specifically to costs
incurred related to compliance with the Endangered Species Act (ESA),
it also refers to ``activities related to such Act''. In the case of
mitigation paid for by BPA and its ratepayers, the ESA has such broad
impact on the region that most if not all fish and wildlife mitigation
could be defined as related to that Act even if it is more formally
associated with another law such as the Northwest Power Act. Also, from
a practical standpoint, many projects may serve multiple purposes under
multiple laws and are difficult to parse in a definitive way.
Conclusion
We support H.R. 4857 because it is a straightforward approach to
providing more information about a major factor in the power rates of
consumer-owned utilities. Timely release of useful information is a
worthy goal in and of itself. But, just as important is the potential
that this information may create incentives for better management of
our natural resources that would benefit endangered species and
ratepayers alike.
______
Ms. McMorris. Thank you very much, and thank you to
everyone for being here today and offering your testimony. We
really appreciate it.
I wanted to start just with an open question to anyone who
would like to answer, but just to speak to how informed you
think people are of the endangered species costs and why you
think it is the case.
Mr. Corwin. I can take that one. You know, you mentioned a
poll before that was done last year by a consortium of river
users and other utilities, and it really was striking.
Consumers are not well-informed at all, and I do not know why
that is the case. In our world, we certainly talk about these
issues a whole lot. Occasionally, they get some media
attention, but I think folks in general know when their rates
go up; they do not know why, and it is not displayed in a clear
and easy-to-use manner on the power bills for utilities to use.
Ms. McMorris. OK.
Ms. Patton. I just wanted to say that I have not seen the
results of the River Partners' poll, but there are many polls
that have been done over the course of the last 10 years anyway
asking customers what they really would be willing to pay in
order to preserve salmon, and the numbers that come back from
those polls ranged from up to $5 a month on bills, which is so
much larger than any of the actual costs that it would be
interesting to look at those polls together.
Ms. McMorris. I might just ask Mr. Corwin and Ms. Mikkelsen
just to comment, since you work for utilities, how accessible
is this information, and then I know because I am a customer of
Inland Power and Light--it is on our bill, but would you just
comment as to what the customers' response has been to that
line item on the bill?
Ms. Mikkelsen. Certainly. I think that the customers'
response to the line item has been largely related to the size
of their electric bill, and so we would have a local grocery
operation that pays in excess of $25,000 a year for the fish
and wildlife component of the BPA program, the BPA power, and
clearly that particular element of their bill has gotten more
attention than with a residential consumer who is paying in the
neighborhood of $10 a month.
So my sense is that the response from the customers and the
interest from the customers in terms of the total amount has at
least in some measure been related to the actual dollar amount
of the bill. I think that from our commercial sector customers
especially this has been a very eye-opening exercise in terms
of informing them about the nature of fish and wildlife
programs in the Pacific Northwest.
We also have had a number of residential consumers,
especially those living on low and fixed incomes, that have
been very concerned over the levels and have appreciated the
information.
Ms. McMorris. Can you speak to how difficult it was to get
the information?
Ms. Patton. Yes. Let me describe the process we used, and
that may give you a sense of it. So we had a retired, high-
level, BPA manager that came to work for Inland Power and
Light, and as I said, one of his first jobs was to try and get
information about fish and wildlife costs. We knew at the get-
go that we would not have perfect information, but we felt that
if we could get in the ball park and feel comfortable that
generally that we were providing good information to the
members, that good information was better than perfect
information.
It took many months to do that, and the process went
something like this: We would ask some questions of a BPA
person, and that person would kind of ask the next level up and
the next level up and the next level up. It was a very
iterative process in terms of trying to make sure that the
agency was comfortable with releasing the information. Also, I
think it is fair to say that had we not had somebody with a
familiarity of the organization and a familiarity of the basic,
underlying issues and the rocks to look under and those sorts
of things, that it would have been extremely difficult to have
done this.
So I am not at all convinced that had we not had the person
working on the project that we did that we would have ever
gotten to the result that we did.
Ms. McMorris. Very good. A quick question to BPA. The--of
the spills has been in the forefront of our minds and the
impact that it has had on electricity generation. It was due to
Judge Redden's decision related to the Endangered Species Act.
Do your agencies consider that cost one that should be passed
on to the customer, the consumer?
Mr. Delwiche. Thank you, Madam Chair. Your question is,
does Bonneville believe that the costs associated with Judge
Redden's orders should be passed on to the customer? Well, the
costs associated with this order are real costs that affect
Bonneville's financial bottom line, and being that we sell
power at cost, and our costs are recovered fully through our
power rates, we have no choice but to pass those costs on to
our customers.
I might also opine that in the Northwest the ratepayer
burden associated with Endangered Species Act compliance
relative to the taxpayer burden is probably different than
other parts of the country where ESA activities in other parts
of the country are more borne by the taxpayer and less by the
ratepayer.
Ms. McMorris. OK. Thank you.
Mr. Grijalva?
Mr. Grijalva. Thank you, Madam Chair. With your
concurrence, if I may enter this statement into the record.
Ms. McMorris. Yes.
[The prepared statement of Mr. Grijalva follows:]
Statement of The Honorable Raul M. Grijalva, a Representative in
Congress from the State of Arizona
Thank you Madame Chairwoman:
I must voice my opposition to this bill. This bill is unnecessary
and would create a cumbersome and expensive new procedure for Power
Marketing Administrations in the West, while unfairly demonizing the
Endangered Species Act in the process.
