1998 Council Briefing Book, document 98-10

1998 Council Briefing Book

May 1998 | document 98-10

The briefing book provides information on the history of the Council and issues the Council currently is addressing.

Administrative Issues

FINANCE AND ADMINISTRATION

Central Office Staff

COUNCIL CENTRAL OFFICE STAFF FLOW CHART
COUNCIL CENTRAL OFFICE STAFF DIRECTORY

1998 SUPPLEMENT ON CURRENT COUNCIL ISSUES
A brief review of major tasks the Council is undertaking
May 1998

Fish and Wildlife Issues

1. Future Role of Fish Hatcheries

The Issue: The region lacks a coordinated policy to guide future operation of fish hatcheries in the Columbia River Basin. At the request of Congress, the Northwest Power Planning Council convened a panel of scientists and an advisory committee to review all fish hatchery production in the Columbia River Basin as a first step toward developing such a policy.

Timeline: The review should be completed and delivered to Congress by June 1999.

Background: Fish hatcheries have a long history in the Columbia River Basin. For more than 100 years, hatcheries have been used to produce fish for harvest, primarily in commercial fisheries in the lower Columbia River. For the last 60 years, hatcheries also have been used to mitigate the impact of federal dams on salmon and steelhead. Because most of this fish production, and commercial fishing occurred downstream of Bonneville Dam, many people believe the less-abundant wild salmon and steelhead that spawn upriver were disproportionately affected. Hatcheries, regardless of where they are located, also occasionally experience disease problems, and these diseases can be passed to other fish if the diseased fish are released.

On the other hand, proponents of artificial production say it may be the only way to rebuild seriously depleted stocks of salmon and steelhead that spawn in the wild. With care, hatcheries could provide the seed stocks to rebuild naturally spawning runs. This practice, known as supplementation, involves raising fish at hatcheries and then releasing them into streams where they will return, by natural instinct, to spawn.

Last September, the Northwest Power Planning Council called for a comprehensive review of artificial production of fish in the Columbia River Basin. Earlier in the year, Congress called for a similar review as a first step toward developing a coordinated policy to guide future operation of federally funded hatcheries in the basin, and two recent independent scientific reviews of fish and wildlife restoration in the Columbia River Basin have done so, as well. The common concern in each case was whether current hatchery practices and the level of production - about 80 percent of the Basin's fish are produced in hatcheries - are appropriate.

The Council's review, which will be conducted by five independent scientists and monitored by a broad-based, 25-member advisory committee, will address three major questions:

1. How does artificial production fit, or might it be altered to fit, into the Columbia Basin ecosystem?

2. How can artificial production be used to meet the needs of society for sustainable populations of fish that support harvest, as well as other competing resources?

3. What institutional structures are needed to meet the needs of society for sustainable populations of fish that support harvest?

Five scientists have been appointed by the Council to conduct the hatchery review. Three are members of the Independent Scientific Advisory Board, a panel of scientists who advise the Council and the National Marine Fisheries Service. They are Jim Lichatowich, a consulting fisheries biologist from Sequim, Washington; Rick Williams, a consulting geneticist from Meridian, Idaho; and Brian Riddell of Nanaimo, British Columbia, a fisheries biologist with the Department of Fisheries and Oceans, the Canadian federal fisheries agency. The two other scientists are Ken Currens, a biologist with the Northwest Indian Fisheries Commission in Olympia, Washington, and Ernie Brannon, a biologist with the University of Idaho.

2. Review of Corps of Engineers capital construction projects

The Issue: What fish passage improvements should the Corps of Engineers pursue in the future at dams on the lower Snake and Columbia rivers?

Timeline: The review is scheduled to be completed early in 1999.

Background: In the Conference Report accompanying the Energy and Water Development Appropriations Act for Fiscal Year 1998, Congress directed the Northwest Power Planning Council to review "the major fish mitigation capital construction activities proposed for implementation at the federal dams in the Columbia River Basin." By definition, then, this is a review of the U.S. Army Corps of Engineers' Columbia River Fish Mitigation Program. Through this program, the Corps improves fish passage at its Columbia and Snake River dams. Fish passage devices include screens to keep juvenile salmon and steelhead from being drawn into the turbines, bypass systems to carry juvenile fish around the dams, collection devices to direct juvenile fish into barges or back into the river on the downstream side of the dams, fish ladders to help adult fish swim over the dams, and related equipment. The conference report notes that the Corps' program appears to reflect multiple, sometimes conflicting strategies. For example, why should the Corps spend tens of millions of dollars to repair aging facilities at Ice Harbor Dam if there is a possibility the dam will be breached, along with the other lower Snake River federal dams, to improve migration conditions for endangered Snake River salmon?

Congress did not ask the Council to resolve such conflicts, but to point them out for further review. The Council also will identify policy and technical questions that should be addressed. The Council will address policy questions, and scientific or technical questions will be submitted to the Independent Scientific Advisory Board, an 11-member panel of independent scientists who advise both the Council and the National Marine Fisheries Service.

The Council's review will focus primarily on fish passage improvements proposed for implementation, rather than on those already under way or in the research phase. However, the Council also will review three particularly controversial projects that already are moving ahead. These are:

Relocating the bypass outlet pipe at Bonneville Dam.
Installing extended-length screens in front of the turbine entrances at John Day Dam.
Further development and testing of the surface spill bypass system at Lower Granite Dam.

3. Audit of Bonneville's Fish and Wildlife Contracting Procedures

The Issue: A 1996 amendment to the Northwest Power Act requires improved cost-effectiveness and accountability for fish and wildlife spending in the Columbia River Basin. In response, the Council retained Moss Adams LLP, an independent accounting firm, to conduct a management review of contracting processes for implementing the Council's Columbia River Basin Fish and Wildlife Program. In February 1998, after seven months of work, Moss Adams reported that the contracting process needs more competition, streamlined project procurement and improved accountability.

Timeline: The Council, Bonneville and the region's Indian tribes and fish and wildlife agencies will meet with Moss Adams to discuss how to implement the recommendations.

Background: The audit came on the heels of a Council-sponsored review of Bonneville's other costs. That review recommended $147 million in annual savings at the agency.

Most of the findings and recommendations of the management review address Bonneville's fish and wildlife project procurement and contract administration. Specifically, the review made recommendations in four areas: contract procurement, contract administration, program planning and, monitoring and evaluation. Highlights of the recommendations include:

? Increase competition in solicitation and negotiation of contracts and make the procurement process more efficient through more comprehensive program planning.
? Require additional reporting and documentation to ensure accountability for contract modifications, budgets and schedules, project status and project monitoring.
? Planning documents should be more specific about project scoping, cost definition and prioritization. Providing more specificity during planning would allow project solicitations to be more focused.
? Ensure that monitoring and evaluation play a larger role in annual planning so procurement can be guided by project results. Give one entity responsibility for monitoring and evaluation.

4. Fiscal Year 1999 Fish and Wildlife Project Selection

The Issue: Determining how to spend $127 million of Bonneville ratepayer money on fish and wildlife restoration to implement the Council's Columbia River Basin Fish and Wildlife Program in Fiscal Year 1999.

Background: Each September, the Northwest Power Planning Council recommends projects to Bonneville for funding in the coming fiscal year. The project selection process takes most of the year and includes project review and prioritization by the Columbia Basin Fish and Wildlife Authority, an association of the region's state, tribal and federal fish and wildlife agencies; review of the prioritized projects by independent panels of scientists and economists; and review by the public and the Council.

Timeline: Schedule for Fiscal Year 1999 Project Selection Process:

January 23, 1998: Project proposals due to Bonneville; projects compiled for regional review and distributed.

April 22: Columbia Basin Fish and Wildlife Authority reviews ongoing and proposed projects and drafts a work plan for independent scientific review.

June 15 (or sooner): Independent Scientific Review Panel begins review of individual projects and reports on the Basin Authority's draft work plan for Fiscal Year 1999 by June 30.

June 16 - September 1: Public review and comment

September 15: Council recommends projects to Bonneville for funding in Fiscal Year 1999.

October 1: Fiscal year begins. 5. A New Scientific Foundation for the Fish and Wildlife Program

The Issue: Fish and wildlife recovery efforts in the Columbia River Basin lack an underlying, unifying scientific foundation. The Council is taking steps to develop one.

Timeline:

February 24-25, 1998: Meeting in Boise, the Council reviewed draft scientific principles developed by the Council's staff. The principles will be reviewed by a five-person technical group representing state, tribal and federal fish and wildlife managers, and by the Independent Scientific Advisory Board, an 11-member panel that advises both the Council and the National Marine Fisheries Service.

March 17-18, 1998: Meeting in Spokane, the Council reviewed the final draft of the scientific principles.

April 7-8, 1998: Meeting in Portland, the Council approved the final draft of the scientific principles, but the document was not released for public comment pending consultation with Columbia Basin Indian tribes.

Background: The Council is developing steps to change the nature of its Columbia River Basin Fish and Wildlife Program from a set of individual measures to an overarching framework to guide annual implementation decisions. The framework ultimately will be a set of goals, objectives and strategies to guide fish and wildlife recovery in the Columbia River Basin. It is called a framework because its goals, objectives and strategies are interconnected: goals lead to objectives, objectives lead to strategies, and strategies are implemented in the annual fish and wildlife project selection process.

Before the Council can set goals, objectives and strategies through amendments to the fish and wildlife program, it first must develop a set of draft scientific principles that explain our understanding of the interactions among fish and wildlife and the world they inhabit. Scientific principles, described as physical and biological laws and assumptions, will help the Council use the program amendment process to determine which goals are reasonable and which strategies are most likely to achieve them. By stating the scientific principles explicitly, the Council will help the region refine them through program amendments and, over time, through experience.

Because the principles will help shape all the other elements of the framework that will be developed in program amendments - the goals, objectives and strategies - the Council is focusing on the scientific principles first.

Examples of possible draft principles are:

Ecosystem conditions are controlled by physical and biological factors, some of which are influenced by human activities;
Watersheds are the basic ecological units;
Genetic diversity contributes to persistence and productivity of species.

Power Issues

1. Northwest Energy Review Transition Board

The issue: In 1996, a 20-member committee appointed by the governors of Idaho, Montana, Oregon and Washington reviewed the Pacific Northwest electricity system and made a number of recommendations for how the region could take advantage of increasing electricity industry competition as the result of deregulation and also preserve the benefits of the region's mostly federal hydropower system. Following the conclusion of the Comprehensive Review of the Northwest Energy System, the governors appointed the four-member Northwest Energy Review Transition Board to carry forward the recommendations of the review in the form of draft legislation - a "Northwest Chapter" for federal energy deregulation legislation.

Timeline: The Transition Board appointed subcommittees to work on certain recommendations of the Comprehensive Review, including separating Bonneville's transmission from its generation, and federal hydropower subscription for the next rate case period (2002-2006). The Transition Board intends to complete work on the Northwest Chapter and submit it to the governors by July 1, 1998.

Background: Among the Comprehensive Review Steering Committee's recommendations:
? Bonneville would sell power by subscription. Subscribers would contract to purchase power from the system, at cost, for the periods of their subscriptions. They would be able to buy power at cost, regardless of whether that cost is above or below market prices.
? All electricity customers should be able to choose an electricity supplier by July 1, 1999.
? An independent electricity transmission system operator should be established to ensure reliable service and equitable access to transmission.
? Utilities voluntarily should support local conservation, renewable energy and low-income energy assistance programs, and state legislatures should mandate support if the voluntary effort fails. Regionwide, this funding should be approximately $210 million per year. Utility access to the energy marketplace should be linked to funding for these public purposes.
? Local utilities should retain control over local energy decisions.
? The region should continue to honor its obligation to restore salmon and steelhead runs that have been affected by the hydropower dams.

2. Bonneville Cost Review: Cut Annual Spending By $147 Million

The Issue: Deregulation of the nation's electricity industry is driving down the cost of power. In order to attract customers after 2001, when 90 percent of its power sales contracts expire, the Bonneville Power Administration needs to cut its costs in order to reduce the price of its power. At the request of Congress, the Council and Bonneville convened a committee that included five experts in corporate management to review Bonneville's costs and recommend ways to reduce them. The committee recommended cuts that should yield approximately $147 million in annual savings during the next five-year Bonneville rate period, beginning in 2001.

Timeline: The committee submitted its final recommendations to Bonneville and members of the Northwest congressional delegation on March 9, 1998. Implementation of the recommendations will be Bonneville's responsibility.

Background: The Bonneville cost review grew out of the 1996 Comprehensive Review of the Northwest Energy System, a year-long effort initiated by the governors of Idaho, Montana, Oregon and Washington. In that review, a 20-member committee recommended ways the Northwest could take advantage of increasing electricity industry competition and also retain the benefits of the federal Columbia River power system. One key recommendation was to market Bonneville's power long-term to regional customers.

Following the Comprehensive Review, the governors asked the Power Planning Council to work with Bonneville to appoint a cost-review committee. The work began last June. The committee included four Council members, two representatives from Bonneville and five experts in corporate management and finance.

The committee's recommendations include:

Washington Nuclear Plant 2: Cut the cost of the plant's power from about 2.4 cents kilowatt hour to 1.9 cents by the year 2000 (estimated annual savings: $19 million), and shut it down if it can't compete.
Energy conservation and renewable energy: Reduce conservation funding and staff, and make no long-term commitments to renewable energy projects beyond those currently planned. Estimated annual savings: $3.3 million.
Power system cost management: Initiate a cost management strategy involving Bonneville, the Corps of Engineers and Bureau of Reclamation, which operate the federal dams. Estimated savings: $48 million (Corps, $40 million, Bureau, $8 million).
Shrink the marketing department: 1) Reduce Bonneville staff and expenses associated with power marketing and related activities. Estimated annual savings: $14.7 million.
Cut overhead costs: 1) Reduce corporate overhead costs by 50 percent in areas including business services, planning, public affairs and legal services (estimated annual savings: $32 million); 2) Pursue law changes to improve administrative effectiveness and efficiency (estimated annual savings: $10 million). Northwest Power Planning Council: Reduce staff to reflect a changed power planning role, change law to require one Council member from each state instead of two. Estimated annual savings: $1.7 million.
Transmission: 1) Change certain cost allocations between the transmission and power marketing business lines. Estimated annual savings: $30 million to the Power Business Line. 2) Reduce internal overhead costs. Estimated annual savings: $2.5 million.
Fixed costs: Further reduce nonfederal debt service through such actions as bond refinancing. Estimated savings: $20 million.

3. Assessing Bonneville's Possible Stranded Costs

The issue: At the request of the Council's four-member Power Committee, the staff conducted a reconnaissance-level analysis of Bonneville's potential stranded costs, which could result if electricity market prices are lower than the price of Bonneville's power. It is important to estimate future market prices with confidence, as this will help the region resolve the contentious issue of developing a stranded-cost mechanism for Bonneville. The initial results indicate that while breaching the four lower Snake River dams and John Day Dam on the Columbia would have a significant impact on power capability in the Northwest, there would be no significant impact on West Coast market prices for electricity. It is important to emphasize that this was only a preliminary analysis and that further work is necessary before any conclusions can be drawn.

Timeline: The staff hopes to conclude its analysis and report to the Council by mid-April 1998.

Background: The Council staff's analysis to date indicates that Bonneville's potential transition costs are very dependent on market prices. The Council's previous analyses were based on 1996 analysis done for Bonneville by the consulting firm of Putnam, Hayes and Bartlett and more-or-less ad hoc variations on that forecast. Market forecasts need to be updated to reflect the latest information regarding load forecasts, gas price forecasts, generation technologies, the possible effects of the California restructuring and so on.

To accomplish this, the Council leased a computer program known as Aurora, a market-fundamentals model. Aurora simulates the operation and expansion of generating resources in the power system represented by the Western Systems Coordinating Council (WSCC). The model incorporates the logic and data for economic expansion and retirement of generating capacity, as well as for retirement or reduction in capability of generating units - as in the breaching of four lower Snake River dams or the retirement of California nuclear plants. The model can estimate market prices in various scenarios.

Because river conditions vary, affecting hydropower generation and therefore Bonneville's revenues, this uncertainty needs to be reflected in the model. It is possible for Bonneville to have no stranded costs under average water conditions while experiencing an unacceptably large number of periods in which it cannot recover its costs as a result of water conditions. The model also needs to incorporate the best possible estimate of river operations changes that might be implemented, and also their costs and time schedules for implementation. Power system costs and impacts from these river operations also need to be estimated and reflected in the model.

Reflecting these and other components, the analysis produced by Aurora should be useful in decision-making about the future of the region's power system.

HISTORY OF THE REGIONAL POWER SYSTEM

The development of the Columbia River system in the Pacific Northwest began in the 1930s under a program of regional cooperation to meet the needs of electric power production, land reclamation, flood control, navigation, recreation and other river uses.

From the beginning, the federal government has played a major role in the development of one of the largest multiple-use river systems in the world. Thirty multi-purpose dams on the Columbia River and its tributaries were built by the U.S. Army Corps of Engineers and the Bureau of Reclamation. Investor-owned and publicly owned utilities also built a major system of dams and generating facilities. Congress directed the Bonneville Power Administration, in the Bonneville Project Act of 1937, to build and operate transmission lines to deliver the power from dams, and to market electricity from federal generating projects on the river at rates set only high enough to repay the federal investment over a reasonable period of time.

Canadian Treaty

As demand for power grew, the United States and Canadian governments recognized a need for development of water storage sites in the upper reaches of the Columbia River Basin. The governments of both nations negotiated a treaty in the early 1960s for the cooperative use of dams that would be built by both countries. Four treaty dams were built. Three are on the Columbia River in Canada - Hugh Keenleyside, Duncan and Mica - and the fourth, Libby, is on a major Columbia tributary, the Kootenai River, in Montana. The Canadian dams were completed by 1973, and Libby was completed in 1975. These dams provide flood control and additional power generation at dams downstream in the United States. The power-generating capability of downstream dams increased by the following percentages as a result of the treaty storage: Grand Coulee, 13 percent; Chief Joseph, 14 percent; the five mid-Columbia public utility district dams, 18 percent; and dams farther downstream on the Columbia, 11 percent collectively. In return, Canada received a cash settlement for its share of the additional power generation. The value of this power, known as the downstream benefit, recently was renegotiated by the two countries.

Intertie

Also in the 1960s, Congress authorized the construction of three major power lines linking the Columbia River hydro projects with power markets in California and the rest of the Pacific Southwest. The interties benefit the Pacific Northwest in several ways. They allow the sale of hydropower from the Columbia when it is not needed here and would otherwise be lost in the form of water spilled over dams without generating electricity, and they permit this region to buy power from California when power is needed here during shortages and periods of heavy use. In the first instance, sales of surplus Northwest hydropower to California has saved the equivalent of some 200 million barrels of oil. In the second case, California utilities sold power to Pacific Northwest utilities in the drought years of 1973, 1977, 1979, 1992, 1993 and 1994.

To protect Northwest access to power, Congress passed regional preference provisions in 1964. Bonneville must offer any surplus power to utilities in the Northwest before selling it to California. Sales to California can be called back if the power is needed in the Northwest. Sales of firm energy can be recalled with 60 days notice, sales of peaking capacity can be recalled in five years.

Net Billing Agreements

With the dams developed in Canada as well as the United States, the river system provided virtually all the electricity needed by the region until the early 1970s. But by that time, all dam sites on the mainstem of the Columbia that were economically feasible and environmentally acceptable were either developed or under development, and the region was looking for other ways to meet electric load growth. Bonneville and the region's utilities were predicting shortages of electricity unless thermal generating plants were brought on line in response to increasing demand.

The region's publicly owned utilities and investor-owned utilities turned mainly to coal-fired and nuclear plants to meet growth throughout the Pacific Northwest. Utilities believed the development of such plants was the most economic and environmentally acceptable option available at the time. Bonneville helped the utilities respond to these needs by participating in a Hydro-Thermal Power Plan for the continued development of electricity resources in the Pacific Northwest.

Under the plan, Bonneville agreed to acquire electricity by entering into "net billing" agreements with its publicly owned utility customers. These agreements made it possible for the publicly owned utilities, which owned shares of power plants, to sell to Bonneville all or part of the generating capacity of thermal projects. Bonneville credited, and continues to credit, the wholesale power bills of these utilities in amounts sufficient to cover the costs of their shares in these plants. Bonneville then sells the output of these plants, melding the higher costs of this thermal power with the lower costs of hydropower, for the benefit of all customers. The plants were cooperative efforts of both publicly owned and investor-owned utilities, but Bonneville purchased only the shares of generating capacity owned by publicly owned utilities.

Hydro-Thermal Power Program

Under the Hydro-Thermal Power Program (Phase I), Pacific Power & Light Company and other investor-owned utilities built the Centralia coal-fired plant with the co-ownership of several publicly owned utilities. Portland General Electric Company built the Trojan nuclear power plant, with 30 percent co-ownership by Eugene Water and Electric Board (EWEB) covered by a net-billing agreement. And the Washington Public Power Supply System (WPPSS), under net-billing agreements, completed one nuclear plant (WNP 2) and partially constructed two other nuclear plants (WNP 1 and 3) in Washington state. The Hanford N-reactor turbine generator, built by WPPSS, also came on line just prior to the formal initiation of the Hydro-Thermal Power Program, and before its closure in 1987 was considered a part of the overall effort. Bonneville became the agent for integrating these resources so the consumers of the region could benefit from the greatest efficiency and lowest costs from operation of the regional electric system. The thermal power plants, which run continuously, would meet the base, or constant, power needs. The hydroelectric dams would be operated to follow the fluctuation of energy needs throughout the day.

In spite of the efforts of utilities and Bonneville to continue developing the region's generating resources in a systematic way, the region continued to lose ground to rapidly growing demands for electricity. The Hydro-Thermal Program failed to meet the region's expectations for two basic reasons. A revision of regulations by the Internal Revenue Service denied tax exempt status to bonds sold by publicly owned utilities to finance their plants if power from the facilities was sold to Bonneville, a Federal body. And, Bonneville's financial ability to participate in net-billing agreements reached its limits far sooner than expected because of the climbing costs of new thermal plants.

In 1973, Bonneville and the region's utilities initiated a Hydro-Thermal Program, Phase II, in which the utilities would finance their own plants without net-billing participation by Bonneville. Thus, WPPSS nuclear units 4 and 5, now terminated, were not covered by net-billing contracts. Nonetheless, Bonneville expected to provide electric load management and power integration services and to supply peaking power and reserves from federal facilities in order to bring about the most efficient mix of resources possible. Bonneville's participation in this program was enjoined by a federal court, which required that Bonneville complete an environmental impact statement on its role in the region.

The environmental impact statement found that fluctuation in the use of hydroelectric dams would have to be limited to protect shore structures along the river. In addition, delays in the construction of new plants, costs higher than originally expected, and the realization that the Hydro-Thermal Program would not be adequate to meet needs made it evident that Bonneville would not be able to sell firm power to investor-owned utilities and still provide first priority to serving "preference customers" as directed by federal law.

Preference

The Bonneville Project Act of 1937 directed that the co-ops and publicly owned utilities of the region be given first call on available federal resources. They consequently came to be called "preference customers." Until the 1970s, their legal preference had never been exercised because there had been enough electricity for everyone. In 1973, when Bonneville's firm-power contracts with investor-owned utilities expired, Bonneville could not offer new ones if preference customers were to continue to have first call on federal resources. So the firm power contracts with the investor-owned utilities were not renewed.

However, Bonneville continues to sell some peaking power to the investor-owned utilities - power they need to get through periods of heavy use in the winter heating season. Bonneville also sold "non-firm" power to the investor-owned utilities and utilities outside the region when electricity surplus to the needs of the preference customers is available.

In 1976, Bonneville's power demand and supply projections showed that federal power supplies were running short for preference customers, and that Bonneville would no longer be able to guarantee preference customers that their load growth could be met beyond 1983. Bonneville issued a notice of insufficiency to the utilities in June of 1976.

Rate Disparities

With the investor-owned utilities relying on their own hydro and thermal resources to meet the demand of their customers, and with the prices of federal hydropower much lower than that of new thermal generation, a divisive struggle for access to limited federal resources grew. Sixty percent of the residential and farm customers of the region are served by investor-owned utilities. These customers were paying, on average, twice as much for electricity as customers of publicly owned utilities receiving wholesale power from Bonneville. The City of Portland sued Bonneville, claiming a right to a share of hydropower resources for its citizens. The State of Oregon passed a law authorizing formation of a statewide public utility - the Domestic and Rural Power Authority - to seek service as a preference customer from Bonneville so that all residential customers of private utilities could receive the rate benefits of Federal resources. Elected officials of other states talked of forming their own statewide public utilities.

