Coping with change: energy, fish, and the Bonneville Power Administration.

I. Introduction

Hydropower and fish are strange bedfellows. For the Bonneville Power Administration (BPA), the Pacific Northwest's federal marketer of Columbia River hydroelectric power, they rest side by side. Once the cheapest power in the nation, Columbia River federal hydropower is no longer the bargain it once was.(1) By passing the Energy Policy Act of 1992,(2) Congress dramatically changed the electric utility industry with several deregulatory measures, including expanded access to BPA's transmission lines.(3) Small facilities, independent power producers, and other power suppliers now can market. power to BPA's traditional customer base, thereby exposing BPA to its first significant competition in over 50 years. While BPA power still costs less than most alternatives, the difference is narrowing.(4)

At the same time, litigation involving endangered Columbia and Snake River salmon(5) threatens to force BPA rates higher.(6) Several different interests(7) challenged two separate federal fish recovery plans aimed at changing current hydrosystem operations. The first recovery plan(8) is a "regional" plan developed pursuant to the Pacific Northwest Electric Power Planning and Conservation Act of 1980 (Northwest Power Act).(9) This Act requires BPA to balance two conflicting goals: It must operate in a manner that protects, mitigates, and enhances fish and wildlife(10) while "assur[ing] the Pacific Northwest of an adequate, efficient, economical, and reliable power supply."(11) The second recovery plan(12) stemmed from federal action taken pursuant to the Endangered Species Act.(13) Implementation of either plan will increase BPA's costs through foregone hydroelectric revenue and the need for replacement capacity and energy resources. Under BPA's statutory rate scheme, these costs must be passed through to customers.(14) Thus, BPA finds itself in a Sisyphean struggle to remain competitive in the deregulated electric utility industry and yet remain faithful to both the fish and wildlife and energy mandates of the Northwest Power Act.(15)

Today's market competitiveness has led many large corporations to downsize, and BPA is following this trend.(16) However, BPA must continue to meet its statutory responsibilities, which cost billions of dollars. BPA's customers and their consumers must pay all costs necessary to produce, transmit, and conserve resources, including amortization of the federal investment in the Federal Columbia River Power System,(17) the bonds issued to pay for the construction of three nuclear power plants,(18) and the rising cost of fish preservation.(19) Reinventing itself as a competitive utility presents a serious challenge to BPA. Some observers doubt that BPA can continue to pay the rising costs of fish protection measures,(20) and uncertainties over BPA's future costs are leading some BPA customers to conclude that BPA may soon lose its position as a competitive power provider.(21)

As the region looks to BPA for continued funding of fish recovery programs, BPA must become financially strong, with its long-term costs predictable and under control. In developing this theme, Part II summarizes BPA's changing role in the utility marketplace from BPA's formation in 1937 to the present challenges posed by deregulation. With this foundation in mind, Part III discusses two cases, Idaho Department of Fish & Game v. National Marine Fisheries Service(22) and Northwest Resource Information Center, Inc. v. Northwest Power Planning Council,(23) which involved challenges to controversial fish recovery plans that impact federal hydroelectric system operations. Part IV analyzes the cases' impact on BPA's competitiveness, explaining BPA's response, and discussing several measures being considered in Congress and by the Administration.

II. BPA's Evolving Role in the Power Market

A. Formation

BPA is a product of the Great Depression and President Franklin D. Roosevelt's "New Deal."(24) A foremost New Deal policy objective was the delivery of low-cost power to a wide range of consumers, with federal water development projects serving as a "government yardstick" by which to measure private utility rates.(25) In the Pacific Northwest, President Roosevelt's power policies took shape in 1933 when construction began on both the Bonneville and Grand Coulee dams.(26) It was not until 1937, with the Bonneville Dam nearing completion, that Congress and President Roosevelt compromised on such issues as facility management, transmission, power marketing, rate policies, and other important matters.(27) This compromise was embodied in the Bonneville Project Act,(28) which assigned operational responsibilities for the dam to the Army Corps of Engineers and created BPA to market all power generated by the Bonneville Dam, construct and operate transmission facilities, negotiate power contracts, and propose rate schedules.(29) The Bonneville Project Act incorporated several New Deal policy objectives, including: 1) encouraging the widest possible use of energy generated and marketed by federal projects;(30) 2) preventing monopolization of electric transmission lines and facilities by private power distributors;(31) 3) ensuring benefits to the general public, particularly when and domestic consumers;(32) 4) granting preference and priority to public and cooperative systems;(33) 5) establishing an equitable distribution of electric energy by maintaining reasonable rate schedules;(34) and 6) preserving the preferential rights of public utilities by reserving the right to cancel a private purchaser's contract.(35)