This bill purports to require disclosure of the cost of compliance
with the Endangered Species Act to power customers in Western states.
However, to a great extent, the reason many species, particularly those
in the Columbia River, are listed is because of dam operations and
power generation. If the way in which hydropower was generated weren't
so damaging to the environment and to wildlife and fish in particular,
these costs would not be necessary.
In addition, this bill seems designed to demonize the Endangered
Species Act by singling out compliance with that law as a cost on its
own. The fact is, you can't separate out costs to comply with that
particular Act, because the PMAs are required under numerous laws and
treaties to take certain actions with regard to fish and wildlife that
overlap partly or completely with ESA compliance.
For example, there is significant overlap between the requirements
of the ESA and laws such as the Pacific Northwest Electric Power
Planning and Conservation Act. In addition, the federal government must
fulfill its trust responsibilities to Northwest tribes under various
treaties by preserving aboriginal fishing rights on the Columbia river
and its tributaries.
So to single out the Endangered Species Act as the reason for all
fish and wildlife costs related to dam operation is an
oversimplification and is disingenuous considering all these other
obligations.
Moreover, despite there being these costs related to fish and
wildlife, utility rates in the Pacific Northwest are among the lowest
in the nation.
This bill would add an unnecessary, burdensome and costly procedure
to Power Marketing Administration's reporting duties. While I look
forward to hearing testimony today, I believe there is absolutely no
need for this legislation and I am firmly opposed to it.
______
Mr. Grijalva. Thank you. Just a couple of questions, Madam
Chair, and let me, if I may, begin with Mr. Hacskaylo. On page
2 of your testimony, you say ESA operating constraints prevent
the generation of hydropower when it is the most valuable,
creating lost sales and revenue. If Western is required to
abide by ESA--this is my question--how can ESA compliance be a
cost? Does not Western also consider water delivered to meet
irrigation contracts, flood control as lost revenues because
water is not being used at that time to generate power?
Mr. Hacskaylo. In response to your question, sir, that
Western views the issue of lost revenues as a result of the
timing of when water can be released through the generators in
order to comply with Endangered Species Act requirements; that
is where we see the lost revenue coming in.
Mr. Grijalva. And with regard to irrigation contracts and
flood control, that is not a lost-revenue question as well?
Mr. Hacskaylo. We do not deal with irrigation or flood
control. I will defer to the Bureau of Reclamation on those
issues.
Ms. McMorris. As used in Section 2[a], who would be the
firm power customers to receive the monthly estimate of ESA
costs incurred? Who would they be?
Mr. Hacskaylo. The firm customers would be approximately
the 750 customers we have, cities and counties----
Mr. Grijalva. The utilities.
Mr. Hacskaylo. Yes, sir, wholesale utilities.
Mr. Grijalva. Will any residential customers receive these
monthly billing revenues?
Mr. Hacskaylo. Not for Western Area Power Administration,
no, sir.
Mr. Grijalva. And do you track ESA costs specifically at
this point?
Mr. Hacskaylo. We track ESA costs specifically with regard
to the Colorado River Storage Project, which is where most of
our costs are. On our other projects, as these costs and
programs are developing, we will be tracking those costs, yes,
sir.
Mr. Grijalva. OK. The discussion was about objective
accounting and uniform accounting. So all of the power
marketing administrations track cost of revenues the same at
this point?
Mr. Hacskaylo. I do not know the answer to that, sir.
Mr. Grijalva. I think, at some point, that is an important
question because, if not, does it make sense to amend H.R. 4857
to require this uniformity?
Mr. Hacskaylo. I am not sure what additional burden that
would require, to have a uniform system of accounts for all of
the PMAs. I just do not know, sir.
Mr. Grijalva. Let me ask Ms. Patton, if I may, right now,
the discussion on 4857 focuses on the costs of ESA compliance,
and maybe from your perspective and hearing some of it in your
testimony, but maybe you can elaborate, what have been the
economic benefits to restored fisheries, in your experience?
Ms. Patton. Well, it does not even have to be my
experience. The Army Corps of Engineers actually completed an
economic analysis in 1999 that showed that some of the economic
benefits of a restored river could be certainly as high as $300
million a year. We have also seen studies in Idaho of the sort
of surprise fishery that came out, and this is in my written
testimony, that towns like Riggins and others that depend on
tourist dollars saw several million dollars, in the tens of
millions of dollars, of revenue just from that restored
fishery. In Washington and Oregon, there are all kinds of
communities that are facing now a huge economic disadvantage
because of the impact on commercial fishing of loss of salmon.
So benefits are very substantial, and we can direct you to
a number of studies on the issue.
Mr. Grijalva. I would appreciate that. I think it would be
useful information for the Committee.
Mr. Corwin, just a little follow-up on the question that I
was asking previously. If PMAs are required to calculate the
costs of revenues used for ESA, should they be uniform? Second
of all, should they be required to calculate the value of water
for other purposes such as irrigation?
Mr. Corwin. As far as uniformity across PMAs, I cannot
really speak to that. We specialize in BPA, and they have a
pretty well-established way of accounting for total fish and
wildlife costs.
