Appendix R. Assuring the Pacific Northwest an adequate, efficient, economical and reliable power supply

Introduction

Section 4(h)(5) of the Northwest Power Act requires that the Council’s fish and wildlife program consist of measures that protect, mitigate and enhance fish and wildlife affected by the development, operation and management of the Columbia River hydroelectric facilities “while assuring the Pacific Northwest an adequate, efficient, economical, and reliable power supply.” At the conclusion of a program amendment process, the Council signifies in some manner that (1) it has considered the fish and wildlife measures to be adopted as part of the program and their potential effect on the region’s power supply, and (2) has an appropriate level of confidence that the region may implement the revised fish and wildlife program while maintaining an adequate, efficient, economical, and reliable power supply. This is known as the “AEERPS” consideration or conclusion, documented here. And as explained more fully below, the Council concludes here that the region’s power supply can remain adequate, reliable, economical, and efficient as the region implements the protection, mitigation, and enhancement measures in the 2014 Columbia River Basin Fish and Wildlife Program.

Under the Northwest Power Act, subsequent to the fish and wildlife program amendment process, the Council begins the separate statutory process to review and revise it by reviewing the Council’s regional electric power and conservation plan. The AEERPS conclusion in the fish and wildlife program decision recognizes and assumes that the Council will adhere to the Power Act requirements in developing the regional power plan, including approving a conservation and generating resource strategy to guide Bonneville and the region in acquiring the least-cost resources necessary to meet the demand for electricity and to “assist [Bonneville] in meeting the requirements of section 4(h) of this Act,” that is, to implement the Council’s fish and wildlife program.

The relevant terms — adequate, reliable, efficient, and economical — are not defined in the Act. The legislative history of the Act provides only general guidance. The Council began analyzing the relationship of the fish and wildlife program decision to these aspects of the power supply in the first fish and wildlife program decision in 1982. In 1994, as the program grew in scope and extent, the Council produced an extensive analysis explaining its understanding as to what it means to maintain these elements of the power supply in the context of approving the fish and wildlife program. This became Appendix C to the 1994 Fish and Wildlife Program, Assuring an Adequate, Efficient, Economical and Reliable Power Supply and the Ability to Carry Out Other Purposes of the Power Act, combined in the analysis and AEERPS conclusion with Appendix B, Summary of Hydropower Costs and Impacts of the Mainstem Passage Actions. The Council has understood and applied the statutory AEERPS provision in a consistent way both before and after the 1994 explanation, although that has been the most extensive discussion. SeeAppendix A to the 2003 Mainstem Amendments, Analysis of the Adequacy, Efficiency, Economy, and Reliability of the Power System, and for the 2009 Program, the Analysis of Adequacy, Efficiency, Economy, and Reliability of the Pacific Northwest Power System (analysis before the Council at the time of the program decision and included in the administrative record). The documents noted above remain source documents for understanding the Council’s approach. Each element of the AEERPS conclusion is discussed below.

Adequate and reliable power supply

General principles

“Adequate” and “reliable” have specific meanings in the power industry. Adequacy is a component of reliability. A power system is “reliable” if it is:

  • Adequate - the electric system can supply the aggregate electrical demand and energy requirements of the end-use customers at all times, taking into account scheduled and reasonably expected unscheduled outages of system elements.
  • Secure - the electric system can withstand sudden disturbances, such as electric short circuits or unanticipated loss of system elements.

“Adequacy” refers to having sufficient resources – generation, efficiency, and transmission – to serve loads. To be adequate, the power supply must have sufficient energy across all months, sufficient capacity to protect against the coldest periods in winter and the hottest periods in summer, and sufficient flexibility to balance loads and resources within each hour. In determining adequacy, the Council uses a sophisticated computer model that simulates the operation of the power system over many different futures. Each future is simulated with a different set of uncertainties, such as varying water supply, temperature, wind generation, and thermal resource performance. The adequacy standard used by the Council deems the power supply inadequate if the likelihood of curtailment five years in the future is higher than five percent. The Council uses probabilistic analysis to assess that likelihood, most often referred to as the loss of load probability.

