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1994 Columbia River Basin Fish and Wildlife Program |
| Council document 94-55 | |
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1.3 Costs And Responsibilities
1.3A Principles Governing Costs
Congress established three major principles in the Northwest Power Act to govern the economic costs for measures in this fish and wildlife program. First, hydropower ratepayers are to pay only for those measures designed to deal with the effects of hydropower development and operations. Second, measures must protect, mitigate and enhance fish and wildlife while assuring the region an adequate, efficient, economical and reliable power supply. Third, program measures must use the alternative with the lowest economic cost where equally effective ways of reaching the same sound biological objective exist. The Council has taken specific steps in the following program areas to further the economic principles set down by Congress.
- Salmon and steelhead losses and goal: As part of the 1987 Fish and Wildlife Program, the Council conducted an extensive analysis to estimate the scope of losses of salmon and steelhead related to hydropower development and operations. It concluded that from 5 million to 11 million fish have been lost due to the effects of hydropower. As a result, the program's goal of doubling the current run size of 2.5 million salmon and steelhead is well within the scope of hydropower-related losses. (See Section 4.1: Salmon and Steelhead Goal.)
- Salmon and steelhead policies: The policies that will guide efforts toward the doubling goal are designed to help promote sound ratepayer investments. For example, the program calls for assessing the genetic risks of proposals related to producing more fish. Genetic diversity among fish is essential to the long-term productivity of salmon and steelhead stocks in the basin. The program also emphasizes the crucial need for passage at the dams and adequate river flows between the dams on the mainstem Columbia and Snake rivers if fish produced with ratepayer funding in the tributaries and in hatcheries are to survive. The program's salmon and steelhead production policy calls for developing ?master plans? to resolve potential conflicts among increased production, mixed-stock harvest and other objectives, such as gene conservation, before the Council approves ratepayer funding of new artificial production facilities. In its harvest management policy, the program calls on harvest managers to regulate catch, including mixed-stock harvest, to support ratepayer-funded production and passage efforts. The program's adaptive management policy encourages projects to be designed to produce information that will reduce biological uncertainty and aid future decision-making.
- Cost estimates for program measures: The Council has reasonably accurate cost estimates for measures in the program. These estimates either were provided to the Council or were developed by Council staff. There is a problem, however, in that Bonneville is understandably reluctant to provide cost estimates for projects it later will negotiate with contractors. The Council expects to resolve this problem in the future so that the cost of specific measures can be estimated with more precision.
- Research priorities: The program focuses ratepayer-funded salmon and steelhead research into six areas of emphasis, each aimed at improving the effectiveness of existing production and passage facilities and techniques.
- Monitoring and evaluation: The Council is committed to a monitoring and evaluation program to promote sound ratepayer investments in salmon and steelhead projects. Changes in salmon and steelhead run sizes will be evaluated to determine whether those changes are due to ratepayer-funded efforts or to other causes. Monitoring and evaluation also will provide feedback so that ineffective actions can be identified and changed.
- Water budget evaluation: The program reflects the need to examine the effectiveness of the water budget and to explore alternative proposals to provide river flow benefits to fish while minimizing impacts on the power system or to resident fisheries.
- Dam passage: The program emphasizes installation of bypass systems and use of fish transportation, while also calling for investigation of the use of surface bypass and limited spill, as the long-term method to improve fish passage around mainstem dams.
- Resident fish and wildlife criteria: The program includes criteria that specifically tie resident fish and wildlife mitigation projects to hydropower-related losses of those species and their habitat.
- New hydropower development: Measures calling for conditions on new hydropower development should help protect against new hydropower generation that would undermine ratepayer-funded enhancement of salmon and steelhead, resident fish and wildlife.
- Contributions from others: Throughout the program, the Council recognizes that non-hydropower factors also have contributed significantly to declines in fish and wildlife in the basin. Flood control operations, irrigated farming, overfishing, logging and mining are among them. As a result, the program notes the need for complementary funding or other efforts from sources other than hydropower ratepayers.
The Northwest Power Act anticipates that Bonneville will play an active role in this program's implementation by requiring the agency to take the necessary steps to ensure the ?timely implementation? of the Act in a ?sound and businesslike manner? In addition to fulfilling the duties imposed on the other agencies, Bonneville also is to use the powers provided by the Act and other relevant laws, and the finances available in the Bonneville fund, to protect, mitigate and enhance fish and wildlife. These actions are to be consistent with both the requirements of the Act and with the Council's program. Bonneville has the authority to buy, sell and exchange electrical power, provide transmission services, propose power rates, and participate in power system planning and operations.
With the division engineer for the Corps of Engineers, the Bonneville administrator also acts as the U.S. entity in carrying out the provisions of the Columbia River Treaty regarding use of Columbia River Basin water stored in Canadian reservoirs. All these provisions indicate that federal project operators and regulators, particularly Bonneville, are expected to ensure that their decisions reflect this program and other requirements related to fish and wildlife.