Stimulated by rate disparities, the public power movement also experienced a renaissance. A strong public power move to buy out investor-owned utility service areas by means of elections in accordance with State law was revived in Oregon. All votes to form new PUDs failed in the November 1980 elections, but one long inactive PUD, the Columbia Peoples Utility District west of Portland won voter approval for issuing bonds to buy out utility properties in Columbia County.

Meanwhile, planning for more resources to meet demand was hamstrung by uncertainty over the allocation of low-cost federal power among competing claimants, existing and new. For example, Bonneville's contracts with its direct service industries, which are large industrial firms that purchase power directly from Bonneville, were to expire in the 1980s. The power sold to these industries would have to be sold to public utilities under the preference clause. If they were to survive in the Northwest, these industries needed an assured source of electricity.

Declining salmon runs

Finally, by the late 1970s it became clear that our regional prosperity, which resulted in large measure from inexpensive hydropower from the federal dams, had extracted a price on fish and wildlife in the Columbia River Basin. Just a century earlier, for example, between 10 million and 16 million salmon returned to the Columbia each year. But by the late 1970s, there were only about 2.5 million salmon, and most of those returned to hatcheries. Environmental groups and other advocates for fish and wildlife considered filing petitions to protect dwindling fish populations under the federal Endangered Species Act.

These pressures on our regional electric power supply, which once seemed inexhaustible, caused Pacific Northwest residents to question the institutions governing the development, sale, and distribution of generating resources. Should new preference agencies be formed to replace private companies in given areas? How would the supply needs of new preference customers be met? Should private utilities undertake new generating projects in a hostile atmosphere of rapidly rising rates and the threatened shift to public power? How would large industrial customers in the region be served? How should the public, and their elected representatives, participate in decisions that were critical to the region's economy and environment? Who ultimately would be responsible for planning and acquiring new resources to avoid impending electricity shortages? How would our region protect the fish and wildlife that had been damaged over the years by the construction and operation of hydropower dams?

The region continued to work for a cooperative solution that preserved local options while obtaining regional efficiencies of an integrated electric system. Several alternatives were explored, but no agreement was reached. To avoid a court battle over allocation issues, the region turned to Congress for a solution.

Toward a Congressional Solution

Revisions to the Bonneville Project Act were considered as early as 1975. The legislation was prompted by Bonneville's Notice of Insufficiency in June 1976, coupled with the threat posed by Oregon's Domestic and Rural Power Authority. However, it was not until 1977 that Bonneville and its customers, through the Pacific Northwest Utilities Conference Committee (PNUCC), drafted legislation to solve the region's energy problems. Senator Jackson introduced the PNUCC bill in September of 1977, but neither that bill, nor a less complex successor drafted a year later, managed to progress very far by the time the 95th Congress adjourned in late 1978.

When the 96th Congress convened in 1979, a coalition of Bonneville customers was solidly behind a legislative solution to the Northwest's power crisis. Neither Bonneville nor its customers wanted an administrative allocation of limited power supplies, although Bonneville did propose an allocation scheme in October of 1979. Bonneville and its customers, however, maintained that such an allocation would be subjected to protracted litigation. They alleged that Congress could avoid the uncertainties accompanying administrative allocation by devising a legislative allocation scheme and equipping Bonneville with the authority to purchase power from non-federal sources on a long term basis. Supplying Bonneville with purchase authority was, they claimed, the key to implementing any legislative allocation scheme. Congress apparently agreed. The Senate passed the regional legislation on August 3, 1979; the House passed an amended bill on November 17, 1980, which the Senate agreed to two days later. On December 5, 1980, President Carter signed the Pacific Northwest Electric Power Planning and Conservation Act into law as Public Law 96-501.

Northwest Power Act - Major Provisions

After four years of deliberation, Congress devised methods for protecting the preference that existing federal law gives publicly owned utilities, while at the same time providing the benefits of federal hydropower to residential and small farm customers of private utilities. It should be noted that the Act passed largely because it seemed to benefit all the interest groups that lobbied for it.

Here are some highlights of the Act: First, rate disparities between consumers served by private utilities and those served by public utilities were minimized by providing investor-owned utilities access to Bonneville's lower-cost power. Second, the costs of this increased access were paid for by increased rates charged to industrial customers. Third, in return for paying increased rates, existing industrial customers were promised new long term contracts. Fourth, preference customers were guaranteed that their rates would not increase more than they would have without the Act.

Fifth, Bonneville was given purchase authority to expand the system in order to meet the requirements of its customers, but only pursuant to a number of provisions designed to guard against any abuse of that authority. In particular, in response to state claims of a lack of involvement in major regional energy issues, the Act created a unique interstate planning entity, the Pacific Northwest Electric Power and Conservation Planning Council, to govern Bonneville's acquisition of major resources and promote conservation and renewable resources programs through a regional energy plan. This was the key provision from the perspective of the Northwest states - Bonneville got new authority to acquire resources in return for a Council appointed by the governors. This Council would develop a regional plan and oversee its implementation.

Sixth, in an effort to minimize rate increases, the Act requires that all acquisitions be "cost-effective," including consideration of environmental costs, and establishes a resource priority scheme favoring conservation and renewable resources over thermal plants. Seventh, Columbia Basin fish and wildlife damaged by the hydroelectric system are to be preserved and restored through a basin-wide program promulgated by the Council.

Finally, the Act guarantees public involvement in all significant resource decisions.

The Act directs that Bonneville should continue its traditional role of transmitting and marketing power, but also carry out additional responsibilities. Under the Act, Bonneville must acquire all necessary energy resources to serve utilities who choose to apply to Bonneville for wholesale power supplies. The Act contains checks and balances to insure that all customers of Bonneville are treated equitably.

Bonneville remains accountable to the people of the Pacific Northwest for the actions it takes to meet the needs of residents and industry. By creating a regional planning council consisting of two members from each of the four Northwest states to develop a regional plan, Congress provided a regional decision-making system. It emphasizes local control of resource development and power planning.

Here are the major provisions of the Pacific Northwest Electric Power Planning and Conservation Act:

The Northwest Power Planning Council was formed with representation from each of the states. The Act directed the Council to draw up a plan for meeting the electrical needs of the region at the lowest possible cost. The plan must give highest priority to cost-effective conservation, treating it as a resource preferable to all other means of responding to demand for electricity. Renewable sources of energy must be given next highest priority in the region's power planning, to the extent that they are cost-effective ranking ahead of conventional thermal generating resources. Among thermal options, fuel-efficient methods of producing energy, such as cogeneration, must be given priority.
Bonneville became responsible for meeting loads of customers and managing the regional electrical system to achieve the purposes of the Act relating to fish, system efficiency, and experimental projects. The plan adopted by the Council, which is amended periodically, is the basis for Bonneville's actions in meeting loads of its customers. Congress exercises budget review of all proposed Bonneville expenditures. If Bonneville decides to acquire resources not consistent with the Council's plan, specific Congressional approval is required prior to any commitment by Bonneville. Bonneville must give priority to cost-effective conservation and renewable resources in meeting the region's needs. Bonneville may also purchase the generating capabilities of new thermal projects, but only after determination that they are required in addition to all cost-effective conservation and renewables that can be achieved or developed in time. Such projects must also be found reliable and compatible with the regional electric system. Bonneville must spread the benefits and the costs of resources among all of its customers through its rates.
The supply preference and resulting price advantage to co-ops and publicly owned utilities by Federal law was protected and enhanced. Bonneville was given the responsibility of meeting the full future requirements of preference customers - something Bonneville was not previously authorized to do.
Residential and farm customers of investor-owned utilities received rate relief. The utilities sell to Bonneville, at the average cost of their power, an amount of electric energy equal to their residential and farm loads. Bonneville sells to them, in return, enough energy at Bonneville standard rates to cover these residential and farm loads. The rate advantages cannot enhance company profits, but must be passed on directly to the customers.
Direct service industries received new 20-year contracts for power from Bonneville, but at a higher price than they paid under previous contracts. In effect, they pay the cost of rate relief to residential and small farm customers of investor-owned utilities during the first four years, and a substantial portion thereafter, which they agreed to do in exchange for assurances of long-term supplies.
Bonneville sells electricity at a rate that reflects the melded cost of Federal hydropower and more expensive thermal resources, conservation, and renewable sources of energy. The Act contains incentives, as well, to encourage conservation and renewables. Bonneville may credit utilities for their individual actions to implement conservation and renewables.
The Council established a program to protect and enhance the fisheries resources of the Columbia River and to mitigate damage already done to anadromous fish. Funding for the program is to come from Bonneville rate revenue.
All planning for electric resources and fish protection must involve the public. State and local control of land use and water rights is protected under the Act and the decision to allow construction of new resources is left with utilities and state siting authorities.
The Council must provide a method for balancing environmental protection and the energy needs of the region. For each new energy resource, the provisions of the National Environmental Policy Act must be complied with.
The Council is required to seek the recommendations of the region's tribal, state and federal fish and wildlife agencies. In addition, the Council's measures must be consistent with the legal rights of the region's tribes.

Challenges for the Future

The electricity industry in the United States is in the midst of significant restructuring. This restructuring is the product of many factors, including national policy to promote a competitive electricity generation market and state initiatives in California, New York, New England, Wisconsin and elsewhere to open retail electricity markets to competition. This transformation is moving the industry away from the regulated monopoly structure of the past 75 years. Today we are served by individual utilities, many of which control everything from the power plant to the delivery of power to our homes or businesses. In the future, we may have a choice among power suppliers that deliver their product over transmission and distribution systems that are operated independently as common carriers.

There is much to be gained in this transition. Electricity consumers are already benefiting from competition in a number of significant ways. Competition in the natural gas industry has helped lower the cost of electricity produced by gas-fired generating plants. Competition among manufacturers and developers of combustion turbines has contributed to the availability of less expensive, more efficient power plants that can be built relatively quickly. Surplus generating capacity on the West Coast, combined with increasing competition among wholesale suppliers, has reduced the price utilities must pay for power on the open market. Broad competition in the electricity industry that extends to all consumers could result in lower prices and more choices about the sources, variety and quality of their electrical service.

But, there are risks inherent in the transition to more competitive electricity services. Merely declaring that a market should become competitive will not necessarily achieve the full benefits of competition or ensure that they will be broadly shared. It is entirely possible to have deregulation without true competition. Similarly, the reliability of our power supply could be compromised if care is not taken to ensure that competitive pressures do not override the incentives for reliable operation. How competition is structured is important.

It is also important to recognize the limitations of competition. Competitive markets respond to consumer demands, but they do not necessarily accomplish other important public policy objectives. The Northwest has a long tradition of energy policies that support environmental protection, energy-efficiency, renewable resources, affordable services to rural and low-income consumers, and fish and wildlife restoration. These public policy objectives remain important and relevant. Given the enormous economic and environmental implications of energy, these public policy objectives need to be incorporated in the rules and structures of a competitive energy market.

In some respects, the transition to a competitive electricity industry is more complicated in the Northwest because of the presence of the federal Bonneville Power Administration. Bonneville is a major factor in the region's power industry, supplying, on average, 40 percent of the power sold in the region and controlling more than half the region's high-voltage transmission. Bonneville benefits from the fact that it markets most of the region's low-cost hydroelectric power. It is hampered by the fact that it has high fixed costs, including the cost of past investments in nuclear power and the majority of the costs for salmon recovery. As a wholesale power supplier, Bonneville is already fully exposed to competition and is struggling to reduce its costs so that it can compete in the market. The transition to a competitive electricity industry raises many issues for the Bonneville Power Administration and the region. In the near term, how can Bonneville continue to meet its financial and environmental obligations in the face of intense competitive pressure? In the longer term, when market prices rise and some of Bonneville's debt obligations have been retired, how can the Northwest retain the economic benefits of its low-cost hydroelectric power when the rest of the country is paying market prices? And finally, what is the appropriate role of a federal agency in a competitive market? The question is not only whether Bonneville can compete in the near term, but also, should it be a competitor?

The federal power system in the Pacific Northwest has conferred significant benefits on the region for more than 50 years. The availability of inexpensive electricity at cost has supported strong economic growth and helped provide for other uses of the Columbia River, such as irrigation, flood control and navigation. The renewable and non-polluting hydropower system has helped maintain a high quality environment in the region.

But while the power system has produced significant benefits, these benefits came at a substantial cost to the fish and wildlife resources of the Columbia River Basin. Salmon and steelhead populations have been reduced to historic lows, and many runs are or are about to be listed under the federal Endangered Species Act. Resident fish and wildlife populations have also been affected. Native Americans and fishery-dependent communities, businesses and recreationists have suffered substantial losses due in significant part to construction and operation of the power system. The region's ability to sustain its core industries, support conservation and renewable resources, and restore salmon runs is clearly threatened if we cannot reach a consensus regional position to bring to the national electricity restructuring debate. Without a sustainable and financially healthy power system, funding for fish and wildlife restoration could be jeopardized.

In 1996, the governors of Idaho, Montana, Oregon and Washington initiated a comprehensive review of the region's energy system. This review is discussed in more detail later in this briefing book.

THE COLUMBIA RIVER BASIN FISH AND WILDLIFE PROGRAM

The Northwest Power Act requires the Council to review its power plan and the Columbia River Basin Fish and Wildlife Program at least every five years. The last review led to a revision of the fish and wildlife program, which the Council approved in December 1994.

The 1994 program revisions incorporated more rigorous protections for salmon and steelhead, particularly those Snake River salmon runs that have been listed under the federal Endangered Species Act (Snake River spring/summer chinook, fall chinook and sockeye). The 1994 salmon and steelhead amendments responded to a commitment the Council made in the previous revision of the salmon and steelhead chapters of the program, the 1992 Strategy for Salmon. The Strategy included a number of immediate measures to boost salmon survival, but the Council recognized that those measures alone would not be enough to rebuild the runs. So the Council called for investigation of additional, longer-term measures and further consideration in 1994. Some of those longer-term measures were included in the December 1994 amendments.

By approving the amendments, the Council also responded to a ruling by the Ninth Circuit Court of Appeals. In September 1994, the Court remanded the Strategy to the Council in response to lawsuits that challenged various measures in the program. The Court held that the Council needed to do a better job explaining how its program protected fish and, in doing so, should give greater deference to the region's fish agencies and Indian tribes in designing the program. Many of the amendments approved in December were based on recommendations of the agencies and tribes.

Important goals in the Strategy were preserved in the 1994 amendments. For example, the goal of doubling adult salmon populations in the Columbia Basin remains, as does protection for existing biodiversity, including both anadromous and non-anadromous fish populations. The amendments also reaffirmed the Strategy's ambitious rebuilding targets for the listed Snake River salmon species. These targets are: 1) 50,000 spring chinook; 2) 20,000 summer chinook; and 3) 1,000 fall chinook crossing Lower Granite Dam in southeastern Washington. In each run, the target is for adult naturally spawning salmon.

Here are four key directives in the Council's fish and wildlife program regarding anadromous fish:

Improve migration survival

To reach these targets, the program calls for actions at every stage in the salmon's life cycle. Because salmon are killed in large numbers as they attempt to migrate through reservoirs and past hydropower dams, the strategy calls for higher flows and increased river speed, systems to keep salmon smolts from going through turbines, new ways to operate the dams so they kill fewer salmon, controls on predators that eat salmon, and improved barge transportation of salmon to carry them past the dams. The Council's program embraces a philosophy known as "spread-the-risk," which means leaving juvenile salmon and steelhead in the rivers to migrate naturally when river conditions are good (high flows, cool water), and transporting the juvenile fish in barges and trucks when river conditions are poor (low flows, warm water).

Reduce harvest

Because so many Columbia River Basin chinook, particularly those from the Snake River Basin, are caught in both the ocean and in the lower Columbia river, the program calls for more effective control of those harvests.

Protect and improve habitat

Because more than a third of all the salmon habitat in the region has been blocked by dams and more has been degraded by numerous human activities, the program emphasizes habitat repairs that will increase the productivity of anadromous fish in the wild.

Improve hatcheries

Because fish hatcheries can play an important supporting role in rebuilding salmon runs, the program calls for improvements and consistency in hatchery management practices. Here are some key measures the Council amended into the program in 1994:

Continue hatchery reforms and improvements.
As part of updating the subbasin plans, agencies and tribes will propose supplementation projects to help rebuild naturally spawning salmon populations.
Initiate emergency supplementation of Snake River fall chinook; prepare for emergency supplementation of spring and summer chinook.
Evaluate tributary, mainstem (including reservoirs), estuary, plume, near-shore ocean and marine salmon survival, ecology, carrying capacity and limiting factors.
The Bonneville Power Administration should fund the design of an impact assessment to examine the effects of Columbia River Basin hatcheries (individually and collectively) on wild and naturally spawning fish.
Fishery managers should consult with appropriate genetics specialists and develop basinwide guidelines to minimize genetic and ecological impacts of hatchery fish on wild and naturally spawning stocks.

FISH AND WILDLIFE PROGRAM COSTS AND RESULTS

Introduction

Rebuilding fish and wildlife populations won't be easy, quick or inexpensive. Fish and wildlife activities funded by Pacific Northwest ratepayers include Council program and non-program measures. Non-program measures are activities funded by Bonneville that were initiated prior to the adoption of the fish and wildlife program. These include ladders and screens that were installed at the Corps of Engineers mainstem dams and the 22 production facilities built under the Lower Snake River Compensation Program. Provisions in the Northwest Power Act addressing fish and wildlife were included in large part because Congress judged the non-program activities to be inadequate to reverse the declines of salmon and steelhead runs that had extended into the late 1970s.

This section of the Briefing Book explains how much money is available for the Council's fish and wildlife program, where it comes from, and how decisions are made to spend it.

Where the money comes from

Most of the money to pay for fish and wildlife recovery under the Council's program comes from Bonneville Power Administration ratepayers. Some of the money comes from the federal government in the budgets of federal agencies, particularly the U.S. Army Corps of Engineers, and is repaid by Bonneville.

The Council believes that because the fish and wildlife program is a regional effort to rebuild weak salmon stocks, it is appropriate that state and federal entities and others participate in funding. All levels of government must bear responsibility for adequately funding and staffing fish and wildlife rebuilding measures, or run the almost certain risk that the recovery effort will be delayed, with potentially disastrous results.

1996 fish and wildlife budget memorandum of agreement

There are three significant categories of fish and wildlife costs that affect the Bonneville Power Administration's rates. These are project costs, Bonneville's repayment obligations to the U.S. Treasury for improvements at the dams, and foregone hydropower revenues.

Project costs include Bonneville funding of hatchery construction, habitat projects, research and other fish and wildlife initiatives in the Council's program. Under a September 1996 memorandum of agreement between Congress, Bonneville, the Council and Columbia River Basin Indian tribes, the budget for these projects averages $127 million per year through 2001.

Bonneville repays the U.S. Treasury for most of the costs of passage facilities at the Columbia and Snake river federal dams. These are the original fish ladders, the screens and bypass systems whose installation at the dams began in the 1980s, and the juvenile salmon transportation facilities. The annual payment for these existing facilities is set in the 1996 memorandum of agreement at $125 million per year through 2001.

When the Council adopts measures to change river operations to provide improved flows for salmon, Bonneville may not be able to make as much money from power sales. In many winters, Bonneville must buy power from other suppliers to allow the reservoirs to store water for spring and summer salmon flow releases. Spill and lowered mainstem reservoir levels also reduce the ability of individual dams to generate electricity. In 1984, the Council adopted its first "water budget," and in 1989, adopted a spill agreement. The 1992 Strategy for Salmon boosted the water budget volume and added about $45 million in average annual revenue impacts to Bonneville. The amount of foregone revenue will vary year to year, depending on water supplies. In years when storage and runoff are plentiful, foregone revenue will be low. In below-average water years, forgone revenues will be high. Based on an average of 50 water years, the memorandum of agreement estimates that foregone revenues will average $183 million per year.

Thus, the cost of the Council's fish and wildlife program in an average water year is $435 million - $127 million in projects, $125 million in repayments and other fixed obligations, and $183 million in foregone revenues.

The memorandum of agreement also dealt with the issue of whether electricity ratepayers should bear the entire cost of fish and wildlife recovery measures. Section 4(h)(8)(B) of the Northwest Power Act says consumers of electricity will pay the cost of measures designed to deal with adverse impacts caused by the development and operation of electric power facilities. Yet construction of the dams of the Federal Columbia River Power System was authorized by Congress for multiple purposes - including hydropower. Accordingly, Section 4(h)(10)(C) of the Act allows the Bonneville administrator to allocate the costs of fish and wildlife recovery among the various purposes of the dams - irrigation, navigation, etc., in addition to hydropower. While Bonneville has financed the entire amount of the Council's program to date, the memorandum of agreement recognizes Section 4(h)(10)(C) and assigns a value to the impact of these other purposes - about $350 million. This amount is available to Bonneville as a credit against future Treasury payments, if needed.

Annual prioritization of projects in the Council's program for funding by Bonneville

In order to increase public scrutiny of the allocation of fish and wildlife resources within the constrained fish and wildlife budget, in 1995 the Council initiated an ambitious process of prioritizing projects for funding. In this process, the fish and wildlife managers recommend funding priorities to implement the Council's fish and wildlife program. After reviewing and prioritizing projects, the managers submit their recommendations to the Council. The Council analyzes the recommendations, conducts public hearings and consultations, invites written comments as well, and then submits final recommendations to Bonneville in three broad areas: anadromous fish, resident (non-ocean going) fish and wildlife. The Council approves the projects, not their cost. That is a matter for Bonneville to negotiate with contractors.

We have been working each year since 1995 to improve the process. For example, at the Council's direction, projects considered for funding in Fiscal Year 1997 included much more detailed information than was available to the fish and wildlife managers in 1996. Managers now are able to consider anticipated project costs for the coming five years, projected results, milestones and citations of available project reports, and peer-reviewed scientific literature pertaining to the projects. We improved public review, as well, incorporating an analysis of public comments received on the managers' recommendations. The managers have the opportunity to respond to the comments and recommend revisions before the Council makes its final recommendations to Bonneville.

The Independent Scientific Review Panel

In 1996, Congress amended the Northwest Power Act with a new section, 4(h)(10)(D), which provides for independent scientific review of the projects in the Council's fish and wildlife program that are directly funded by Bonneville - the annual $127 million established in the memorandum of agreement. This amendment authorized the Council to recommend projects to Bonneville for funding. Prior to the amendment, this role was not explicitly sanctioned in the Act.

Section 4(h)(10)(D) directs the Council to appoint an 11-member Independent Scientific Review Panel (ISRP) "to review projects proposed to be funded through that portion of the Bonneville Power Administration's annual fish and wildlife budget that implements the Council's fish and wildlife program." The Council also is directed to appoint Scientific Peer Review Groups "to assist the Panel in making its recommendations to the Council." The Council is to select the peer review groups from scientists nominated by the National Academy of Sciences, "provided that Pacific Northwest scientists with expertise in Columbia River anadromous and non-anadromous fish and wildlife and ocean experts shall be among those represented."

The peer review groups, "in conjunction with the Panel," are to review projects proposed for funding through Bonneville's annual fish and wildlife budget and make recommendations to the Council no later than June 15th of each year. The Panel and the review groups need not review every project, but a "sufficient number of projects to adequately ensure that the list of prioritized projects recommended is consistent with the Council's program." Recommendations of the panel and the peer review groups are to be based on a "determination that projects: are based on sound science principles; benefit fish and wildlife and have a clearly defined objective and outcome with provisions for monitoring and evaluation of results." The Panel and review groups are also to review annually "the results of prior year expenditures based upon these criteria," and to submit its findings to the Council.

The Panel's recommendations to the Council must be made available to the public for review and comment. The Council makes final recommendations to Bonneville "after consideration of the recommendations of the Panel and other appropriate entities." The Council also must "consider the impact of ocean conditions" in making its recommendations, and "determine whether the projects employ cost effective measures to achieve program objectives." The Council must explain in writing if it decides not to incorporate a recommendation of the Panel. The amendment directs Bonneville to pay the expenses of the Panel and peer review groups, at a cost not to exceed $2 million. The amendment's provisions expire on September 30, 2000. The Council appointed the 11 members of the ISRP in January 1997, and members of the peer review groups in April.

Independent Economic Analysis Board

Cost-effectiveness is an important consideration for projects in the Council's fish and wildlife program, but until Congress amended the Northwest Power Act in 1996 with Section 4(h)(10)(D), which added a cost-effectiveness component, there was no specific direction in the Act to employ a cost-effectiveness test. Prior to the amendment, the Act directed the Council, at Section 4(h)(6)(C), to consider cost-effectiveness only in the event that two proposed measures have "... equally effective alternative means of achieving the same sound biological objective" but different costs. In that event, the Council is directed to "utilize ... the alternative with the minimum economic cost." Elsewhere in the Act, the Council is directed to design the program to deal with the river and its tributaries as a system, in recognition of the "... unique history, problems, and opportunities presented by the development and operation of hydroelectric facilities on the Columbia River and its tributaries." Some have argued this means the Council cannot include measures in the program that would upset the operation of the power system by making it, for example, uneconomical.