“Security” of the regional power supply is achieved largely by having sufficient reserves and transmission capability to bring power on line quickly in the event of a system disruption. These reserves can be in the form of generation or demand-side curtailment that can take load off the system quickly. The North American Electric Reliability Corporation (NERC) and the Western Electricity Coordinating Council (WECC) establish reserve requirements, frequently expressed in terms of a percentage of load or largest single contingency. An additional resource requirement for the region is thus maintaining the reserves required by NERC and WECC for security and thus for a reliable power system.

Implementing dam operations for the benefit of fish that alter or reduce hydropower generation is one of the power system changes that may affect the adequacy and reliability of the power supply. This is not a surprise — that this should happen to some extent is one of the premises underlying the Northwest Power Act. The generation effects of the operations that the Council adopts into the fish and wildlife program then become one of the many factors the Council has to take into account in its subsequent power planning when making decisions on the new resources necessary to maintain an adequate and reliable power supply. In the context of power planning, adequacy and reliability are as much a matter of time and cost as anything. That is, in the event of changes that threaten the standards, adequacy and reliability can be maintained to the standards with enough lead time to develop the necessary resources and with the investment of enough dollars in those resources.

Decisions on the resource actions necessary to ensure adequacy and reliability take place within the context of the subsequent power plan. But even before that, at the time the Council makes a decision on fish and wildlife program amendments, the Council is able to estimate the effects of the fish operations on hydropower generation from existing projects, including the incremental effects of any new operations for fish and wildlife. The Council combines that information with other information relevant to the adequacy and reliability of the power supply and, with an assumption that the subsequent power planning will function as it should, the Council is able to make a determination whether it can adopt the fish and wildlife program and still maintain an adequate and reliable power supply.

In the past the Council had to undertake extensive technical analysis of the adequacy and reliability of the power system in the fish and wildlife program amendment process itself. Now the Council, with the assistance of its Regional Adequacy Advisory Committee (originally, the Resource Adequacy Forum), regularly assesses the adequacy of the region’s power supply, evaluating the resources available to the region against a resource adequacy standard for the Pacific Northwest that the Council adopted in 2011. The Advisory Committee and the Council most recently assessed the adequacy and reliability of the power supply at the end of 2012 and then again in 2014.

2010, 2012, and 2014 adequacy assessments

In the recent adequacy assessments — for the Sixth Power Plan in 2010 and then in 2012 and 2014 — the contribution of hydropower generation to overall system generation incorporated the effects of the operations for fish found in the 2008/10 biological opinions and the Columbia Basin Fish Accords — and thus also included the baseline measures in the Council’s 2009 Fish and Wildlife Program. The 2012 and 2014 assessments also factored in the generation effects of the additional spill ordered by the federal district court in Oregon.

Since 1980, implementation of operations to benefit fish has reduced hydroelectric generation on average by about 1,200 average megawatts relative to an operation without any constraints for fish and wildlife. For perspective, this energy loss represents about 10 percent of the hydroelectric system’s firm generating capability (that is, the amount of energy the system can be expected to generate under the lowest runoff conditions). Most of the 1,200 aMW reduction occurred gradually over a 30-year period, and the system has had ample time to adjust. The recent changes in hydroelectric generation considered in the most recent adequacy assessments were small in comparison to the 1,200 aMW as a whole.

After factoring in all the information relevant to power supply adequacy, of which the fish and wildlife operational effects were but a small part, the most recent adequacy assessment did show the potential for a power supply adequacy problem in 2019, with a loss-of-load probability of about 6 percent, if the region relies only on existing generating plants (those that are expected to be operational in 2019) and new energy-efficiency savings outlined in the Council’s 2010 Sixth Power Plan. The majority of potential future problems seen were short-term capacity shortfalls, with the most critical months being January and February. The analysis also suggested that there were a number of reasonable actions the region’s utilities and Bonneville can take well before 2019 — new generation, new energy efficiency, or a combination — to result in 400 megawatts of additional capacity and bring the adequacy estimate to the minimum acceptable level by 2019. And the recent assessment also adds 670 megawatts of planned thermal resource capacity that should be operational before 2019. Looking ahead over the next 10 years, the region’s utilities show about 1,800 megawatts of additional planned generating resources (in aggregate), with a mixture of wind and gas-fired generation. These resources are not included in the most recent adequacy assessment because they may not yet be sited or licensed or may not be expected to be operational by 2019. Obviously, not all of these planned resources are needed by 2019 to meet the Council’s adequacy requirement, but it is a good indication that the region is on track to maintain an adequate supply. Most important here, the operations for fish and wildlife were not seen as a particular impediment to our ability to make the power system adaptations needed to assure the region a continued adequate and reliable power supply.

