Meeting Minutes

Council Meeting Minutes

The Heathman Lodge
780 NE Greenwood Drive
Vancouver, WA 98662

January 17, 2001

1. Presentation by Pacific States Marine Fisheries Commission on current activities

Randy Fisher, Executive Director

Randy Fisher, executive director of the Pacific States Marine Fisheries Commission (PSMFC), described the structure and operations of his agency, noting it was authorized by Congress in 1947, with the goal of promoting and supporting conservation, development, and management of fishery resources of concern to the Pacific states through a coordinated regional approach. Each of the five member states – Alaska, California, Idaho, Oregon, and Washington – has three members on the PSMFC, he explained.

Legally, we are closest to a municipality, but we operate like a consulting firm, Fisher stated. PSMFC’s current budget is $24 million, 93 percent of which goes in direct benefits to the member states, he said. Fisher outlined how the commission contracts with other entities to carry out its mission, noting that Bonneville receives over $13 million from PSMFC for various programs. The commission is also active in lobbying issues in Washington, D.C., on behalf of member states, he explained.

Cassidy and Karier quizzed PSMFC staff on the Northern pikeminnow program, pointing out "66 percent of the funds go to bureaucracy." Russell Porter of PSMFC explained that it takes $1 million to operate the 22 check stations, where fishermen go to turn in their catch for a reward. Additional funds go to evaluate the effectiveness of the program, he added, noting that the tribal part of the program is being reduced.

Brogoitti asked about the $1.79 million PSMFC provides to the Fish Passage Center (FPC) and whether the FPC is accountable to the commission. We only handle these financial matters and have nothing to do with their policies and programs, Fisher replied. So "they are an entity unto themselves," Brogoitti observed. I suggest we look into this further, he added. Stan Grace noted that the Council’s recently adopted fish and wildlife program directs the FPC to appear if the Council requests.

2. Council Decision on Releasing Draft Report on Bonneville Fish and Wildlife Expenditures

Dr. Tom Karier, Washington Council Member; John Harrison, Information Officer

Karier described highlights of the first Annual Report of the Columbia Basin Fish and Wildlife Program 1978-1999. He said the project, initiated by a request from Governor Locke echoed by the other governors, was bigger than anticipated. The report contains an accounting of Bonneville’s fish and wildlife expenditures since 1978, information on the basin’s fish and wildlife populations, a brief discussion of future efforts, and the 2001 budget, Karier said. Since 1978, the region has spent $3.48 billion on fish and wildlife mitigation, he stated. Forty percent of that figure is attributed to changes in hydro operations, including both lost generating revenue and power purchases made to accommodate fish operations, according to Karier. The direct program to fund fish and wildlife activities is 23 percent of the total, he said.

"The vast majority" of the money has been spent on anadromous fish recovery, Karier continued. Monitoring and evaluation studies account for "a huge percent of the expenditures," he said, making up one-third of the direct program. Land acquisitions for fish and wildlife purposes now total 233,000 acres, according to Karier. Prior to this report, a complete list of the land acquisitions did not exist, he added. Karier said analysts could not identify all of the benefits of the fish and wildlife expenditures, as the governors had requested.

"We are close to a data crisis" in terms of pulling out the needed data from sources in the region, according to Karier. He said he wanted to develop a data strategy to address the situation

Decision – Release Draft for Comment

The Council voted unanimously in favor of a motion made by Bloch and seconded by Field to release the draft report for 30 days of public comment.

3. Panel on Impacts of Power Situation on Northwest Utilities

Dick Watson, Director, Power Division; Steve Klein, Superintendent, Tacoma Power; Bill Gaines, Vice President, Puget Sound Energy; Pat Ashby, Manager, Tillamook Peoples Utility District; and Wayne Nelson, Manager, Clark Public Utility District

Everyone is focusing attention on California and there has been little acknowledgment of what this energy crisis is doing to the Northwest, staffer Dick Watson said in introducing a panel of regional utility executives. These four very different utilities are facing a number of issues associated with the power situation to the south, he added.

Watson described the collision of events that led to the crisis as "the Perfect Storm." Load growth during the last decade has been met with limited development of new resources and efficiency improvements, he said. In addition, hydro conditions in the Northwest have been poor; the runoff pattern last spring was less than optimal, and dry weather has persisted into the fall and winter, Watson explained. Natural gas prices have also been rising, he pointed out.