To help sort through difficult economic issues, in January 1997 the Council formed the Independent Economic Analysis Board. The Board is a panel of eight economists, chosen from more than 70 applicants, whose expertise will improve cost analysis of fish and wildlife recovery measures. The panel will conduct annual reviews of measures proposed for funding by Bonneville through the Council's fish and wildlife program. The panel also will offer economic advice on other fish, wildlife and energy issues, as the Council requests.

Conclusion

The Council has a thorough process in place to analyze fish and wildlife expenditures annually, ensure public and scientific review and comment on projects before they are recommended for funding, analyze appropriate economic issues as they arise, and monitor and evaluate results of the program expenditures. While the process is daunting and the expense is substantial, the Council believes the cost of inaction potentially is higher.

Without effective restoration measures, the region stands to lose wild salmon stocks whose genetic resources may be critical to the long-term sustainability of the Snake and Columbia river runs. Without an effective regional program, a federally administered Endangered Species Act process on behalf of salmon, resident fish or wildlife could impose substantially more onerous costs on irrigators, electric utilities, navigators, fishing communities and others who use the Columbia River and its resources. While the Council has not sought to put a dollar value on this outcome, no one should mistake the value of a determined, long-term regional fish and wildlife recovery program.

SYSTEM PLANNING

In 1987, the Council established an interim goal to increase Columbia River salmon and steelhead runs by 2.5 million adult fish. Achieving this goal would double the runs over the 1977-1981 average levels. Doing so requires careful consideration of production opportunities, mainstem passage conditions and harvest. In short, it requires the development of a systemwide plan addressing the complete life cycle of salmon and steelhead with care to avoid undermining genetic resources.

System planning was initiated in September 1987, when the Council contracted with the fisheries agencies and tribes to prepare the plans. In June 1991, this effort resulted in an overall, basinwide plan composed of individual salmon and steelhead production plans for 31 geographic areas of the Columbia River Basin. These geographic areas are termed "subbasins" for the planning process, and each is composed of a major tributary or portion of the mainstem Columbia or Snake rivers.

System planning was pursued in an open, public process by subbasin planners, system-level planners and senior staff from interested entities. For each subbasin, a group of local technical experts was assembled to do subbasin-level planning. These planners wrote the plans and gathered input from affected entities to ensure that the plans considered needs of local areas. Technical planners at the system or overall basin level were organized in two groups - the Monitoring and Evaluation Group and the System Planning Group. The System Planning Group provided overall direction to the subbasin-level planners and wrote the system-level reports that provided this direction. The Monitoring and Evaluation Group was composed of experts in technical analysis of salmon and steelhead life history. It provided the analysis that was used to determine whether actions planned for individual subbasins were consistent among all subbasin plans and with activities that occur outside the subbasins, such as mainstem passage and ocean and mainstem harvest.

In the 1992 amendments to the fish and wildlife program, the Council acknowledged that the subbasin plans, along with other resource management plans, will be the starting point for identifying actions to help specific salmon populations. Plans developed under the program, and otherwise, will be used to address other fish and wildlife species.

The Council called on fishery managers and Bonneville to form subregional teams to assist in implementation of fish and wildlife measures in the following subregions of the Columbia River Basin:

* Below Bonneville Dam
* Bonneville Dam to Snake River
* Snake River to Chief Joseph Dam
* Above Chief Joseph Dam
* Snake River from the mouth to Hells Canyon Dam
* Above Hells Canyon Dam

The Council said these teams should use the Integrated System Plan, subbasin plans, other fish and wildlife plans and any other available relevant plans and information to prepare recommendations for the annual implementation work plan and program monitoring report. Each team will be responsible for identifying any conflicts with other resource management plans in the relevant subregion, along with options for resolving these conflicts. Guidelines for these recommendations are listed in Section 3.1D.1, Page 3-5, of the 1994 program (document 94-2).

Another aspect of system planning, coordination of watershed activities in subbasins of the Snake and Columbia (model watersheds), is discussed in Section 7.7 of the 1994 program, beginning on page 7-31 of document 94-2).

RESEARCH

Many uncertainties remain about the biology of Columbia River Basin salmon and steelhead and how best to protect, mitigate and enhance them. To address the major uncertainties and in an effort to end research fragmentation, the program established six areas of research emphasis for Bonneville funding: 1) solving disease problems affecting spring and summer chinook; 2) improving the effectiveness of hatcheries; 3) improving techniques for supplementation (introduction of artificially produced fish into streams); 4) studying water budget effectiveness and reservoir mortality; 5) improving bypass systems; and, 6) improving transportation of juvenile fish past the mainstem Snake and Columbia dams. The last two are areas of research funded by the Corps of Engineers.

These six research areas are believed to hold the most promise for helping to achieve the doubling goal, and a sizable portion of program expenditures supports this research. In the 1992 program amendments, the Council called on Bonneville and the Corps to publish a summary of results from all studies funded under the program and to conduct annual symposiums at which contractors present the results of their studies, beginning in March 1993. The Council also called on Bonneville to continue funding the development of the Coordinated Information System to promote effective exchange and dissemination of information in the standardized, electronic format throughout the Columbia Basin. This system, now in place, is operated by the Pacific States Marine Fisheries Commission and is known as Streamnet.

Disease

Fish disease research focuses on combating three major disease problems of cultured fish: bacterial kidney disease (BKD), a major killer of spring and summer chinook; infectious hematopoietic necrosis (IHN), which primarily affects steelhead; and fungal infections, which may debilitate and kill all species. All the top-priority activities in the fish disease work plan have been initiated. Future research will refine our ability to fight BKD, IHN and fungal infections and to investigate additional disease problems.

Hatchery Effectiveness

Hatchery effectiveness research focuses on improving the production and survival of fish at existing hatcheries. This research is aimed at identifying the rearing and release conditions and other elements of hatchery production that yield highest fish survival rates.

In the 1992 program amendments, the Council concluded that regional standards and procedures for hatchery operations should be developed that are consistent with the goal of rebuilding weak wild naturally spawning stocks. To help develop tools to reduce the impacts of hatchery production on wild and naturally spawning stocks, the Council convened a group of nationally recognized geneticists. These geneticists were asked to bring the best current scientific knowledge to salmon and steelhead production issues. A number of products have resulted from this effort and are being reviewed at the technical and policy levels in the region.

The Council also called on fishery managers to create the Integrated Hatchery Operations Team to develop regionally integrated hatchery policies regarding fish health, genetics, ecological interactions and hatchery performance standards. This work largely was completed, and in 1997 the Council voted to assign any uncompleted tasks to the congressionally mandated review of artificial production in the Columbia River Basin. This review is being undertaken by the Council with the assistance of the Independent Scientific Advisory Board.

Supplementation

Supplementation research is aimed at developing improved techniques to use hatchery production to rebuild natural runs, and at identifying impacts of supplementation on native stocks. In 1988, the Council stipulated that this research should take advantage of ongoing or planned supplementation activities, such as those under the Lower Snake River Compensation Plan. An analysis of the successes and failures of past and ongoing supplementation was conducted by the Council's Regional Assessment of Supplementation Project (RASP), which was created in 1990 to provide a comprehensive framework for supplementation. The project was carried out by technical representatives from the fishery managers, utilities, Bonneville, the Council an others. One of its products was a recommended planning process.

Three supplementation research projects were initiated in 1989. These are 10- to 20-year projects. In the 1992 amendments, the Council called on fishery managers to use existing processes, including RASP and the Integrated System Plan to prepare evaluations, including biological risk assessments, for proposed supplementation experiments that were submitted by the Columbia River Inter-Tribal Fish Commission. Supplementation research hatcheries operated by Indian tribes in the basin are discussed elsewhere in this briefing book.

Reservoir Mortality/Water Budget Effectiveness

In its 1987 fish and wildlife program, the Council called for research into reservoir mortality and water budget effectiveness. However, a technical research work group was unable to agree on a single consensus work plan. Therefore, research in this area has proceeded on a year-to-year basis and has been devoted largely to studying predation of young salmon and steelhead by predators such as squawfish and walleye.

Water budget effectiveness research remains controversial, but in the 1992 amendments the Council recognized that research on the relationship between spring and summer flow, water velocity and fish survival has had unsatisfactory progress to date, notwithstanding concerted efforts by several parties.

Accordingly, the Council agreed to fund an independent, third-party evaluation of all new and existing information and analysis on river velocity and survival of juvenile spring, summer and fall chinook and sockeye salmon. Based on this evaluation, which was completed in October 1993, the Council initiated a process to adopt program amendments stating the Council's position on the relationship between flow, velocity, travel time and survival of juvenile spring, summer and fall chinook, sockeye, and steelhead. The evaluation was conducted by Oak Ridge National Laboratories, Oak Ridge, Tennessee, and the flow-survival hypotheses were amended into the program in May 1994. These hypotheses, which were amended into the program in 1994 as Section 5.0E are considered essential starting points for scientific experimentation.

In 1992, the Council called on Bonneville to fund additional independent, third-party scientific evaluations to determine the relationship of flow and water velocity to the travel time and survival of juvenile spring, summer and fall chinook salmon. This evaluation of survival in the Lower Granite and Little Goose reservoirs is being conducted by the National Marine Fisheries Service. In the 1994 amendments, the Council called for an experiment to compare the survival of transported fish with those that migrate in the river. While this adaptive management experiment never was conducted, the Fisheries Service research continues.

Bypass

A major goal of research on juvenile bypass systems is to improve the bypass systems at Bonneville Dam, particularly at the second powerhouse. Studies evaluated juvenile survival levels through the spillway, turbines and bypass systems at Bonneville Dam. Researchers now have a better understanding of why survival levels through the bypass system at the second powerhouse are lower than expected. The Council, with the assistance of the Independent Scientific Advisory Board, is conducting a review of several controversial capital construction projects at Snake and Columbia river dams. The extended outfall at the Bonneville Second Powerhouse is one of those projects. The others are extended-length screens at the John Day Dam and continued development and testing of the surface-bypass system at Lower Granite Dam. Bypass research also is being carried out at other Corps dams.

Transportation

Transportation research is aimed at determining the benefits of juvenile fish transportation. Studies are underway to compare returns of transported and non-transported fish. A major problem is determining benefits for spring chinook, because of recent low flow years. Ongoing studies also are evaluating effects of fish condition, particularly incidence of bacterial kidney disease, on adult returns of transported and non-transported fish. Studies are in progress to assess the use of PIT (Passive Integrated Transponder) tags to evaluate transportation of wild and hatchery fish, and to develop a PIT tag deflector system that would allow tagged fish to return to the river at collector projects.

In the 1992 and 1994 amendments, the Council called on the Corps to accelerate improvements in transportation. This would include evaluation of techniques to improve transportation, such as the use of cooler water in the barges, reduced densities of fish in the barges and broader dispersion of the fish when they are released below Bonneville Dam. In the longer term, depending on the results of continuing evaluation, barging may be useful in the mix of techniques the region will employ to decrease the mortality associated with migration through the reservoirs. The Council also called on the Corps to evaluate further improvements, including improved fish holding and loading facilities, alternative fish collection sites and alternative transportation technologies.

MAINSTEM PASSAGE

The program employs a number of approaches to reduce downstream and upstream salmon and steelhead mortality at and between Columbia and Snake river hydroelectric dams. The Council's present strategy for improving downstream fish passage includes:

* Spill for fish passage at each project on an interim basis until bypass screens are installed and operational;
* Development, installation and improvement of permanent bypass systems at all mainstem dams;
* Collection and transportation of smolts around mainstem hydroelectric projects in barges and trucks;
* A water budget and phased-in reservoir drawdown strategy to augment flows and increase river velocities during the critical spring outmigration period.
* Control of predators such as squawfish.
* A number of measures to improve survival of returning adult fish.

In 1994, the Council amended the program with additional mainstem survival actions in the following areas:

* An expedited program to improved fish bypass at mainstem dams through the development and testing of surface-flow bypass systems and, until these and other bypass improvements are in place, additional spill to levels that do not exceed state-defined levels of nitrogen gas supersaturation.
* Improvements in spill efficiency and installation of structural measures to reduce high total dissolved gas at mainstem dams.
* Improved flows in the Snake River through acquisition of one million acre-feet of additional water from willing sellers and additional water from Brownlee Reservoir.
* Improved flows in the Columbia River through modified operation of Grand Coulee and Albeni Falls dams and negotiations for additional water from Canadian storage reservoirs.
* Enhanced velocity in the Snake and Columbia rivers through drawdown of Lower Granite and Little Goose reservoirs to near spillway crest level and operation of John Day reservoir at near minimum operating pool.
* Specific milestones to review the drawdown actions.
* An emphasis on inriver juvenile migration in all but the worst water conditions, along with improved fish transportation and an accelerated National Marine Fisheries Service-directed comprehensive scientific evaluation of transportation and inriver migrant survival.
* An intensified effort to control predators and reduce competition with depressed salmon stocks. Here is a look at specific actions to improve mainstem survival:

Spill

The program calls on the region's dam operators and regulators to develop and implement interim annual passage plans to protect juvenile fish until permanent screening and bypass facilities can be developed and installed at all mainstem dams. The most immediate interim solution is to spill water laden with fish through a spillway to provide a non-turbine passage route for juvenile fish migrating to the sea.

In the 1994 amendments, the Council called on dam operators to use spill water so that 80-percent of the fish do not go through the turbines at each Snake River dam from about April 15 to July 31, and at each Columbia dam from about May 1 to August 31. Spill would be limited to comply with the dissolved gas guidelines established by federal and state water quality agencies.

To reduce levels of dissolved gas that results from spilling water at the dams, the Corps installed "flip lips" at Ice Harbor and John Day dams. The installation was completed in 1998. These spillway deflectors should help reduce total dissolved gas levels below these projects by as much as 10 percent.

Screening and Bypass Facilities

The Council's fish and wildlife program calls for improving or installing systems to divert fish away from turbines and for continued spill until the screens are in place.

In the absence of reservoir drawdown, the long-term solution to protect juvenile fish involves installation of mechanical screening and bypass facilities to divert, collect and bypass fish past each of 13 powerhouses on the mainstem Columbia and Snake rivers.

The installation of juvenile fish bypass facilities varies from dam to dam in both type and effectiveness. Some mainstem dams have no screening and bypass facilities installed, while others have already been equipped with new or improved systems. Currently, bypass facilities are installed or undergoing improvements at Bonneville, John Day, McNary, Ice Harbor, Lower Monumental, Little Goose and Lower Granite dams, all operated by the Corps of Engineers, and at Wells Dam, operated by Douglas County Public Utility District. Screens are installed at all federal dams except The Dalles Dam.

The mid-Columbia public utility districts, in consultation with the region's fishery agencies and tribes through a Federal Energy Regulatory Commission settlement agreement, are in the process of developing and testing prototype screening and bypass systems and surface bypass options at the remaining four mid-Columbia dams (Priest Rapids, Wanapum, Rocky Reach and Rock Island).

The Council's top federal budget priority has been to secure needed funds to ensure that bypass systems can be installed and improved at all federal mainstem dams. Consistently, this effort has been supported unanimously by the Pacific Northwest Congressional delegation, the fisheries agencies, the utility community and other sport and commercial fishing groups.

Transportation

Smolt transportation involves the collection and movement of juvenile salmon and steelhead around hydroelectric projects on the Columbia and Snake rivers. It has been studied and implemented by the Corps of Engineers since 1968. Smolts are collected at four projects operated by the Corps: Lower Granite, Little Goose and Lower Monumental dams on the Snake River and McNary Dam on the Columbia River. Transportation also has been tested at Priest Rapids Dam on the mid-Columbia River.

Smolts are moved from the four federal collector projects in barges, although trucks are used at the beginning and end of the migrations when fish numbers are low or to supplement barge transportation during the peak of the migration. Fish are released into the river below Bonneville Dam for the remainder of their journey to the ocean. In recent years, the number of transported fish has increased dramatically. For example, the number of fish transported has increased from about 16 million in 1986 to over 20 million in the low-water year of 1988.

The Council has actively assisted the Corps in efforts to secure additional Congressional funds for the construction of improved holding and loading facilities and new fish barges. This is to ensure that adequate transportation facilities will be available when needed to accommodate increased smolt production. In recent years, fish handling and loading facilities were improved or expanded at Little Goose and McNary dams. Two additional barges were constructed in 1990, bringing the total number of available barges to six. Two more fish barges are presently under construction and scheduled to be completed by spring of 1998.

Transportation appears to work well for steelhead and fall chinook salmon. However, given the uncertain results of transporting spring chinook, the Council determined that the agencies and tribes should control whether and how many fish are transported. Typically, they support transport in low water years. In recent years, the Corps has also deferred to agency and tribal jurisdiction on the issue. A 1994 scientific peer review of transportation concluded, in part, that available evidence is not sufficient to identify transportation as either a primary or supporting method of choice for salmon recovery in the Snake River Basin.

In its 1991 and 1994 amendments to the fish and wildlife program, the Council called for accelerated improvements in transportation operations and facilities. The Council recognized that, in the near term, especially in low-water conditions, smolt barging is one of the few tools the region has to improve survival. The Council called on the Corps to evaluate techniques to improve transportation, such as the use of cooler water in the barges, transporting fewer fish, reducing densities of fish in the barges and broader dispersion of the fish when they are released below Bonneville Dam. The amendments also call for research to test the survival of fish that are transported in barges against those that migrate in the rivers. In February 1998, the ISAB submitted a review of transportation that concludes it is prudent to exercise caution in weighing the possible risks against the perceived benefits of juvenile transportation because of the "magnitude of uncertainty" of information available to assess the strategy.

Water Budget and Flow Augmentation

Juvenile salmon and steelhead have adapted over thousands of years to the Columbia River's natural runoff pattern. But the extensive development of dams and hydropower projects in the basin has greatly altered natural river flows. The historical peak spring runoff is now stored in reservoirs for use during later periods of naturally low flows. Regulating the river in this manner increases the power system's ability to generate firm energy. However, it also reduces river flows, especially during the spring when juvenile fish are migrating to the sea. The sluggish waters of the reservoirs can more than double the time it takes for a smolt to reach the ocean, thus increasing the risk of disease and predation. Higher water temperatures in the reservoirs also contribute to higher mortalities.

To address reservoir mortality, the Council developed an annual water budget. It is a volume of water composed of natural runoff and stored water held in reserve at headwater dams for use during the April 15 to June 15 spring smolt migration. The water budget was developed in response to studies conducted during the last 20 years or so that suggested higher salmon survival resulted from higher river flows. The Council contracted with the Oak Ridge National Laboratories to conduct an independent assessment of the available scientific knowledge on the relationship of river flows to salmon survival. The review concluded that despite certain data problems, the general relationship of increasing survival with increasing flow in the Columbia River basin appears to be reasonable. Studies of different stocks, using different analytical approaches, have tended to show the same general patterns.

During the spring smolt migration, water that could be used to generate electricity at other times of the year is released instead to augment flows to create an artificial spring freshet to aid fish. The Council first adopted a "water budget" in 1982 to reserve 3.45 million acre-feet of upper Columbia water during the winter, plus 1.19 million acre-feet of Snake River water, to be released in the spring when juvenile salmon are migrating. In 1992, the Council added an additional 3 million acre-feet to this storage reserve in the Columbia and identified volumes of more than 1.4 million acre-feet for spring migrants and about 900,000 acre-feet for summer and fall migrants to be reserved in the Snake system in the driest water years. These new volumes replaced the earlier 1.19 million acre-feet water budget in the Snake River and represent the maximum attainable volumes for salmon flows called for in the fish and wildlife program. In 1994, the Council added another million acre-feet for spring flows in the Columbia River and 400,000 acre-feet for summer migrants. The Council also asked that another 1.2 million acre-feet of Snake River water be obtained from Dworshak and Brownlee reservoirs and through voluntary measures from the upper Snake River Basin. These water reserves result in constraints on winter power sales and even periodic power purchases from outside the region to meet winter energy demands, as well as operating constraints on storage reservoirs.

The Council's goal is to provide a minimum monthly average flow or velocity equivalent in the Snake River of 140,000 cubic feet per second in all water years. This would be accomplished with a combination of water releases from upriver storage reservoirs and reservoir drawdowns in the lower Snake. Brownlee Reservoir on the Snake River would be operated in a manner that assists spring-migrating salmon downstream. In addition, Idaho Power Company, which owns and operates Brownlee, will make water available to ensure wild fall chinook redds (nests of eggs) downstream in Hells Canyon remain wet during the winter and spring incubation period.

Meanwhile, the Council set a sliding scale of flow-equivalent objectives for the Columbia River, measured at The Dalles Dam, for the period between April 15 and August 31 varying from 300,000 cubic feet per second during the main migration period (April 15 to June 15) to 160,000 cubic feet per second in August. This will mean increased water storage in years when low runoff is forecasted. John Day Reservoir on the Columbia would be operated at minimum irrigation pool during critical migration periods. The reservoir would be lowered to minimum operating pool as soon as irrigation systems are modified or relocated so they can operate at this lower level. The program called for the Council to decide by 1998 whether to lower the John Day reservoir farther; however, John Day drawdown is now being studied by the Corps of Engineers as part of its 1999 Snake River Feasibility Study. Flow objectives in the Snake and Columbia should be met in most years, depending on water conditions.

Actual power system operations aim to be consistent with the terms of the National Marine Fisheries Service's 1995 biological opinion for the federal power system regarding Snake River salmon and the U.S. Fish and Wildlife Service's biological opinion for Kootenai River sturgeon. The biological opinion regarding endangered Snake River salmon does not provide the same level of protection for resident fish in upriver storage reservoirs as the Council's program. The Council adopted specific "integrated rule curves" to regulate reservoir drawdowns and protect resident fish and wildlife at Hungry Horse and Libby dams in Montana. It also adopted water retention times and specific elevation levels for Grand Coulee Dam. Water retention times and reservoir elevations adopted by the Council in 1995 to protect resident fish are not met in the biological opinion. The biological opinion for Snake River salmon devotes more water from the upper Columbia to salmon flows and less from the Snake River.

The measures also called for operating John Day Dam on the Columbia and the four Lower Snake River dams at lower levels beginning in 1996. Thes---e operations will require costly modifications to the dams and mitigation of impacts to irrigators and other reservoir users. The program conditioned implementation of these operations on prior completion of the mitigation. During the spring and summer juvenile salmon and steelhead migration in 1998, the four lower Snake dams are being held at minimum operating pool and John Day at minimum irrigation pool.

Here is a brief overview of the mainstem measures in the 1994 program amendments:

Improved information:
* Intensified evaluations of improved inriver salmon migration and improved barge transportation of salmon smolts.

Bypass improvements and turbine screens at the dams:
* Accelerate tests of surface bypass systems and schedule rapid decisions on their installation.
* Spill water so that up to 80 percent of the juvenile fish that pass each dam do not go through turbines. Insure that dissolved gas limits set by Washington and Oregon are not exceeded.
* Accelerate structural changes to the dams to reduce gas supersaturation and test slotted spillway gates to improve spill efficiency.
* Relocate problematic bypass outfalls.
* Continue juvenile fish screening and bypass improvements.
* Hold final decision to construct screens at The Dalles Dam until more is learned about the benefits of surface bypass.

More water to boost salmon flows:
* Obtain from willing sellers 500,000 acre-feet in the upper Snake River Basin by the spring of 1996. Obtain up to an additional 1 million acre-feet from willing sellers by the spring of 1999. The latter proposal is being evaluated by the Corps of Engineers in its 1999 Snake River Feasibility Study. Continue to evaluate new upriver water storage dams.
* In the Columbia, provide a volume of water up to 4 million acre-feet in low water years, limited by resident fish protections (see below). * Negotiate with Canada for additional water for flows.
* Hold Lake Pend Oreille higher during winter months to provide additional water for salmon flows in the spring. Test the impact on kokanee spawning in the lake.
* Use reservoir flexibility for summer migration improvements.

River velocity improvements
The 1994 Program called for a phased drawdown strategy with Council review at each milestone date. Mitigation of adverse impacts to irrigation, navigation and other activities would have been provided. While the phased drawdown strategy was not implemented because the Corps followed the 1995-1998 Biological Opinion, here is brief overview of what the Council proposed:

In the Snake River:
* Beginning in 1995, draw down Lower Granite reservoir 28 feet (to elevation 710 feet above sea level) for about two months during the spring and early summer. At this level the adult fish ladder would still operate, but the juvenile fish bypass system would not, and barge traffic would be interrupted for the duration of the drawdown. Beginning in 1996, draw down the reservoir to near spillway level for two months - an additional 17 feet - after modification of the adult ladder exit.
* Beginning in 1999, draw down Little Goose reservoir to near spillway crest for two months in the spring - after modifications to adult and juvenile passage facilities.
* Continue to evaluate additional drawdowns and make a decision on drawing down Lower Monumental and Ice Harbor dams to near spillway crest - about 40 feet - prior to 2002.