The adequacy assessments do not directly assess the ability of the system to balance loads and resources within the hour, a growing regional concern in the last decade due to the addition of significant amounts of variable generation, primarily wind. However, assuring that the system has the necessary balancing capability is reflected in the adequacy assessment. This is because the system holds in reserve sufficient amounts of generating capacity (commonly referred to as incremental and decremental reserves) to be able to balance variable generation and loads on short-term notice. The adequacy determination includes an inquiry into whether the region has sufficient resources not only to meet all regional loads but also to provide sufficient flexibility for within-hour balancing needs.

The operations to benefit fish can affect the flexibility of the system to balance loads and resources within hour, especially to the extent that fish benefit from reducing the short-term fluctuations in hydroelectric generation that might be optimum for power system balancing. As with other aspects of adequacy, the power planning work of the Council and the region has to take these constraints into account and, if necessary, add resources to make sure the system has adequate resources for this purpose and others.

2014 Fish and Wildlife Program measures and adequacy and reliability

The operational measures to benefit fish included in the 2014 Fish and Wildlife Program amendments have not changed materially from the operations included as part of the 2012 adequacy assessment. The operations specified in the NOAA Fisheries’ 2014 FCRPS Biological Opinion similarly have not changed dramatically from those in the 2008/2010 FCRPS Biological Opinion, and the biological opinion operations along with the Columbia Basin Fish Accords remain the baseline operational measures of the Council’s 2014 Program.

The operational provisions added by the Council to this baseline — such as the call to investigate potential refinements to Libby and Hungry Horse operations to benefit resident fish in the upper river and reservoirs — are not sufficiently specific at this time to model the possible effects. Even so there is no indication that the refinements contemplated will significantly alter current operations to such a degree as to alter the most recent adequacy assessment. A spill experiment proposal recommended to the Council could in theory alter system generation to such a material extent as to necessitate a further adequacy assessment in this process. The Council concluded that proposal was not sufficient to consider for implementation, for a number of reasons. If and when a new operation is proposed that is sufficient to consider, there will be time to evaluate the power system implications as well as the biological implications before making a decision on implementation.

For these reasons, the Council concludes that the measures in the 2014 Fish and Wildlife Program will not alter system generation materially from the measures included in the most recent adequacy assessment. The Council’s conclusion in that 2012 assessment was that the region would be able to take the necessary steps to maintain system adequacy. The Council thus concludes that adopting the 2014 Fish and Wildlife Program measures will not preclude the Council from developing a regional power supply that assures the region an adequate and reliable power supply.

Efficient power supply — and cost-effective fish and wildlife measures

Efficient power supply and the addition of cost-effective energy resources

One objective of planners and operators of the Pacific Northwest power system is to provide a system that is as efficient as possible given that its largest component — the hydroelectric dams — have equally important non-power uses, including physical modifications and operational changes to benefit fish and wildlife. From the single objective of power operations, the power system is less efficient than it was at the time of the passage of the Northwest Power Act in 1980. This is the result of many factors, some of which are related to characteristics of the new resources available to meet growth and some related to the effects of fish mitigation and protection measures that reduce the optimum generation of the system to meet loads. Even so, the region continues to have an efficient system relative to systems elsewhere.

The Northwest Power Act clearly expected the region to meet both fish and power objectives, that is, to operate the system to meet multiple objectives. Congress in the Power Act thus did not mean the term “efficient” to establish an absolute standard for the power supply alone. Instead, the system must be operated efficiently given all the constraints under which it must operate. The consequences of being inefficient are economic — additional costs to supply a given amount of power. The Council’s least-cost planning requirements encourage the development of efficient resources to serve the electricity needs of the region while meeting other objectives as well, including fish and wildlife.