As far as lost revenues relating to other matters, like I
said, there is nothing with this level of volatility and
certainly nothing with this magnitude, irrigation included. The
study that Ms. Patton referred to regarding the level of
supposed value of water used for irrigation in the region was a
study from one staffer at the Northwest Power and Conservation
Council. It is a draft. It is out for comments, and it is going
to receive several. As far as the assumptions used in that
study, it was based on a lot of old studies on other topics, so
I think there are a lot of questions. It is a tough thing to
measure. The water returns to the river off of the land used
for irrigation at certain points. You have to try to measure
that evaporation.
The ESA costs are unique in that, unlike other costs, there
are many ways to achieve the objectives of ESA implementation,
and we would say, in a lot of cases, more efficient ways to
achieve those objectives. They are well defined. They are
easily measured. Most of the large losses of generation from
ESA implementation came into the Northwest starting in about
1995 when the implementation kicked in.
Mr. Grijalva. I think the Northwest Power Conservation
Council recently, and I do not know how recent this might be,
found $250 million is lost by using water to irrigate crops
rather than leaving it in the river to generate electricity.
Shouldn't that be part of the accountability?
Mr. Corwin. That is a memo I was just referring to. The
council did not find that; one staffer did, and it is out for
comment, and it is in draft, and I think there are a lot of
flaws in that. Whether there is some level of loss there that
can be accurately measured and included is up for debate. It
has not been measured previously, and it would be a difficult
thing to do.
Mr. Grijalva. The question is about the whole picture, not
part of the picture.
Mr. Corwin. Yes. Philosophically, perhaps, but Bonneville
could answer that.
Ms. McMorris. OK. Mr. Pearce has to leave, so we are going
to go to him next. Thank you.
Mr. Pearce. Thanks. Ms. Mikkelsen, you heard the comment
that ratepayers would pay up to $5 to support the salmon. If
you disaggregate and look at the senior citizens on fixed
income, would they be willing, in your estimation, to add five
bucks to their monthly fee?
Ms. Mikkelsen. Thank you. I think that it is fair to say
that many of the senior citizens and low-income consumers that
we serve struggle mightily to pay their electric bills and that
$5 represents a significantly higher proportion of their
disposable income than for the rest of the population. My sense
is that their willingness to have the costs be anything higher
than $5 would be limited.
Mr. Pearce. Thank you.
Ms. Patton, there are some states that really try to
mandate conversion to a certain amount of green electricity;
that is, if a producer is using a coal-fired plant, they have
to have a certain amount of green-generated power. Is that
something your group supports or you personally support, that
mandatory conversion?
Ms. Patton. The NW Energy Coalition supported and worked
with our members in Oregon to achieve what is called the
``public benefits charge,'' which is providing both low-income
weatherization and low-income energy assistance, as well as
energy efficiency and renewable energy.
Mr. Pearce. You would vote for mandatory conversion.
Ms. Patton. There is a mandatory requirement that the
utilities, and we are talking about industrial utilities here,
would set aside----
Mr. Pearce. I would ask that if you would not remind my
reclaiming my time, so you would support this mandatory
conversion, even though it is very difficult. In some places,
there might not be enough green power to really fill the
requirement, but you still think we should push the envelope
just a little bit.
Ms. Patton. We think that there is going to be green power,
and we think it is the best thing for our country and for the
ratepayers, yes. It is cleaner, affordable power, and we think
it is a good idea.
Mr. Pearce. So you would be in favor of mandating things
that would be somewhat difficult to achieve in order to, even
though it might be hard to get into the----
Ms. Patton. We do not think that they are difficult to
achieve. We think they are a little bit unfamiliar, and the
main issue is that your costs are up front.
Mr. Pearce. So whatever the objections, they should
overcome the objections and try to get it done.
Ms. Patton. We want them to look at the long range, yes.
Mr. Pearce. When I look at your testimony, I find that you
say that this bill is not possible because it would be
difficult or impossible, and yet I find you having a different
value set on one set of issues, that we should push the
envelope just a little bit, even though it is difficult or
impossible, but on this particular bill, you would not want to
do that, and I find that curious.
Ms. Patton. I think we were just talking about separating
USA from Pacific Northwest electric power planning and treaty
obligations. That is not the same thing----
Mr. Pearce. One of your bullet points also says it is
likely to focus national attention on the fact that rates are
60 percent below. Isn't that part of transparency? Isn't it
true for the part of transparency, even though it might bring
attention? I find that very curious that you would not want the
rest of the Nation to know the truth, that hydroelectric is a
somewhat better, lower-priced energy source. Why is that a
particular objection for you?
Ms. Patton. I am fine with the transparency so long as we
are meeting our responsibilities to salmon and to make
available the cleanest and cheapest power to our customers.
Mr. Pearce. But not to bring to the attention of the Nation
that hydroelectric power is 60 percent less.
Ms. Patton. There is always an interesting phenomenon
attached to that, special attention, as opposed to transparency
all by itself.
Mr. Pearce. I think transparency myself is good in all
regions.
Now, if the Bonneville Power Administration is forced by
environmental standards to convert from clean-burning or clean-
produced hydroelectric power to coal because of certain
endangered species actions, isn't that part of transparency
that would be good for the customers to know, that this law is
being used to shut down hydroelectric power, and then, in the
meantime, we want to convert to coal power, and we want to
generate more coal power. That seems like that is very powerful
and good information, and yet----
Ms. Patton. It would be good if it were true, but, in fact,
the Northwest Power and Conservation Council, which is the four
Governors of the four Northwest states, has already done a 20-
year forecast that shows there is plenty of clean electricity
from energy efficiency and renewables to meet all load growth
and to cover those issues, so it is not an issue of needing the
coal. If that were true, I would certainly want that to be
transparent, but it is not the case.