Environmental constraints, particularly air quality standards in California, have taken some resources off line at a time when they are needed to meet load, Watson continued. On top of that, "we have a dysfunctional California market design," he stated. The price signals in the deregulated California market are not appropriate to cause consumers to curb consumption, Watson explained. The utilities in California "are buying high and selling low," he added. Things might have functioned all right with lots of hydro in the market, but instead, the market power of those who now own the generation has been evident in California’s deregulation design, Watson said.

These circumstances have led to unprecedented high wholesale power prices, he went on, noting that spot market prices spiked on the mid-Columbia hub in November and December. The problem in the market was apparent when prices shot up last May and June, but we thought things would moderate later in the year, Watson explained. Unit outages in California and poor hydro conditions have converged to keep prices high, and the consequences have been "not so perfect," he stated.

Industrial customers in the Northwest are finding it uneconomic to continue operating, and there has been considerable impact on utilities that will ultimately pass on to consumers, Watson said. "The chaos in California works its way back to us by stressing Northwest supplies," he explained.

Watson gave an overview of poor reservoir conditions in the Northwest this winter, noting that a "cold event" could create serious problems with supply. The early-bird runoff forecast is 75 percent of normal, and without more precipitation and/or ability to import power, reservoir refill is in jeopardy, he said. A hot summer in 2001 could mean continued tight power supplies on the West Coast, Watson said. The current elevation at Grand Coulee is the lowest in 25 years, except for 1989, "and that shouldn’t give anyone any comfort," he added. The snowpack is also low, and almost everywhere in the Columbia River Basin, streamflow forecasts are at least 10 percent below normal, Watson pointed out.

"We were flying along full speed and suddenly went into a 90-degree vertical dive," said Tacoma Power superintendent Steve Klein, as he explained the situation of Northwest utilities with exposure to the West Coast power market. "I don’t see anything that will allow us to impact the ground in a solvent way," he added. To recover costs, utilities are faced with unprecedented rate increases and surcharges, Klein said. Tacoma has already seen Schnitzer Steel and Louisiana Pacific curtail operations, and Pioneer Chlor-Alkali is on the verge, he said. Pioneer produces chlorine for sewage treatment and components for aircraft fuel; if it stops production, there will be impacts to operations at SeaTac and to local sewage treatment plants, Klein reported.

Tacoma has implemented a 50 percent rate surcharge, which amounts to a 43 percent increase to residential customers and 75 percent to industrials, he continued. Industrial customers that have diversified suppliers and are buying from the market are experiencing increases greater than 75 percent, Klein added.

For Tacoma, unseasonably dry weather is compounding the problem, he said. We were prepared for adverse water, but our reservoirs are lower than critical, and we’ve had to cut back on generation and reduce output to conserve water for fish, Klein stated. We’re also discussing whether to ask local authorities to mandate curtailment, which he called "a political hot potato." It would be a way to keep the utility solvent and protect the environment, but Klein added that Tacoma would risk being sued.

Tacoma was caught in the market when spot prices were as high as $3,000 per megawatt-hour (MWh), he acknowledged. The utility spent $60 million on power in December and faces continuing high prices, Klein said. Tacoma bought diesel generators with 50 MW of capacity, called for conservation, imposed a rate surcharge, and is also planning to take on "$100 million in commercial paper" to get through the rest of the winter, he reported.

You can’t buy power at $200, $400, or $2,800 per MWh and sell it for $25 or $50 and stay solvent, but we can’t raise retail rates enough to cover costs without shutting businesses down, Klein went on. Tacoma serves a large percentage of working poor customers, he added. Borrowing is the last resort to keep from going insolvent, but that has its own consequences, Klein stated.

As for ways to relieve some of the burden, he pointed out that the state is realizing a windfall in utility taxes because of rate surcharges. That money could help us solve these problems, for instance by supporting conservation, in lieu of just adding revenue to the state coffers, Klein suggested.

We are hearing about the calamity in California, where they are facing just a 10 percent rate increase, Tom Karier observed. "It seems like California sneezed and we caught the cold," he stated. They froze rates in California to get public support for restructuring, and now the problem is with "taking back that promise" if rates go up, Klein responded. "The rate increases in California are not even a down payment for what needs to be done in terms of buying resources now and preparing for what will be needed," another panelist commented.

