Senate Bill 76: “The Rest of the Story”

Senate Bill 76 will have its first hearing before the Senate Committee on Environment and Natural Resources Tuesday, February 3, at 3:00 PM in Hearing Room C in the Oregon State Capitol. The bill is alleged to create the funding resources to enable the removal of the four hydroelectric dams on the Klamath River. The mechanism would be to create a 2 percent surcharge payable by all Oregon PacifiCorp ratepayers on their monthly bill for the next ten years.

PacifiCorp’s 2007 Oregon revenue was about $929,000,000 collected from about 548,000 Oregon ratepayers. The proposed 2 percent surcharge would generate about $18.6 million annually. This surcharge would appear to generate enough money to pay the $180 million obligated by the Agreement in Principle to be paid for dam removal by Oregon PacifiCorp ratepayers as their “fair share.” However, this amount collected from ten years of surcharge would not appear to be sufficient to pay for all of the costs obligated to the PacifiCorp ratepayers by SB 76 that are associated with the removal of the four dams. 

SB 76 Section (3) states that if all recoverable costs specified in the bill have not been recovered by PacifiCorp before a dam is removed, the commission shall allow recovery of those amounts by PacifiCorp in the public utility’s rates and tariffs without an amortization schedule. This appears to direct the Oregon Public Utility Commission to allow PacifiCorp to charge the ratepayers for certain costs as they are incurred by the company.

The Federal Energy Regulatory Commission Environmental Impact Statement (FERC EIS) discusses the potential cost of the environmental cleanup that may be necessitated by dam removal. It estimates that more than 9,000 acre feet of sediment may be sequestered behind the dams. Removing that much sediment would require somewhere near one and a half million 10 yard truckloads of sediment to be hauled away and disposed of in an environmentally responsible manner. One survey of sediment removal and disposal included in the FERC EIS document estimated the cost at about half a million dollars per acre foot. May we assume that Oregon’s fair share is 90 percent of the more than $4.5 billion in that potential environmental liability as well? Will the ratepayers, or the taxpayers of Oregon, be held responsible for paying that $3.9 billion?

The bill allows PacifiCorp to recover about 90 percent of all future ongoing PacifiCorp costs for replacement the power resources lost as the result of dam removal, as well as replacement of the unique peaking functions provided by the dams, from its Oregon ratepayers. The FERC EIS document estimates those replacement costs to be as much as $35 million annually computed in 2006 dollar value. Replacement of the power with renewable sources could cost exponentially more. The cost of the loss of the peaking function has not been publicly estimated. The amount of these ongoing costs appears to be neither estimated nor included in the dam removal surcharge.

The bill allows PacifiCorp to recover about 90 percent of the cost of all the company’s un-depreciated assets in the hydroelectric project from Oregon ratepayers. The amount of these un-depreciated assets appears to be neither quantified nor included in the dam removal surcharge.

The bill allows PacifiCorp to recover about 90 percent of PacifiCorp costs for continued operations of the dams, including the cost of environmental regulation, water quality regulation, and enhanced fish passage from Oregon ratepayers until dam removal is completed. The total amount of these costs appears to be neither estimated nor included in the dam removal surcharge.

The bill allows PacifiCorp to recover about 90 percent of PacifiCorp’s costs for settlement of issues of relicensing or decommissioning the dams that have already been incurred, or that will be incurred, from its Oregon ratepayers. The amount of these charges appears to be neither estimated nor included in the dam removal surcharge.

Four separate cost projections published in the relevant FERC EIS compute the cost of the removal of all four dams at less than $100 million. If these estimates for dam removal cost are accurate, it would appear that the Agreement in Principle provision for California to share in the cost by providing bonding authority for about $250 million of dam removal costs is specious at best. Why Oregon ratepayers’ “fair share” is 90 percent of the entire projected cost of the dam removal is not made clear. This percentage seems inequitable given that PacifiCorp provides electric service to ratepayers in six states.

The cost of the $180 million dam removal surcharge would cost the average PacifiCorp residential ratepayer about $35 per year.  The $35 million annual increase in power cost would result in the average PacifiCorp residential ratepayer paying about $65 more per month. The combined charges would result in more than a 10 percent increase in the average PacifiCorp ratepayer’s annual bill which stood at $984 in 2007.

          In our opinion, SB 76 as currently written appears to establish an open ended financial liability of near biblical proportions for more than half a million Oregon PacifiCorp ratepayers.