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Dam issue all business;  Removal may be best option for ratepayers

Written by Nicholas Grube, The Triplicate May 07, 2009

Pacific Power President Patrick Reiten addresses the audience Tuesday night at the Hampton Inn. The Daily Triplicate/Rick PostalThe president of Pacific Power called a preliminary agreement to remove four hydroelectric dams on the Klamath River a good business decision while in Crescent City on Wednesday.

Their removal is far from a done deal, however, he told The Triplicate.

Patrick Reiten, who has been the head of Pacific Power since September 2006, said dam removal appears to be a cheaper option than continuing to operate them, not only for the utility company, but also for its customers.

“There’s so much emotion and politics around dam removal in general, and those dams in particular,” Reiten said. “It’s important to know that we did not enter into the agreement in principle because of a political stance one way or another.?We did what we thought was right from a business perspective for our customers.”

Pacific Power provides electricity to customers in California, Oregon and Washington, and is a division of Portland-based PacifiCorp, which operates the Iron Gate, J.C. Boyle, Copco 1 and Copco 2 dams on the Klamath River.

Reiten said there are still two options regarding the fate of these dams and the associated costs for the company and its customers. One is to agree to remove the structures — a plan that is in the final negotiation stages today — and the other is to try to relicense the dams to continue running them for the next several decades. PacifiCorp’s federal license to operate the four dams, known collectively as the Klamath Hydroelectric Project, expired in 2006. This prompted the company to file an application with the Federal Energy Regulatory Commission to renew its license.

There are a number of associated costs with the relicensing process that might make this option more expensive than removing them, Reiten said, not the least of which has to do with providing access to more than 300 miles of salmon spawning habitat blocked by the dams.

“We know that we’ll have to put in fish passage — fish ladders — and we know that those are $350 million, maybe higher,” he said.?“We know that we’ll have to get water quality permits as part of relicensing, and the water quality commissions, particularly in California, will create flow restrictions that will have negative impacts on the operating capabilities of the projects and that will impact their ongoing value.”

PacifiCorp’s dams have the capacity to generate 169 megawatts of electricity. Currently, the dams only produce about half that per year, enough to power 70,000 homes. This is a fraction of its entire system, which produces about 10,000 megawatts annually.

In addition to the costs from installing fish ladders and reducing the output from the dams, Reiten said other capital improvements would need to be made to the structures, and wildlife habitat requirements would have to be met that would further increase the costs of relicensing.

“Ultimately, when you get down to it, the state of California, the state of Oregon and the federal government have made it clear their interest is in removing those projects,” he said.

In November, PacifiCorp, Oregon, California and the U.S. Department of the Interior signed an agreement in principle that would remove the four dams on the Klamath River. A final agreement is still in the works, and a deadline for negotiations is currently set at June 30.

This agreement, if it goes through, allows PacifiCorp to cap its costs for dam removal. It would also shift the actual responsibility for removing the structures and the associated liability to the federal government or some other entity.

According to PacifiCorp spokesman Art Sasse, who was also in Del Norte County this week, the agreement limits what utility customers in California and Oregon would pay for dam removal to $200 million. This amounts to an additional $1.50 charge per month for the next 10 years.

“That’s the maximum level they’ll pay, and that’s, frankly, the minimum cost they would pay if we headed down a relicensing path,” Sasse said. “You have all this uncertainty on top of it with relicensing, so this gives us certainty and it also takes our customers off the hook from a liability standpoint.”

California voters would also be asked to approve a $250 million bond measure to cover the additional costs of dam removal, since three of the four projects are in the state.

Sasse said PacifiCorp is committed to meeting the deadline for a final agreement, but added that it could be pushed back if needed.

“There are multiple people at the table on this deal,” he said. “So we are pushing hard to close it by June 30.”

Even if an agreement is signed, PacifiCorp will continue with the federal relicensing process, Sasse said. The Secretary of the Interior still needs to make a decision by 2012 to determine if the benefits of dam removal outweigh the costs, and California and Oregon legislatures still must approve measures to secure the funding for dam removal.

“There’s various offramps in getting to a final agreement,” Sasse said, “and that relicensing process will always be on the side until the secretary has taken transfer.”
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