What has been the response to your calls for conservation? Bloch asked. I only have anecdotal information, Klein replied. For example, the colonel at Fort Lewis asked "what can we do" and subsequently turned off non-essential power at the base, and Tacoma Mall has shut down operations a half-hour early every day, he reported. But on my drive down today, I saw all of the bulbs burning at a lighting fixture store and the outdoor lights flashing at the casinos, Klein said. Tacoma bills on a two-month cycle, and we’ll get more response once people feel it in the pocket, he added.

We knew a change was coming in 1992 with the National Energy Policy Act, according to Pat Ashby, manager of Tillamook People’s Utility District. "We had a parade of consultants in saying `learn to be competitive,’" he said. Tillamook "put a toe in the water" initially and purchased 7 MW of power from the market, then added 5 MW, Ashby explained. Tillamook subsequently joined five other utilities in the Oregon Utility Resource Coordination Association (OURCA) and took 20 percent of its load to the market, with prices indexed to the Mid-Columbia hub, he said.

Conditions in the market changed rapidly, Ashby indicated. Tillamook alone is facing market exposure of $20 million, he said, adding that the PUD’s annual power budget is only $11 million. (The $20 million covers the period up to October 1, 2001, when the PUD’s new Bonneville Subscription contract takes effect.) The total bill for OURCA’s market exposure is $117 million, Ashby reported. He acknowledged being "remorseful we took the utility into this," but above all, the money to pay for the power "will be taken from a community that can’t afford it" and will hurt for years to come.

Ashby said Tillamook’s experience has caused him to question his understanding of how a market is supposed to work. In a true market, buyers and sellers enter transactions on mutually agreeable terms, he said. There is not such a market for power today, and there won’t be tomorrow, Ashby stated. I don’t believe a commodity market for power can ever exist, he said. Tillamook has developed financial tools to deal with its power costs, Ashby said, explaining that OURCA recently purchased a risk mitigation product that caps the amount of exposure the utilities have to the market. The price ceiling is giving us more predictability, and we have a narrower band of exposure, he said. The power market probably needs re-regulation, Ashby stated.

Tillamook has visited its large customers to talk about cutting electricity consumption, but they have orders to fill and are reluctant to jeopardize production, he said. Enhancing flows on the hydro system for generation would help to ease the utilities’ stress, Ashby suggested. Public entities also need to consider developing supply, he stated.

Do you see re-regulation as a transition step or as a long-term proposition? Giacometto asked. Some "extraordinarily wise and clever people" need to answer that question, Ashby replied, reiterating his support for re-regulating wholesale markets.

The power situation in the region "is anything but stable," stated Bill Gaines, vice president for Puget Sound Energy. The load/resource balance at Puget, the largest gas and electric utility in the Northwest, is generally okay, but "we are balanced on a knife edge," he said. "Any perturbation in supply would put us in the position of purchasing in this market, and the opportunities for perturbations abound," Gaines added. He noted that Puget relies on thermal generation, including the Colstrip units in Montana, and "any outage would put us into this $200 market." Gaines suggested that if the Secretary of Energy continues to direct utilities in the region to export to California, Northwest utilities could be forced to purchase power in the future. The potential impacts of such a situation are magnified by prices in the market, where forward purchases for 2001 are nearly 200 mills per kilowatt-hour (KWh), he explained.

We have had high spikes in Pacific Northwest gas prices, Gaines continued. The prices in California have set the price point for gas supplies at Sumas, on the U.S./Canada border, he said. We’ve seen prices as high as $40 per mmbtu, with the average price in December at $12 to $15 per mmbtu, Gaines said.

Puget is operating with a five-year residential rate freeze and has been able to operate within the freeze, he stated. We can request emergency rate relief, and "the way the hydro situation is shaping up looms large in that consideration," Gaines added. Some of Puget’s industrial customers demanded the opportunity to go to the market, and since the mid 1990s, a number of refiners and pulp and paper producers have been purchasing at prices indexed to the daily mid-Columbia market, he said. High prices have caused industrial shutdowns, and some customers have petitioned for relief from that index, Gaines reported.

"We must get the California situation under control," he stated. "California is an energy sink," and officials there "are fiddling while Rome burns," Gaines said. We need creditworthy customers in California, he continued, adding that utilities there are already paying a credit premium of 200 to 300 mills per KWh. The Federal Energy Regulatory Commission’s (FERC) December 15 order identified some flaws in the California market that need to be remedied, Gaines said. "They are needed, but they will not fix the market," he added. Puget advocated price caps, but FERC did not impose them, Gaines said. The market is in need of stabilization, and we think an interim price cap is a step toward that, he added. Gaines also expressed concern about the Department of Energy’s (DOE) orders directing utilities in the Northwest to sell to California "without any assurance of payment." They should do what they can before calling on the Northwest – we may need that water later in the season, he added.