In the Columbia River:
* Operate John Day reservoir near minimum operating pool - elevation 257, an 11-foot drawdown from full pool - by the spring of 1996. Operate at this level year-round. Barge traffic continues, but some pumps would need to be extended prior to the drawdown. This measure was not implemented, but the reservoir is being held at minimum irrigation pool during the 1998 migration season (elevation 262.5), which is five and one half feet higher than minimum operating pool (elevation 257).
* Accelerate evaluation of lowering John Day reservoir to near spillway crest - elevation 220, a 48-foot drawdown from full pool - and make a construction decision by December 1996, after evaluation of structural modifications to allow continued navigation and irrigation and impacts to flood control and power production.
* Evaluate other reservoirs for flow or velocity improvements.

Barge transportation of juvenile fish:
* Make improvements in transportation, such as additional barges, reduced fish density in barges, and dispersed release of fish.
* National Marine Fisheries Service, state fish agencies and Indian tribes determine how many fish are transported.

Upstream Passage

Hydroelectric projects present a physical barrier to adult salmon and steelhead migrating from the ocean to spawning areas upstream. To solve this problem, fishways were constructed prior to the fish and wildlife program at many of the dams in the Columbia River Basin. Flow and spill criteria also have been adopted to provide unimpeded passage and maximum attraction of the fish to the fishways.

However, not all these measures have been successful. For example, flow and spill conditions in the tailraces of some mainstem dams tend to discourage fish movement upstream or to mask the flows intended to attract fish into the fishway. In addition, inadequacies in certain fishway facilities and in their operation and maintenance reduce the success of adult fish passage at both mainstem and tributary dams. These inadequacies include failure to provide necessary attraction flows at fishway entrances; ineffective fish ladders; mechanical failures of pumps that supply fishway auxiliary water; and lack of fish counting facilities to permit effective management of adult runs.

The program includes a number of measures to improve adult passage. The program calls on the project operators to continue to implement adult fish flow, spill and fishway operating criteria and evaluate measures to improve fish passage at each project. The Corps of Engineers and the mid-Columbia public utility districts implement adult fish flow, spill and operating criteria in accordance with an annual operating plan developed in consultation with the fishery agencies and tribes. The program also calls on the Corps to correct problems created by unreliable pumps. In response, the Corps has acquired spare parts to minimize pump outages, rebuilt unreliable fish pump gearboxes, and developed annual pump maintenance plans.

In 1994, the Council called on the Corps of Engineers to implement all spill and operating criteria for mainstem adult fish passage facilities and to make needed improvements. In addition, the Council called on the Corps to leave juvenile fish screens installed for a longer period to provide protection for adult salmon that may fall back through the powerhouses.

Tributary projects to improve adult fish passage also have been approved. In addition, the program also calls for research on issues such as fish disease at adult passage facilities and the effectiveness of adult passage facilities and flow and spill criteria. The Council also calls on the Corps to investigate potential methods to reduce water temperature in mainstem fish ladders, as well as to evaluate whether releasing cold water from Dworshak Dam and Hells Canyon complex in late summer improves adult fall chinook passage and survival.

HABITAT AND PRODUCTION

Hydropower development and operation, as well as other causes, have eliminated much of the natural fish production in the Columbia River system. Reservoirs created by dams have inundated nearly all of the mainstem Columbia spawning habitat. The only free-flowing stretch of the Columbia River, in the Hanford Reach below Priest Rapids Dam, supports a sizable population of naturally spawning fall chinook. Large areas of the basin have been blocked by dams that provide no passage to spawning and rearing habitat in the areas above Chief Joseph/Grand Coulee, the Hells Canyon complex of dams and numerous tributaries. Regardless, opportunities do exist for enhancing remaining spawning and rearing areas through habitat rehabilitation, improving and increasing hatchery propagation, and providing passage around barriers that prevent fish from reaching production areas.

The program supports a three-part approach to producing more salmon and steelhead through a combination of natural production, hatchery production, and supplementation of wild and natural fish produced by releasing hatchery fish into natural habitats. To advance this effort, the Council has adopted measures to provide water flows and temperatures suitable for natural and wild propagation, improve habitat and tributary passage, increase knowledge of appropriate timing and sites for release of hatchery fish, improve existing artificial production facilities, and build new hatcheries, mostly as supplementation facilities.

Maintaining the delicate balance between naturally spawning and hatchery-produced fish will require a systematic, basinwide approach to existing and new production. But a focus solely on production will not yield success. Accordingly, the Council's program for increasing production acknowledges the need for a systemwide approach that coordinates production, harvest regulation and passage improvements.

Habitat Rehabilitation

Under the program, numerous projects were completed to improve tributary passage and repair habitat for salmon and steelhead in the Clearwater, Deschutes, Grande Ronde, John Day, Salmon, Umatilla, Wenatchee, Willamette and Yakima River subbasins. More than 2,000 miles of streams have been improved for salmon and steelhead. Typically, these projects involve fencing and replanting stream banks and restoring structure in the streams to provide cover, rearing areas and other essential elements of habitat. Another 1,000 miles of habitat have been opened to fish production by improving passage at or removing barriers.

Subregional approach

The subregional approach will be the basis for the program treatment of habitat and production issues, but it is apparent that this approach will take time to develop and implement. In the interim, many salmon and steelhead populations continue to decline. Some of these populations, such as chinook produced in the Snake River Basin, cannot wait for this approach to be implemented. They require expedited actions. Council evaluation indicates that even with improved salmon and steelhead survival through changes in mainstem operations, many populations will not be maintained, let alone rebuilt, without immediate and significant increases in survival at other stages of their lives.

Habitat improvements and changes in hatchery operations (for example, the use of supplementation) can be implemented to increase natural production and survival significantly. In the short term, options appear to be fairly limited in this area.

Yakima and Klickitat Projects

The Yakima River Basin is located east of the Cascade range in Washington where annual precipitation is very low. Irrigation has changed the Yakima River valley from a near-desert environment to one of the most productive agricultural regions in the country. Development of the Yakima River Basin for agriculture and irrigation has meant stream flows sufficient to support salmon and steelhead have been greatly reduced. Yet much of the Yakima's fish habitat remains largely intact, and fisheries experts consider this basin to be one of the areas with the best potential for producing salmon and steelhead in the Columbia River Basin.

The Yakima and Klickitat projects are a group of artificial production facilities to be used primarily for supplementing natural runs of salmon and steelhead. The Klickitat subbasin was added to the project because of its close proximity to the Yakima and opportunities for siting facilities and fish enhancement in the basin. The stocks that will be enhanced include spring, fall and summer chinook, coho salmon, summer steelhead and potentially sockeye salmon. It is estimated that some 76,000-175,000 adult salmon and steelhead could result from the project, which will be carefully monitored and evaluated. The facilities will include a central hatchery used to raise juvenile fish for release and satellite stations, acclimation ponds, adult traps and transportation facilities.

Originally, the two projects were pursued together, but work fell behind on the Klickitat project, and so emphasis in recent years has been on the larger Yakima project. The Council believes it is important to proceed with this project because of the importance of the added production to be provided by the facility, the potential learning benefits of the facility, and the long lead time required for planning, design and construction of the facility. The production facility, located near Cle Elum, was completed in 1997 and will produce its first fish for release in the spring of 1999.

Umatilla Hatchery

The hatchery is one of several key features of a program to rebuild salmon and steelhead runs in the Umatilla River Basin. The program is part of a compromise to settle disputes between irrigators and tribes over use of the Umatilla River.

The Umatilla Basin Project is being pursued in two phases. The first phase included diverting Columbia River water through an existing canal to the Umatilla River below Three Mile Dam, thus putting more water in a stretch of the river that had been dewatered in summer for many years. The second phase involved installing new pipes and canals, and building a major pumping complex on the Columbia to deliver water to the Hermiston and Stanfield irrigation districts.

The combination of projects, including the hatchery, flow enhancement, and passage and habitat improvements, is expected to re-establish salmon runs of approximately 48,000 adult fish in the Umatilla River Basin. The hatchery is located on the south shore of the Columbia River near Irrigon, Oregon, about 10 miles below the mouth of the Umatilla River. The hatchery began operation in the fall of 1991 and is designed to produce up to 290,000 pounds of fish. It is a state-of-the-art project, making use of oxygen supplementation in rearing ponds to produce Pacific salmon. This technique could allow the hatchery to produce more fish per rearing area than a standard type of facility. However, the hatchery water supply proved to be less plentiful than was envisioned when the facility was designed. Engineering studies are being conducted to assess the water supply and to recommend methods to boost the supply and improve the efficiency and output of the hatchery.

The $16 million facility will supplement some $42 million in federal funds and several million in ratepayer funds to improve passage, habitat and flows in the basin.

Other Production Projects

Besides the planned hatcheries in the Umatilla and Yakima river basins, several other artificial production projects are included in the Council's fish and wildlife program. There has been controversy regarding these projects, and the Council is working closely with the tribes, other proponents and contesting parties to resolve the issues. Probably the most energetic debate is over the merits of supplementation, which some hatchery opponents argue poses genetic risks to fish populations. Hatchery proponents are following National Environmental Policy Act guidelines as they work to resolve these issues. There are other concerns. For example, certain sport fishers oppose boosting salmon production in the Yakima Basin because salmon would compete with resident trout, and there is an important trout fishery in the river system.

In the 1994 amendments, the Council acknowledged that artificial propagation and the proper use of hatchery fish to supplement wild and naturally spawning populations of salmon and steelhead as a rebuilding measure will continue to be as intensely debated as is the relationship of increased mainstem flows to fish survival. Regardless, the outlook for Snake River Basin chinook, as well as some other populations, requires the immediate implementation of dramatic measures. Without immediate action, these populations will not survive long enough to make the results of these debates meaningful.

These hatchery projects are in various stages of implementation:

a) Northeast Oregon projects - Plans are under way for hatchery facilities needed to raise salmon and steelhead for enhancement in the Umatilla, Grande Ronde and Imnaha rivers and elsewhere.

b) Nez Perce Facility - Development of a propagation facility on the Nez Perce Reservation is proceeding.

c) Pelton Dam - The Council recently approved a project master plan for converting a 2.8-mile long fish ladder at Pelton Dam on the Deschutes River for salmon and steelhead propagation. The program specifies that this project will be low-cost and small-scale.

Tributary Passage Projects

A major area of program actions has been to improve passage for adult and juvenile salmon and steelhead in the tributaries of the Columbia and Snake rivers. Impediments to passage include low flows caused by water diversion, diversion of fish into irrigation canals, and dams without ladders or ladders that are ineffective.

Projects to improve tributary passage for salmon and steelhead have been proposed for most of the subbasins in the Columbia Basin. Projects have been completed in the Clearwater, Deschutes, John Day, Salmon, Umatilla, Wenatchee, Willamette, Tucannon, Klickitat and Yakima river subbasins. These projects have included construction and improvement of ladders at tributary dams and screening irrigation diversions. In the Yakima subbasin alone, more than 20 laddering and screening projects have been completed. Subsequent evaluations indicated these projects were performing at zero mortality for passing fish. In the Umatilla Basin, projects included channel modification and pumping of water from the Columbia River to improve flows for adult and juvenile fish

Ecosystem Approach to Maintain Biodiversity

In the 1992 program amendments, the Council emphasized an ecosystem approach to salmon rebuilding activities. This approach requires close coordination of habitat and production measures. The purpose is to ensure that habitat and production measures are driven by the needs of specific populations, and the condition of the watersheds in which these populations live. Because opportunities to achieve significant salmon production increases through improving natural habitats are limited, additional salmon increases may have to be achieved through artificial production - creating artificial spawning and rearing environments such as hatcheries. But, as mentioned earlier, there is a dilemma: artificial production can have negative effects on wild and naturally spawning salmon populations.

In developing production measures to amend into the fish and wildlife program, the Council identified actions that are consistent with the goal of doubling the number of salmon and steelhead in the basin while maintaining existing levels of biodiversity.

Specific actions in the program

Here are some of the specific production measures in the program:

* The program encourages improved and consistent basinwide hatchery practices and better coordinated management throughout the Columbia Basin so hatchery fish are better able to survive in the natural environment and do not harm wild fish.
* Hatchery practices throughout the Columbia Basin were audited and the results are being used to improve those practices.
* The Council calls on the National Marine Fisheries Service to quickly develop guidelines on when to use captive broodstock technology and other emergency measures to save seriously depleted salmon runs. Captive broodstock technology was a last-minute tool for the Snake River sockeye.
* The program calls for the collection of additional information on naturally spawning salmon populations, such as population status, life history and other data.
* The Council calls for evaluation of new supplementation projects. We also call for development of a policy for experimental conversion of existing hatcheries to undertake supplementation projects in order to conserve and rebuild naturally reproducing fish populations, and for an assessment of the cumulative effects of existing and new supplementation projects. The Council hopes scientists will pursue experiments in natural production and supplementation in order to measure the relative success of each approach.
* The Council called for a study of the juvenile fish carrying capacity of the Columbia River mainstem, estuary and near-ocean environment in order to ensure that hatchery releases are not exceeding that capacity.
* The program supports the continued involvement of appropriate genetics experts in discussions of how to sustain the diversity of salmon runs.
* The program calls for evaluation of reintroducing anadromous fish into the upper Cowlitz River Basin above the new Cowlitz Falls Dam. We also call for development of appropriate recommendations for protecting and enhancing runs of sockeye, coho and chum salmon, sea-run cutthroat trout and lamprey in the Columbia River Basin.

Here are some of the specific habitat improvement measures included by the Council:

* The program calls for, at a minimum, maintaining the present quality of all habitat. It calls for comprehensive, coordinated watershed approaches in all subbasins. It identifies specific habitat standards designed to promote good habitat for fish and wildlife.
* The program seeks to expand and accelerate the cooperative approach to watershed-wide salmon habitat and production improvements. Designating model and focus watersheds will help focus federal, state and local efforts to improve conditions for fish.
* Public and private-sector resources should be used to ensure timely construction and installation of high-priority screens and water measuring devices at water diversions in salmon rearing areas.
* All underwater diversions in the mainstem Columbia and Snake rivers should be inspected regularly to determine whether screens, which deflect fish from the intakes, are installed and operating.
* The program says permanent riparian management areas should be identified and protected. Where water quality standards are being met, these riparian areas would be maintained. Where standards are not being met, revegetation would be promoted.
* Property easements should be accorded high priority as a means to protect salmon habitat.
* The program calls on the states to review and, if necessary, improve state water standards and mining laws to promote salmon productivity.
* The Council urges federal and state land managers to pay special attention to insect infestations that may lead to catastrophic fires and, in turn, promote increased erosion that damages salmon and steelhead habitat.

RESIDENT FISH AND SUBSTITUTIONS

Resident Fish

The resident fish measures in the program address the impacts of hydropower development and operation on Columbia River resident fish populations, such as rainbow and cutthroat trout, kokanee and sturgeon. Though resident fish species do not generally migrate between ocean and freshwater environments, they rely on in-stream conditions to support them during various life stages. Consequently, where these conditions have been affected by hydropower projects or other activities, resident fish populations, like salmon and steelhead populations, have declined.

The Council's program directs numerous actions to improve resident populations, particularly in areas above Chief Joseph and Hells Canyon dams which are permanently blocked to salmon and steelhead. These actions include fish stocking, streambank enhancement and other efforts to reduce impacts from reservoir operations.

Actions under way through the fish and wildlife program include:

a) Montana - Studies of the relationship between water levels and resident fish populations in Hungry Horse and Libby reservoirs, and development of mitigation strategies for the Flathead River and Flathead Lake system. The Council's 1994 program amendments included new operating procedures for Hungry Horse and Libby dams to protect resident fish and wildlife in those reservoirs. Other actions are being implemented to protect and improve resident fish populations in the Kootenai River system, Lower Clark Fork drainage and below Milltown and Painted Rock dams.

b) Idaho - Providing minimum flows in the South Fork Boise River; protecting and enhancing fisheries in lakes Pend Oreille and Coeur d'Alene and in the Spokane, Clearwater and Pend Oreille rivers; and evaluating resident fish impacts of Dworshak Dam operations.

c) Oregon - Exploring opportunities to enhance bull trout and crayfish populations in Lake Billy Chinook.

Resident Fish Substitutions

Salmon and steelhead probably never will return to some areas of the basin because of blockages by dams. These areas include those above Chief Joseph Dam, the Hells Canyon complex and other smaller blocked areas.

In 1987, the Council amended the program to include resident fish substitutions for salmon and steelhead losses in blocked areas. At that time the Council concluded that 1) mitigation in blocked areas is appropriate where salmon and steelhead were affected by development and operation of the hydroelectric system; 2) to treat the Columbia River and its tributaries as a system, some level of substitution is reasonable for lost salmon and steelhead in areas where in-kind mitigation cannot occur; and 3) some flexibility in approach is needed to develop a program that complements the activities of fish and wildlife agencies and tribes and is based on the best available scientific knowledge. For substitution purposes, the program notes that resident fish may include landlocked anadromous fish, such as white sturgeon, kokanee and coho, as well as traditionally defined resident fish species.

The program contains resident fish substitution projects only for the major blocked areas above Chief Joseph Dam and the Hells Canyon Complex. These measures range from hatchery construction to habitat survey and improvement.

The Colville Reservation Trout Hatchery was dedicated in September 1989, and two kokanee hatcheries that stock Lake Roosevelt behind Grand Coulee Dam were completed later. In addition, the program calls for construction of a trout hatchery on the Coeur d'Alene Indian Reservation, a bass hatchery on the Kalispel Indian reservation, net-pen rearing of trout in Lake Roosevelt and an investigation of the most feasible measures for enhancing desirable fish populations in Washington's Moses Lake. Resident fish substitution projects also are contemplated in the blocked areas above Dworshak Dam in Idaho and Pelton Dam in Oregon.

For the area above Hells Canyon Dam, the program calls on Bonneville, the Idaho Power Company and the Bureau of Reclamation to consult with the relevant fish agencies and tribes to apportion funding responsibilities for various projects. These include development of a comprehensive fisheries plan for the Duck Valley Indian Reservation, as well as planting trout in reservation lakes, habitat restoration and enhancement activities on the Fort Hall Reservation, and propagation of resident fish species for planting on the two reservations and in C.J. Strike, Lucky Peak, and Cascade reservoirs.

Bull trout

Bull trout once were abundant in the Columbia River Basin, but population levels have declined in some areas. The program calls for studies and evaluations to determine on-the-ground projects that could be implemented as soon as possible to address the needs of the species, particularly in Montana and Oregon.

Other resident fish populations

The program also includes actions to protect and enhance other resident fish populations, including rainbow trout in the Clearwater River, spiny-rayed fish in the Pend Oreille River, burbot in the Kootenai River, and kokanee in Banks Lake and Lake Pend Oreille.

Sturgeon

Sturgeon research is being cooperatively funded to determine: 1) the impact of development and operation of the Columbia River Basin hydropower system on sturgeon populations; 2) habitat requirements, genetics, status, potential for artificial production, and potential for migration of sturgeon; and 3) ways to protect and enhance sturgeon. These objectives were pursued through three projects that were cost-shared by state and federal agencies and ratepayers: 1) a study of sturgeon genetics and life history; 2) a survey of the badly depleted Kootenai River sturgeon population and analysis of the potential to artificially enhance this population, which led to an emergency hatchery program (these fish were listed as an endangered species under the federal Endangered Species Act in 1994); and 3) a study of lower river population status and habitat requirements.

These studies indicated that sturgeon harvest rates were too high to sustain the population; management agencies responded by further restricting harvest.

PROTECTED AREAS AMENDMENT

On August 10, 1988, the Council adopted a proposal to designate some 44,000 miles of Northwest streams as "protected areas" because of their importance as critical fish and wildlife habitat.

The "protected areas" amendment was a major step in the Council's efforts to rebuild fish and wildlife populations that have been damaged by hydroelectric development. Low cost hydroelectric power has provided tremendous benefits to the Northwest, but those benefits also have imposed significant costs. The Northwest's fish and wildlife have suffered extensive losses; salmon and steelhead runs in the Columbia River drainage, for example, are a fraction of their former numbers. The region's concerted efforts to restore these populations could not be fully effective without strong protection of fish and wildlife habitat. The Council's goal of doubling salmon and steelhead runs in the Columbia River Basin will require hardy wild and natural fish populations, which rely on high-quality habitat. To protect the ratepayers' investment in fish and wildlife restoration, it is necessary to protect the best remaining habitat.

The designation of protected areas also is intended to play a positive role in the efficient development of environmentally benign hydropower. New hydro development in the region's most critical fish and wildlife habitat is likely to generate divisive, time-consuming and costly controversy. By identifying this habitat as "protected," the Council hopes to point developers to less sensitive areas, where the time and cost of development will be lower. Ratepayers should benefit from both more productive fish and wildlife investments and from reduced hydro development costs.

While the Council does not license hydroelectric development, certain federal agencies have a legal obligation to take the Council's action into account in their decision-making. Those agencies include the Federal Energy Regulatory Commission, which grants licenses to nonfederal hydropower projects, and the Bonneville Power Administration, which acquires and transmits electrical power from the projects.

The Council periodically amends new areas into the protected-areas rule and removes the designation from other areas, based on analysis and public comment. The Council last amended the protected-areas rule in June 1992.

HARVEST

The Council has no direct harvest management authority. But harvest management can affect the Council's program and the substantial investment of ratepayers to rebuild salmon and steelhead resources in the Columbia River Basin. Because of this, the program calls on fishery managers to regulate harvest as needed, especially in mixed-stock fisheries, in order to support efforts to rebuild runs.

The Council monitors ocean and inriver harvest and receives biannual reports on developments and arising issues. Significant improvements in harvest regulation have occurred through adoption of the U.S./Canada Pacific Salmon Treaty and through settlement of the U.S. v. Oregon inriver harvest litigation. Negotiations under the U.S.-Canada salmon treaty are continuing.

The commercial, recreational and tribal fisheries in the ocean and mainstem Columbia River are mixed-stock fisheries. They harvest a mixture of hatchery and naturally produced stocks from numerous areas of origin. Generally, mixed-stock fisheries are unable to harvest specific stocks selectively and, therefore, overfishing can occur for some stocks in order to harvest the surplus of other stocks. In the Columbia River, the problem associated with mixed-stock fisheries results in part from operations of hatcheries constructed to mitigate the effects of hydropower development. In addition, fish productivity is reduced by the effects of passing dams on outward and upstream migration.

The Council also took an active role in the effort to ban the use of driftnets in the high seas squid fishery, fearing this fishery could intercept salmon and steelhead.

Key elements of the harvest recommendations in the fish and wildlife program include:

* In general, harvest must be limited further in order to allow a sufficient number of adult fish to return upstream to spawn.
* In order to protect endangered Snake River sockeye, there should be no commercial harvest of sockeye below the confluence of the Snake and Columbia rivers.
* Overall harvest rates on Snake River fall chinook have been reduced to less than 50 percent of the run from levels greater than 70 percent in recent years. Snake River fall chinook return through the most intense mixed-stock fisheries. Reducing the harvest rate of Snake River fall chinook required vastly greater harvest reductions in the overall fishery.
* River harvest of spring chinook in non-treaty fisheries has been limited to about 4 percent of the upriver run, the 1987-1991 average.
* There has been no commercial fishery for summer chinook until rebuilding allows it, continuing the ban that has been in place since the mid-1960s.
* Substantial reductions in Canadian harvest of U.S. salmon are needed to protect depleted stocks.
* Voluntary lease-back and buy-back programs should be developed for commercial fishing licenses to further reduce harvest until rebuilding can occur.
* Harvest alternatives, such as live-catch, known-stock and terminal harvest fisheries, should be demonstrated and evaluated.
* Sport fishing regulations should be reviewed and catch-and-release rules adopted where appropriate.
* Incidental harvest of salmon in other fisheries should be accounted for; ocean fishery managers should report to the Council on incidental harvest of salmon in other fisheries.
* States and tribes have increased law enforcement and public education to deter illegal fishing.
* The Pacific States Marine Fisheries Commission will prepare and circulate a unified, annual report by June 1 each year on harvest and escapement of various Columbia Basin salmon stocks.