As noted in the discussion of adequacy and reliability, the measures added to the program in this amendment cycle will not significantly change the operation of the system compared to the measures adopted and analyzed before. System efficiency faces many challenges in the current era, including how efficient the system can be as it integrates intermittent resources. Even so, the Council is able to conclude that it can adopt the 2014 Fish and Wildlife Program while still assuring the region a power supply produced efficiently while meeting multiple system objectives.

Efficient and cost-effective fish and wildlife measures

Fish and wildlife objectives should also be met as efficiently and as cost-effectively as possible. Given the high cost of some measures and the uncertainty regarding their effectiveness in meeting biological objectives, it is imperative that continual efforts be made to assess and improve the effectiveness and cost-effectiveness of these measures. Section 4(h)(6)(C) of the Northwest Power Act in particular requires the Council to adopt program measures that “utilize, where equally effective alternative means of achieving the same sound biological objective exist, the alternative with the minimum economic cost.” Cost effectiveness more generally is an important consideration in all aspects of the Council’s fish and wildlife and power planning. The following discussion, conclusions and recommendations regarding cost-effectiveness and efficiency in the implementation of the fish and wildlife program are not part of the formal conclusions required by the statute with regard to efficiency and the region’s power supply. This is, however, a useful place in the program to consider these broader issues of fish and wildlife implementation, efficiency, and cost-effectiveness.

Quantitative cost-effectiveness comparisons of fish and wildlife measures

A quantitative cost-effectiveness comparison of alternative energy resources is a cornerstone of the Council’s power plan, made possible by our ability both to estimate the total costs of alternative measures and to use a singular metric of benefits — megawatts generated or saved — for the comparison. Useful quantitative cost effective comparisons of alternative fish or wildlife measures have proven far more difficult to achieve, for a number of reasons. The Council periodically considers the potential for quantitative cost effectiveness analysis in the fish and wildlife program. A notable early effect came in a report produced by the Council staff in 1997 with the assistance of the Council’s newly-formed Independent Economic Advisory Board, “Methods of Economic Analysis for Salmon Recovery Programs,” Council Document No. 97-12 (July 1997). The “methods analysis” continues to guide the Council today. And at the other bookend is the most recent report from the IEAB — a March 2014 review of the Council’s fish and wildlife program: “Recommendations related to amendments for the 2014 Fish and Wildlife Program,” IEAB 2014-1. The following discussion is drawn from these and other sources.

Several factors make it difficult for the Council and the region to undertake a quantitative cost-effectiveness comparison among different fish and wildlife measures for the program. The most important has been the inherent difficulty of developing a single measure of ultimate biological effectiveness for different types of actions, so as to be able to determine if two measures “achieve the same sound biological objective” and then choose the one with the least cost. The complex life-cycles of fish and wildlife, especially anadromous fish, and the many human and environmental factors that affect their survival, make it difficult to isolate and determine the ultimate biological benefits of any particular activity or to compare the different biological effects of different activities in a rigorously quantitative manner.

At best the region has been able to compare the immediate biological effects of very similar activities on specific quantitative terms that are something less than life-cycle survival. This includes, for example, comparing the immediate passage survival of juvenile spring Chinook from different passage methods; or comparing the amount of habitat that might be protected per dollar for different land acquisitions in the same subbasin or the different amounts of habitat that might be opened per dollar through the removal of passage barriers in a particular subbasin; or roughly estimating the different gains in productivity of juvenile habitat or survival of juveniles that might result from different riparian habitat improvements in a particular subbasin. Even these types of comparisons, as limited as they have been, have made the program more cost-effective over the last 30 years.

The region’s use of these quantitative comparative techniques has been improving and increasing every year. The Council encourages continued efforts in this direction. So does the Independent Economic Advisory Board (IEAB): Its most recent review report began with the recommendation that the Council “[c]onsider funding a science initiative to assess the state of achievement metrics, methods to standardize metrics, the value of comparing metrics across types of projects, and research needs to develop standard metrics.” The Council will consider this and other approaches for making further progress in standardizing the metrics of benefits; supporting the development of improved analytical and modeling techniques for relating individual activities to life-cycle benefits; and in pushing for the increasing use of metrics and techniques of this nature in cost-effectiveness comparisons of different measures.