I see three conflicts looming, Gaines said: the Northwest versus California, power versus fish, and power versus air. These issues have been long simmering, but they will come to the fore in 2001, and they need to be dealt with, he concluded.

Bloch asked about the level and duration of a price cap. We need a price high enough to allow for the economic operation of all resources in the West, which would include covering the costs of gas and pollution credits, Gaines responded. Even with a price cap, my sense is prices would still be higher than what we are used to in this region, Bloch observed. Yes, absolutely, that is right, Gaines stated. Cassidy asked Gaines to elaborate on the issue of power versus air. In California and the Northwest, we have plants that are idle because they are over their annual emission limits, Gaines responded. There seems to be little help from the agencies with jurisdiction to lift those limits, he said.

Klein said Tacoma recently secured "state-of-the-art" diesel units and needed air quality permits to operate them. We negotiated with the appropriate agencies and had assurances they would declare an emergency so we could have a shorter-than-usual period for public notice, he explained. But the agencies failed to declare the emergency, and if we need to operate the generators, which meet all the environmental requirements, we could be fined for being out of compliance with the notice requirements.

The requirement to sell to California seems unfair and disingenuous without a backup for the buyers’ creditworthiness, Karier observed. Will the proposal to create a new authority in California to purchase power help with that problem? he asked. Gaines said it would, adding that under the proposal being considered, an existing state agency would be used to provide credit support for power purchases. The likelihood of success depends on "how many ornaments are hung on the tree," such as a 55-mill price cap, he added.

Are there other things they should be doing in California? Bloch asked. There is little or no price signaling going to the market, Gaines replied. To get an appropriate demand-side response, customers need to see the price of the product they are consuming, he said. In the third of four mandatory sales orders, DOE said California had to reduce consumption by 5 percent, according to Gaines. They didn’t, and the order was suspended, but another order was subsequently issued, he said. As for the future of deregulation, Gaines said "at the wholesale level, the genie is out of the bottle." In Washington state, we have been very cautious about changes at the retail level and "that has been wise," he added.

How much of this market is being manufactured? John Brogoitti asked. Enough of it to require changes to the law, Klein responded. He pointed out that the California Independent System Operator (ISO) auctions for reserves a day in advance of when they are needed. It is easy to exploit such a situation, Klein said. The structure allows for exploitation, and it is not illegal – "when the ISO declares an emergency, the market feeds on itself," he observed. One of the first changes should be to have the auction for reserves take place a year in advance and hold the bidders responsible for delivering, Klein suggested. I’ve read stories in the Wall Street Journal in which companies talk about exploiting the California market, he said, noting that resource owners can bid into the market or hold back on generation.

Clark Public Utilities has not been exposed directly to the power market, but has felt the effects of rising gas prices, according to PUD manager Wayne Nelson. Clark meets half of its load with generation from the 250-MW River Road plant, a gas-fired generator brought on line in 1998, he explained. The utility buys power to meet the rest of its load on fixed-rate contracts "in the $20 range" from PacifiCorp and Avista, Nelson said. Those contracts expire in July, and Clark will have to replace that power from July to October 1, when its new BPA Subscription contract takes effect, he went on. July and August are two of the highest-priced months of the year, Nelson added.

For the first year the River Road plant was on line, gas prices were $2 to $3 per mmbtu, he said. We budgeted $2.50 per mmbtu for 2000, but paid closer to $4, Nelson explained. Fortunately, we were able to market surplus power into a high-priced market to offset rising gas prices, he reported. Clark budgeted $5 per mmbtu for 2001, but prices are now $8, with the projections for the rest of 2001 at $6 per mmbtu, according to Nelson. He noted that Clark will not have excess power to sell in 2001. Having seen the volatility in the gas market, we’ve changed our strategy and will go to the long-term market to fill our gas needs, Nelson continued. A price of $4 to $5 per mmbtu in the long-term market will keep our plant competitive, he said.

