by David Smith, Siskiyou Daily News February 24, 2011

California — Following in the footsteps of the Oregon Public Utilities Commission, a California administrative judge’s ruling Tuesday affirmed PacifiCorp’s rate increase request to fund a portion of dam removal costs.

The ruling, issued by Judge Karen V. Clopton, approves PacifiCorp’s request to add a $13.76 million surcharge for its approximately 45,000 California customers to cover its obligation for dam removal costs under the Klamath Hydroelectric Settlement Agreement.

The surcharge would be assessed over a nine-year period and would be added to two trust accounts created to hold the funds until their disbursment. Last year, the Oregon PUC approved the collection of a $158 million surcharge over a 10-year period from PacifiCorp’s Oregon ratepayers, which, after adding to California’s contribution and collecting interest, is expected to provide $200 million for dam removal costs.

According to the ruling, PacifiCorp’s request has been opposed by the Division of Ratepayer Advocates (DRA), suggesting that the California PUC’s decision be held in abeyance until it can be determined whether a source of funding for the rest of the dam removal costs can be found, authorizing legislation for the KHSA is passed and the Internal Revenue Service has approved the trust funds that are to be created.

The KHSA calls for a cap of $450 million for dam decommissioning and removal costs, with $250 million expected from a 2010 California water bond that was delayed until at least 2012.

Despite the lack of a secured funding source above the $200 million in surcharge funds, DRA’s request was denied in the ruling.

“In particular, since the customer surcharge is the primary source of funding pursuant to the KHSA, and California bond funding is a secondary source of funding and will only be used if the cost of removal exceeds the Oregon and California customer contributions, there is no reason to hold up consideration of the reasonableness of the customer surcharge,” the ruling states.

According to the ruling, the estimated amount that would be added to customers’ rates each month is $1.61. An alternative proposed by the DRA, also dismissed in the ruling, was to spread the surcharge out over 18 years.

In a move similar to that in Oregon, if the KHSA is terminated or funds are collected over the actual costs of dam removal, PacifiCorp is directed to refund the money to its ratepayers by direct refund, through the funding of “beneficial programs” associated with the Klamath project or to fund relicensing of the project.

According to the ruling, the proposed decision will not become effective until approved by the PUC, and it will not appear on the PUC’s agenda for 30 days. In that time, parties to the proceedings can file comments on the proposed decision.

– David Smith can be reached at dsmith@siskiyoudaily.com