Mr. Pearce. So you are saying there is plenty of renewable
power, so we could go ahead and just shut down the
hydroelectric now.
Ms. Patton. No, not the whole system. Of course, not.
Mr. Pearce. Well, there are people who would do that.
Ms. Patton. I do not know any of them.
Mr. Pearce. I am sure you would not.
Madam Chair, I have extended beyond my time, and I
appreciate the consideration to let me go ahead of the rest of
the group. Thanks.
Ms. McMorris. Thank you. Mr. Inslee?
Mr. Inslee. Thank you. Ms. James, do you support repeal of
the Endangered Species Act?
Ms. James. Mr. Inslee, thank you for the question. My
organization supports reform of the Endangered Species Act.
Mr. Inslee. Do you think that the ESA should be repealed if
it ends up that consumers are paying $2.80 a month for
household electricity due to efforts to keep salmon in the
rivers for our grandchildren?
Ms. James. As I stated, we support reform, not repeal.
Mr. Inslee. Have you been advised that Mr. Sheets--all fish
and wildlife costs would be about $2.80 a month for a household
in the Pacific Northwest associated with fish and wildlife
expenses?
Ms. James. Mr. Inslee, I have no knowledge of that. My
region is the Colorado River Basin, so maybe the question needs
to go to another witness.
Mr. Inslee. Well, I just want to read to you an e-mail from
Ed Sheets that says these ESA cost estimates would translate
into about $6.90 per month for a consumer that is served by a
utility that buys 100 percent of its power from BPA. BPA serves
40 percent of the Northwest. The average impact on consumers
would be about $2.80 a month. So all of this hullabaloo is
about trying to make sure that is on one piece of paper that
goes to the utilities when this information is available to the
public already.
Ms. James. I would like to turn the response over to Ms.
Mikkelsen. I do not even know who Mr. Sheets is, and I think he
is probably referring to her region and not mine.
Mr. Inslee. I have his official title. I want to make sure
I get his official title right--former head of the Northwest
Public Power Council for 15 years.
The point I am making, this information is available. I am
just asking a question, if I can. I assume the purpose of this
bill is to share information for the public. Do you think
should the public be told the cost of the nuclear experiment
that did not work in the Northwest? Do you think they should be
told the cost of that debacle on their bills once a month?
Ms. James. In terms of consumer transparency, again, that
is not my region, but I would think that would be an
appropriate thing, If what we are looking for is disclosing
true and actual costs to consumers, I think that is a good
idea.
Mr. Inslee. Well, now we are getting somewhere. So now you
are going to put on the bills the cost of the nuclear debacle.
How about the debacle of the Federal budget where we are paying
over $100 billion a year for Federal interest payments because
the deficit has ballooned in the last six years? Do you think
we should give that information to consumers, too?
Ms. James. I am not sure who would do that, but, you know,
in theory, again, what we are supporting is increased
understanding and education and transparency of the costs that
the customers are paying. If the taxpayers are paying that
cost, I think it would be appropriate to disclose it.
Mr. Inslee. That would be interesting. I represent a
district in western Washington, and we do not have huge
irrigated agriculture. I used to represent a district that did
have irrigated agriculture. They are both great districts. My
concern is, in my particular region, the district that I now
represent, they do not have a lot of irrigated agriculture. Do
you think they should be told the cost of providing irrigated
agriculture to the districts that do use irrigated agriculture
so they can see how their money is being spent for a district
that is not--do you think that is important for them to know?
Ms. James. If they are paying those costs, yes, I do.
Mr. Inslee. OK. How about the cost of the Iraq war? Do you
think people ought to be told the cost of the Iraq war?
Ms. James. I think, since the American taxpayers are paying
the cost of the Iraq war that, yes, they should be able to know
those costs.
Mr. Inslee. Well, they do, and they can because it is
publicly available information just like this is already, and
my concern about this bill is to add unnecessary duplication,
litigation, hassle, heartache, and confusion to something that
is already publicly available, and if this bill is not required
to go to the consumers, I am not sure what is going to be
gained here. As I understand this bill--let me ask you, does
this bill simply require this information to be given to
utilities? Is that correct?
Ms. James. Yes, it is, and I think there are some
differences in our region versus what I have heard this morning
on Bonneville and the Northwest. The Northwest appears to be a
step ahead of our region in terms of that type of transparency.
Certainly, the costs are available if we ask for them and seek
them out. By having, at minimal, expense in time, the costs
actually provided to the wholesale consumers, they can then
each choose how they decide to share those with their retail
consumers.
Mr. Inslee. I want to make sure I understand. It is your
position that if this bill advanced, you would support an
amendment that would make available to the same people that
this bill would the cost of the compliance with the nuclear
debacle and irrigation costs to provide irrigation services to
people in these affected areas. You would support that
amendment. Is that correct?
Ms. James. No, not without seeing the actual text, I could
not.
Mr. Inslee. OK. Well, we may provide that to you if this
bill advances at all.
Ms. Patton, I just wondered, do you think there should be
any distinction? The motivation, I am sure, is sincere of those
who proposed this legislation, and it is to share information
with the public, which normally is a laudable goal. Sharing
information with the public in a democracy is a laudable goal.