WILDLIFE MITIGATION

The development of the hydropower system in the Columbia River Basin has affected many species of wildlife as well as fish. Some floodplain and riparian habitats important to wildlife were inundated when reservoirs were filled. In some cases, fluctuating water levels caused by dam operations have created barren vegetation zones, which expose wildlife to increased predation. In addition to these reservoir-related effects, a number of other activities associated with hydroelectric development have altered land and stream areas in ways that affect wildlife. These activities include construction of roads and facilities, draining and filling of wetlands, stream channelization and shoreline riprapping (using large rocks or boulders to reduce erosion along streambanks). In some cases, the construction and maintenance of power transmission corridors altered vegetation, increased access to and harassment of wildlife, and increased erosion and sedimentation in the Columbia River and its tributaries.

The habitat that was lost because of the hydropower system was not just land, it was home to many different, interdependent species. In responding to the system's impacts, we should respect the importance of natural ecosystems and species diversity.

While the development of the hydropower system harmed wildlife, it also resulted in a number of beneficial effects. For example, the creation of reservoirs provided important resting, feeding and wintering habitat for waterfowl. In addition, where reservoir storage is used for irrigation as well as power generation, the irrigation water promoted extensive growth of grass and food that provided some seasonal benefit to species that could not otherwise exist in such a dry climate. A large body of scientific evidence shows that some of the species have not sustained initial population increases. Programs to protect, mitigate and enhance wildlife affected by hydroelectric development should consider the net effects on wildlife associated with hydropower development.

Although the Northwest Power Act refers to them as "hydropower facilities," the dams serve multiple purposes: hydropower, flood control, navigation, irrigation, recreation and other purposes. Congress encouraged a comprehensive response to the fish and wildlife impacts of dams on the Columbia River and its tributaries, and rejected the piecemeal, fragmented approach that characterized past mitigation efforts. The Council believes the region will benefit from a coordinated approach to wildlife mitigation. At the same time, as Congress specified, consumers of electric power should pay only the cost of measures to deal with the effects of electric power. The Act gives Bonneville the responsibility to allocate expenditures to the various project purposes, in consultation with the Corps of Engineers and the Bureau of Reclamation and in accordance with existing accounting procedures.

The Council's program addresses the full impacts of the "hydropower facilities" in the broad sense that Congress intended, including all effects traceable to any of the projects' purposes.

The goal of the program's wildlife strategy is to achieve and sustain levels of habitat and species productivity as a means of fully mitigating wildlife losses caused by construction and operation of the federal and non-federal hydroelectric system. Through the program, Bonneville has financed the acquisition of thousands of acres of wildlife habitat in the Columbia River Basin.

Here are some specific measures in the wildlife strategy:

* The program called on Bonneville to consult with the Corps of Engineers, the Bureau of Reclamation, wildlife managers, state and federal land management agencies, tribes, utilities, the Council and other interested parties to allocate wildlife mitigation expenditures to the various project purposes in accordance with existing accounting procedures.
* The program defines mitigation as achieving and sustaining the levels of habitat and species productivity for the habitat units lost as a result of the construction and operation of the federal and non-federal hydropower system.
* The program called on Bonneville to use the estimates of inundation losses as the basis for identifying wildlife measures and developing short-term and long-term wildlife mitigation agreements.
* The program called on Bonneville to fund studies to develop statements of wildlife and/or habitat losses and gains caused by the operation of the federal hydropower system. The studies should be designed to identify both direct and indirect operational losses and gains to fish and wildlife habitat and should be based on a written plan designed to promote consistency of results between and among projects and encourage early public and local involvement.
* Through the Council's program, Bonneville has purchased thousands of acres of wildlife habitat, most recently a 10,300-acre parcel bordering Joseph Creek in Northeast Oregon. The land will be managed by the Nez Perce Tribe as wildlife habitat.

GLOSSARY OF FISH-RELATED TERMS

acclimation pond
Concrete or earthen pond or a temporary structure used for rearing and imprinting juvenile fish in the water of a particular stream before their release into that stream.

adaptive management
A scientific policy that seeks to improve management of biological resources, particularly in areas of scientific uncertainty, by viewing program actions as vehicles for learning. Projects arc designed and implemented as experiments so that even if they fail, they provide useful information for future actions. Monitoring and evaluation are emphasized so that the interaction of different elements of the system are better understood.

adult equivalent population
The number of fish that would have returned to the mouth of the Columbia River in the absence of any prior harvest.

anadromous fish
Fish that hatch in freshwater, migrate to the ocean, mature there and return to freshwater to spawn. For example, salmon or steelhead.

biodiversity
The variety of and variability in living organisms, with respect to genetics, life history, behavior and other fundamental characteristics.

captive brood stock
Fish raised and spawned in captivity.

carrying capacity
The number of individuals of one species that the resources of a habitat can support.

Coordinated Information System
Still under development, this system is designed to allow interested parties to access technical information about Columbia River salmon and steelhead.

deflector screens/diversion screens
Wire mesh screens placed at the point where water is diverted from a stream or river. The screens keep fish from entering the diversion channel or pipe.

demography
The study of characteristics of human populations, especially size, density, growth, distribution, migration and vital statistics, and the effect of these on social and economic conditions.

drawdown
The release of water from a reservoir for power generation, flood control, irrigation or other water management activity.

economies of scale
Reductions in the average cost of a product that result from increased production.

ecosystem
The biological community considered together with the land and water that make up its environment.

embeddedness
The degree to which dirt is mixed in with spawning gravel.

escapement
The number of salmon and steelhead that return to a specified point of measurement after all natural mortality and harvest have occurred. Spawning escapement consists of those fish that survive to spawn.

evolutionary biology
The study of the processes by which living organisms have acquired distinguishing characteristics.

extinction
The natural or human-induced process by which a species, subspecies or population ceases to exist.

fish flows
Artificially increased flows in the river system called for in the fish and wildlife program to quickly move the young fish down the river during their spring migration period. (See "water budget.")

fish passage efficiency
The percentage of the total number of fish that pass a dam without passing through the turbine units.

flows
The rate at which water passes a given point in a stream or river, usually expressed in cubic-feet per second (cfs).

flow augmentation
Increased flow from release of water from storage dams.

gametes
The sexual reproductive cells, eggs and sperm.

gas supersaturation
The overabundance of gases in turbulent water, such as at the base of a dam spillway. Can cause a fatal condition in fish similar to the bends.

genetic conservation refuge
Reserve area whose goal is to protect genetic diversity and natural evolutionary processes within and among natural populations, while allowing varying degrees of exploitation and modification.

genetic diversity
All of the genetic variation within a species. Genetic diversity includes both genetic differences among individuals in a breeding population and genetic differences among different breeding populations.

genetic integrity
The ability of a breeding population or group of breeding populations to remain adapted to its natural environment.

genotype
The complement of genes in an individual.

glides
Stream areas with velocities generally less than one cubic foot per second and with a smooth surface. Water depth generally is less than two feet.

harvest controls
Regulations established for commercial and sport fisheries to ensure that the correct proportion of the different stocks escape to spawn.

impoundment
A body of water formed behind a dam.

imprinting
The physiological and behavioral process by which migratory fish assimilate environmental cues to aid their return to their stream of origin as adults.

mainstem
The main channel of the river in a river basin, as opposed to the streams and smaller rivers that feed into it. In the fish and wildlife program, mainstem refers to the Columbia and Snake rivers.

minimum operating pool
The lowest water level of an impoundment at which navigation locks can still operate.

mixed-stock fishery
A harvest management technique by which different species, strains, races or stocks are harvested together.

morphology
A study of the form and structure of animals and plants.

naturally spawning populations
Populations of fish that have completed their entire life cycle in the natural environment and may be the progeny of wild, hatchery or mixed parentage.

naturalization
The process by which introduced fish successfully establish a naturally spawning population.

outfall
The mouth or outlet of a river, stream, lake, drain or sewer.

PIT tags
PIT tags are used for identifying individual salmon for monitoring and research purposes. This miniaturized tag consists of an integrated microchip that is programmed to include specific fish information. The tag is inserted into the body cavity of the fish and decoded at selected monitoring sites.

plume
The area of the Pacific Ocean that is influenced by discharge from the Columbia River, up to 500 miles beyond the mouth of the river.

population
A group of organisms belonging to the same species that occupy a well-defined locality and exhibit reproductive continuity from generation to generation.

population vulnerability analysis
A systematic process for estimating species, location and time-specific criteria for persistence of a population.

redd
A spawning nest made in the gravel bed of a river by salmon or steelhead.

reproductive isolating mechanisms
Mechanisms that retain genetic diversity among populations. The primary reproductive isolating mecha-nism for anadromous fish is accuracy of homing, which can be reduced by improper hatchery operations. Stock transfers also reduce reproductive isolation.

resident fish
Fish that spend their entire life cycle in freshwater. For program purposes, resident fish includes land-locked anadromous fish (e.g., white sturgeon, kokanee and coho), as well as traditionally defined resident fish species.

riffle
A shallow extending across the bed of a stream over which water flows swiftly so that the surface of the water is broken in waves.

riparian habitat
Habitat along the banks of streams, lakes or rivers.

rule curves
Graphic guides to the use of storage water. They are developed to define certain operating rights, entitlements, obligations and limitations for each reservoir.

sinuosity
The amount of bending, winding and curving in a stream or river.

smolt
A juvenile salmon or steelhead migrating to the ocean and undergoing physiological changes (smoltification) to adapt its body from a freshwater to a saltwater existence.

spill
Releasing water through the spillway rather than through the turbine units.

spillway crest elevation
The point at which the reservoir behind a dam is level with the top of the dam's spillway.

stream morphology
The study of the form and structure of streams.

supplementation
The release of hatchery fry and juvenile fish in the natural environment to quickly increase or establish naturally spawning fish populations.

tailrace
The canal or channel that carries water away from the dam.

velocity
The speed of water flowing in a watercourse, such as a river.

velocity barrier
A physical structure, such as a barrier dam or floating weir, built in the tailrace of a hydroelectric powerhouse, which blocks the tailrace from further adult salmon or steelhead migration to prevent physical injury or migration delay.

water budget
A means of increasing survival of downstream migrating juvenile fish by increasing Columbia and Snake river flows during the spring migration period. The water budget was developed by the Council, which oversees its use in conjunction with the fish and wildlife agencies and Indian tribes, the U.S. Army Corps of Engineers, the Bonneville Power Administration and the Bureau of Reclamation.

watershed
The area that drains into a stream or river.

weak stock
Listed in the Integrated System Plan's list of stocks of high or highest concern; listed in the American Fisheries Society report as at high or moderate risk of extinction; or stocks the National Marine Fisheries Service has listed. "Weak stock" is an evolving concept; the Council does not purport to establish a fixed definition. Nor does the Council imply that any particular change in management is required because of this definition.

wild populations
Fish that have maintained successful natural reproduction with little or no supplementation from hatcheries.

THE CHANGING UTILITY WORLD

The past several years have been marked with tremendous change in the electric utility industry. Those changes are already having an impact on the Council and the Northwest. The Council will need to adapt its planning approaches to this new environment in some fairly significant ways to remain effective. Most of the changes are the result of a trend toward greater market orientation and less regulation in the utility industry. This trend is the product of a number of factors and developments:

* Low price and apparently abundant supplies of natural gas, combined with relatively low capital cost, short lead time gas turbine technology, have made it feasible for non-utility entities to compete in the supply of new generation;

* Policy initiatives also encourage resource development by non-utility entities;

* New policies are opening access to transmission systems to wholesale transactions - facilitating competition among potential suppliers;

* Retail utilities are also being opened to competition - for example, the California Public Utility Commission has ordered retail access to utilities' distribution systems to allow consumers to choose their power supplier.

These trends have resulted in a world that is already a great deal different than the one that existed when the Council was established. In many respects, the changes are beneficial. Competitive markets will require efficiency in the delivery of electricity services, which may drive consumers' costs down. Competition will offer consumers choices that allow them to tailor their electricity purchases to their needs.

Competition may, however, have other characteristics that are more problematic. Will competition result in all cost-effective conservation being implemented or are there market barriers that still must be addressed? Will competition take environmental considerations adequately into account? Will a competitive utility industry be inordinately focused on the short term to the detriment of the long term? Will the sum of the benefits of local competitive decisions be less than the aggregate benefit that might be derived from more coordinated development of the regional system? Will competition shift costs unfairly to those less able to take advantage of competitive alternatives?

To address these concerns, the governors of Idaho, Montana, Oregon and Washington convened in 1996 the Comprehensive Review of the Northwest Energy System. The governors appointed a broadly representative steering committee, which in turn created a number of work groups to address specific issues. After approximately a year of intense meetings and discussion, the Steering Committee proposed a set of recommendations. The governors then appointed the Northwest Energy Review Transition Board to oversee refinement and implementation of those recommendations.

The Transition Board members are John Etchart, Montana Power Planning Council member; Todd Maddock, Idaho Council member; Mike Kreidler, Washington Council member; Roy Hemmingway, representing Oregon's Governor John Kitzhaber. The Board and its work groups have been meeting since January 1997 to carry out the recommendations of the Steering Committee.

COMPREHENSIVE REVIEW OF THE NORTHWEST ENERGY SYSTEM

In January 1996, the governors of Idaho, Montana, Oregon and Washington established a 20-member committee, broadly representative of Northwest power issues, to study changes sweeping the electricity industry and recommend a constructive response tailored to the Northwest. The Steering Committee of the Comprehensive Review of the Northwest Energy System met 29 times, conducted 10 public hearings around the region on its draft report and reviewed more than 1,000 written comments. Former Power Planning Council Member Chuck Collins of Seattle, was the committee's chairman.

The Steering Committee's efforts represented the first time an entire region worked together, in public, to craft a single, common-sense approach that addresses electricity industry restructuring. In December 1996, the Steering Committee presented its recommendations to the governors.

These recommendations are summarized in the following sections: federal power marketing; governance of the Columbia River system (a related topic to federal power marketing); conservation, renewable resources and low-income energy services; consumer access to the competitive market; transmission; and future power system roles for a four-state regional body. Issues related to federal power marketing; conservation, renewable resources and low-income services; consumer access to the competitive market; and transmission were analyzed and discussed in work groups during the review process. Although described as distinct parts, this is an integrated set of recommendations, the parts of which are interdependent.

Federal Power Marketing - the Bonneville Power Administration

The Steering Committee's goals for federal power marketing were: 1) align the benefits and risks of access to existing federal power; 2) ensure repayment of the debt to the U.S. Treasury with a greater probability than currently exists while not compromising the security or tax-exempt status of Bonneville's third-party debt; and 3) retain the long-term benefits of the system for the region. The recommendation is also intended to be consistent with emerging competitive markets and regional transmission solutions. The mechanism proposed to accomplish these goals is a subscription system for purchasing specified amounts of power at cost with incentives for customers to take longer-term (15 to 20 year) subscriptions. Public utility customers with small loads would be able to subscribe under contracts that would accommodate minor load growth. Subscriptions would be available first to regional customers in a specified multi-part priority order, starting with preference customers, then the direct service industrial customers of Bonneville and the residential and small farm customers of those investor-owned utilities currently participating in Bonneville's residential exchange, followed by other regional customers. Non-regional customers could subscribe after in-region customers. Within each phase of the subscription process, longer-term contracts would have priority over shorter-term contracts if the system is oversubscribed.

Longer-term subscribers would have the right to purchase power at cost for the term of the contract. While the cost of the power from the federal system is currently somewhat above market prices, the costs are generally expected to be below market prices in the future. Short-term subscribers also get the right to purchase power at cost. If they wish to be assured the ability to renew their contracts at cost, they must pay an option fee for the term of their contracts to compensate the U.S. Treasury for the risk of shorter-term contracts. A sliding-scale option fee, ranging between 2 mills per kilowatt-hour for a five-year contract to 0 mills for a 15-20 year contract has been proposed.

The longer-term subscribers assume more risk than current Bonneville customers from the effects of year-to-year variations in weather, future power system cost increases and changes in market conditions. For example, if we were to experience lower than expected market prices that are below Bonneville costs for an extended period of time, the subscribers would still be obligated to pay Bonneville's costs. At the end of their subscription period, short-term subscribers would be able to let their subscriptions lapse and buy at market prices. If they let their subscriptions lapse, however, they would not be able to buy at cost in the future, should that become desirable.

The Steering Committee recognized Bonneville's existing fish and wildlife obligations and intended that none of its recommendations affect existing trust obligations or treaty rights. The Steering Committee further recognized that the region will need to provide most of the required fish and wildlife funding, but supported assistance and cost sharing by the federal government. The Committee recommended detailed multiyear fish and wildlife budgets be developed in government-to-government consultations by federal, state and tribal authorities. These budgets would be incorporated into Bonneville rate projections, allowing shorter-term customers certainty regarding fish and wildlife costs. If market prices are above costs, the Treasury would share in these benefits by getting some percentage of the difference between market prices and the cost. The Treasury's share would be applied to accelerate repayment of the federal debt.

Competition raises the possibility of stranded costs - previously incurred fixed costs that cannot be recovered at market prices. If successfully implemented, the subscription system should greatly reduce the possibility of Bonneville experiencing any stranded cost. However, if unmitigable stranded costs remain, a mechanism for recovery of those costs will be required.

Subscribers may resell power in cases of loss of load and/or to the extent allowed by existing law. Other commercial transactions by the subscriber would not disqualify the purchase of federal power. The benefits of purchases for residential and small farm customers of exchanging investor-owned utilities should be passed on to end users.

The recommendations would have the effect of disposing of much if not all of the firm power available from Bonneville on a long- or intermediate-term basis. The fact that most of Bonneville's power would be subscribed at cost would limit Bonneville's market role. Any remaining firm power and other power products would be sold at Federal Energy Regulatory Commission (FERC)-regulated prices or at competitive prices, where FERC determines that competitive markets exist. To the extent consistent with its obligation to repay Treasury, Bonneville should return to its historic role of marketing power generated by the Federal Columbia River Power System, rather than becoming an aggressive marketer of products and services in the emerging competitive power market. Bonneville should develop a quantitative marketing plan. The plan should be presented to a transition board reporting to the Governors.

In addition, it is recommended that Bonneville would not acquire resources to serve its customers' load growth except on a direct bilateral basis where the customer takes on all the risk of the acquisition. Similarly, it is proposed that Bonneville would not sell directly to new retail loads, beyond the existing direct service industry loads, although it may sell through intermediaries whose transactions would be subject to state or local jurisdiction.

The Steering Committee recommended that the governors of Idaho, Montana, Oregon and Washington appoint a transition board to oversee implementation of these and other recommendations. In particular, the board should periodically determine whether the subscription process is making adequate progress or whether another approach is necessary.

Columbia River System Governance

The Steering Committee concluded that the region cannot expect to achieve both the degree of cost stability the electricity industry requires to maintain the benefits of the Columbia River power system for the region and achieve sustainable fish restoration unless the region ensures predictability, accountability and effective governance for the fish and wildlife interests of the river. In short, an effective conclusion of the region's effort is not possible without an improved system of river governance that pursues fish restoration as a high priority.

The Steering Committee was asked by the Northwest governors to focus on the restructuring of the electricity system and to address the financial stability of the federal power system. The Committee recommended changes to the federal system that accomplish that goal. It recognized that there are other important, related issues and decisions, including those affecting fish and wildlife, that must be resolved before a truly comprehensive package can be achieved.

The Steering Committee considered a number of matters related to the governance of the river and the power system. The role of the Northwest Power Planning Council in river governance was not addressed, but needs to be. The governors should hold the Council or its successor accountable for ensuring that the region is making the most cost-effective use of fish and wildlife funding. River governance is a fundamental part of any effective response to changes in the electric utility industry. Until governance deliberations move forward through a government-to-government consultation among federal, state and tribal authorities, the prospects for a consensus on the regional response to utility restructuring are diminished and controversial. The Steering Committee requested the governors to initiate a broadly based discussion of improvements in river system governance that would provide more effective decision-making for this complex ecosystem and all of its competing uses.

Conservation, Renewable Resources and Low-Income Energy Services

The Northwest electric utility industry has a long and successful history of developing cost-effective conservation and supporting the development of renewable electricity sources, such as wind, geothermal and biomass energy. In addition, the utilities have played a major role in delivering weatherization to low-income households and helping low-income households with their energy bills. Competitive pressures, however, are expected to make significant changes in the ways utilities carry out these activities in the future. The goal of the Steering Committee's recommendations was to provide for maximum local control in the implementation of conservation, renewables and low-income energy services, while establishing an effective minimum standard that ensures stable funding for these purposes.

To ensure that cost-effective conservation, renewable resource development and low-income weatherization are sustained during the transition to competition and beyond, the Steering Committee recommended that by July 1, 1997, and annually thereafter for a period of 10 years, 3 percent of the revenues from the sale of electricity services in the region ($210 million in 1995) be dedicated to those purposes. After 10 years, this commitment should be re-evaluated. Three percent of revenues is roughly 65 percent of what was spent for these purposes by the region's utilities and Bonneville in 1995.

The Steering Committee recommended that by July 1, 1999, each of the Northwest states enact legislation that ensures that all electric utilities operating within its borders are meeting the minimum standard for investment in the development of conservation and renewable resources and provision of weatherization and energy-efficiency services to low-income consumers. Utilities should demonstrate compliance with the minimum standard by July 1, 1999. Public utilities may satisfy the standard in aggregate. If this minimum standard is not being met, the legislation should provide for the assessment of a uniform system benefits charge that ensures the collection and investment of funds for these purposes. Due to the rapid emergence of competitive pressures, the Committee strongly recommends prompt legislative action. Legislation implementing these requirements should be implemented simultaneously with open retail access.

The Steering Committee proposed that between two-thirds and five-sixths of the funds be retained by local distribution utilities to carry out locally initiated cost-effective conservation, low-income weatherization and energy-efficiency services and renewable energy projects. Conservation projects implemented and funded by large consumers should be credited against the local conservation target, not including low-income energy-efficiency services. Local utilities would also offer, or allow other electricity service providers to offer, "green" power to their consumers - power from renewable assistance energy sources. The Steering Committee recommended that utilities maintain their current level of low-income energy assistance until states adopt alternative mechanisms for providing these services. The report recognized and affirmed the energy system's historic role in providing energy assistance and proposes that states now provide this assistance by establishing a "Universal Electrical Service Fund" to provide energy bill assistance. This fund could be supported by federal Low-Income Home Energy Assistance Program (LIHEAP) funds, state or local government funds, other funds and/or by a retail distribution system access fee or meters charge.

Some conservation and renewable resource activities benefit from regional planning and coordination. Consequently, it is proposed that between one sixth and one third of the funds be used by a regional non-profit entity with utility, government, consumer and public interest membership. Its functions would be to bring about changes in the markets for targeted energy-efficiency products and services that will improve their market share; to plan and contract for research and limited demonstration of renewable energy technologies, and to support the development of several megawatts annually of renewable generating capacity. A regional technical forum would be established to track regional progress toward the achievement of regional goals and provide feedback and suggestions for improving the effectiveness of conservation and renewable resource development programs. Funding for these activities should be collected in part through Bonneville wholesale rates to the extent regional firm loads are served by power from Bonneville.

How the funds are collected is a matter for state or local decision, as appropriate. The Steering Committee expected that methods of collection that are competitively neutral and affect all participants in the market equally will be found to be preferable.

Consumer Access to the Competitive Market

The goals of the recommendations on retail markets and customer choice were to encourage a more efficient power system, lower electricity costs, increased product choice and greater product innovation for all consumers. These goals were adopted subject to a commitment to maintain the reliability and safety of the electrical power system. The Steering Committee concluded that this goal could best be accomplished by putting in place a competitive electricity market that is driven by consumer choice. However, there is concern that the benefits of a competitive market may flow unevenly to different classes of consumers and that some small consumers may even suffer harm. The report recommends safeguards intended to help mitigate these concerns.

The Steering Committee recommended that regulators and local utility boards and commissions offer open access for all customers that desire it no later than July 1, 1999. The Committee recognized that some of these regulatory bodies may choose to phase in full retail access. In these cases, a similar phase-in of the recommendations on conservation, renewable resources and low-income energy services may be effected.

Direct access may occur prior to July 1, 1999, however, for direct retail access to be implemented promptly, several activities must be accomplished. These include the identification of any stranded costs and, if any stranded costs are determined to exist, the creation of a stranded cost collection mechanism; unbundling and cost-based pricing of delivery services; pilot programs to explore aggregation for small commercial and residential customers; the exploration of market index pricing options for residential and small commercial customers; and implementation of public purposes funding, energy assistance funding and consumer protection mechanisms consistent with this report's recommendations.