1.3B Three Types of Costs
There are three significant categories of fish and wildlife costs that affect the Bonneville Power Administration's rates:
Project Costs
Bonneville funds construction of hatcheries, habitat projects, research and other fish and wildlife initiatives in the Council's program. The budget for these projects currently amounts to between $80 million and $90 million each year. The Council estimates that the new projects adopted in this program could add about $25 million to Bonneville's project budget. The average annual budget would therefore total $115 million a year. The Council expects that some of the additional activities described in these measures can be funded through modifications of existing projects.
Repayment Obligations
Bonneville repays the U. S. Treasury for most of the costs of passage facilities at the Columbia and Snake river federal dams. These are the original fish ladders, the screens and bypass systems whose installation at the dams began in the 1980s, and the juvenile salmon transportation facilities. The annual payment for these existing facilities was about $60 million in 1994. The Council estimates that it will cost an additional $95 million a year, beginning in 1998, to repay the cost of the additional investments for dam modifications in this program. Bonneville's total fish and wildlife repayment obligation would then average about $155 million each year.
Foregone Hydropower Revenues
When the Council adopts measures to change river operations to provide improved flows for salmon, Bonneville is not able to make as much money from power sales as it could before. In many winters, Bonneville must buy power from other suppliers to allow the reservoirs to store water for spring and summer salmon flow releases. Spill and lowered mainstem reservoir levels also reduce the ability of individual dams to generate electricity.
In 1984, the Council adopted its first ?water budget? and in 1989, adopted a spill agreement. These measures reduce Bonneville's power sale revenues by an average $55 million a year. The interim flow operations of the 1992 Strategy for Salmon added approximately $45 million in average annual revenue impacts to Bonneville. Together, those earlier measures resulted in a net revenue impact to Bonneville averaging about $100 million annually. The Council estimates that the impact to Bonneville from the foregone revenue and additional energy purchases necessary to implement the measures in this program will average an estimated $57 million annually, beginning in 1995. This average annual cost will rise to nearly $80 million in 1999. Thus, the total revenue impact to Bonneville from foregone revenue and replacement power purchases for salmon operations will average approximately $157 million, beginning in 1995, and increase to $180 million in 1999.
These additional costs are significant. Together with the cost of the current program, total program costs will amount to approximately $450 million per year on average. Elsewhere in this document, the Council discusses the impact of these costs on Bonneville's continued ability to be an economic supplier of electricity. The Council believes there is a need for the federal government to assist Bonneville with and share in these costs through adjustment of Bonneville's Treasury repayment obligations, general appropriations or other mechanisms.
Potential Rate Increases
To evaluate these costs in terms of their effect on Bonneville's rates, the Council looked at possible rate impacts, assuming that no federal assistance is provided. When incorporated into Bonneville's total budget, the Council estimates that these costs could translate into about a 6 percent wholesale rate increase by 1997, rising to about a total of 9 percent by 2015, as these additional measures are implemented. This is the increase to Bonneville's wholesale customers. The Council estimates that the cost to a typical residential ratepayer would be about a 4 percent increase in the home electricity bill in 1997, rising to 6 percent by 2015. Stated another way, these estimates predict that typical Northwest monthly electricity bills will increase by about $2 a month by 1997 and a total of $3 a month in 2015, to pay for the additional salmon measures called for in this program.
Additional cost analysis is included in Appendix B. Those costs are reported in levelized dollars.
1.3C Regional Funding and Staffing
Because it is a regional program to rebuild weak fish and wildlife populations, the Council's program calls for participation and funding by state and federal entities and others.
All levels of government must bear responsibility for adequately funding and staffing fish and wildlife rebuilding measures, or run the almost certain risk that the recovery effort will be delayed, with potentially disastrous results.
Until now, most fish and wildlife rebuilding costs have been borne by electric power consumers through the Bonneville Power Administration pursuant to the provisions of the Northwest Power Act. To the extent that measures -- including off-site measures and programs -- respond to the impacts on fish and wildlife caused by the region's hydroelectric system, ratepayer reimbursement is appropriate. But these fish and wildlife populations were diminished, and rebuilding measures are required, because of a variety of other causes. The costs of responding to these other causes should be shared by all responsible parties. The Council will work with the states, Bonneville and other federal agencies to clarify funding responsibilities.
The Council intends to make cost-effectiveness an important part of the program. A successful program is one that provides permanent restoration of fish and wildlife populations at the lowest cost. Such a program cannot be restricted to any one life stage, but must comprehensively include all stages in fish and wildlife life cycles. Short-term, least-cost calculations are not part of this plan, but aiming for long-run success is.
To assess measures that will have the greatest level of biological effectiveness relative to the regional costs incurred, the Council shall review and acknowledge all cost-effectiveness analyses submitted to the Council and related to the program.