I do have some concerns about this, though, of, first off,
being able to actually segregate compliance with ESA costs
compared to compliance 2[e] responsibilities, contractual
obligations to the states, just basic good government decisions
made by these appointed and elected officials. Trying to
segregate these things; I think it would be very, very
difficult, actually, to comply.
My perspective on this, actually, I think consumers would
be more interested in the sort of total cost we spend,
investment we make, in trying to keep salmon in the rivers for
our grandchildren. I think that is what people would be most
interested in, and trying to segregate ESA from treaties and
everything else is going to drive people nuts, frankly, and
they will all end up in litigation and everything else, and it
really will not achieve a purpose. Do you have any comments in
that regard?
Ms. Patton. Yes, definitely. And I think BPA also has said,
and Mr. Delwiche has said, that it would be much easier to
report, which they already do, the costs for the full program
for fish and wildlife restoration, and we would strongly
support that, obviously, along with the costs of the rest of
the program, and we would like to see the benefits weighed as
well when we do that kind of analysis. It is sort of like the
question earlier that you pay up front for a wind turbine, and
then you do not have any fuel costs. So you have to look at the
long term in order to see what the costs and the benefits are.
So, yes, we would like to see all of the fish and wildlife
costs, as well as the irrigation withdrawal costs and as well
as the nuclear debt costs as well as the benefits that we see
on the other side because that is the only way we can make a
fair determination of the wisdom of the decisions that are
being made for us.
Mr. Inslee. My reaction to this is if we head down this
path, we are going to have this, you know, 50-page document
with all of this information that is already pretty much
publicly available and really no public benefit. I am over my
time. Thank you.
Ms. McMorris. Mr. Otter. Yes, Mr. Walden, I do know you are
a Member, but Mr. Otter has been patiently waiting and also
worked on this legislation in years past.
STATEMENT OF HON. C.L. ``BUTCH'' OTTER, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF IDAHO
Mr. Otter. Thank you, Madam Chairman. Thank you very much
for your leadership on this. As I was just explaining to Mr.
Walden, I had an amendment last year to the Endangered Species
Act very much similar to this, and what I had envisioned, and
all of the confusion that you could possibly add to this to try
to mask the subject, I think, flies in the face of most of
those advocates like the former questioner from this bench who
constantly requires advocacy and transparency, I should say, of
Enron, who we meet every day at the gas station, and the list
goes on and on.
If there were a question about how much information was
available in the travel expenses or in the executive
compensation or bonuses or anything else, I am quite confident
that that information would not only be forthcoming from my
colleagues but also in many other sectors.
I would like to state for the record, Madam Chairman, that
the study referred to by Ms. Patton was a study that was,
indeed, put on in Idaho and that there was, indeed, some $300
million that was felt that the state would benefit from the
free-flowing river and the loss of the four dams, 3,000
megawatts, the shipping, the siltations of the river on down,
the total disruption of the flows for years to come. That was,
indeed, a $300 million study benefit.
However, an analysis by the University of Idaho, and, Madam
Chairman, I would like to ask unanimous consent that both the
study referred to by Ms. Patton and the analysis by the
University of Idaho which indicated that the numbers were
inflated, and if not, they were involved in some advocacy
accounting, I would like to have both of those submitted to the
record so that the statement made by Ms. Patton does not go
unchallenged or at least unclarified.
Ms. McMorris. Without objection.
[NOTE: The study and analysis submitted for the record by
Mr. Otter have been retained in the Committee's official
files.]
Mr. Otter. What we had envisioned is when I get my property
tax in Idaho, I get a property tax, and it says, this is what
schools are costing you, and this is what fire department and
police department and the sheriff's department--it goes right
on down the line. So I need a list of all of those who the
government uses their authority to collect taxes from my
property and the value of my property. I know exactly, if I
look at this year's tax bill compared to last year's tax bill,
I know exactly who is costing me more money, and if it is the
schools, and if I am not getting the product out of the
schools, then I have a legitimate complaint. That is the kind
of transparency that I believe that I envisioned and I believe
Ms. McMorris, in her leadership effort on this bill, also
envisioned.
If I am getting bit by mosquitoes in the summer months, and
I look down, and mosquito abatement is part of that, and I am
not getting my money's worth, I know who to complain to. So
that is exactly what we were talking about. The community that
has resisted this effort, my effort, for the last three years
and is now resisting this effort, as far as I am concerned, do
not want the ratepayers to know.
Every month when I get my power bill, it always comes with
how to protect yourself, do not lift your hand line and hit the
power line because it could electrocute you. It comes with all
kinds of information, including conservation information--turn
the lights off, put a jacket around your hot water heater--all
of these things, but it does not give you the information of
how much I am paying per kilowatt hour for the power that I
consume. That is exactly what I had envisioned, and I think
that Ms. McMorris has envisioned, by this bill.
I find it extremely curious, to use Mr. Pearce's word, that
we would not be able to identify these costs. Mr. Delwiche, you
said that the three primary categories were debt service, M&O,
and what was the third one? I wrote them down here right quick.
Mr. Delwiche. The revenue effect of flow and spill and
operations changes at the dams.
Mr. Otter. That is right. Last year during the spill
period, we were spilling a million dollars a month worth of
water, to what benefit we are still not sure, and we will not
know for three years because we have not studied that two
years. We have only studied 25 percent of the fish's life span.
We did not study the 75 percent of the time that they spend out
in the ocean, so we are just studying a very short period.
My point is this: We are going to be voting this afternoon
on a bill to add, I think, another $700 million to--heap while
we are spending a million dollars a day with water in Idaho.
