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1994 Columbia River Basin Fish and Wildlife Program |
| Council document 94-55 | |
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1.8 Assuring the Region an Adequate, Efficient, Economical and Reliable Power Supply
1.8 Assuring the Region an Adequate, Efficient, Economical and Reliable Power Supply
The Ninth Circuit Court of Appeals in NRIC v. Northwest Power Planning Council characterized the fish and wildlife provisions of the Northwest Power Act as ?[a]ttempting to balance environmental and energy considerations.?[1] The Council's fish and wildlife program must consist of measures to ?protect, mitigate, and enhance fish and wildlife affected by the development, operation, and management of [hydropower] facilities while assuring the Pacific Northwest an adequate, efficient, economical, and reliable power supply.?[2] The measures in the remainder of this program address the first part of this requirement. The findings below address the second part of the requirement.
Attached as an appendix to this program are two analyses that are relevant to these findings. The first is Part I of Appendix B, which is a power system/rate analysis of the adopted mainstem measures (and alternative proposed measures), which estimates the power impacts, costs (including capital costs) and rate impacts of these measures. The second, Appendix C, is a broader analysis, ?Assuring an Adequate, Efficient, Economical and Reliable Power Supply and the Ability to Carry Out Other Purposes of the Power Act.? This report examines the elements of the Act's power supply standard from a number of angles, and, most important for these findings, analyzes whether and how the cost, rate and power impacts of the Council's anadromous fish measures can be accommodated by changes in the power system and still assure the region an adequate, efficient, economical and reliable power supply. The following findings are distilled from those analyses:
- The Council has not departed from utility industry standards for an adequate and reliable power supply. If fish recovery measures do not allow enough time or flexibility for the power system to be adapted, they could violate the conditions necessary for an adequate and reliable power supply. The Council's analysis indicates that there are sufficient resources under development, available for purchase on West Coast electricity markets, or that could be developed with relatively short lead time to ensure the region an adequate power supply. Although the reliance on purchased power is a departure from traditional regional planning practices, the Council believes this is becoming common practice in the emerging competitive power market. The costs of those resources have to be considered in the context of the economics of the power system.
- To ensure the reliability of the power supply, power system operators need the ability to draft storage projects notwithstanding fish needs in emergency circumstances that threaten firm loads (e.g., major temperature drops like those experienced in 1989 and 1990; loss of a major resource like Washington Nuclear Project 2 or a large Grand Coulee unit; or loss of the Northern or Southern intertie). System operators need some discretion to begin drafting in anticipation of severe weather events, in order that the water can reach the lower river projects at the time it is needed. Bonneville also has the responsibility under the Pacific Northwest Coordination Agreement, the Northwest Power Pool and the Western Systems Coordinating Council to maintain reliability standards for voltage and transmission stability. Instability could result in local or regional blackouts. Accordingly, during the time of year that water is being stored for fish at the federal projects (Hungry Horse, Libby, Dworshak, Albeni Falls and Grand Coulee), such storage may be temporarily drafted to avoid: 1) threatened inability to meet firm loads due to emergency circumstances (see above); or 2) voltage and transmission instability. Such drafts should be temporary and should strike an equitable balance between impacts to resident fish and anadromous species. System operators are expected to make purchases to minimize the risk that there will be less water stored for anadromous and resident fish than would otherwise have been stored. The role of financial considerations in Bonneville's purchase decisions is discussed in Appendix C.
- Fish recovery measures may require actions that are not as efficient from the standpoint of the objective of power operations as actions that are devoted solely to that objective. However, the Northwest Power Act clearly expected that operations would be balanced among fish, power and other objectives. The changes in power operations efficiency will have impacts on the economics of the power system.
- From the standpoint of the region's economy and power system as a whole, it is unlikely that fish recovery measures would result in an uneconomical power supply. The total costs are small relative to regional income. Even if Bonneville's customers were to turn to other sources of supply, the resulting power supply would still be relatively economical in relation to the rates paid in other parts of the nation. The advantage the Northwest currently enjoys would, however, be expected to diminish as a result of increased costs in this region and decreased costs brought on by competition elsewhere.
- The picture may change for specific parts of the region or consumer groups: costs could prove to be burdensome to some, and if so, ways to avoid unreasonable burdens on specific customer groups should be explored.
