News from the Front #1:  Senator Gorton's Efforts to Prevent BPA from Building a Dam Removal War Chest

This morning's Oregonian [June 17, 1999] reports that Senator Gorton introduced an amendment, which was passed by the Senate, to prohibit BPA from collecting funds in the rate case for dam removal. Senator Gorton should be commended for his efforts to prevent BPA from building a war chest for dam removal, and we should all make an effort to support those efforts.  He, above all the other Northwest politicians, is trying to understand what is going on in the bowels of the bureaucracy and take steps to combat junk science and the warping of federal fish and wildlife statutes beyond all recognition.

I send this bulletin in the hopes that some of you may be able to contact the Senator and urge him to refine his amendments, however, because the amendments as presently drafted will be insufficient to accomplish his worthy goals.  BPA knows this, which is why this morning's Oregonian also reports the BPA response:  the amendment "would not change what we're doing in the rate case".

To understand why BPA can believe it is still free to build the war chest for dam removal, it is necessary to consider the precise language of the amendments and the background facts to which they apply.   Specifically, Gorton introduced Amendment No. 646 to the Energy and Water Appropriations Act, 2000, which amends 7 of the Northwest Power Act to provide:

"Notwithstanding any other provision of this section, rates established under this section shall not include any costs to undertake the removal or breaching of any dam that is part of the Federal Columbia River Power System."

At the same time, he introduced Amendment No. 677, which also amends  7 to provide:

"Notwithstanding any other provision of this section, rates established by the Administrator, in accordance with established fish funding principles, under this section shall recover costs for protection, mitigation and enhancement of fish, whether under the Pacific Northwest Electric Power Planning and Conservation Act or any other act, not to exceed such amounts the Administrator forecasts will be expended during the period for which such rates are established." (Emphasis added.)

The weakness of the amendments is the reference to "established fish funding principles", which may reasonably construed to refer to the September 16, 1998 "Fish and Wildlife Funding Principles for BPA Rates and Contracts" adopted in (and attached as an Appendix to) the December 21, 1998 Power Subscription Strategy Record of Decision (ROD).

The Principles declare that they "are "intended to 'keep the options open' for future fish and wildlife decisions that are anticipated to be made in late 1999 on reconfiguration of the hydrosystem . . .". (Subscription ROD Appendix at 22.) Specifically, BPA declares its intention to ensure that "all these commitments can be met without creating a new contract and rate 'cliff' at the end of the next five year rate period in 2006. (Id.) To do this, BPA proposes to raise rates by assuming that "all 13 system configuration alternatives are equally likely to occur", seven of which include drawdowns.

The BPA party line is that it proposes to jack up its revenue requirement and raise rates solely to achieve a high probability of Treasury repayment, consistent with its Principle #3. As Principle #4 confirms, however, the Treasury repayment probability is inextricably linked to fish costs:

"Given the range of potential fish and wildlife costs, Bonneville will design rates and contracts which will position Bonneville to achieve similarly high Treasury payment probability for the post-2006 period by building financial reserve levels and through other mechanisms."

In other words, by assuming that extraordinarily expensive drawdowns are in the future, and requiring high Treasury repayment probabilities post-2006 under drawdown scenarios, BPA is jacking up rates now to cover potential dam removal costs.

The problem with the amendment language is that it may be read to constitute a Congressional endorsement of the fish funding principles. Such an interpretation would limit the ability of BPA customers to challenge the Fish Funding Principles in ongoing litigation over the Subscription ROD.

It is possible that Senator Gorton does not fully understand the import of the BPA Fish Funding Principles or that his language is not intended to refer to them. If Congress is going to address the Fish Funding Principles at all, it ought to be overturning them, not endorsing them.  Improvements to the amendments could fix the problem by forbidding BPA from basing rates on any forecast of costs that includes costs related, directly or indirectly, to fish and wildlife alternatives the spending for which would require Congressional authorization, including but not limited to efforts to remove the dams.  If anyone can take the initiative to help inform the Senator as to these details, such an effort cannot help but contribute to limiting excessive fish and wildlife spending and bringing about a more rational and effective approach to fish and wildlife recovery.

James Buchal, June 17, 1999

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