Some of that money is obviously going to go to the Northeast,
but it is going to go to the Northwest.
Madam Chairman, I apologize for making a speech here
instead of asking the questions, but I thank you all very much
for your testimony. I have it. That will become, as you know, a
matter of this record, and I appreciate you all being here
today. Thank you, Madam Chair.
[The prepared statement of Mr. Otter follows:]
Statement of The Honorable C.L. ``Butch'' Otter, a Representative in
Congress from the State of Idaho
Madam Chairman, thank you for allowing me to join you in this
hearing today and I am proud to be a co-sponsor of your legislation.
H.R. 4857 is similar to an amendment I offered last year to the
Threatened and Endangered Species Recovery Act.
By requiring Power Marketing Administrations, like Bonneville Power
Administration, to include costs related to the Endangered Species Act
in their customers' monthly billings, this is a common-sense bill aimed
at empowering electricity consumers with the ``right to know'' what
they're paying for. The bill simply provides ``sunshine'' and
transparency to the way our federal government does business.
In the Pacific Northwest alone, the Bonneville Power Administration
accounts for 45 percent of the region's electricity sales and 75
percent of its transmission lines.
The regions hydropower is no longer cheap by today's standards due
to a number of reasons. One of those is the Endangered Species Act. The
ESA has a tremendous impact on the electricity backbone of the nation.
In siting new transmission lines, in relicensing hydroelectric projects
and in generating power, the ESA impacts almost every facet of how
consumers receive electricity.
Bonneville's rates have risen 46 percent since 2001, due in part to
the ESA's impact on the Columbia/Snake hydropower system. The agency
spends an average of $500 million per year on ESA compliance. Since
these costs are passed directly to the regions consumers, it's safe to
say that when many turn their light switches on; the ESA meter is
literally running.
When I get my bill for my property tax, I know exactly where all of
my money is going. Everything is listed out from dog catcher to
education to police department and so on. When my bill goes up I can
compare it to last years bill and know who was responsible for my
increase. We should have the same ability with our electricity bills.
The point of all this is that few Pacific Northwest consumers have
a notion of what amount of their monthly bills go towards ESA
compliance. Nor do the other end-use customers of the other Power
Marketing Administrations. It is estimated that as much as one-third of
the power bill is devoted to salmon recovery--but no one knows for
sure.
I get a bill once a month from my power company and it includes all
sorts of information about tips on conserving energy and warnings on
how to keep from electrocuting myself, but nowhere does is detail what
I am paying for. How much is for generating power, how much is for
transmission costs and how much is ESA? All we're asking for is a
little transparency and better government accounting, and that's what
this bill does. So thank you, Madam Chairman, for having a hearing on
this bill and for your leadership on this issue.
______
Ms. McMorris. Very good. Mr. Walden?
Mr. Walden. Thank you, Madam Chairman. I want to commend
you for bringing this legislation forward and Mr. Otter for his
work in this area as well. I think the consumers have a right
to know, and that is what this really gets down to. As Mr.
Otter and others have said, I get my property tax bill, and I
know what the port district costs me and the school district
costs me, and I know what bonded indebtedness, and all of those
costs, and I do not have any problem trying to also know what
the WHOOPS debt is and what we are paying on it and some of
these other costs. Now, I am not sure we need to put the Iraq
war cost on my electric bill, or maybe it goes on my phone
bill, some bill, but it is publicly available----
Mr. Otter. Would the gentleman yield?
Mr. Walden.--put it on your credit card, Mr. Otter.
Mr. Otter. Would the gentleman yield? I think you will find
that out in about another 30 days. It is called April 15.
Mr. Walden. Yes. It is on our tax bill. What a consequence.
So I think people need to know the costs. I also serve on the
Energy and Commerce Committee. We looked at the E-rate program.
Pick up your phone bill, and there is how much we pay for the E
rate, how much we pay for E-911. I do not see anything wrong
with that unless you are on the side that is panicked that
people might actually, once they know the costs, develop a
different view of how we manage things and the process
involved.
I have spent a lot of time on these issues. I am a native
Oregonian. I love getting out in the woods and everything else,
and I think there is a lot we can change in the process without
ever lowering environmental standards. Sometimes that change
does not come about, frankly, until people understand there is
a cost associated with it. I will keep myself under control
here because I get tired of seeing my little rural
communication have their economies shut down by people who only
think they come through there to have a park, a place to play,
and they do not mind the forest being burned to the ground and
nothing happening afterward as long as they are not affected by
it.
In the Northwest, we are all affected by these issues. We
just had a study come out somewhere that questions whether the
spill being ordered by the Federal judge is actually having a
positive effect. Now, it is heresy to even raise that as an
issue in some quarters, that we would question what we are
doing works. Congressman Norm Dixon and Brian Baird and I have
been raising some questions about how our hatcheries operate,
how our harvest is done.
Why is it we allow as an incidental take 45 percent of the
Wild Falls Chinook Run going up the Snake River that we are
trying to save. Forty-five percent of that run, an endangered
run, was allowed to be harvested as part of a bigger harvest,
and then we call it incidental. For God sakes, if we cut
100,000 trees out in the forest and happen to take 45 percent
of the spotted owl nests, and I think somebody would chain
themselves to a skidder, and yet we sort of ignore this when it
comes to fish.
