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NW Fishletter #382, June 4, 2018

[4] BPA's Fish And Wildlife Costs Plummeted In 2017, Largely From High Runoff

While direct program costs for BPA's fish and wildlife program remained stable in fiscal year 2017, total costs plummeted to $450.4 million, the lowest since 2002 and $170.6 million less than in FY 2016, according to a draft report by the Northwest Power and Conservation Council.

The drop is largely due to 2017's high runoff, resulting in drastically lower costs for forgone revenue and power purchases, which together accounted for a $137.8 million reduction compared to 2016 costs. On paper, for the first time ever, BPA actually made money on power purchases needed to operate the hydro system for fish.

The recently released figures come from the Council's draft report on BPA's fish and wildlife program costs, which is open to public comment until June 29.

John Harrison, NWPCC spokesman who created the report, said BPA provides the figures, and he draws up the annual report, which is sent to the governors of Washington, Oregon, Idaho and Montana.

Fish and wildlife costs continued to account for about one-third of BPA's wholesale rates, the report says. Total fish and wildlife costs of $450.4 million comprise 18.2 percent of Bonneville's entire power business line costs of $2.46 billion, the report says, or 17.8 percent of its total power-related costs without forgone revenue included in the costs.

The report also shows reduced costs in all five categories compared with 2016, including a small reduction of $3.4 million the direct program, which makes up more than half of all costs. Direct annual program costs have generally increased from decade to decade, breaking the $200 million mark in 2011, where it has remained ever since. Direct program expenses dropped last year, from $258.1 million to $254.7 million.

Last year's power purchase costs were listed at negative $20.5 million--which was "an anomaly," the Council report says, and significantly lower than the $50.3 million spent on power purchases in 2016. Forgone revenue went from $76.6 million in 2016 to $9.6 million last year.

In an emailed response to questions posed by NW Fishletter, BPA said that 2017 "exhibited an unusual and unintuitive result" for power purchases and forgone revenues, "which approximate impact of fish operations on the hydro system by comparing the actual operation with a theoretical without-fish operation." Although BPA lost about 210 aMW in generation by operating for fish, that pushed some generation into months with higher power prices, "and the value of that generation more than offset the value of the overall generation lost," BPA said.

Harrison told NW Fishletter that power purchases and forgone revenue can fluctuate wildly from year to year, as those figures depend both on the level of runoff and power prices. Power purchases were on the other end of the spectrum in 2001, when water runoff was low, and power prices were high. That year--also an anomaly--BPA's power purchases for fish enhancement totaled nearly $1.4 billion--three times as high as all fish and wildlife program costs in 2017.

Harrison said there's been an ongoing debate over whether forgone revenue should even be considered a "real" cost of the F&W program.

"It's not dollars out the door," he noted. "But if you're an economist, it's a real cost. It's a lost opportunity. It's the result of an action Bonneville is required by law to do--they have to spill, and that takes water away from generation."

On the other side, he said, forgone revenue is a calculation of the difference between the cost of operating the dams with the fish operations, and operating them with no fish operations, which is purely hypothetical because it would be illegal and unreasonable to operate dams without considering fish needs.

The $450.5 million total cost for the fish and wildlife program does not include the $65.6 million BPA borrowed in 2017 from the U.S. Treasury for capital projects, software development and an appropriation from Congress for fish mitigation.

Nor does it include a credit of $53.7 million from the Treasury related to fish and wildlife costs that Bonneville must take under the Northwest Power Act. That credit also dropped significantly compared with FY 2016, when the credit was $72.6 million. The credit reduced Bonneville's total 2017 fish and wildlife-related costs to $396.7 million for which ratepayers are responsible.

Bonneville says the decline in credit was driven by the negative figure in power purchases.

"Prior to FY 2017, annual replacement power costs were always a positive value, which increased the credit amount, as hydro operations with fish mitigation measures resulted in additional power purchases," the agency said in its email.

"However, in FY 2017 the studies used to determine the amount of credit showed that operations with fish mitigation measures resulted in fewer replacement power purchases, and therefore net savings leading to a reduction to the credit amount." -K.C. Mehaffey

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NW Fishletter is produced by Energy NewsData.
Publisher/Editor-in-Chief: Mark Ohrenschall, Editor: K.C. Mehaffey
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