To achieve a competitive retail electricity market requires separation of the distribution and electricity marketing functions of current retail utilities. This is necessary to ensure that consumers will have unimpeded access to alternative electricity suppliers, and vice versa, over the wires of the distribution utility. The distribution utility would continue to be a regulated monopoly responsible for the reliable and safe delivery of electricity from electric service companies to consumers over local distribution wires. Electricity service companies will offer a variety of electricity products and services (e.g., firm or interruptible power, power from renewable resources, peak or off-peak power, fixed or spot-market prices) to consumers on a competitive basis and may, in fact, offer other products unrelated to electricity markets. The electricity services portion of current integrated retail utilities could compete in this market if the distribution utility function is sufficiently separated from the electricity services business to ensure that control of distribution is not used to advantage the electricity services business.

Putting such a competitive market in place will require a significant transition and ongoing market maintenance procedures. There is a danger that, until competitive markets have fully developed for all consumers, some of the benefits of increased competition may be realized primarily by large consumers at the expense of small consumers. Therefore, the Steering Committee calls for active government oversight of the transition and active ongoing programs to facilitate and encourage the development of meaningful market access for all consumer classes and to prevent unwarranted cost shifts among consumer classes. Specifically, the policy calls for licensing of new electricity service providers, applicability of consumer protection laws, formal complaint processes, consumer information programs, and a "provider of last resort" to ensure continued affordable service to all consumers. To further minimize cost shifts to small consumers, policies should be adopted to provide utilities a fair opportunity to recover costs of previous investments that may be stranded by the opening of the market. This is viewed as a transitional problem only, and incentives must be included for utilities to mitigate any stranded costs they potentially face.

TRANSMISSION

Transmission is the "highway system" over which the products of electrical generation flow. If there is to be effective competition among generators, transmission facilities should be operated independently of generation ownership. An independent grid operator (IGO) regulated by the Federal Energy Regulatory Commission with broad membership, including Bonneville and the region's other major transmission owners, was proposed as a means of ensuring independence of transmission operation and improving the efficiency of transmission operation. An independent grid operator should also have clear incentives to maintain reliability and encourage efficient use of the transmission system.

The independent operation of Bonneville's transmission facilities is particularly important to effective competition among generators in this region because Bonneville's facilities make up a large part of the regional transmission system. To ensure this independence, it was recommended that Bonneville be legally separated into two organizations - a power marketing organization to market the power from the federal power system and a transmission organization to carry out the transmission functions. The separation of these functions should be structured so that it does not jeopardize or diminish the legal obligation and ability of Bonneville to meet fish and wildlife and other obligations. A separated federal transmission owner (e.g., the Bonneville Transmission Corporation) could lease its assets to an independent grid operator, or could be an independent grid operator and operate other participants' assets if FERC and the other participants agree.

Legislation will be required to accomplish these goals. While legislation is under consideration, Bonneville should move quickly to achieve as much administrative separation as possible, and to participate in efforts to form an independent grid operator that could operate both federal and non-federal transmission assets.

Future Power System Role for a Four-State Regional Body

When the Northwest Power Act was passed in 1980, the authors contemplated an extended time of electricity shortage and the need for increasingly costly large-scale power plants. The Northwest Power Planning Council was established with two representatives from each of the Northwest states (Idaho, Montana, Oregon and Washington) to provide the states and the public a role in determining the region's future need for electricity and how that need could best be met. The Council was also charged with furthering the goals of: encouraging conservation and renewable resources; helping assure an adequate, efficient, economical and reliable power system; providing environmental quality; and protecting, mitigating, and enhancing the fish and wildlife of the Columbia Basin.

The Power Planning Council has been credited with many improvements in electricity planning. However, in an era in which market forces will play the primary role in determining what plants are built and what can be charged for their output, the Council's resource acquisition planning role is no longer relevant. The Steering Committee believed, however. that the remaining goals are still important to the citizens of the region. The issue is how they are to be achieved in the context of a competitive market.

There is much that is unknown about the competitive future we are about to embrace. As the Northwest transitions toward a competitive electricity industry, there are roles that the region would want carried out by a regional body. These roles do not involve resource acquisition planning, regulation or implementation. They do involve monitoring and analyzing the transition to a competitive electricity market and informing policy-makers and the public. This will help ensure that the transition to a competitive market is accomplished efficiently and fairly throughout the region and that the public values the Northwest has sought from its power system are preserved and enhanced.

These roles include:
Conservation and Renewables - working with regional interests to devise ways of overcoming market barriers, participating in market transformation activities, providing guidance in meeting the region's conservation and renewable goals and working with the regional technical forum to track regional progress;

The Competitive Marketplace - providing information, evaluation and analysis of the evolving marketplace to ensure full, fair and effective competition throughout the region; and

Public Participation and Involvement- informing and involving interested members of the public on matters that affect them, their environment and their economy.

The funding of the Northwest Power Planning Council has been through a charge on Bonneville Power Administration rates. If federal legislation affecting the role of the Northwest Power Planning Council or a similar regional body is pursued, the question of the level and sources of the funding should be addressed.

TRANSMISSION

Orders 888 and 889 issued by the Federal Energy Regulatory Commission (FERC) in April 1996 indicated that the Commission's implementation of the National Energy Policy Act of 1992 would require several things of utilities under its jurisdiction: 1) "unbundling" of the costs and operation of transmission from those of generation; 2) transmission tariffs that offered transmission service to other parties on the same terms as the utility applies to itself; and 3) providing timely information about availability and costs of transmission. The goal of these orders was a transmission system that would be open to all competitors in the generation market on equal terms, and would make possible effective competition in the wholesale market for electricity.

The Council's draft power plan described alternatives for separation of transmission and generation, and it described the alternatives' relative effectiveness in reducing the opportunities and temptation to use control of transmission to benefit a utility's generation business. The alternatives (listed in order of increasing certainty that effective open access to transmission will be achieved) are: 1) functional separation within the utility; 2) spinning off generation and transmission subsidiaries within an existing corporation; 3) turning over control of transmission assets to an independent operator; and 4) divestiture - selling off the generation or transmission assets to new owners. Unfortunately, the more certain alternatives are also the most complex to implement.

Recommendations from the Comprehensive Review

The Steering Committee stated that its primary goal for transmission was "a transmission system whose structure and operation help ensure a fully competitive generation market." It recommended the formation of an independent grid operator to operate the region's transmission system, including Bonneville's assets. It recommended that "Bonneville's generation and transmission functions should be fully and legally separated (including separated funds)" and that the separation "be achieved in such a way that it does not jeopardize or diminish the legal obligation and ability of Bonneville to meet fish and wildlife and other obligations." The Steering Committee also recommended that Bonneville's transmission be subject to FERC regulation "that is equivalent to FERC regulation of investor-owned utilities."

IndeGO proposal

The formation of an independent grid operator along the lines of the Steering Committee's recommendations (IndeGO) was begun in July 1996. In late 1997, participants released for public review a draft IndeGO proposed structure. Under the IndeGO model, scheduling of all transmission would be turned over to the grid operator. Pricing of transmission services would also be governed by IndeGO, subject to regulation by the Federal Energy Regulatory Commission.

That proposal was dropped when at least one utility refused to participate in it. Efforts to redesign the IndeGO proposal have been suspended. However, separate discussions are under way to create either an independent system operator or an independent grid scheduler. These new entities would have limited authority.

Bonneville transmission issues

The governors' Transition Board formed a transmission working group to discuss how best to accomplish the separation of Bonneville generation and transmission. That work group has been meeting since April 1997. One of the major issues the group is examining is how to effectively separate generation and transmission without threatening the security of bonds issued by the Washington Public Power Supply System (WPPSS), and without compromising the ability of Bonneville to mitigate the effects of the power system on the region's fish and wildlife. If the separated power marketing organization has trouble meeting its revenue requirements, should it be able to call on the separated transmission organization for financial support? Holders of WPPSS bonds, fish and wildlife advocates and the federal Treasury are likely to resist a separation that appears to threaten their interests. On the other hand, prospective users of the separated transmission system and competitors of the separated power marketing organization will not be satisfied with an arrangement that leaves Bonneville with significant incentive and ability to use the transmission system to benefit its power marketing revenues.

Another of the Steering Committee's recommendations that the working group is discussing is regulation of Bonneville's transmission by the Federal Energy Regulatory Commission that is equivalent to its regulation of investor-owned utilities. The work group has made progress toward definition of "equivalent" regulation of Bonneville's transmission. Next, the group intends to consider to what extent, and in what areas, it would be appropriate for FERC regulation of Bonneville to depart from "investor-owned equivalency."

TRANSMISSION SYSTEM IMPACTS FROM BREACHING JOHN DAY DAM

As the Pacific Northwest explores lowering reservoir elevations as a potential option to improve salmon survival, it is imperative that all costs and impacts be assessed. Many scenarios have been discussed, ranging from complete bypass of the four lower Snake River and John Day dams year round to a partial drawdown implemented only during the migration season (April to August). The potential impacts of such actions are far reaching, affecting irrigation, navigation, industrial river users, recreation, flood control, cultural resources, and of course, power production and the transmission system. Many parties in the Northwest are in the process of analyzing the biological benefits and societal costs of various drawdown scenarios. This paper addresses one such scenario in which the John Day Dam is bypassed or breached, permanently returning the river to a more natural state. This option eliminates all power generation at the John Day Dam.

What is not widely appreciated is the role that the generation at John Day plays in maintaining the transfer capability and reliability of the transmission system. Previous cost estimates for similar drawdown scenarios may be understated due to the omission of costs for actions that would have to be taken to compensate for transmission impacts due to loss of generation. This paper focuses only on the costs associated with power generation and, in particular, the impacts to the transmission system.

Total power system cost falls into three categories: 1) energy losses, 2) capacity losses, and 3) transmission impacts. Assessing the cost of energy loss is perhaps the most intuitive. On average, John Day generates about 10.5 million megawatt-hours of energy per year (about 12 percent of Bonneville's average annual energy production). The value of that energy depends on the price, which varies by month and by time of day. Current estimates indicate the cost to be between $100 and $200 million per year.

The cost of capacity loss is a little more complicated to evaluate. The ability of John Day's generators to swing with fluctuations in demand saves the region money and contributes to the stability of the Northwest's power system. John Day generators provide up to 2,500 megawatts of peaking capacity (about 11 percent of Bonneville's total generating capacity). The value of that capacity is currently estimated to be in the range of $25 to $50 million per year.

A better estimate of capacity loss is much more difficult to assess. Hydroelectric projects contribute greatly to system reliability through the Automatic Generation Control (AGC) system that adjusts the generation, second by second, to match changes in demand. The dams also fulfill part of the Western Systems Coordinating Council (WSCC) reserve requirements and provide backup generation in the event of an unexpected outage. In addition, they provide extra energy during extreme cold weather periods and help maintain transmission stability during system disturbances. The U.S. Army Corps of Engineers and other federal agencies are examining capacity losses and their cost in more detail in a study to be completed in 1999.

The impact to the transmission system is even more complicated to evaluate. Due to John Day's proximity to the California-Oregon Intertie (COI), a loss of generation at John Day would affect both exports and imports. In either case, energy would have to be transmitted over greater distances. The further energy is transferred, the harder it is to maintain constant voltage on the transmission system and the higher the losses. Even though sufficient generation may be available in the West to make up for the loss at John Day, actions would have to be taken to upgrade the transfer capability of transmission paths in order to maintain the same level of reliability to Northwest customers. While at this time no estimate is available, it would be safe to say that the added cost to offset transmission impacts is significant.

FEDERAL POWER MARKETING: THE ROLE OF THE BONNEVILLE POWER ADMINISTRATION

The Council's draft power plan raised several key issues about the future role of the Bonneville Power Administration in a competitive market. These issues were divided into three main areas: 1) the consistency of various aspects of Bonneville's status as a federal power marketer with a competitive market, including separation of transmission and generation, market power, and risk and reward trade-offs; 2) the allocation of the benefits of the federal hydropower system; and 3) future support for the various public purposes that Bonneville historically supported.

The draft power plan discussed some key characteristics of competitive markets and suggested that Bonneville, because it controlled large portions of both the region's transmission and generation capability, has the potential to exercise too much control over the power market. That would be inconsistent with open and fair competition. Furthermore, as a federal agency, Bonneville is limited in its ability to deal with the risks and rewards that are essential aspects of a competitive market. The draft power plan discussed several alternative approaches to the separation of Bonneville's generation and transmission functions. The plan also examined different approaches to the disposition of federal power marketing rights that would better balance risk and reward, and be more consistent with a competitive power market.

The draft power plan also examined the allocation of historic and expected future regional benefits of the federal hydropower system operated by Bonneville, including future mechanisms that would retain those benefits for the region while being more consistent with a competitive market and the risk and reward balancing that it implies.

Finally, the draft power plan suggested that several of the public purposes that Bonneville had historically supported, such as funding energy-efficiency programs and renewable resources, and special rates for certain classes of customers, could be inconsistent with a competitive power market and would be unlikely to be the kinds of things that Bonneville would be able to support in the future.

Recommendations from the Comprehensive Review

The Comprehensive Review Steering Committee also concluded that the issues identified in the draft plan were critical and addressed them in its deliberations (see previous discussion of the Comprehensive Review). The Steering Committee recommended that Bonneville's role in a competitive market, particularly its potential market power, be limited by selling Bonneville's power, to the extent possible, under longer-term subscriptions. The recommendations also called for a more limited Bonneville role in resource acquisition. These limitations would tend to minimize the political exposure of Bonneville as a government-owned supplier in a competitive market. The recommendations also limited the market risk that Bonneville could take on, given that, as a federal agency, it lacks risk-taking owners, the means by which typical participants in competitive markets deal with risk and absorb losses.

The Review's final report summarized this issue as follows:

The related questions of balancing risk and reward and of allocating the benefits of the federal hydropower system were central to the deliberations of the Comprehensive Review.

The Steering Committee summarized its goals for federal power marketing:

* align the benefits and risks of access to existing federal power;
* ensure repayment of the debt to the U.S. Treasury with a greater probability than currently exists while not compromising the security or tax-exempt status of Bonneville's third-party debt; and
* retain the long-term benefits of the system for the region. The recommendation is also intended to be consistent with emerging competitive markets and regional transmission solutions.

The Steering Committee chose a solution that favored long-term subscriptions to federal power that would be sold at cost. Cost might be somewhat higher than market prices in the near term, but is expected to be lower in later years. This scheme aimed at having the subscribers take on more of the current business risk of Bonneville, in return for an assured ability to buy electricity at below-market prices in the future. Some customers might wish to limit their exposure to Bonneville's costs being at above-market prices by deferring making longer term commitments until the risk has been reduced by the passage of time and by the consequent better knowledge. Those wishing to make short-term purchases would have to pay a premium, in the form of an option payment, to renew the contracts at cost at a later time.

Actions since the Comprehensive Review
Bonneville and the Pacific Northwest Utilities Conference Committee have formed a subscription work group open to all regional interests to implement the federal power marketing recommendations from the Comprehensive Review. The work group reports regularly to the Transition Board.

The subscription work group has set out a multiyear work plan for implementing the Steering Committee's recommendations and permitting the signing of new Bonneville power sales contracts in advance of the termination of current contracts. During Phase 1 of the workgroup's effort, through mid-1998, the group is addressing business interests, product definition, pricing principles and potential legal issues. Phase 2, mid-1998 through mid-2000, is expected to be devoted to a rate case and final contract negotiations. Currently, the work group is well ahead of schedule in its Phase 1 work, having explored the business interests of potential subscribers and the definition of the products they are interested in buying from Bonneville. Alternatives for an overall contractual relationship with Bonneville and more detailed definition of products are the current focus of the work group.

COST REVIEW OF THE FEDERAL COLUMBIA RIVER POWER SYSTEM

In 1997, the four Northwest Governors asked the Northwest Power Planning Council to establish a cost control forum to assist the Bonneville Power Administration in controlling the costs it recovers through rates in preparation for a subscription process for the post-2001 period. This Cost Review has covered planned costs of the Federal Columbia River Power System (FCRPS), including transmission, with a focus on projected costs for the 2002-2006 period. The objective has been to ensure that Bonneville's near and long-term power and transmission costs are as low as possible consistent with sound business practices, thereby enabling full cost recovery with power rates at or below market prices.

Following are the recommendations of the Cost Review Management Committee. They reflect the Committee's consideration of extensive public comment on its draft recommendations. In particular, the Committee has heeded the admonitions of many commentors to ensure that its recommendations for conservation and renewable resource development are consistent with the recommendations of the Comprehensive Review of the Northwest Energy System . In addition, the recommendations regarding Washington Public Power Supply System Plant 2 have been modified to respond to legal and operational issues that have been identified.

* Power system cost management: Initiate a consolidated, integrated asset management strategy for the Federal Columbia River Power System involving Bonneville, the Corps of Engineers and Bureau of Reclamation. Estimated operations and maintenance savings and enhanced revenues: $48 million (Corps, $40 million; Bureau $8 million).
* Power marketing: 1) Reduce staff and expenses associated with power marketing and related activities. Estimated annual savings: $14.7 million.
* Energy conservation: Contribute to regional efforts to develop a market for energy-conserving products and services, reduce the cost of ongoing energy conservation projects and do not modify or extend them, with the exception of a program to weatherize low-income homes. Reduce associated staffing. These recommendations are consistent with those of the 1996 Comprehensive Review of the Northwest Energy System. Estimated annual savings: $7.1 million.
* Northwest Power Planning Council: Reduce staff to reflect a changed power planning role, change law to require one Council member from each state instead of two, determine the Council's future role through a regional process. Estimated annual savings: $1.1 million.
* Renewable energy: Fund three planned projects and research and development; annual losses from projects not to exceed $15 million; no additional projects unless Bonneville's costs are fully recovered by project revenues. Estimated annual savings: $2.2 million.
* Washington Nuclear Plant 2: Combine aggressive cost management with a flexible response to market conditions and unforeseen costs. Manage annual operating costs to annual revenues achievable at market prices. Sell a portion of Bonneville's power, equal to the output of WNP2, at a price that will recover the plant's operating costs. Test the plant's power prices against market prices every two years, and evaluate terminating the plant if projected operating costs exceed projected revenues. If revenues exceed costs, use a portion to build a decommissioning fund. Estimated annual savings: $19 million.
* Administrative and other support service costs: 1) Reduce by 50 percent, in aggregate, from 1996 levels including business services, planning, public affairs and legal services costs, among others. Estimated annual savings $31.7 million. 2) Pursue legislative changes in internal personnel and management laws to improve administrative effectiveness and efficiency. Estimated annual savings: $10 million.
* Transmission: 1) Change certain cost allocations between the transmission and power marketing business lines. Estimated annual savings: $30 million to the Power Business Line. 2) Reduce internal overhead costs. Estimated annual savings: $2.5 million.
* Fixed costs: Further reduce debt service through such actions as bond refinancing. Estimated savings: $20 million.

These recommendations have been forwarded to the Bonneville Administrator and to the region's governors, the Northwest Congressional delegation, and the House and Senate Committees on Appropriations in Congress. Responsibility for decision and action lies with the Administrator. The recommendations identify $146 million in reductions to planned power expenses for Bonneville's next rate period, Fiscal Years 2002-2006. These reductions are in addition to substantial cost cutting already undertaken. Fully implemented, the cost reductions identified herein, and those identified in earlier Bonneville budget planning, would reduce annual power expenses in the Fiscal Year 2002-2006 period more than $200 million beyond what Bonneville planned when rates were set for the current rate period, Fiscal Years 1997-2001.

FOURTH NORTHWEST CONSERVATION AND ELECTRIC POWER PLAN

The Council released its draft fourth Northwest Power Plan in the spring of 1996 for public review and comment. Because of the concurrent process - the Comprehensive Review of the Northwest Energy System - comment on the draft was kept open until conclusion of the Review.

Recommendations from the Review and suggestions on how to implement the recommendations were then incorporated into the draft in the form of an addendum. The addendum was available for public comment until late fall 1997. It is unclear at this time when the new power plan, with its addendum, will be adopted formally.

The addendum has two principal objectives. First, it reviews important developments since the release of the draft power plan. These developments include what has happened with respect to: generation and conservation resources, gas and electricity markets, electricity loads, institutions, and policies. While there have been significant developments in the electricity industry since March 1996, none of them invalidates the analysis contained in the draft power plan. The more important developments include the creation of new institutions in response to the increasingly competitive utility industry, and the continued evolution of policies at the state and federal levels designed to facilitate competitive electricity markets. These are discussed in detail in the addendum.

The second purpose of the addendum is to examine the relationships between the analysis contained in the draft power plan and the recommendations from the Comprehensive Review's Steering Committee. In several instances, the addendum suggests approaches that would help move the Northwest from the usually general nature of the Steering Committee's recommendations to the specifics that will have to be addressed by legislatures and state and local regulators.

The draft power plan focused primarily on issues raised by the transition to competitive electricity markets and highlighted, where possible, important considerations and principles in that transition. The Comprehensive Review dealt with many of the same issues. In general, the recommendations from the Review are supported by the analysis of the draft power plan or, where they are not, the recommendations reflect legitimate policy choices on the part of the Review's Steering Committee. In many instances, however, the recommendations from the Review are specific in intent but, of necessity, lacking in detail. For example, one recommendation is that provisions for recovering stranded investments be made as part of opening retail electricity markets to competition. However, the recommendation provides little guidance regarding how stranded investment recovery might be structured and why. The addendum builds on the analysis in the draft power plan to suggest important considerations in recovering stranded investments. The same is true with respect to several of the recommendations for competition and consumer access, and provisions for conservation and renewable resources.

The addendum also describes potential new roles for the Northwest Power Planning Council that are based on recommendations from the Comprehensive Review. During the transition to a more competitive electricity market, the Council has been asked to help the region ensure that the benefits of competition are shared by all electricity consumers, and that public purposes, such as energy-efficiency improvements, development of renewable resources and services to low-income customers, continue to be provided.

CONSERVATION ACQUISITION STATUS

The Council's 1991 Northwest Conservation and Electric Power Plan called for acquiring at least 1,500 megawatts of conservation resources by the year 2000. The region's utilities and Bonneville acquired approximately 250 megawatts by the end of 1993 through programs they operated. In addition, by the end of 1994, both Oregon and Washington adopted new energy codes for commercial buildings that will capture about 50 percent of the cost-effective conservation identified as available in new commercial buildings in the Council's 1991 plan. Nationally, the US Department of Energy has issued revised standards for several residential appliances that incorporate most of the energy savings featured identified as cost effective in the 1991 plan. Also, the US. Department of Housing and Urban Development adopted revised energy standards for new manufactured housing that has improved the efficiency of these homes by over 35 percent.

In its Draft Fourth Northwest Power Plan, the Council identified another 1,500 megawatts of energy savings that remain cost-effective to acquire for the region, despite new lower alternative resource costs. Acquiring these additional savings under the new utility scenario of competition poses new challenges to Northwest utilities.

Sustaining Conservation Investments in a More Competitive Environment

The National Energy Policy Act of 1992, which permits open competition at the wholesale level and the reduced cost of natural gas-fired generation technologies, have left some utilities concerned about their ability to remain cost competitive. Some utilities have asserted that continued investments in conservation are not sustainable in a competitive market. They argue that because their likely competitors (AKA, independent power producers) need not invest in conservation, the price (i.e. rates) they can charge for power will be lower.

While energy conservation costs less than other alternatives, it can increase utility rates slightly. Conservation programs cost money and reduce the sales of electricity. Therefore, the cost per kilowatt-hour can go up.

The Council, working with Bonneville and other utilities, regulators and others, developed alternative approaches to acquiring conservation that would reduce costs to utilities and potentially mitigate some conservation rate impacts. These approaches are known collectively as "market transformation ventures."

Market transformation is a strategic effort by utilities and other entities to induce lasting structural or behavioral changes in the market that result in increases in the adoption and penetration of energy efficient technologies and practices. Because the market for energy using products (e.g. motors, refrigerators) does not match the service territory of individual utilities, it is necessary for utilities to act collectively to leverage change. In the Northwest, Bonneville and the region's utilities have historically cooperated on some of the nation's most successful market transformation programs, the Super GOOD CENTS/Northwest Energy Code programs and Manufactured Housing Acquisition Program (MAP). Although most of the major public and private utilities in the region have indicated a preference for pursuing market transformation programs where they make economic sense, few have been willing to allocate staff to develop these programs. Moreover, with increasing utility concerns about competition, there may be less willingness to continue such collaboration in the future.

Bonneville's Conservation Reinvention

Bonneville, as part of its overall effort to become more business-like, revised the way it acquires conservation. Under the Northwest Power Act, Bonneville is charged with acquiring "all regionally cost-effective conservation." Historically, the agency has carried out this obligation by providing funds to its customer utilities to operate Bonneville-designed conservation programs. The cost of these conservation programs is recovered in Bonneville's rates, just like other resource acquisitions.