So I think it is important to put these issues on the
table. I think consumers have a right to know. I think public
policy people have a right to know. I think there are limits,
trying to calculate everything, but it sounds like this
information is generally available, so what is wrong with
sharing it in a more effective way? So I guess that is my
question for Mr. Corwin, folks from the BPA. Is what we are
proposing here something that is reasonable to get the
information out?
I do not want to burden our folks with new costs, new
equipment needs to the point we are driving up electrical
costs. We are fighting the Administration on a proposal to do
that. Can you all respond? In what you see in this bill, are we
doing it in a way that is not going to add costs to ratepayers
but will just give the public the right to know what these ESA
costs are? Greg, do you want?
Mr. Delwiche. Mr. Walden, thank you. As I had indicated in
my testimony, if we report these costs on a percentage basis, a
percentage of the customer's total bill, that information is
readily available, and it would be easy for us to provide.
Mr. Walden. Mr. Corwin?
Mr. Corwin. I think it is a very reasonable proposal, and
it is not something that is easy to grab otherwise. One of the
Members mentioned a consultant saying the cost was $2.80 a
month. Well, not in our utilities area. It is much higher, and,
in fact, if you are using $300,000 worth of electricity a year
to run your agricultural operation, the costs would be
enormous. This bill, I think, could clarify for people what the
cost is.
Mr. Walden. All right. Mr. Hacskaylo?
Mr. Hacskaylo. Thank you. As with Bonneville, we can
accomplish the goals of this bill with no additional staffing,
with minimal cost, and provide the information to our wholesale
firm power customers.
Mr. Walden. So if it does not take more staff, it really
takes no more cost, and you can acquire these data, then what
is the harm with sharing it? And I am out of town. I will leave
it as a rhetorical question. Thank you.
Ms. McMorris. Thank you. I wanted to follow up. I am just
not confident maybe that the information placed on the table
earlier is accurate as far as what we are facing when we think
of energy demand versus energy supply because over the next 20
years there is a lot that can be done related to conservation,
and I think we need to be promoting that and encouraging people
and educating people as to how they can better use energy and
conserve. There is a lot of potential there. We need to be
promoting the alternatives, but there is still a lot of work
that needs to be done.
I wanted to ask whoever wants to respond what they see as
the realities of demand versus supply, and maybe, Greg, if you
would start with BPA, just what you know and some of the
impacts on hydro, and then we will go from there.
Mr. Delwiche. Thank you, Madam Chair. There was a question
raised earlier about if we generate less electricity, what
resource is used as a replacement resource, and on a forward-
looking basis, of course, the Northwest Power Planning and
Conservation Council suggested that we use green power to meet
the load growth needs of the Northwest. However, in real time,
as we spill water instead of generating electricity, we have to
use conventional resources, the existing resources, the
constructed resources to generate electricity, and generally
speaking, those are resources that combust fossil fuel, be it
natural gas or coal or even, in some cases, oil if we are at
the most expensive part of the resource stack.
On a forward-looking basis, as I indicated, the council has
suggested that the region can meet its load growth needs
through construction of green resources such as wind farms. I
should point out, though, that, of course, wind is an
intermittent resource. It requires a farming resource to absorb
the intermittent nature of wind and reshape it into a form that
is consistent with demand, and the Federal Columbia River power
system is unique in its ability to do that in a very efficient
way. However, the more constraints that get placed on the
system, the greater the risk will be in the future that we will
be unable to use the system to farm wind, which is the very
resource the council is suggesting that we place most of our
eggs in the basket of for meeting the region's load growth
needs.
Ms. McMorris. Does anyone else wish to comment?
Mr. Hacskaylo. Very briefly, Madam Chair, the Energy Policy
Act of 2005 provides for a number of studies by the Department
of Energy, the Department of the Interior, the secretary of
Army looking at hydropower enhancement and improvements, as
well as additional means to streamline rights-of-way so that we
can build the appropriate transmission to move, for example,
wind or other generation to load as the demand increases in the
years ahead.
Ms. Patton. I would just like to add that the BPA is really
to be commended for the work it has done to use the hydro
system to begin that process of farming wind and farming other
kinds of intermittent resources. It has been a really huge
contribution to figure it out. I think that the Northwest Power
and Conservation Council did account for that aspect of farming
wind with hydro and not having to put on fossil fuels to do
that in their study for forward-looking.
The other thing I would say is that these witnesses would
agree that transparency is a good thing, and more of it is a
good thing. I think we would also agree that certainty is a
good thing, and more of it would be a good thing, and that is
why I think that it is important to get some certainty into the
fish and wildlife constraints on the river so that we know then
and can start building the resources that are going to not have
to rely on the spot market, as Mr. Delwiche is noting that the
spot market can give you some pretty nasty stuff. So that is my
position.
Ms. McMorris. OK, OK. Just quickly, then, BPA and Western,
are you currently using any fossil-based fuels to replace
hydro?
Mr. Hacskaylo. Western, I am sure that we are, yes, ma'am.
Mr. Delwiche. Similarly, ma'am, as we need to enter the
spot market to match gaps between supply and demand, as I
pointed out earlier, oftentimes the resources that are
generating energy that is sold into the spot market are
resources that use fossil fuel as an energy source.
Ms. McMorris. To Mr. Corwin, Ms. James, or Ms. Mikkelsen,
do you think the PMAs currently have clear direction in
reporting ESA costs to customers? Is there easy and uniform
access to these numbers, and is the bill unnecessary, as has
been stated?