- With these qualifications, and apart from financial impacts to Bonneville itself, the Council can provide reasonable assurance that the region's power supply will be adequate, efficient, economical and reliable while implementing the fish and wildlife program.
Financial effects on Bonneville
The Council also must determine whether the fish and wildlife program is consistent with other purposes of the Northwest Power Act.[3] One of the purposes of the Act is to ensure that Bonneville's customers and consumers pay the full cost of power, including repayment of the U. S. Treasury.[4] Care must be taken to ensure that Bonneville's financial obligations, including the cost of protecting fish and wildlife from the adverse effects of the hydropower system, do not make Bonneville uneconomic and unable to carry out the purposes of the Northwest Power Act. The Bonneville Power Administration is an integral part of the region's power supply, and the principal means for financing energy conservation and fish and wildlife initiatives under the Northwest Power Act. It is possible for fish recovery measures and other costs to cause Bonneville's power supply to be perceived as no longer economical in relation to competing supplies. If a significant number of utilities decided to seek other supplies of electricity, Bonneville might no longer be able to collect sufficient revenue to fund the fish and wildlife recovery and other purposes of the Act, including repayment of its debt to the federal Treasury.
The factors affecting Bonneville's financial position obviously are not limited to the costs of the fish and wildlife program. The federal hydropower system must repay the substantial debt remaining from past regional investments in thermal generation, for example. In addition, federal legislation affords unique advantages to Bonneville's regional customers that may impair Bonneville's competitive position. The Council's analysis suggests that Bonneville probably can absorb some additional fish recovery costs and still be able to carry out the Act's purposes. However, this conclusion is quite uncertain, particularly in the short term, and the Council believes that additional means should be explored to pay these costs.
The Council has identified the actions that are necessary to protect, mitigate and enhance fish and wildlife affected by the development, operation, and management of hydropower facilities. To successfully implement these actions, assure an adequate, efficient, economical and reliable power supply and not subvert the other power purposes of the Act, the region will need to work with the federal government on the allocation of costs. There is a need to implement the fish recovery measures and maintain the Bonneville Power Administration's financial health.
Four means of spreading the costs of implementing the program suggest themselves: One is to seek federal appropriations or other sources of funding for fish recovery measures. A second is to share as much of the cost of fish and wildlife costs as are attributable to the non-power uses of the Columbia River system as allowed under Section 4(h)(10)(c) of the Act. A third recognizes the parallel between fish recovery measures and utility investment that is stranded by competitive pressures. Much of the policy debate surrounding the ongoing restructuring of the electricity industry nationwide is focused on the question of stranded investment. A charge for use of transmission and/or distribution systems is the mechanism that is most frequently mentioned. The potential for recovering part of the fish recovery costs through a transmission charge should be investigated. Fourth, a number of suggestions were made in the Bonneville Power Administration Congressional Task Force Report for reforms that could save money for Bonneville. These suggestions should be explored.
In addition, the Council believes that arrangements should be developed to ensure that in years when Bonneville's revenues are healthier, Bonneville pays a greater portion of fish and wildlife costs than in years when revenues are strained. In healthier years, the region should have less need to call on the alternatives discussed above.
Finally, while the Council has done considerable analysis in connection with these findings, it is important to recognize that the adequacy, efficiency, affordability, and reliability of the region's power supply, and the impact of these measures on Bonneville's ability to carry out the purposes of the Act, can be more fully gauged as the Council revises its regional power plan. The fish and wildlife program is part of the power plan, and the mutual impacts of fish and power measures are intended to be examined together.[5] Some recommendations submitted in the fish and wildlife amendment process, for example, the Columbia River Inter-Tribal Fish Commission's proposal to establish ramping rates for flow fluctuations at mainstem dams, raise issues of adequacy and reliability that could not be addressed in the fish and wildlife process. The potential impacts of these and other fish and wildlife measures deserve further consideration in the context of a full revision of the power plan.
[1] NRIC v.
Northwest Power Planning Council slip opinion at p. 10879 (9th Cir.
1994).
[2]16 U.S.C. ?
839b(h)(5).
[3]16 U.S.C. ?
839b(h)(7)
[4]16 U.S.C. ?
839(4).
[5] 16 U.S.C. ?
839b(e)(3)(F).