February 21, 2003

PORTLAND ? By deferring some work to future years and changing certain spending policies, the Bonneville Power Administration could help relieve its financial crisis and comply with a fish and wildlife spending limit imposed by its administrator for 2003, the Council recommended today. But the Council also cautioned that further reductions in spending could jeopardize Bonneville's ability to meet its legal requirements and also slow progress toward fish and wildlife recovery. See letter (40k PDF) and accompanying tables (150k PDF).

In December 2002, Bonneville Administrator Steve Wright capped direct expenses for the Council's Columbia River Basin Fish and Wildlife Program at $139 million for 2003 without any provision for costs that carry forward from previous years, which this year amount to about $40 million. Thus, Bonneville had planned to spend up to about $180 million this year. Wright asked the Council to recommend ways to reduce or defer spending to fit within the $139 million cap, and to do so by today.

?While it is difficult to defer this important work, we understand that it is necessary in order to help Bonneville through a difficult time,? Council Chair Judi Danielson said. ?But we also understand that the burden of these expenditures falls on ratepayers, who already have experienced rate increases in response to Bonneville's financial crisis and may get another one later this year. We try to balance this financial burden by including projects in our fish and wildlife program that are scientifically sound and cost-efficient.?

The fish and wildlife program is implemented through projects that are proposed to the Council, reviewed by the region's state, federal and tribal fish and wildlife managers and a panel of independent scientists, and then recommended by the Council to Bonneville. Most of the projects are implemented over periods of years and have budgets for each year. Bonneville contracts with project sponsors to carry out the work. Immediate spending cuts or deferrals, which Bonneville requested, would undermine the regional effort, the Council commented in its letter to Wright:

?Based on the budget figures developed by Bonneville, we were not convinced that an immediate rush to project contract modifications and terminations was necessary to meet your Fiscal Year 2003 spending objective,? the Council wrote. The Council said its goal is to preserve the integrity of the program and the decisions and priorities established by the Council and the region's fish and wildlife agencies and Indian tribes.

The Council took a cash-management approach to meeting the $139-million spending target, fine-tuning specific spending forecasts and confirming spending targets for individual projects with their sponsors. This would yield savings by extending some project budgets into future years and eliminating funding for projects that were not authorized by the Council. In addition, the Council recommended that work performed in 2002 but not paid for should not be counted against the 2003 budget. The Council also suggested that Bonneville consider reducing the overhead costs of its Fish and Wildlife Division, which are paid from the Council program budget.

Two important policy recommendations also will affect whether Bonneville can meet its $139 million target, the Council commented. First, Bonneville should use its capital borrowing authority to purchase land and land easements for fish and wildlife habitat that have been approved by the Council and that also respond to requirements of the Biological Opinion. These amount to about $20 million. Second, there needs to be resolution for about $40 million in project costs that were carried forward from the last six-year rate period, which ended in 2001, to the current period. Bonneville could cut this amount in half by using its borrowing authority for the land purchases, the Council noted, and the remainder could be carried forward into future years. The Council also commented on Bonneville's recent announcement that it would change its accounting practices. The Council believes the changes could leave some projects stranded without funding.

Wright asked the Council to recommend ways to reduce fish and wildlife spending below $139 million in future years, but the Council said that ?may jeopardize [Bonneville's] ability to meet legal requirements under the 2000 Biological Opinion and the Northwest Power Act.? Spending reductions in 2003 will impact fish and wildlife restoration efforts, the Council said, adding: ?We are concerned that deeper and sustained cuts in the out-years may have serious impacts that could retard the progress we have been making.?

The Council is an agency of the states of Idaho, Montana, Oregon and Washington and is directed by the Northwest Power Act of 1980 to prepare a program to protect, mitigate and enhance fish and wildlife of the Columbia River Basin affected by hydropower dams while also assuring the region an adequate, efficient, economical and reliable power supply.