Mr. Corwin. Thank you. I would say no to all of the above.
Ms. McMorris. OK. Ms. James?
Ms. James. I would say the bill is necessary. The
information is available on an as-request basis. So I think the
bill takes that step forward in requiring the disclosure and
transparency in our region.
Ms. McMorris. OK.
Ms. Mikkelsen. And I have spoken to this earlier, but I
think that the bill is clearly needed. We would feel much more
comfortable providing information to our consumers with
information that came directly from Bonneville and was easily
substantiated.
Ms. McMorris. OK. Mr. Otter?
Mr. Otter. I just have one more question, and that would be
of everyone. Right now, the Elks Canyon complex in Idaho is
going through relicensure, and the bill thus far we know is up
around $600 million for relicensing, in mitigation and
relicensing those dams.
A couple of years ago, probably five years ago now, we had
a similar on the middle Snake where we had to relicense several
small dams on the middle Snake. Those costs were outrageous.
Those dams have been in place obviously for 30 years; that is
why they had to be relicensed.
Those are costs that folks who receive their power bill
feel like it is the BPA or it is Idaho Power or it is Seattle
Power or whoever, but they are the ones that raise the rates.
They do not know that the fish and wildlife has raised the
rates. The state parks--these people who are unelected are
actually setting the power rates to some extent, and that is
the clarity that we are trying to bring here with the ESA and
the cost to the ESA is who is setting your power rates? I can
understand their objection to it because I agree with Mr.
Walden.
So the question that I would have is, on your relicensure
cost, couldn't that also become an item on your power bill that
says, this is what it is costing you every kilowatt hour to
relicense these dams, for instance, up around the Box Canyon
dam when they put a bicycle path--isn't that nice--all the way
around there so that about maybe 2 or 3 percent of the power
ratepayers could enjoy the bicycle path around the new
reservoir and the dam? Couldn't we also include those costs in
that? Whoever wants to yield to that.
Ms. Patton. I think it is an interesting question. I was
working for CLC Light when it went through relicensure for its
three dams on the Skagit River, and ultimately the changes that
they made because of that relicensing led the NW Energy
Coalition and Save Our Wild Salmon and a number of other
organizations to, in fact, endorse the power as green power,
and now CLC is commanding a premium for 300 average megawatts
of power because of what they did under relicensing.
So that is the issue: Do you want to have just the costs,
or do you want to have the benefits because their power costs
now are going down because of the benefits of that relicensing?
Mr. Otter. And that bicycle path that went around the Box
Canyon dam; that added to the production of power?
Ms. Patton. I am not familiar with the Box Canyon dam, but
I am very familiar with the Skagit, and that was the
relicensing changes that they made, made it premium power.
Mr. Otter. BPA is going to be going through or has already
gone through relicensure requirements. What about those costs?
Mr. Delwiche. Mr. Otter, by relicensure, I assume you are
referring to new costs associated with Endangered Species Act
compliance, and those additional costs would be part of the
costs that we would be reporting if this bill becomes
legislation or is passed.
Going to your example regarding Pend Oreille Public Utility
District, they are what is called a ``partial-requirements
customer,'' Bonneville, so they have their own resource, Box
Canyon dam, and they also buy some energy from Bonneville. So
under this proposed legislation, we would be reporting on a
percentage basis the share of their costs that we bill them for
that are attributed to our fish and wildlife recovery efforts.
They could, as a utility, also choose to reflect on their
customers' retail bills their relicensing costs associated with
things like the bicycle path and show them both, but that would
be their choice.
Mr. Otter. I am going to go to the question on percentages,
reported percentages. If you are producing, let us just say for
round figures, if you are producing 1,000 kilowatts, and 20
percent of the production of that 1,000 kilowatts is ESA costs,
let us say, why couldn't you get that right down to the
kilowatt hour and say, you used 100 kilowatt hours, and so 20
percent of that 100 hours of kilowatts that you used is the
cost of the Endangered Species Act? Now you know what the
Endangered Species Act is costing you. Why do we have to do it
just in percentages?
Mr. Delwiche. Thank you, sir. In my written testimony,
attached to it is a sample copy of one of our customer's bills,
and as I noted, many of our customers buy a whole suite of
products from us that, in aggregate, are used by them to meet
their retail needs, and ESA-compliance costs hit each of those
products--our rate design is intended to spread the cost in a
proportional way, but we would have to develop some very
complicated billing algorithms to actually attribute dollars
and cents the ESA-compliance costs associated with each product
that adds up to the whole. So the percentage approach would be
just much easier from a manpower point of view.
Mr. Otter. But then if I were a consumer, and let us say my
power bill was $100, and you said the percentage of ESA cost to
your power bill is 20 percent. It would not take a phi beta
kappa in accounting to figure out that that is 20 bucks.
Mr. Delwiche. Exactly. That is why we are proposing the
percentage basis. It is simpler. It is easier for us on the
billing side, and the consumer can do the calculation, like you
described, or the retail utility could.
Mr. Otter. I thank all of the witnesses once again and you,
Madam Chairman, for your endurance.
Ms. McMorris. Thank you for being here, and thank you to
all of the witnesses. Again, I appreciate you taking the time
to be here. I think we agree with the overall intent of
information and transparency, and that is the intent of this
bill. I look forward to working with all of you as we hopefully
get ultimate passage of the legislation. Thanks again. The
hearing is adjourned.
[Whereupon, at 10:28 a.m., the Committee was adjourned.]