Bill may raise power rates

Governor’s proposal is part of Klamath water settlement

by Ty Beaver, Herald and News 2/3/09

A state legislative committee is scheduled to consider a bill today that will increase power rates for PacifiCorp’s Oregon customers. The increase is aimed at paying for the removal of four hydroelectric dams on the Klamath River.

Dam removal is a key component of the proposed Klamath Basin Restoration Agreement that seeks to resolve disputes about water in the Basin. If passed, Senate Bill 76 would raise up to $180 million a year to pay for the dam removal.

Opponents criticize the bill for being too open-ended, allowing PacifiCorp to raise rates at will for its half-million Oregon customers, potentially as much as $35 to $65 more per month.

“The big fallacy of it is, they don’t even know what the dam removal cost is,” said Tom Mallams, an irrigator off the Klamath Reclamation Project and head of the Klamath Off-Project Water Users.

Proponents say the bill is critical for moving the restoration agreement forward and that it limits liability to the Portland based utility’s customers, limiting any rate increase to about $1.50 per month.

“That’s the reason we negotiated the deal we did,” said Art Sasse, PacifiCorp spokesman.

A group of stakeholders, state and federal officials and representatives from PacifiCorp reached a tentative dam removal agreement in November. They have until July 1 to hammer out a final agreement, with dam removal beginning no later than the year 2020.

Gov. Ted Kulongoski promised he’d bring about the legislation during the current session that would direct the state’s Public Utility Commission to raise PacifiCorp’s rates to pay for dam removal. He submitted the bill for consideration.

The $180 million, along with $20 million from PacifiCorp’s ratepayers in other states, would be combined with $250 million in voter-approved bonds from the state of California.

Returned to customers

If dam removal does not take place, money collected through rates to pay for it would be returned to ratepayers.

The Senate Environment and Natural Resources Committee hearing on the bill will be the first opportunity for state lawmakers to weigh in on dam removal and the broader restoration agreement.

“We definitely have an interest in seeing it passing,” said Jillian Schoene, Kulongoski’s spokeswoman.

Greg Addington, executive director of Klamath Water Users Association, said his board supports the bill because it would push the restoration agreement closer to implementation. “This is an element of the bigger package to bring stability to a place that hasn’t seen a lot of it,” he said.

Sen. Whitsett objects

But state Sen. Doug Whitsett, R -Klamath Falls, said in a press release that the bill would “establish an open ended financial liability of near biblical proportions” for PacifiCorp’s ratepayers.

The state lawmaker wrote that sections of the bill allow the utility to collect additional money to cover any unforeseen costs, such as the removal of an estimated 9,000 acre-feet of sediment behind the dams.

A study from the Federal Energy Regulatory Commission indicates removal of that sediment could cost up to $500,000 per acre-foot, or up to $4.5 billion.

Other sections allow the company to charge customers for finding new power sources and other liabilities, many of which there are no cost estimates available.

$35-65 a month

The result would be an increase of up to $35 to $65 a month for the average PacifiCorp customer, Whitsett wrote.

Mallams said studies should have been conducted on the feasibility of dam removal before introducing any legislation.

“They’ve put the cart way before the horse,” he said.

Sasse refuted the allegation the legislation will give PacifiCorp carte blanche to raise rates, saying it effectively caps the contribution from Oregon ratepayers at $180 million. Any cost overruns for dam removal would have to be paid from some other source.

A request by the Herald and News for further comment from Whitsett was not returned. State Sen. Jason Atkinson, R-Central Point, and vice chairman of the Senate Environment and Natural Resources Committee also did not return a request for comment.

Side Bar

How much of a rate increase?

A bill in the state Senate would increase PacifiCorp’s Oregon customers’ rates to help pay for removal of four hydroelectric dams on the Klamath River.

PacifiCorp officials have said the proposed increase would raise the average Oregon customer’s bill by about $1.50 a month. Agricultural power users would see about a 2 percent increase in their bills.

Art Sasse, spokesman for the Portland-based utility, said the bill represents the best-case scenario for customers, as the maximum they pay with dam removal is the minimum they’d pay if the dams are relicensed with federal government’s requirements for continued operation, such as installing fish ladders.

“This caps costs and eliminates the risk of relicensing,” he said.