Other ways of improving the cost-effectiveness of fish and wildlife measures

Still, our ability to undertake quantitative cost-effectiveness comparisons is limited at this time. So the Council and the IEAB have also focused on other ways to increase the region’s confidence that program measures and the projects that implement them are effective and the costs appropriate, and thus that the region’s expenditures are as cost-effective as can be. Much can be done and had been done to review the efficiency of projects; to improve the likelihood that measures and projects selected will be the most cost effective; to improve project management; to monitor, report, and review results; to develop better and more cost-efficient techniques for monitoring and evaluating improvements in habitat and population characteristics; and to emphasize accountability for results and effectiveness.

Most notably the Council has focused significant resources on an ongoing and rigorous review of both the projects implementing the program and of the broader biological premises and uncertainties underlying the program. This work has particularly involved the use of independent scientific review of both individual projects and of larger scientific questions, assumptions, decisions, and reports underling the program. The Council’s work in this regard has improved the quality, effectiveness and efficiency of the projects that implement the program, and ultimately of the program measures that are the underlying basis for these projects. Early in this effort, in the late 1990s and early 2000s, the Council also focused significant attention on: improving the quality of the information generated on the costs of individual projects and of the program as a whole; significantly improving the biological and fiscal review of major capital investments (such as the Council’s “three-step review”); increasing attention on ongoing operation and maintenance obligations; and improving contract management procedures.

In recent years, the Council has focused increasing attention on four areas: (1) improving the state of the monitoring and evaluation elements of the program to make them more effective, relevant, and cost-effective, pushing for the results from monitoring and evaluation to be used more often in decision-making; (2) calling for more regular reporting and review of results and for the standardization of what is reported; (3) requiring improved study designs and review of program research, including bringing research projects to effective conclusions; and (4) improving the annual reporting to the public and decision-makers on program costs, program activities, and the biological indicators of results. More can be accomplished in all four areas, and the Council will continue its efforts.

Finally, the IEAB included a number of other recommendations for the Council to consider, in the IEAB’s review of the Council’s fish and wildlife program for the 2014 program amendment process. The IEAB’s first recommendation called for continued efforts to develop better and more standardized metrics and methods to estimate benefits, so as to allow for more of a quantitative approach to cost-effectiveness, discussed above. A number of IEAB’s other recommendations are in the nature of further improvements in cost information and in non-quantitative techniques that could help assure a more effective and efficient program. These include:

  • Projects and project proposals should include not only a discussion of expected outcomes but also an efficient “exit strategy” if the project is not performing as planned.
  • Program measures and project proposals with important cost implications and investments that are not reversible or recoverable should include and analyze an appropriate range of alternatives, including the implications of a “do nothing” alternative.
  • New project proposals that require future operations, maintenance, replacement or decommissioning costs should provide information on expected life-cycle costs by year, including the expected life of depreciable assets, and a discussion on how future costs will be paid.
  • Existing projects that have unfunded needs for future maintenance or replacement should provide such cost information for review and consideration as soon as practical.
  • The Council should consider an external review of the future financial needs, the ability to meet those needs, and alternatives for financing those needs, for the entire fish and wildlife program that includes operation and maintenance, disaster management, and expected hydrosystem revenue base.

As part of the implementation of the 2014 Program, the Council will consider whether and how to implement these recommendations from the IEAB.

Economical power supply

General principles

The final aspect of the AEERPS conclusion is that the Council adopts the fish and wildlife program while assuring the region an “economical” power supply. As with the other terms, the Northwest Power Act does not define an “economical” power supply. One of the expectations of the Power Act is that the power system is to bear the cost of managing the hydroelectric system to improve conditions for fish and wildlife. This means the regional power system absorbs both the financial effects of fish operations that reduce the output and revenue of the system as well as expenditures on other measures to implement the fish and wildlife protection and mitigation program. In order to do so, the power system must generate sufficient revenue to cover these financial requirements. This necessarily makes the region’s power supply more expensive, intentionally so. This is the point of the provisions in the Power Act requiring the Council to assure that the power supply remains economical or affordable to the region even while the revenues are used to meet the fish and wildlife and other objectives of the Act.