If Clark has to pay $350 or $400 per MWh when it goes to the market to fill its July-to- October power deficit, it would cost $83 million more than we anticipated, Nelson said. That amounts to a 40 percent rate increase, and we will probably finance our purchases for that period, spreading payments over five years, he reported. "If we’d known what the market would be like, we would have done things differently," Nelson stated. Clark faces an additional problem related to BPA’s contract prices, he went on. Initially, Bonneville contracts were expected to be in the low 20 mills, but those prices are going up too, Nelson explained, noting that Bonneville expects to hike its rate 30 percent before contracts take effect in October.

This week, Clark adopted a 20 percent rate increase to meet the increased price of gas for the River Road plant, he said. When the Bonneville contract goes into effect, we will need another increase, and "we’ll be hard pressed to keep that to a single digit," Nelson stated. Before this year, Clark raised rates only three times in the past 17 years, he noted. We are making a public relations effort for conservation, Nelson said, adding that it is difficult to get people to change their lifestyle with three to four-cent power.

He acknowledged that in addition to price, power supply has become an issue. In December, Nelson said PacifiCorp notified Clark that it was on the verge of blackouts, and that as a wholesale customer, "we could be affected." We have always realized there would be price pressure, but did not consider reliability at risk, he said. That’s not the case anymore, Nelson stated.

We need to solve the California problem, Nelson urged. The Pacific Northwest has grown in the last decade, and Clark is one of the only utilities to bring a resource on line in that period, he pointed out. We need more generation in the Northwest, Nelson said, noting that the price of gas will have an impact on future developers.

Do you think there will be a supply crunch in the next nine months? Kempton asked. We are moving out of our peak period in the Northwest, but if we continue to have to supply power to California, there could be, Nelson replied. "I wouldn’t be comfortable saying we will not face supply problems," he added. Kempton asked if there is something the Northwest governors should do. The governors have emergency authorities, Klein responded. While customers may not be feeling the effects of the problem yet, "the finger-pointing will come later," and the governors would have nothing to lose by declaring an emergency, he advised. I don’t think we should wait for the public to catch on; the governors should get out in front of this, Klein said.

Gaines said he agreed, adding that the industry may have been slow to push on the issue. It is hard to get people to conserve when they’re paying 3.5 cents per KWh, he said. We believe there should be a price-induced demand response, Gaines added.

It is the responsibility of the industry to send up warning flags, Kempton responded. "If we don’t get a trigger, you won’t get much action from the political side," he said. Send the message into the system and to the governors, Kempton counseled.

Karier noted that Washington’s governor has been "very engaged" in the issue, calling for conservation and traveling to California to meet with officials. Governor Locke has also called for cost-based price caps across the region, he said. We want prices in the Northwest to reflect what power costs, but to avoid opportunities for profiteering, Karier added. The governor is also on record with concerns about the sales to California, he continued. "Once the water goes through the dams, it won’t come back," Karier concluded.

Ashby said he is looking for leadership "on the supply side." The publics may have an integral role to play with their access to tax-exempt financing, he added. Ashby also pointed out that the Public Power Council has developed "a white paper" on the energy crisis, with suggestions for addressing the situation.

I have trouble asking people in the Northwest to curtail electricity use when California can’t cut back 5 percent, Giacometto stated. We need to let DOE know that people are suffering in the Northwest, not in California, he added. Klein added that Tacoma has experience with trying to secure power when DOE is pressuring utilities in the Northwest to deliver to California. We made a short-term purchase from PGE, and when the ISO declared an emergency, DOE said to deliver all Northwest surplus to California, he reported. Walt Pollock (PGE) had to stand firm in order to make the delivery to Tacoma, according to Klein.

4. Remarks by Steve Wright, Acting CEO, Bonneville Power Administration

Acting Bonneville Administrator Steve Wright outlined his priorities for the next six months. First, Bonneville has to conclude a power rate case before the new Subscription contracts take effect October 1, or we will have "a fiscal crisis" on our hands, he said. Second, Bonneville has to complete acquisition of 3,000 MW of system augmentation in order to meet the 11,000-MW load signed up under Subscription, Wright continued. We’ve accomplished 1,000 MW to date, he reported. Third, Bonneville has to determine the magnitude of the cost recovery adjustment clause (CRAC) that will be required to cover costs, Wright said. In December, we proposed a CRAC of 15 percent, but it will be hard to hold it to that, he indicated.