As of Fiscal Year 1996, however, Bonneville has been providing funds only for conservation programs that are designed to transform regional markets, in other words, collective actions that bring economies of scale. (Projects with existing long-term budgets are continuing under Bonneville funding but only until they are completed.) Investor owned utilities in the region have joined with Bonneville to form the Northwest Energy Efficiency Alliance to carry out these collective market transformation activities.

The Northwest Energy Efficiency Alliance

Formed January 1, 1997 (after lengthy negotiations in 1996), the Northwest Energy Efficiency Alliance brings together all the Northwest's investor-owned utilities; Bonneville's public utility customers; utility regulators and governors' representatives from Idaho, Montana, Oregon and Washington; public interest groups; and the energy efficiency industry to carry out regionwide market transformation ventures. The Council was instrumental in forming the Alliance.

The Alliance has $65 million in funding to carry its programs through the year 2000. In its second year of operation, the Alliance has committed $44 million to operate 26 projects, including public information and training efforts. The Alliance has its own Internet web site: www.nwalliance.org and underwrites several other public information Internet sites throughout the region. The Alliance also operates a $7 million program to introduce resource-efficient clothes washers in the region, which has already exceeded its goals. In addition, the Alliance is coordinating a regionwide effort to improve the energy efficiency of new residential and commercial buildings. A joint project co-sponsored by the Alliance and Siemen's Solar Industry in Vancouver, Washington, is designed to improve the efficiency of photovoltaic cell development. In addition to saving electricity, this project, if successful, could reduce the cost of photocell technologies by approximately 10 percent. The Alliance is also working with irrigating farmers across the region to save both water and electricity by using more sophisticated equipment to target watering times and amounts.

GLOSSARY OF POWER-RELATED TERMS

administrative costs
Certain overhead costs related to conservation or generating resources, such as project management and accounting costs incurred by utility or contractor staff.

alternating current (AC)
An electric current in which the electrons flow in alternate directions. In North American electrical grids, this reversal of flow is governed at 60 cycles per second (Hertz). With some exceptions (see "direct current"), commercial electric generation, transmission and distribution systems operate on alternating current.

anadromous fish
Fish that hatch in freshwater, migrate to the ocean, mature there, and return to freshwater to spawn. For example, salmon or steelhead trout.

available technology
In the power plan, the term "available technology" refers to equipment or facilities for generating and conservation resources, including electrical appliances, that are currently available and are expected to be generally available in the marketplace during the 20-year planning period.

average cost pricing
A concept used in pricing electricity. The average cost price is derived by dividing the total cost of production by the total number of units sold in the same period to obtain an average unit cost. This unit cost is then directly applied as a price.

average megawatt or average annual megawatt
Equivalent to the energy produced by the continuous operation of one megawatt of capacity over a period of one year. (Equivalent to 8.76 gigawatt-hours, 8,760 megawatt-hours or 8,760,000 kilowatt-hours.)

avoided cost
An investment guideline, describing the value of conservation and generation resource investments in terms of the cost of more expensive resources that would otherwise have to be acquired.

base loaded resources
Base loaded electricity generating resources are those that generally are operated continually except for maintenance and unscheduled outages.

billing credit
Under the Northwest Power Act, a payment by Bonneville to a customer (in cash or offsets against billings) for actions taken by that customer to reduce Bonneville's obligations to acquire new resources.

Bonneville Power Administration (Bonneville)
A federal agency that markets the power produced by Federal Base System resources and resources acquired under the provisions of the Northwest Power Act of 1980. Bonneville sells power to public and private utilities, direct service industrial customers and various public agencies. The Northwest Power Act charges Bonneville with other duties, including pursuing conservation, acquiring sufficient resources to meet its contract obligations, funding certain fish and wildlife recovery efforts and implementing the Council's plan.

Btu (British thermal unit)
The amount of heat energy necessary to raise the temperature of one pound of water one degree Fahrenheit (3,413 Btus are equal to one kilowatt-hour).

Buy-back program
A conservation program that, in effect, purchases electrical energy in the form of conservation measures installed by a consumer. The consumer is paid a certain amount per kilowatt-hour of energy saved.

callback
A power sale contract provision that gives the seller the right to stop delivery of power to the buyer when it is needed to meet other specified obligations of the seller.

capacity
The maximum power that a machine or system can produce or carry under specified conditions. The capacity of generating equipment is generally expressed in kilowatts or megawatts. In terms of transmission lines, capacity refers to the maximum load a line is capable of carrying under specified conditions.

climate zone
As part of its model conservation standards, the Council has established climate zones for the region based on the number of heating degree days, as follows: Zone 1: 4,000 to 6,000 heating degree days (the mild maritime climate west of the Cascades and other temperate areas); Zone 2: 6,000 to 8,000 heating degree days (the somewhat harsher eastern parts of the region); and Zone 3: more than 8,000 heating degree days (western Montana and higher elevations throughout the region).

coal gasification
The process of converting coal to a synthetic gaseous fuel.

cogeneration
The sequential production of electricity and useful thermal energy. This is frequently accomplished by the recovery of reject heat from an electric generating plant for use in industrial processes, space or water heating applications. Conversely, cogeneration can be accomplished by using reject heat from industrial processes to power an electricity generator.

combined-cycle power plant
The combination of a gas turbine and a steam turbine in an electric generation plant. The waste heat from the gas turbine provides the heat energy for the steam turbine.

combustion turbine
A turbine engine generator, often fired by natural gas or fuel oil, used to generate electricity. The turbine generator is turned by combustion gases rather than heat-created steam.

conductor
Wire or cable for transferring electric power.

conservation
According to the Northwest Power Act, any reduction in electric power consumption as a result of increases in the efficiency of energy use, production or distribution.

construction lead time
The length of time between a decision to construct a resource and when the resource is expected to deliver power to the grid. Generally defined for purposes of this plan as the interval between detailed engineering and equipment order to completion of start-up testing.

cost-effective
According to the Northwest Power Act, a cost-effective measure or resource must be forecast to be reliable and available within the time it is needed, and to meet or reduce electrical power demand of consumers at an estimated incremental system cost no greater than that of the least-costly, similarly reliable and available alternative or combination of alternatives.

cost of debt
The amount paid to the holders of debt (bonds and other securities) for use of their money. Generally expressed as an annual percentage in the power plan.

cost of equity
Earnings expected by a shareholder on an investment in a company. Generally expressed as an annual percentage in this plan.

critical period
The sequence of low water conditions during which the regional hydropower system's least amount of en-ergy can be generated (see "critical water") while drafting storage reservoirs from full to empty. Under the Pacific Northwest Coordination Agreement, critical period is based on the lowest multi-month streamflow observed since 1928. Based on analysis of streamflows at The Dalles Dam, this is also the lowest streamflow since recordkeeping began in 1879.

critical water
The sequence of streamflows in the critical period under which the hydropower system will generate about 12,500 average megawatts. In an average year, the Northwest hydropower system will produce about 16,600 average megawatts.

curtailment
An externally imposed reduction of energy consumption due to a shortage of resources.

debt
Investment funds raised through the sale of securities having fixed rates of interest.

debt/equity ratio
The ratio of debt financing to equity financing used for capital investment.

demand forecast
An estimate of the level of energy that is likely to be needed at some time in the future. The Council's demand forecast contains a range of estimated consumption based on various assumptions about demographics and the state of the economy.

direct application renewable resource
Technologies that use renewable energy sources to perform a task without converting the energy into electricity. These sources and their functions may include wood for space heat, solar for space heat and drying, geothermal space and water heating, and wind machines used for mechanical drive (such as pumping).

direct current (DC)
An electrical current in which the electrons flow continuously in one direction. Direct current is used in specialized applications in commercial electric generation, transmission and distribution systems.

direct service industry
An industrial customer that buys power directly from the Bonneville Power Administration. Most direct service industries are aluminum smelting plants.

discount rate
The rate used in a formula to convert future costs or benefits to their present value.

dispatch
Operating control of an integrated electrical system involving operations such as control of the operation of high-voltage lines, substations or other equipment.

distribution
The transfer of electricity from the transmission network to the consumer. Distribution systems generally include the equipment to transfer power from the substation to the customer's meter.

drawdown
Release of water from a reservoir for purposes of power generation, flood control, irrigation or other water management activity.

economic feasibility
The Northwest Power Act requires all conservation measures to be "economically feasible" for consumers. The Act does not define this concept. In this plan, the Council considers a program or measure to be economically feasible if the measure or program results in the minimum life-cycle costs to the consumer, taking into account financial assistance made available pursuant to other provisions of the Act.

end use
A term referring to the final use of energy. In the aggregate, it is used the same as "energy demand." In a more detailed use, it often refers to the specific energy services (for example, space heating), or the type of energy-consuming equipment (for example, motors).

energy
That which does, or is capable of doing, work. Energy is measured in terms of the work it is capable of doing. Electrical energy is commonly measured in kilowatt-hours, or in average megawatts (8,760,000 kilowatt-hours).

energy services
The actual service energy is used to provide (for example, space heat, refrigeration, transportation).

equity
Investment funds raised through the sale of shares of company ownership.

equivalent availability
The ratio of the maximum amount of energy a generating unit can produce in a fixed period of time, after adjustment for expected maintenance and forced outage, to the maximum energy it could produce if it ran continuously over the fixed time period. This represents an upper limit for a long-run (annual or longer) capacity factor for a generating unit. For example, a unit with an equivalent availability of 70 percent and a capacity of 500 megawatts could be relied on to produce 350 average megawatts of energy over the long term, if required.

externality
Any costs or benefits of goods or services that are not accounted for in the price of the goods or services. Specifically, the term given to the effects of pollution and other environmental effects from power plants or conservation measures.

Federal Base System
The system includes the Federal Columbia River Power System hydroelectric projects, resources acquired by the Bonneville Power Administration under long-term contracts prior to the Northwest Power Act, and resources acquired to replace reductions in the capability of existing resources subsequent to the Act.

Federal Energy Regulatory Commission (FERC)
A federal agency that regulates interstate aspects of electric power and natural gas industries. It has jurisdiction over licensing of hydropower projects and setting rates for electricity sold between states. FERC was formerly the Federal Power Commission.

firm capacity
That portion of a customer's capacity requirements for which service is assured by the utility provider.

firm energy
That portion of a customer's energy load for which service is assured by the utility provider. That portion for which service is not assured is referred to as "interruptible."

firm energy load carrying capability (FELCC)
The amount of firm energy that can be produced from a hydropower system based on the system's lowest recorded sequence of streamflows and the maximum amount of reservoir storage currently available to the system.

firm surplus
Firm energy in excess of the firm load.

fuel cycle
The series of steps required to produce electricity from power plants. The fuel cycle includes mining or otherwise acquiring the raw fuel source, processing and cleaning the fuel, transporting, generating, waste management and plant decommissioning.

generation
The act or process of producing electricity from other forms of energy.

geothermal
Useful energy derived from the natural heat of the earth as manifested by hot rocks, hot water, hot brines or steam.

head
The vertical height of water in a reservoir above the turbine.

heat engines
Devices that convert thermal energy to mechanical energy. Examples include steam turbines, gas turbines internal combustion engines and Stirling engines.

heat rate
The amount of input (fuel) energy required by a power plant to produce one kilowatt-hour of electrical output. Expressed as Btu/kWh.

heating degree days
A measure of the amount of heat needed in a building over a fixed period of time, usually a year. Heating degree days per day are calculated by subtracting from a fixed temperature the average temperature over the day. Historically, the fixed temperature has been set at 65 degrees Fahrenheit, the outdoor temperature below which heat was typically needed. As an example, a day with an average temperature of 45 degrees Fahrenheit would have 20 heating degree days, assuming a base of 65 degrees Fahrenheit.

hydroelectric power (hydropower)
The generation of electricity using falling water to turn turbo-electric generators.

independent power producer (IPP)
An independent power producer is a power production facility that is not part of a regulated utility. Power production facilities that qualify under PURPA (see "qualifying facility") are considered independent power producers, together with other independent power production facilities, such as independently owned coal-fired generating plants.

infiltration control
Conservation measures, such as caulking. better windows and weatherstripping, which reduce the amount of cold air entering or warm air escaping from a building.

insolation
The rate of energy from the sun falling on the earth's surface, typically measured in watts per-square meter.

integrated resource planing
See "least-cost planning."

interruptible power
Power that, by contract, can be interrupted in the event of a power deficiency.

intertie
A transmission line or system of lines permitting a flow of electricity between major power systems.

investor-owned utility
A utility that is organized under state law as a corporation to provide electric power service and earn a profit for its stockholders.

ISAAC
A computer model used by the Council to simulate system operation, decisions to option and build resources, and the associated costs of providing power across a large number of possible load forecasts. ISAAC accounts for the effects of uncertainty on the load forecast variations in hydropower availability for analyzing various resource strategies. The Council uses the model to help choose the best mix of resources and to establish the power plan Action Plan.

kilowatt (kW)
The electrical unit of power that equals 1,000 watts.

kilowatt-hour (kWh)
A basic unit of electrical energy that equals one kilowatt of power applied for one hour.

lead time
The length of time it takes to move a resource from concept to completion.

least-cost planning
Least-cost planning or, as it is often called, "integrated resource planning," is a name given to the power planning strategy and philosophy adopted by the Council. This strategy recognizes load uncertainty, embodies an emphasis on risk management, and reviews all available and reliable resources to meet current and future loads. The term "least-cost" refers to all costs, including capital, labor, fuel, maintenance, decommissioning, known environmental impacts and difficult-to-quantify ramifications of selecting one resource over another.

levelized life-cycle cost
The present value of a resource's cost (including capital, financing and operating costs) converted into a stream of equal annual payments. This stream of payments can be converted to a unit cost of energy by dividing them by the number of kilowatt-hours produced or saved by the resource in associated years. By levelizing costs, resources with different lifetimes and generating capabilities can be compared.

life-cycle costs
See "levelized life-cycle cost."

load
The amount of electric power required at a given point on a system.

load forecast
An estimate of the level of energy that must be generated to meet a need. This differs from a demand forecast in that transmission and distribution losses from the generator to the customer are included.

load path
One future scenario for electric load growth, as opposed to a range that accommodates multiple forecasts of future load growth.

lost-opportunity resources
Resources that, because of physical or institutional characteristics, may lose their cost-effectiveness unless actions are taken to develop these resources or to hold them for future use.

major resource
According to the Northwest Power Act, a resource with a planned capability greater than 50 average megawatts and, if acquired by Bonneville, acquired for more than five years.

manufactured home
A structure, such as a mobile home, that is transportable in one or more sections, and that is built on a permanent chassis and designed to be used as a dwelling, with or without a permanent foundation, when connected to the required utilities. These homes must comply with the Manufactured Home Construction and Safety Standards issued by the U.S. Department of Housing and Urban Development.
This does not include other categories of homes whose components are manufactured, such as modular, sectional, panelized and pre-cut homes. These homes must comply with state and local building codes.

marginal cost
The cost of producing the last unit of energy (the long-run incremental cost of production). In the plan, "regional marginal cost" means the long-run cost of additional consumption to the region due to additional resources being required. It does not include consideration of such additional costs to any specific utility due to its purchases from Bonneville at average cost.

measure
In the power plan, a measure refers to either an individual conservation measure or action or a combination of actions.

megawatt (MW)
The electrical unit of power that equals one million watts or one thousand kilowatts.

mill
A tenth of a cent. The cost of electricity is often given in mills per kilowatt-hour.

model conservation standards
Any energy-efficiency program or standard adopted by the Council, including, but not limited to: 1) new and existing structures; 2) utility. customer and governmental programs; and 3) other consumer actions for achieving conservation. The most well-known are the energy-efficient building standards developed by the Council for new electrically heated buildings.

Monte Carlo simulation
The mathematical simulation of uncertain events having known probability characteristics by random sampling from a known probability distribution function.

municipal solid waste (MSW)
Refuse offering the potential for energy recovery. Technically, residential, commercial and institutional discards. Also included in the definition of municipal solid waste for purposes of this plan are non-hazardous processable byproducts from manufacturing activities. Not included are combustible byproducts of the lumber, wood products, paper and allied products industries. These are considered separately as mill residue.

net billed plants
Refers to the 30 percent share of the Trojan Nuclear Plant, all of Washington Public Power Supply System's nuclear project 1 (WNP-1) and WNP-2, and 70 percent of WNP-3.

net billing
A financial arrangement that allowed Bonneville to underwrite the costs of electric generating projects. Utilities that owned shares in thermal projects, and paid a share of their costs, assigned to Bonneville all or part of the generating capability of these resources. Bonneville, in turn, credited and continues to credit the wholesale power bills of these utilities to cover the costs of their shares in the thermal resources. Bonneville then sells the output of the thermal plants, averaging the higher costs of the thermal power with lower-cost hydropower.

nominal dollars
Dollars that include the effects of inflation. These are dollars that, at the time they are spent, have no adjustments made for the amount of inflation that has affected their value over time.

non-firm energy
Energy produced by the hydropower system that is available with water conditions better than critical and after reservoir refill is assured. It is available in varying amounts depending upon season and weather conditions.

non-utility generator
A generic term for non-utility power plant owners and operators. Non-utility generators include qualifying facilities, small power producers and independent power producers.

option
As used in the power plan, a project that has been sited, licensed and designed, but not yet constructed. Options are held in inventory until new resources are clearly needed.

overnight cost
Total of all direct and indirect project construction costs, including engineering, overhead costs, fees and contingency. Exclusive of costs attributable to interest and escalation incurred during construction.

Pacific Northwest (the region)
According to the Northwest Power Act, the area consisting of Oregon, Washington, Idaho and Montana west of the Continental Divide, and those portions of Nevada, Utah and Wyoming that are within the Columbia River Basin. It also includes any contiguous areas not more than 75 miles from the above areas that are part of the service area of a rural electric cooperative served by Bonneville on the effective date of the Act and whose distribution system serves both within and outside of the region.

Pacific Northwest Coordination Agreement
An agreement between federal and nonfederal owners of hydropower generation on the Columbia River system. It governs the seasonal release of stored water to obtain the maximum usable energy subject to other uses.

Pacific Northwest Utilities Conference Committee (PNUCC)
Formed by Pacific Northwest utilities to coordinate policy on regional power supply issues, PNUCC lacks contractual authority, but it does play a major role in regional power planning through its policy, steering, fish and wildlife, and lawyers committees, and the Technical Coordination Group. PNUCC publishes the Northwest Regional Forecast containing information on regional loads and resources.

peak capacity
The maximum capacity of a system to meet loads.

peak demand
The highest demand for power during a stated period of time.

penetration rate
One annual share of a potential market for conservation that is realized, as in "7 percent of the region's homes have been weatherized this year."

photovoltaic
Direct conversion of sunlight to electric energy through the effects of solar radiation on semi-conductor materials.

post-operational capital replacement costs
The cost of major equipment replacements occurring during the operating life of a project. In practice, these costs generally are capitalized (i.e., financed by debt or equity). For resource cost-effectiveness analyses, these costs are frequently treated as expenses.

preference
Priority access to federal power by public bodies and cooperatives.

present value
The worth of future returns or costs in terms of their current value. To obtain a present value, an interest rate is used to discount these future returns and costs.

public utility commissions
State agencies that regulate, among others, investor-owned utilities operating in the state with a protected monopoly to supply power in assigned service territories.

Public Utility Regulatory Policies Act of 1978 (PURPA)
Federal legislation that requires utilities to purchase electricity from qualified independent power producers at a price that reflects what the utilities would have to pay for the construction of new generating resources (see "avoided cost"). The Act was designed to encourage the development of small-scale cogeneration and renewable resources.

qualifying facility (QF)
Qualifying facility is a power production facility that qualifies for special treatment under a 1978 federal law-Public Utility Regulatory Policies Act (PURPA). PURPA requires a utility to buy the power produced by the qualifying facility at a price equal to that which the utility would otherwise pay if it were to build its own power plant or buy the power from another source. A qualifying facility must generate its power using cogeneration, biomass. waste, geothermal energy, or renewable resources, such as solar and wind, and, depending on the energy source and the time at which the facility is constructed, its size may be limited to 80 megawatts or smaller. PURPA prohibits utilities from owning majority interest in qualifying facilities.

quantifiable environmental costs and benefits
Environmental costs and benefits capable of being expressed in numeric terms (for example, in dollars, deaths, reductions in crop yields).

quartile
The direct service industries load is divided into four quartiles. The top quartile is the portion of that load most susceptible to interruption.

R-value
A measure of a material's resistance to heat flow. The higher the R-value, the higher the insulating value.

real dollars
Dollars that do not include the effects of inflation. They represent constant purchasing power.

region
See "Pacific Northwest."

reliability
The ability of the power system to provide customers uninterrupted electric service. Includes generation, transmission and distribution reliability. The plan deals only with generation reliability.

renewable resource
Under the Northwest Power Act, a resource that uses solar, wind, water (hydro), geothermal, biomass or similar sources of energy, and that either is used for electric power generation or for reducing the electric power requirements of a customer.

reserve capacity
Generating capacity available to meet unanticipated demands for power, or to generate power in the event of outages in normal generating capacity. This includes delays in operations of new scheduled generation. Forced outage reserves apply to those reserves intended to replace power lost by accident or breakdown of equipment. Load growth reserves are those reserves intended for use as a cushion to meet unanticipated load growth.

resource
Under the Northwest Power Act, electric power, including the actual or planned electric capability of generating facilities, or actual or planned load reduction resulting from direct application of a renewable resource by a consumer, or from a conservation measure.

retrofit
To modify an existing generating plant, structure or process. The modifications are done to improve energy efficiency, reduce environmental impacts or to otherwise improve the facility.

sectors
The economy is divided into four sectors for energy planning. These are the residential, commercial (e.g., retail stores, office and institutional buildings), industrial and irrigation sectors.

simple payback
The time required before savings from a particular investment offset costs. For example, an investment costing $100 and resulting in a savings of $25 each year would be said to have a simple payback of four years. Simple paybacks do not account for future cost escalation, nor other investment opportunities.

siting agencies
State agencies with the authority for issuing permits to locate generating plants of defined types and sizes to utilities at specific locations.

siting and licensing
The process of preparing a power plant and associated services, such as transmission lines, for construction and operation. Steps include locating a site, developing the design, conducting a feasibility study, preliminary engineering, meeting applicable regulatory requirements, and obtaining the necessary licenses and permits for construction of the facilities.

space conditioning
Controlling the conditions inside a building in order to maintain human comfort and other desired environmental conditions through heating, cooling. humidification, dehumidification and air quality modifications.

sunk cost
A cost already incurred and therefore not considered in making a current investment decision.

supply curve
A traditional economic tool used to depict the amount of a product available across a range of prices.

surcharge
Under the Northwest Power Act, an additional sum added to the usual wholesale power rate charged to a utility customer of Bonneville to recover costs incurred by Bonneville due to the failure of that customer (or of a state or local government served by that customer) to achieve conservation savings comparable to those achievable under the Council's model conservation standards. Surcharges can range from 10 to 50 percent of a customer's bill.

System Analysis Model (SAM)
A computer model used by the Council to determine resource cost-effectiveness. SAM performs a detailed simulation of the Northwest generating system to estimate the cost associated with a specific set of loads and resources. It incorporates uncertainty associated with hydropower, thermal availability, resource arrival and load fluctuation due to economic cycles.

system cost
According to the Northwest Power Act, all direct costs of a measure or resource over its effective life. It includes, if applicable, distribution and transmission costs, waste disposal costs, end-of-cycle costs, fuel costs (including projected increases) and quantifiable environmental measures. The Council is also required to take into account projected resource operations based on appropriate historical experience with similar measures or resources.

thermal resource
A facility that produces electricity by using a heat engine to power an electric generator. The heat may be supplied by burning coal, oil, natural gas, biomass or other fuel, by nuclear fission, or by solar or geothermal sources.

tipping fee
The fee assessed for disposal of waste. This fee is used when estimating the cost of producing electricity from municipal solid waste.

transformer
A device for transferring energy from one circuit to another in an alternating-current system. Its most frequent use in power systems is for changing voltage levels.

transmission
The act or process of long-distance transport of electric energy, generally accomplished by elevating the electric current to high voltages. In the Pacific Northwest, Bonneville operates a majority of the high-voltage, long-distance transmission lines.

U-value
The measure of a material's ability to conduct heat, numerically equal to 1 divided by the R-value of the material.