Fish and wildlife program costs in total

The first step is to estimate what the fish and wildlife program costs are that the power system is to bear. The Council did not develop program cost estimates in the amendment process itself. The Council produces an annual report to the region’s governors on Columbia Basin Fish and Wildlife Program Costs, based mostly on information produced by Bonneville. The Council issued the most recent report, for Fiscal Year 2013, in September 2014. The Council has drawn on the FY 2012 cost report for the information and conclusions here; the figures in the draft FY 2013 cost report are not significantly different.

Bonneville uses well-defined methods for calculating the costs of the fish and wildlife program. For Fiscal Year 2012, Bonneville reported its fish and wildlife program costs as follows:

  • $248.9 million in direct expense costs
  • $73.0 million in direct costs and reimbursements to the federal Treasury for expenditures by the Corps of Engineers, Bureau of Reclamation, and U.S. Fish and Wildlife Service for investments in fish passage and fish production, including direct funding of operations and maintenance expenses of federal fish hatcheries; also includes one-half of the Council’s annual approximately $10 million budget
  • $131.5 million in fixed costs (interest, amortization, and depreciation) of capital investments for facilities such as hatcheries, fish passage facilities at dams, and some land purchases for fish and wildlife habitat
  • $152.2 million in forgone hydropower sales revenue that results from dam operations that benefit fish but reduce hydropower generation
  • $38.5 million in power purchases during periods when dam operations reduce generation to protect migrating fish

The FY 2012 costs totaled $644.1 million, including the forgone revenue. The $644.1 million total does not include annual capital investments in 2012 totaling $57.5 million for program-related projects, and $114.5 million for associated federal projects, including capital investments at dams operated by the Corps of Engineers and Bureau of Reclamation. These latter investments are funded by congressional appropriations and then repaid by Bonneville. Including them in the same total as fixed costs would double-count some of the capital investment. The total also does not reflect a credit of $77.0 million from the federal Treasury related to fish and wildlife costs in 2012. Adding in the credit reduced the total fish and wildlife costs to $567.1 million. The fish and wildlife costs for FY 2012 (with the addition of the forgone revenue figure to the expenditures) represented over 20 per cent of Bonneville’s total costs for its power business.

The costs Bonneville reported for FY 2012 are in line with the range of costs for program implementation that Bonneville has reported in recent years and that Bonneville anticipates in the near future. The financial effects of operations in particular can fluctuate significantly from year to year depending on runoff conditions and market prices. This means FY 2012 costs are in the lower end of a range that Bonneville estimates can be as high as $900 million before subtracting the credit. Similarly, the FY 2013 costs reported by the Council in September 2014 total $682.4 million. This amount is also in the lower end of the range of Bonneville’s estimated annual fish and wildlife costs.

The Council realizes that how and why Bonneville reports forgone revenue is controversial with some. The controversy is not relevant here, because as noted below the Council concludes that even as the fish and wildlife costs are reported by Bonneville, the region’s power supply remains affordable. The Council has not limited the measures in the program based on either the costs of individual measures or on the basis of total program costs.

Effects of the 2014 Program on fish and wildlife costs

In past fish and wildlife program decisions over the last 32 years, the Council has determined each time, as the program grew in scope and extent, that the costs of implementing the program could be absorbed by the power system and maintain an economical power supply. So particularly important in any program amendment decision, including this one, is whether the newly amended program represents an additional increment of costs to the power system, and if so, whether and how that changes the consideration of the economical nature of the region’s power supply.

As noted in the adequacy discussion above, the Council does not expect the operations for fish in the 2014 Fish and Wildlife Program to be materially different from the operations in the recent past. And thus the financial effects of operations should remain stable over at least the next few years, within the expected range.