Fourth, Bonneville must address the National Marine Fisheries Service’s (NMFS) 2000 Biological Opinion (BiOp), Wright went on. Path A would be to declare we are unhappy with the BiOp and seek to rewrite it, he explained. Path B is to consider the BiOp "close enough" and a good framework for implementing recovery measures, according to Wright. We should choose Path B, he stated. Path A is risky, according to Wright, and Path B offers the opportunity for the region to say, "we have a plan and are following it." Salmon recovery is a national issue, and Congress will engage it, he cautioned. We should proceed to implement the plan we have, Wright advised.

Fifth, Wright said the region needs to decide how to proceed on its Regional Transmission Organization (RTO). So far, we have been able to implement a form of RTO that provides benefits, and we’re proceeding with a FERC filing in the spring or early summer, he said. The sixth priority is winter readiness, Wright stated. Even before the current crisis in California, "we knew we had a problem with insufficiency," he said. The Council’s work last year brought that to light, Wright acknow-ledged. We have taken "gigantic strides" to resolve the situation by putting together an Emergency Response Team (ERT), he said. Wright added that the Council has a crucial role to play as an objective analyst with access to information utilities consider confidential in a competitive market.

"We have seen complete disarray in the power markets," he stated. The core of the problem is supply and demand, according to Wright. No resources have been developed and that has been coupled with a low water year, he said. Increases in gas prices have exacerbated the situation, as has "the troubled mechanism" California put in place for deregulation, Wright went on. Price caps are needed to stabilize the market, in which "prices no longer reflect economic fundamentals," he said. Price caps are not a long-term answer, Wright acknowledged, adding he saw little hope caps would be put into place in the next two months.

Conservation and curtailment are what we are looking at, he stated. Any kilowatt-hours we can save now help to solve our future problem with supply, price, and having water for fish in the spring, according to Wright. "I’d encourage the Council to use the bully pulpit available to you to support conservation efforts," he said. Wright said the federal agencies have chosen to operate to keep chum salmon reds wet. The BiOp allows us to operate the system to preserve reliability, but it does not address economics, he explained. Bonneville is spending $40 million to $50 million this week to purchase power and preserve reservoir levels, Wright said. Bonneville is taking actions to avoid spending hundreds of millions more on purchases, he indicated. We’re also working with the aluminum companies to take load off the system starting in February, Wright added.

He outlined several investments the region needs to make to address the shortage. We need to get conservation into our market plan, Wright suggested. We also need to accelerate the development of new generation and new gas pipeline and storage capacity in the region, he said. The region is low on stored gas, and we have to have more to operate new gas-fired combustion turbines, according to Wright. There is a need to have an entity that looks at these issues from a regional perspective, across state boundaries, he continued. Bonneville will look at things from a Bonneville perspective, but you are in a position to consider issues region wide, Wright told the Council.

And, he stated, overall, the Northwest needs a plan to preserve the federal system benefits, "which are at risk." Wright said the greatest risk "is ourselves" and the fights over allocation of benefits that erupt in the region. We need a regional process to address the allocation of benefits, he suggested. It will not be easy, and it will require "political will," Wright said, adding it will take the Council and the region’s Congressional delegation to make an allocation plan work.

There are mutually beneficial transactions between the Northwest and California, and if we did not do them, we’d have a more expensive power system, Wright said. All of the transactions to date have had benefits for the Northwest; because of the two-for-one exchanges, we have substantial energy in the system that will help us address reliability, price, and fish problems, he said. According to Wright, Bonneville is assuring that transactions to send power to California have benefits for the Northwest. "We are continuing to enter into those transactions today, and I think they have benefits," he stated, adding that some of the power California owes the region is being returned during peak hours.

The voluntary exchanges are useful, but mandatory exchanges are a concern, Karier stated. "We have not been ordered to enter into exchanges," Wright responded. We have been clear with DOE that any transactions that are not good for the Northwest would be in conflict with our statutes, he added. "We have not been ordered to do transactions against our will," Wright reiterated.

Karier asked if Bonneville is considering tiered rates, in which there would be a low-cost tier for federal power and a second tier that covers the cost of system augmentation. Wright acknowledged tiered rates send the right price signals. From an economic viewpoint, "I am attracted to them," he stated. We have taken a shot at putting them into effect, but have not succeeded, Wright said, adding that if considering tiered rates delays resolution of the rate case, "it’s a non-starter."

Mike Field asked about the level of Bonneville’s fish funding under the BiOp. Wright said he subscribes to Judi Johansen’s position: "show us a least-cost program that gets us where we need to go, and we’ll fund it."