Washington Public Power Supply System (WPPSS)
Municipal corporation and joint operation agency in Washington comprising representatives of public utility districts and municipal utilities. Based on power purchase contracts of its members or other utilities, WPPSS has the power to acquire, construct and operate facilities for the generation or transmission of electric power.

water budget
A means of increasing survival of downstream migrating juvenile fish by increasing flows during spring and early summer migrations. The water budget was proposed by the Council and is overseen by it in conjunction with the U.S. Army Corps of Engineers, the fishery agencies and Indian tribes, the Bonneville Power Administration and the Bureau of Reclamation

watt
The electrical unit of power or rate of energy transfer. One horsepower is equivalent to approximately 746 watts.

WHAT KIND OF LEGAL CREATURE IS THE COUNCIL?

The Northwest Power Act specifies that the Council is not a federal agency. The Council is also not a state agency in the usual meaning of the words, because it acts on behalf of more than one state. So what is it?

The Council is one of a small group of hybrid organizations known as interstate compact agencies. These multi-state organizations are created by an agreement among the participating states with the consent of Congress. The Council was authorized by Congress in December 1980, and came into being when each of the legislatures of the participating states passed a law agreeing to participate in the Council, subject to the conditions spelled out in the Northwest Power Act.

Interstate compact agencies are usually created to deal with issues or to manage resources that involve more than a single state. The Constitution gives most of the authority over matters between states to the federal government exclusively. In the Northwest Power Act, however, Congress gave back to the Northwest states some of this federal authority. In other words, although the Council is not a federal agency, it exercises certain powers granted to it by the federal government.

In particular, the Council has authority to adopt plans and programs that guide the actions of federal agencies. The Bonneville Power Administration is required to ensure that its actions are "consistent" with these plans and programs. Other federal agencies are required to take the Council's fish and wildlife program into account "at each relevant stage of decision-making processes to the fullest extent practicable." The Council also must make recommendations on Bonneville's annual expenditure of fish and wildlife funds, based on advice of an independent scientific panel. These are unique authorities. This grant is one of only a few instances in which the federal government has given states significant power over a federal agency.

Federal Laws Applicable to the Council

State agencies are governed by state law. Federal agencies are governed by federal law. For interstate compact agencies, there is no general body of governing law.

When Congress created the Council, it solved this problem by making a number of laws regulating federal agencies applicable to the Council. In Section 4(a)(4) of the Northwest Power Act, the open meetings law applicable to the Federal Energy Regulatory Commission, and federal laws applicable to Bonneville relating to contracts, conflicts of interest, financial disclosure, advisory committees, disclosure of information, judicial review, and "related matters" are made generally applicable to the Council.

However, Congress recognized that not all of these laws would fit the Council exactly and therefore gave the Council yet another unique authority, the power to adapt federal laws to fit its own circumstances. The Northwest Power Act says that specified federal laws "shall apply to the Council to the extent appropriate." The legislative history of the Act explains that the Council is to determine when it is and is not "appropriate" to follow the federal law, and explains that the Council has discretion to depart from the requirements of federal law where it has good reason to do so.

For the most part, the applicable federal laws have proved to be workable, and the Council has followed them as written. However, various administrative details have been modified to fit the Council. For example, financial disclosure forms are filed with the Council's General Counsel, not with the U.S. Department of Energy. When the Council has departed from the federal laws, it has usually made written findings explaining why the law as written was inappropriate, and how the adaptation was more appropriate.

There are a few rules regarding the financial disclosure and ethics laws that apply to the Council. The Council recently adopted a policy covering these matters, a copy of which will be provided to you. First, Council Members and staff are required to file financial disclosure forms, some parts of which are public records and some parts of which are confidential. Second, Council Members and staff may not participate in particular Council matters that will have a direct and predictable effect on their own financial interests, including, among others, those of their spouses and dependent children. Participation will be permitted in the case of de minimis holdings and/or if the individual is granted a waiver. The Council has always observed a blanket prohibition on holding a financial interest in some firms, primarily energy companies and fish and wildlife concerns doing business in the Western United States. While this is part of the Council's current policy, it is under review, in light of a recent change in the law. Third, Council Members and staff generally cannot accept anything of more than nominal financial value from people whose interests stand to be affected by Council actions. The Council's legal division has always advised that political activity is not disallowed, provided you are not a candidate for partisan office and you do not use your Council position for political purposes. The candidacy prohibition is currently under review. In addition, the legal division seeks guidance from other federal laws and regulations as issues arise. The legal division is available for advice on any questions that may arise with Council Members and staff.

State Laws Applicable to the Council

While federal laws govern most of what the Council does as a body, some state laws are still applicable to individual Council members and Council staff. In particular, Council members are officers of their respective states, and, if paid by their states, are state employees subject to the various state laws and regulations that apply to state officers and employees, including requirements governing how much time must be devoted to Council activities, state salary schedules, and the like. These state laws apply to Council members so long as they do not conflict with the federal laws that are made applicable under Section 4(a)(4).

Employees in the Eastern Washington office are state employees and, like Council members, are employed subject to the laws and regulations of their state governments. Employees of the Council's central office and the remaining Council offices are employees of the Council, rather than of a single state. The Council sets the salaries, benefits, employment conditions, and the retirement plans for the central staff. In questions of labor laws and workers compensation, the Council follows the applicable laws of each state as applied to non-profit and governmental organizations.

In some instances, state and federal laws applicable to Council members may overlap or have conflicting requirements. Only rarely has such overlap resulted in a public debate. In 1988, for example, an Oregon member who was leaving the Council was offered employment with a public utility. Under the federal conflict of interest law, the member was allowed to take the job. Under Oregon conflict of interest law, the member was not allowed to take the job. The Council took the position that the federal law preempted state law on this point. A protective lawsuit was filed by the utility based on threats of prosecution by the Oregon Attorney General. However, nothing further came of the matter, and the suit was eventually withdrawn.

Liability and Indemnification

As of 1988, the attorneys general of each of the Northwest states had confirmed in writing that Council members from their state were considered state employees for liability purposes, and that each state was obligated to defend Council members and pay judgments rendered against them in the same manner as with other state employees. Thus, it is unlikely that any Council member would be subject to personal liability for an official action taken while a Council member.

The Council has also entered into an indemnification agreement with each of its members, promising to defend claims and pay judgments. The indemnification appears in Chapter 19 of the Council's bylaws.

For the first several years of its existence, the Council was able to obtain an insurance policy to cover such claims. However, as a result of the Washington Public Power Supply System (WPPSS) nuclear power plant bond default, the premiums for this type of insurance increased enormously, and the available policies contained exclusions removing coverage for decisions relating to nuclear plants and other power planning decisions. For these reasons, the Council chose to adopt an indemnification agreement rather than to continue to purchase this type of insurance.

The Council continues to maintain a normal commercial liability policy, which covers such matters as personal injuries on Council premises. This policy also covers Council members while driving rental cars on Council business. It is therefore not necessary for Council members to purchase the optional additional insurance offered by rental car companies when renting cars on Council business.

PROCEDURES FOR AMENDING THE COUNCIL'S POWER PLAN AND FISH AND WILDLIFE PROGRAM

In developing the Power Plan and the Fish and Wildlife Program, the Northwest Power Act directs the Council to observe certain procedures unique to the Power Act, the informal rulemaking procedures of the federal Administrative Procedure Act (APA) and any other procedures the Council may adopt. The Council must hold public hearings in each of the member states before adopting the plan or program, or substantial, non-technical amendments to either. The Council must review the plan at least every five years.

Power Plan Amendments

For purposes of power plan amendments, the federal APA requires public notice of proposed amendment or a description of the subjects and issues involved, and a statement of how the public may participate in the process. The public must be given an opportunity to submit written material.

Once the period for public comment has closed, people outside the Council may be foreclosed from communicating with the staff and Council members on the subject of the rulemaking. In some rulemakings the Council has allowed limited, additional public comment up to the time of decision, although the Council must have enough time to analyze all comments before taking final action.

An agency must give a concise general statement of the basis and purpose of the rules it adopts. The Council, following an approach approved by the courts, has satisfied this requirement by publishing a Response to Comments, which briefly summarizes the major comments received and explains how the Council has dealt with them.

Fish and Wildlife Program Amendments

The Fish and Wildlife Program is published separately from the Power Plan, although it is legally an element of the Plan. But the Act sets out specific procedural requirements for developing and amending the Fish and Wildlife Program that make it quite distinct from the Power Plan.

In amending the Fish and Wildlife Program, the Act requires the Council to request from the region's fish and wildlife agencies and appropriate Indian tribes recommendations for measures for fish and wildlife affected by hydropower in the Columbia and its tributaries. Section 4(h)(2) of the Act provides that recommendations must be solicited prior to the development or review of the power plan, or any major revision to the plan. Others may also make such recommendations. Once the Council has received these recommendations, along with supporting documentation, it must make them available for comment. Typically, the Council also issues its own draft fish and wildlife amendments, which reflect the Council's attempt to fit the recommendations into a systemwide context, and invites public comment. The Council must act on the recommendations within one year. The Council may reject a recommendation only for certain reasons spelled out in Section 4(h)(7) of the Act. If the Council rejects a recommendation, it must give its reasons in writing.

The role of the fish and wildlife agencies and Indian tribes is particularly important. Not only must the Council solicit their recommendations for fish and wildlife measures, but if there are conflicting recommendations, the Council must consult with the tribes and agencies and give "due weight" to "their recommendations, expertise and legal rights and responsibilities" in resolving the inconsistency. In determining which recommendations to accept, moreover, the Council must determine whether a proposed measure would: (1) "complement the existing and future activities" of the agencies and tribes, and (2) be consistent with the tribes' legal rights. In 1994, the federal appeals court said, in dicta, that the Council must give a "high degree of deference" to the fish and wildlife agencies and tribes.

The 1994 court opinion also said that the program must include sound biological objectives to structure the program and guide Council decisions.

Because the Fish and Wildlife Program must be based on recommendations submitted to the Council, and because the Council must make findings on any recommendations it rejects, program amendment processes are organized around the recommendations. Most of the comments the Council receives are directed to recommendations, and most of the Council's responses to comments are made in findings.

Petitions for Rulemaking

The APA also requires administrative agencies to give interested persons the right to petition for the issuance, amendment or repeal of an administrative rule, such as changes in the Power Plan or Fish and Wildlife Program. The Council has adopted a policy for how it will treat such petitions. A petition must set forth the substance or text of a proposed amendment or identify the provision to be repealed; explain the interest of the petitioner; and set forth the facts, reasons and new information that support the petitioner's request. The Council will conduct such study as it deems appropriate and within 120 days of receipt of the petition, grant or deny it. If an amendment process results from the petition process, the Council has committed to completing the process within seven months from the decision to begin the amendment process.

COUNCIL INTERPRETATIONS OF THE NORTHWEST POWER ACT

Section 6(c)

In November 1986, the Northwest Power Planning Council and the Bonneville Power Administration each issued complementary policy statements on the implementation of Section 6(c) of the Northwest Power Act. Section 6(c) requires Bonneville to submit certain proposals related to major resources to a public review process to determine whether they are consistent with the Council's Northwest Power Plan. The Council then has the right to make its own determination regarding consistency. If either Bonneville or the Council finds a resource inconsistent with the power plan, the resource can be acquired only after congressional action.

The Act identifies as "major" resources those over 50 megawatts with more than five years' duration.

The purpose of review under Section 6(c) is to ensure that a major resource is needed and is cost-effective before the Northwest invests a great deal of money in it. The process speaks directly to the balance of power between state and federal interests. The Northwest Power Act established Bonneville's authority to acquire resources, but it also gave the states, through the Council, the right to review those acquisitions before committing ratepayers to large expenditures.

In March 1993, the Council and Bonneville completed a five-year review of their respective 6(c) policies. The region had had little experience under Section 6(c) in the years since the adoption of the original policies, and therefore, little was changed. The revised policies were expanded, however, to cover all the Bonneville proposals made subject to review under the terms of the Act. In early 1998, in light of the restructuring occurring in the utility industry, the Council and Bonneville decided to postpone for five years further review of their 6(c) policies.

Section 5(d)

Bonneville was authorized under Section 5(d) of the Act to sign power sales contracts on special terms with existing direct service industrial customers (DSIs) for an amount of power that each customer was receiving under its earlier contract. The DSIs are customers that had industrial firm power contracts with Bonneville in 1975. The Act expressly precluded sales to new direct service industrial customers, but did permit Bonneville to sell additional power to existing DSIs, provided Bonneville and the Council made certain findings.

In late 1989, Bonneville tentatively agreed to sell additional power to an existing DSI customer without the review called for under Section 5(d), provided the customer could arrange an assignment of unused contract demand from another existing direct service customer. Bonneville took the position that Section 5(d) review was not required so long as the total amount of power it sold to the DSIs did not exceed the aggregate amount to which all the DSIs were entitled when the Act was passed. Public comment brought this proposed transaction to the Council's attention.

The Council has adopted an interpretation of Section 5(d) that requires review whenever a proposed sale to an individual DSI would result in that DSI receiving more power than it received under its initial entitlement. The Council's interpretation does not call for review if an existing DSI assigns its power sales contract to a successor in interest for use at the same location for purposes similar to those established under the original contract. Except for transfers of the sort just described, an amendment or assignment of a contract that results in the delivery of additional power to an existing DSI is a sale subject to Section 5(d) review.

LITIGATION

Seattle Master Builders Association, et al. v. Northwest Power Planning Council

On April 10, 1986, the United States Court of Appeals for the Ninth Circuit decided this challenge to the Council's model conservation standards (MCS) brought by several construction-related organizations. The petitioners had advanced two principal lines of argument. First, with respect to the Council's model conservation standards, petitioners challenged the cost effectiveness of the measures to make new residential buildings more energy efficient, and the methodologies used by the Council to determine cost effectiveness. Petitioners also argued that the Council should have prepared an environmental impact statement regarding promulgation of the standards.

Second, petitioners challenged the constitutionality of the Council, citing the appointments clause of the U.S. Constitution, which requires officers of the United States to be appointed by the executive branch of government. Council members are officers of an interstate compact agency appointed by the governors of the four Northwest states and not by the President.

The Bonneville Power Administration intervened in the case and ultimately argued that the Council's adoption of the MCS did not violate the constitution. Bonneville said that the Council's model conservation standards did not impose a legal obligation on anyone, and therefore adoption of the standards was not the sort of exercise of significant authority over a federal agency that might require Council members to be appointed by the executive branch.

In earlier communications, however, regarding what posture the Department of Justice should adopt, the Department of Energy had taken a more aggressive position. The Secretary of Energy, Don Hodel, wrote to Justice in early 1985 and urged that if the Council were, indeed, anything more than advisory, and if it could, in fact, significantly limit Bonneville's actions, it ought to be found unconstitutional and replaced by a federal council. John Dingell, the Chairman of the House Energy and Commerce Committee that drafted the Northwest Power Act, wrote a strong letter in opposition to Energy's request. Mr. Dingell fully supported the view that the Council was intended to be more than an advisory body, with functions that are more significant than the Secretary of Energy had contended. He also concluded that the Council was properly formed and was operating according to the expectations of Congress.

In a two-to-one decision, the Ninth Circuit ruled for the Council on all the issues. With respect to the model conservation standards, the court held that the Council had adopted a proper approach to determining the cost effectiveness of conservation measures; that the methodology the Council used for determining conservation value was within the Council's discretion; and that the Council was not obliged to prepare an environmental impact statement on the standards, pursuant to the laws of the states that are members of the interstate compact. On the constitutional question, the court noted that the functions of the Council and Bonneville "directly overlap," and held that the Council "violates neither the compact nor appointments clauses of the United States Constitution. The Act established an innovative system of cooperative federalism under which the states, within limits provided by the Act, can represent their shared interests in maintenance and development of a power supply in the Pacific Northwest and in related environmental concerns."

The Master Builders petitioned the Ninth Circuit for rehearing en banc (before a larger panel of judges in the circuit) on the ground that the panel overlooked material laws and facts. The United States also petitioned for rehearing or for rehearing en banc, arguing that the court decided constitutional questions not presented by the case. The Ninth Circuit denied both petitions. The Master Builders' subsequent petition for certiorari was denied by the Supreme Court of the United States.

Northwest Conservation Act Coalition, et al. v. Northwest Power Planning Council

The Coalition and the Natural Resources Defense Council filed a petition for review in the Ninth Circuit challenging the model conservation standards amended in 1986, in an effort to make the requirements of the amended standards more rigorous. In particular, petitioners alleged that the Council's standards for conservation in new commercial buildings ought to be more stringent; that a surcharge is necessary if the standards governing the energy efficiency of buildings that convert to electric space heat are to be effective; and that the Council's amended standards ought to contain standards for utility-financed incentives to conserve electricity in existing residences. Upon petitioners' request, the Council entered rulemaking to amend the standards in the respects summarized above. Petitioners then dismissed their suit in the Ninth Circuit.

Cascade Natural Gas Corp. v. Evans

In 1983, six regional natural gas companies brought suit challenging the Council's plan, arguing, among other things, that the Council had unfairly ignored natural gas as a conservation resource. The case was settled before trial and the Council agreed to modify the plan to make clear that the model conservation standards apply only to electrically heated homes. The Council also said that it would consider modifying the plan if significant fuel switching from natural gas to electricity were demonstrated. The terms of this settlement expired on April 27, 1988.

CASE, The Utility Reform Project and Michael Rose v. Northwest Power Planning Council

In May of 1986, CASE (Citizens for and Adequate Supply of Energy), The Utility Reform Project and Michael Rose filed suit in the Ninth Circuit, challenging certain portions of the 1986 model conservation standards. Petitioners also asked the Council to enter rulemaking to address the matters raised in the Ninth Circuit. In response to these two actions, the Council: Clarified that its then current MCS rulemaking addressed model standards for new residential and commercial buildings at federal agency facilities; committed to assess the conservation potential of existing buildings and other electricity uses at federal agency facilities as part of the next major plan revision; and extended the period for comment and consultation on MCS for federal agency customers beyond the deadline for the then current MCS rulemaking. The Council also agreed to defer action on the CASE petition to enter rulemaking to develop model conservation standards for the direct service industries, pending further analysis of increased interruptibility of the direct service industries, which the Council agreed to conduct before calling for Bonneville acquisition of new resources or before the next major revision of the Power Plan, whichever is first. As a result of these actions by the Council, the petitioners agreed to settle the case.

Northwest Resource Information Center, Inc., et al v. Northwest Power Planning Council; Confederated Tribes and Bands of the Yakima Indian Nation v. Northwest Power Planning Council (the "Phase Two" cases)

To act as quickly as possible to improve conditions for salmon and steelhead, which were then proposed for listing under the Endangered Species Act, beginning in August 1991 the Council began a multi-phase rulemaking on salmon and steelhead measures. In January 1992, the Council published its notice of final action on measures dealing with increased flows and drawdown of the lower Snake River. Three petitions were subsequently filed challenging the measures, one by the Northwest Resource Information Center, Trout Unlimited, the Oregon Natural Resources Council, Idaho Steelhead and Salmon Unlimited, and The Wilderness Society, represented by the Sierra Club Legal Defense Fund; a second petition was filed by the Yakama Tribe; and a third was filed by a group of aluminum companies and other industrial customers of the Bonneville Power Administration. After the petitions had been filed, 15 to 20 additional parties intervened, including Oregon Trout, the United States government, a number of utilities and the State of Idaho.

On September 9, 1994, the Court ruled that the Council had not adequately explained its reasons for rejecting amendment recommendations because the Council's findings on the recommendations were put in a separate document, rather than in the fish and wildlife program itself. The Court also held that the Council's findings in an early phase of the amendment process were voided by findings in a later phase. While the Court's holdings were limited to these procedural matters, the opinion offered extensive interpretations (called "dicta" because they are not strictly binding) of the Northwest Power Act. Some of the dicta told the Council that it should give a "high degree of deference" to the fish and wildlife agencies' and Indian tribes' recommendations and expertise, and that the Council's discretion to reject these recommendations is narrow. The Court remanded the Strategy for Salmon for the Council to develop new findings.

A.H. Canada v. Northwest Power Planning Council

In 1994, Mr. Alfred H. Canada, a retired power engineer, sued the Council in federal District Court. Mr. Canada sought to overturn the Council's denial of a petition for rulemaking he had earlier filed. The rulemaking would have considered replacing the plan's call for conservation with an equivalent amount of solar photovoltaics. The District Court dismissed, reaffirming the established rule that suits challenging final actions of the Council are to be brought in the Ninth Circuit Court of Appeals.

Nez Perce and other tribes v. Northwest Power Planning Council

In 1997, four Indian tribes challenged the Council's recommendations pursuant to Section 4(h)(10)(D) of the Northwest Power Act regarding the Bonneville Power Administration's fish and wildlife expenditures. The challenges are still pending before the Ninth Circuit Court of Appeals.

FINANCE AND ADMINISTRATION

Council Funding

Expenses of the Council necessary for carrying out its functions and responsibilities under the Northwest Power Act are paid from funds received from the Bonneville Power Administration. Funds are advanced to the central office from Bonneville on a request basis. Each state, in turn, requests funds to be advanced from the central Council office to the state to cover the operating expenses of the state Councils.

Costs associated with the operation of the Council's central office in Portland are paid for from the central office budget. Expenses for each state Council office are paid from each state Council budget by the state agency which provides accounting/payroll services to each state Council office. In some instances, state expenses are paid directly from the central office accounting and payroll systems.

Budgets

The Council is required to develop annual (state and central office) budgets for transmittal to the Bonneville Power Administration and which are included in Bonneville's budget submittal to the Department of Energy, Office of Management and Budget, and Congress.

The Council's budget is limited to an amount equal to 0.02 mills multiplied by the kilowatt hours of firm power forecast to be sold by the Bonneville Administrator during the year to be funded. In most years, this limitation represents approximately $2 million. However, based on an annual showing by the Council that such limitation will not permit the Council to carry out its functions and responsibilities under the Act, the Administrator may raise such limit to any amount not in excess of 0.10 mills. In most years, this maximum limitation represents approximately $10 million. From 1981 to 1997, the Council's budget has ranged from approximately $5.9 million to $8.5 million annually. The average annual percent of increase for the Council's budget since 1988 through 1996 is 3.2 percent. For the same period, annual inflation for the Portland area has averaged 3.8 percent.

The Council is currently on a $1.7 million budget reduction trajectory from approximately $8.0 million in Fiscal Year 1997 to $6.2 million in Fiscal Year 2001. These reductions are being made in order to conform with the Council budget cap that will result from the phase-out of Bonneville's residential exchange of firm power sales in 2001.

The Council's annual budget process occurs between the months of March and June. Each state Council office develops its budget (usually on a biennial basis) which is approved through the state legislative process and then integrated with the Council's central office budget.

The Council's draft budget is distributed for a 30 to 60-day public review and comment period during which time consultations are held with interested parties regarding the Council's proposed funding requirements. Following final revision and adoption by the Council, the budget is transmitted to Bonneville.

Audits

The U.S. General Accounting Office (GAO) is the government entity authorized to audit the Council's fiscal and program operations. However, the Council, through an agreement with Bonneville, engages an independent CPA firm to conduct annual financial audits of the Council's operations. A copy of these audits is forwarded to the Portland office of the General Accounting Office and to other interested parties, as well as being included in the Council's Annual Report to Congress. In addition, state audit agencies audit each state Council office's fiscal operations in the course of their regular state agency audit schedules. In 1996, the GAO conducted an extensive audit of the Council's business policies and practices. That audit resulted in a very positive finding by the GAO.

Council organization

The Act provides that the Council shall determine its organization and prescribe its practices and procedures for carrying out its functions and responsibilities under the Act.

State offices

Council members organize and staff their state offices based on the level of support they determine necessary. This typically includes technical assistants and/or policy analysts in the areas of power planning, fish and wildlife, and public information and public involvement. Administrative support is also provided.

Council members may also use outside contractors or the technical services of state agencies to conduct special studies and analyses regarding issues stemming from the power plan and the fish and wildlife program as they impact their respective states.

State staff are usually employees of the state. State laws, rules and regulations are applicable. There are some exceptions where state support for Council members is administered (payroll, travel and office expenses) by the central office.

The central office provides overall support to the Council in the areas of power planning, fish and wildlife, public affairs, legal matters, and finance and administration.

Staffing levels for the central office are established by the Council in its budget. All personnel actions are authorized by the executive director after consultation/approval by the Council chairman. Staff compensation plans and benefit programs are established by the Council based on recommendations by outside consultants, and are subject to periodic reviews by the consultant with the Council.

Travel rules and expense reimbursement policies for central staff are set by the Council.

Contracts to assist the Council in carrying out its responsibilities are awarded on a competitive basis. Contracts over $25,000 require approval by the full Council.

The central office also provides computing and information systems support to the state offices augmented by occasional assistance from state agencies and local vendors.

Council central office staff directory

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1998 Council Briefing Book

Fish and Wildlife Issues

Power Issues

Legal Issues