Bonneville (and Congress) decide in any particular year how much to budget and expend on measures to protect, mitigate and enhance Columbia River Basin fish and wildlife in a manner consistent with the Council’s program. Even so, the Council expects that expenditures on program measures and on reimbursement of appropriations will remain relatively stable over the next few years. Based on the fish and wildlife recommendations to the Council, the 2014 Program does contain additional measures in certain areas, with an expectation that expanded work in these areas will take place in the next few years. This includes, for example, additional measures to deal with toxic contaminants, blocked area mitigation, non-native species, and passage. Even so, the Council concludes that the additional investments in these areas are unlikely to change significantly the scope of power system expenditures over the next few years. This is in part because the Council intends program implementation to move carefully into these areas; in part because the Council considers a number of these activities to be the shared responsibility and investment of a number of sectors of the economy, not just the power supply; and in part because the Council is aware Bonneville has entered into stable multi-year funding commitments with many program implementers that continue to 2018.

For all these reasons the Council’s expectation is that fish and wildlife program costs will not differ significantly — certainly not a significant difference in magnitude or scale — as a result of the decision to approve the measures in the 2014 Fish and Wildlife Program. The general conclusion that the power supply remains affordable at this level of fish and wildlife investments should remain valid.

Different perspectives for considering an “economical” power supply and conclusions

Understanding what the fish and wildlife program costs are is the beginning, not the end, of the consideration as to whether the power supply is economical. There are at least three perspectives to consider.

One perspective is at the regional scale, in comparison to the regional economy as a whole and in comparison to other regions. The per-kilowatt-hour costs of the Pacific Northwest power supply have increased significantly over time, because of fish and wildlife expenditures as well as other reasons, and in this sense the power supply is less economical than it was in the past. Even so, the Pacific Northwest still ranks as one of the lowest-cost regions in the nation, and the region’s electrical energy costs remain a relatively steady percentage of the region’s overall economy.

An aggregate regional perspective, however, does not capture the potential impacts of energy costs on specific sectors of the economy and particular local areas within the region. Electricity-intensive industries and industries subjected to global economic pressures, such as aluminum smelting, are proportionately more affected by increases in electricity costs than the region’s economy as a whole. The same is true for local areas within the region that lag behind in economic vitality compared to the region as a whole. All increases in costs, including energy costs and including the portion of energy costs related to the fish and wildlife program, contribute to difficulties for these sectors and areas. Even so, there is no indication that the fish and wildlife cost obligations of the power system are such a particular drag on these aspects of the economy to cause the Council to conclude the fish and wildlife program measures in the 2014 Program have unbalanced the economical nature of the region’s power supply.

Finally, the question of whether the power supply is economical has to be seen within the perspective of whether the demands of the fish and wildlife program are consistent with the financial health of the agency primarily dependent upon for these continuing investments — the Bonneville Power Administration. Bonneville must be able to implement the program while also meeting the other financial purposes of the Power Act and other laws relevant to Bonneville, including being able to cover all of its costs and make timely repayments of Bonneville’s debt to the United States Treasury. Bonneville always has to be diligent in protecting its financial status to maintain a viable operation. But the agency is not currently in difficult financial circumstances, and the implementation of the 2014 Program will not change those circumstances. Still, fish and wildlife costs are a significant contributor to Bonneville’s overall cost structure and must be reviewed periodically.

Longer-term questions about assuring the region an economical power supply into the future will be addressed by the Council in the Seventh Power Plan. The issues in that setting relate not to fish and wildlife costs, but to whether the region can add the least-cost resources needed to meet energy demands while adequately hedging risks, conforming to environmental constraints on new resources, and meeting all system costs — and in the end maintain a power supply that is economical within the region.

In conclusion, the Northwest Power Act recognizes that the region’s power system has an obligation to address the adverse effects of the hydrosystem on fish and wildlife. The Council is adopting a program with substantial measures to protect, mitigate and enhance fish and wildlife. The Council recognizes that these actions to do so impose significant costs on the region’s ratepayers. Despite these costs, the power system remains economical in the broad sense that power rates remain affordable within the context of the region’s economy.

← Appendix Q. Administration and procedures of the Independent Scientific Review Panel, the Scientific Peer Review groups, and the Independent Scientific Advisory Board

Appendix S. Responses to recommendations and comments, including findings on recommendations not adopted into the 2014 Fish and Wildlife Program →

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