July 6, 2012
Mark Walker
Public Affairs Division Director
Northwest Power & Conservation Council
851 SW 6th Avenue, Suite 1100
Portland, Oregon  97204-1348

 

Dear Mr. Walker:

The NW Energy Coalition appreciates the opportunity to comment on the Northwest Power and Conservation Council’s Draft 2011 Expenditures Report: Columbia River Basin Fish and Wildlife Program (“Report”), document 2012-3.

First we note that the draft Report brings welcome news about the Council’s efforts to institute and report on high-level progress indicators.  We commend the Council for this and encourage continued expansion of the indicators to the full breadth of the Fish and Wildlife Program.

With regard to the substance, our concerns with this year’s draft Report continue along the same lines we have expressed for many years.  For example, on June 6, 2008, the Coalition and the Save Our Wild Salmon coalition jointly submitted comments on the Council’s draft Seventh Annual Report.  That submission is attached for reference.  For the most part, the comments we made then still pertain.  We focus here on the core question of “forgone revenues” and their categorization as “expenditures” as proposed by the Bonneville Power Administration.

In the current draft Report, footnote 1 states:

The Council’s program and the Biological Opinions on Federal
Columbia River Power System operations issued by NOAA Fisheries
and the U.S. Fish and Wildlife Service specify hydropower dam
operations for fish that also affect power generation.  Compliance
with these legal requirements, and others, limits the amount of
revenue that would be possible from an unrestricted operation of
the hydropower system.  For reporting purposes, on an annual basis
Bonneville calculates the value of both power purchases and forgone
revenues attributable to fish operations and reports them as part of
its expenditures to mitigate the impacts to fish and wildlife from
operation of the hydropower system.  As noted earlier, this and other
financial information was provided by Bonneville in response to
requests from the Council and was not independently verified by the
Council or its staff.
Our objection continues to be about the term “forgone revenues” and its designation by Bonneville as expenditures.  As we argue here, the legal requirements for changing dam operations to protect fish do not create a category of revenues that can be forgone.  Those requirements are part of the basic conditions for operating the federal dams and related facilities in an environmentally sound manner.  While they are a “cost of doing business,” they do not give rise to “forgone revenues” or “expenditures” any more than requirements for wages, hours, benefits and work conditions create a distinct category of “labor regulation expenditures” in an accounting sense.

Bonneville cannot forgo revenues for power that the Corps of Engineers and Bureau of Reclamation cannot legally generate.  The cost of following the law cannot be judged as a lost opportunity for revenue or as an increased expenditure.  Therefore, blending together monetary costs (“expenditures”) and the value of electric power losses (not “expenditures) is inappropriate and leads to inaccurate assessment of true program costs and impacts.

Assessing the impact of environmental regulations is an important public policy question, and there are bound to be differing views on how to do so.  The results of such investigations are not additive with direct expenditures in an accounting sense, as Bonneville’s approach does in this instance.

The implication of Bonneville’s use of the term “forgone revenues” and putting it in the category of “expenditures” is to make this effect seem equally concrete and in the same category as direct expenditures for measures recommended in the Council’s Program.  This leaves the impression that “forgone revenues” are in some fashion subject to agency discretion.

This raises the expectation that somehow, if “forgone revenues” decreased, then BPA’s rates could decrease.  Among other things, this has been used as an argument for lower amounts of spill to assist with fish passage.  But spill caps are not the result of policies or ratemaking concepts which, in their absence, could increase Bonneville’s power sales and revenues, as with the irrigation and low-density discounts.

The effect is to blur the actual impact of the Council’s Program and Bonneville’s implementation of its obligations to protect fish and wildlife, especially anadromous fish, under the Northwest Power Act and other statutes.  This is creating undue confusion and impeding progress on accomplishing the goals of the Council’s Fish and Wildlife Program.

We can seek a remedy to this confusion in the Northwest Power Act itself, where Congress took account of the distinction.  Section 4(h)(8) enumerates the principles that the Council “shall consider” in developing and adopting the Program, including the following: “Monetary costs and electric power losses resulting from the implementation of the program shall be allocated by the Administrator consistent with individual project impacts and system wide objectives of this subsection.”  16 USC 839b(h)(8)(D) (emphasis added).

Bonneville reports monetary costs in several expenditure categories as summarized in the draft Report:

•   $221.1 million in direct expenditures

•   $74.3 million in reimbursements to the Treasury for expenditures by other federal agencies for fish passage and production, and half of Bonneville’s expenditure for the Council’s budget

•   $127.2 million in fixed costs of capital investments and some land purchases for fish and wildlife habitat

•   $70.7 million in power purchases during periods of dam operations for storage and spill to protect migrating fish

While there are differences of opinion in how some of these amounts are calculated — including concerns we have expressed in the past on the valuation of power purchases within the context of the Program and the Power Act’s requirement for equitable treatment of fish and wildlife — it is clear these are legitimately considered as expenditures.

Therefore, considering the discussion above, we suggest that the “forgone revenues” category be relabeled as “estimated electric power losses” or a similar designation which is less prone to creating confusion.

This would result in a change of the labeling of the Figures in the draft Report.  For example, Figure 1A would be modified so that “estimated electric power losses” are no longer included with “cumulative expenditures” and as a “major spending area.”  While they may be considered impacts of the combined effect of the Northwest Power Act, other federal statutes, and the Council’s Program, they are not “expenditures” or “expenses” that have a discretionary differential effect on Bonneville’s rates and the costs paid by customers and consumers.

We thank the Council for its ongoing efforts to develop the Fish and Wildlife Program and for informing the governors and the Pacific Northwest region about the Bonneville’s implementation efforts and look forward to further discussion on these issues.

 

Sincerely,

Fred Heutte
Senior Policy Associate
503.757-6222
fred@nwenergy.org