A plan to take out four lower Klamath River dams is likely to be delayed by a year and cost an additional $12.25 million, Klamath River Renewal Corporation representatives told the Oregon PUC Sept. 8.
The delay is due to FERC's July 16 decision requiring PacifiCorp to stay on as a license holder throughout the dam removal and restoration process, instead of fully transferring it—and the associated liability—to KRRC (CU No. 1962 ).
KRRC can likely absorb the added costs into the $450 million earmarked for the project, due to extensive accommodations for cost overruns built into the budget, Laura Hazlett, KRRC's CFO/COO, told the commission.
"I have been laser-focused on being able to find opportunities" for cost savings, she said, later adding, "I'm working every day to try to get that down."
OPUC met virtually to receive an update on the project, which still requires an environmental review and FERC's final approval to surrender the license and decommission the dams. Funding sources are a $250 million California bond, $184 million from PacifiCorp customers in Oregon and $16 million from the utility's customers in California.
Parties of the amended Klamath Hydroelectric Settlement Agreement—which had called for transferring the license for the four dams to KRRC before the dam removal process began—continue to meet to resolve issues raised by FERC's decision.
"The idea of dam removal—which was one that was arrived at by the states, and had support from previous administrations—was never seen as the least-cost, least-risk option," Scott Bolton, PacifiCorp's senior VP for external affairs and customer solutions, told the commission following presentations by KRRC and the Oregon Department of Environmental Quality.
He said the FERC order fundamentally changed PacifiCorp's consideration of what's in the best interest of its customers. It now has to consider what it will mean to be a co-licensee through the full process of dam removal, and whether terms and conditions of relicensing would be a better alternative for customers, he said.
Bolton noted that while KRRC's work has greatly interested the company, PacifiCorp still needs to better understand risks and features of the removal plans.
He added that PacifiCorp's goal and intention is to achieve the core principles outlined in the negotiated settlement agreement, as long as they are within range of meeting its customers' best interests. "We absolutely want to achieve that, if we can," he said.
Oregon DEQ Director Richard Whitman noted the FERC order did not alter the costs or risks of the project. "What it alters, potentially, is who bears the cost," he said. Whitman added that Oregon and California are also taking on risks of the project, as funders. "We feel the package is already very robust, and was intended to protect all of the [settlement] parties," he said.
That package is where KRRC hopes to save enough money to make up for the added costs of delaying the project by one year, Hazlett said. "As we gain certainty, the level of risk presumably goes down," she said. She explained that the project underwent a Monte Carlo simulation of all risks, and is attempting to cover costs if 80 percent of risks that could happen did happen. "As we advance through the project, several of those risks go away. That effectively frees up some money for other elements of the project," she said.
The added $12.25 million includes another year of operating KRRC, legal work and escalation by both contractors.
Hazlett said without delays, the timeline calls for fieldwork to begin in 2021, and reservoir drawdowns to follow in 2022. "It is very unlikely at this point we will keep this reservoir drawdown in 2022," she said, and later noted, "We think it's unlikely there will be any fieldwork in 2021."
So far, KRRC has spent $3.9 million for the first phase of the project, which includes startup costs such as appointing a board, hiring a CEO and setting up legal, technical and administrative operations. It has spent $71.5 million of its $111.6 million budget for the second phase of the project, which involves completing the definite plan, completing regulatory filings, hiring staff, developing a risk management plan, preparing procurement documents, engaging a contractor, designing the project and establishing a guaranteed maximum price with Kiewit, the design-build contractor, and RES, the restoration contractor. The third phase includes deconstruction and removal of the facilities, restoring native habitat, and monitoring and reporting.
KRRC CEO Mark Bransom told the commission his organization is engaged in parallel processes—continuing to prepare for removing the dams while providing support to the settlement agreement parties.
He said it is working closely with settlement parties to address issues in the FERC order, which is "front and center" in KRRC's work. "We have not allowed that to detract from our core mission," he said.
Bransom said memorandums of understanding are being finalized with state agencies and local counties to address potential impacts. KRRC is also working on property transfer agreements to submit to state regulators that will allow assets to be transferred to the states after the dams are removed and the river is restored. It is also developing a final biological assessment to submit to FERC, and a local impact mitigation fund to settle local claims in advance and avoid potential litigation.
"We continue to push on design, to allow us to be ready to go—to turn our contractors loose—just as soon as the parties indicate to us it's time to go," he said.
Whitman added that adaptive management and resilience were built into the settlement agreement. He said as a party to the settlement, Oregon is working to keep the agreement's basic structure as it was originally intended—to ensure California taxpayers and PacifiCorp customers in California and Oregon pay for costs, and to avoid financial impacts to customers in other states.
He said Oregon remains firmly committed to the deal, and hopes to complete the dam removal and restoration project as expeditiously as possible. While the risk of cost overrun is a concern, he said, "I would say that's not the most serious issue we're looking at."
He said he hopes to have an update for the commission no later than January 2021.