Giacometto asked if Bonneville plans to enhance its transmission system. We have plants that are ready to go in Montana, but no transmission to move the power, he said. We are prepared to enter into discussions about where new transmission resources need to be developed, Wright responded. There are limits on Bonneville’s borrowing authority, so the question becomes, can we live within our means, or should we consider trying to modify the law on our borrowing? he said. Giacometto suggested the system needs "massive upgrades." If you are talking about getting to California, that’s true, Wright said, adding that if that is the intention, there’s a question of whether it is Bonneville’s responsibility alone to add to the system outside its service territory.

Is it time to call on the ERT? Kempton asked. Wright pointed out that the team was set up to respond to an emergency and not necessarily to address a 30 to 90-day power shortage. We have to keep asking if the ERT is the right vehicle for this, he said, adding that he wants to try to make the current structure work. Bloch asked if Bonneville is getting the supply-demand information from utilities it needs to make real-time decisions. The frustration is that the information comes to us in the aggregate, and we continue to see problems in the way it adds up, Wright responded. It’s hard to get inside such problems when time is short to make a decision, he indicated.

Brogoitti asked if Bonneville is working on a new Memorandum of Agreement (MOA) on fish funding. We are interested in working with the Council to get those discussions going, Wright responded. "I am reluctant to call this ‘Son of MOA,’" since we may need a different form, he stated.

Bloch asked about BC Hydro’s participation in solving the current power crisis. BC did enter the market yesterday, Wright replied. The history is that they sell at high prices and won’t necessarily be part of the solution, he added. Bonneville needs to take a role in promoting conservation, Bloch observed. I agree, Wright responded. We’ll probably increase our efforts in that area, but I don’t see us going back to the old days of a $200 million annual program, he added. Karier asked how Bonneville’s bid program for acquiring conservation was going. We don’t have too many bids, and we might need a new plan for that, Wright acknowledged.

5. Briefing on Federal Biological Opinion and Recovery Planning Efforts

Elizabeth Gaar, Brian Brown and Larry Rutter, National Marine Fisheries Service

Brian Brown and other staffers from NMFS briefed the Council on the 2000 BiOp, which applies to the Federal Columbia River Power System (FCRPS) and 19 Bureau of Reclamation projects in the basin. The panel covered NMFS’ analytical approach to the BiOp, performance standards and check-in points, hydro actions, off-site actions, and the relationship of the BiOp to the Council’s fish and wildlife program.

The actions in the BiOp are set up to meet NMFS’ recovery standards, which include a 50 percent species recovery in 48 years and no more than a 5 percent risk of extinction, Brown explained. Our lifecycle analysis determined where the greatest opportunities exist to increase survival for the salmonids, he said. For example, the greatest mortality occurs at the egg-to-smolt stage, which suggests that improving habitat and water quality in the tributaries could increase overall survival, Brown pointed out. We looked for the percentage of change that would be needed at a particular life stage to get the species to the recovery standards, he said.

Brown went on to explain performance standards in the BiOp, which are programmatic, biological, and physical. Our first check-in point is in 2003, where we will check on whether the recovery activities are being implemented and whether funding is coming along, he said. In 2005 and 2008, NMFS will do a check on the status of the stocks, Brown continued. We’ll look at how we are doing relative to the 1980 to 2000 base period, including comparing the populations with what is needed to achieve recovery within 48 years, he added. Brown said the performance standards and evaluation will allow NMFS to determine whether the populations are improving, and if not, whether the failure is due to not implementing the actions or the stocks not responding.

He laid out a schedule for getting under way with the one and five-year implementation plans called for in the BiOp, noting initial drafts are due April 2. As for funding, Brown acknowledged that Bonneville’s direct fish and wildlife program expenses are expected to go up by $100 million per year to fund the recovery activities, from $252 million to $352 million. Another $170 million to $190 million will be available from other federal agencies, he said. Program costs could double in the future, depending on the effectiveness of the measures, Brown added. The 2000 BiOp means a 59 aMW loss of generation for the hydropower system, which brings the cumulative reduction over the years to 982 aMW, he reported. The costs to the hydro system will vary depending on market and water conditions, brown said.

When you decided on the 2003 check-in, were you expecting to get an aggressive start in 2001? Bloch asked. Yes, we thought we would be aggressively implementing in 2001, Brown responded. Field asked about NMFS’ efforts to devise selective fishing techniques. "It’s critical we get started on an effort to develop a selective fishing capability," Larry Rutter of NMFS replied. He acknowledged that the timing and proposals for that activity have not fallen into place. "We will have to beat the bushes for proposals," Rutter stated. He also said the tribes must concur, as new fishing requirements have implications for Treaty rights. The tribes have not completely embraced the idea, Rutter indicated.

Jim Ruff of NMFS pointed out that concerns about reliability on the transmission system could limit NMFS’ spill program, and that NMFS has been discussing the issue with the agencies that operate the FCRPS. We have asked Bonneville to upgrade the transmission system in some areas, and the agency is looking at doing so, he added.

With regard to the relationship between the BiOp and the Council’s fish and wildlife program, Elizabeth Gaar of NMFS pointed out that the region "put a lot of the eggs in the Council program basket" to achieve salmon recovery goals, a move that "was not without controversy." We will all be implementing activities at the same time, and "we need an unprecedented amount of coordinating and cooperation," she stated.

6. Presentation by Independent Scientific Advisory Board on performance standards for artificial production.

Eric Loudenslager, ISAB

Loudenslager's presentation was postponed to a future meeting

7. Council Decision on performance standards for artificial production

Bruce Suzumoto, manager, special projects

A vote by the Council to adopt standards for artificial production was postponed to a future meeting

8. Council Decision on Recommendations for Fiscal Year 2001 Project Funding Issues

Bob Lohn, Director, Fish and Wildlife Division; Doug Marker, Senior Policy Coordinator and Mark Fritsch, Fish Production Coordinator

Staffer Doug Marker introduced a number of fish and wildlife projects proposed for funding in fiscal year 2001. Information requests and other concerns about the projects have been cleared up, he reported.

Decisions - Funding

Bloch moved and Field seconded a motion for the Council to recommend Bonneville renew funding for the FPC at a budget of approximately $1.1 million. The Council voted unanimously to approve.

Bloch moved and Brogoitti seconded a motion to recommend Bonneville restore $450,000 to the Walla Walla passage improvement project. The Council voted unanimously to approve.

Bloch moved and Field seconded a motion to recommend Bonneville restore $97,500 to the budget for the StreamNet project. Karier proposed an amendment to make clear that StreamNet’s charge includes presenting data on resident fish. The Council voted unanimously to approve the amended motion.

Bloch moved and Brogoitti seconded a motion to recommend Bonneville fund a project to study the experimental reintroduction of sockeye at Skaha Lake and fund the Clearwater Subbasin Focus Program. The Council voted unanimously to approve funding at $49,357 for Skaha Lake and $48,062 for the Clearwater subbasin project.

Bloch moved and Field seconded a motion to recommend Bonneville fund three activities related to the Yakima/Klickitat fisheries project for a total of $578,000. The Council voted unanimously to approve the motion. A fourth activity, construction of an interpretive center at the Cle Elum facility, was not approved. Bloch offered the motion, which he said he would vote against, and Brogoitti seconded. Grace said he felt the Council had committed in the past to funding the center, and Field pointed out the Council voted against a similar request from the Nez Perce. The motion was defeated, with Grace, Giacometto, and Cassidy voting yes, and five members voting no.

Bloch moved and Field seconded a motion to approve $65,000 in annual funding for the Council’s Regional Assessment Advisory Committee. The motion passed unanimously.

Bloch moved the Council recommend $271,000 in funding to develop the Ecosystem Diagnosis and Treatment (EDT) tool as a web-based product and Field seconded. The Council voted unanimously to approve the motion.

The Council also voted unanimously, on a motion from Bloch and a second by Brogoitti, to approve sending a report to the Northwest governors on integration of the Council’s fish and wildlife program with other federal, state, and regional planning processes.

9. Council Business

Decision – Minutes Approved

Bloch moved and Brogoitti seconded a motion to approve minutes for meetings 282 and 283. The motion passed unanimously.

Decision – Officers Elected

Karier nominated Cassidy for a second term as chair and Bloch seconded. Giacometto nominated Bloch for a second term as vice chair and Brogoitti seconded. The candidates were elected unanimously. Cassidy appointed Field to chair the fish committee and Karier to chair power.

The meeting was adjourned at 4:10 p.m.

Approved March 7, 2001

s/s Eric Bloch
Vice Chairman

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