B. The War Years to the Transmission Act

BPA's role in the Pacific Northwest grew significantly during World War II. With much of the nation suffering from a power shortage, the Pacific Northwest, particularly when Grand Coulee Dam began operating, enjoyed a power surplus.(36) In 1940, President Roosevelt, by Executive Order, granted BPA authority to market Ground Coulee's power.(37) This set the stage for BPA's later role as the power marketer for all federal hydroelectric projects in the region.(38) The war years also saw BPA's transmission grid grow from only 142.3 circuit miles on July 1, 1940, to 2,736.8 mile on June 30, 1945.(39)

Following the war, BPA faced a significantly reduced load demand caused largely by a slowdown in industrial production.(40) BPA managed to offset half of its million kilowatt surplus in 1946 by selling a block of power directly to the revived Pacific Northwest aluminum industry.(41) By 1948 there was a power shortage, and BPA required all future contracts with aluminum and other direct service industrial (DSI) customers to include a portion of interruptible power.(42) In time, all sales to DSIs were to be of interruptible power.(43)

In the 1950s, the Eisenhower Administration refused to approve any new federal power projects.(44) However, projects previously authorized were completed and BPA's transmission system expanded to 8,028 circuit miles.(45) Meanwhile, private utilities continued to expand their generating capacity. Faced with having to construct their own transmission lines, private utilities sought access to BPA's surplus transmission capacity. BPA was receptive, in part, because power transmission for another party, a concept known as "wheeling," promised to generate new revenues.(46) Although there was no direct congressional authority for BPA to wheel power, legal opinions by the Regional Solicitor in 1956 and 1957, along with implicit congressional consent found in a 1957 appropriations bill, encouraged BPA to proceed with wheeling contracts.(47)

By the late 1950s, imminent power shortfalls, due primarily to increased industrial sales, sparked an interest in expanding system capacity by regulating streamflows. However, effective streamflow regulation was not feasible without Canadian cooperation. After years of negotiations, the United States and Canada finally signed the Columbia River Treaty on January 17, 1961,(48) which doubled the Columbia River Basin's storage capacity and increased downstream productive capacity by about 1,900 megawatts.(49) The Treaty entitled British Columbia to power generated by the Treaty projects, but the Province did not need the power.(50) Instead, British Columbia sold its entitlements to the Columbia Storage Power Exchange, which, in turn, sold the entitlements to public and private utilities.(51) These utilities then transferred the entitlements to BPA in exchange for firm power.(52) In effect, therefore, BPA ended up marketing the additional power resulting from the Treaty.

Concerned with potential future power surpluses, BPA sought to service both California and Arizona through a regional agreement known as the Pacific Northwest-Pacific Southwest Intertie.(53) However, BPA could not proceed without direct congressional authorization, which was not forthcoming until the Northwest Regional Preference Act of 1964.(54) Although this Act authorized BPA power sales to the Southwest, it gave preference rights to Pacific Northwest customers, effectively allowing BPA to sell only surplus power to the Southwest.(55)

By the late 1960s, however, power shortfalls seemed imminent. BPA and regional utilities responded with the Hydro-Thermal Power Program, which sought to expand regional power generation by installing additional hydroelectric generators and encouraging construction of seven thermal plants, including the Trojan Nuclear Plant and Washington Nuclear Plants (WNPs) 1, 2, and 3.(56) Because BPA did not have congressional authority to construct the plants itself, BPA originally relied on a financing scheme known as "net billing".(57) Under net billing arrangements, public utilities constructed the plants and BPA contracted to purchase a specified percentage of power production at a rate tied to the utilities' financial obligations in the plants.(58) Since these utilities were BPA customers, BPA paid for the power by crediting the utilities' accounts - hence, the term "net billing.(59)

Congress finally backed BPA's efforts by passing the Federal Columbia River Transmission System Act of 1974 (Transmission Act),(60) which, with respect to the Hydro-Thermal Power Program, enabled BPA to finance

ct also granted BPA authority to operate on a self-financed basis, which provided BPA with financial flexibility by freeing it from the annual congressional appropriations process.(61) Finally, the Transmission Act reaffirmed and clarified BPA's fun authority to "wheel" power,(62) requiring that "BPA wheeling charges reflect an equitable allocation of costs of BPA transmission facilities between the delivery of Federal and non-Federal power."(63) However, when skyrocketing construction costs made net billing unworkable, BPA and the utilities sought alternative means of resource acquisition. In 1980, Congress facilitated their efforts by passing the Northwest Power Act.(64)

C. The Northwest Power Act(65)

In passing the Northwest Power Act, Congress responded to the need to allocate limited federal power resources(66) and address dwindling Columbia River salmon populations.(67) In provisions directly applicable to BPA, the Act enabled BPA to pursue conservation measures,(68) expanded BPA's authority to acquire power resources,(69) and mandated adoption of a "residential exchange" program.(70) The residential exchange program was designed to minimize an existing rate disparity between residential customers of private investor owned utilities (IOUs) and their counterparts served by public utilities.(71) Under the program, BPA "sells" its low-cost federal power to participating IOUs in exchange for an equivalent amount of the IOUs' high-cost power.(72) IOUs Must then pass-on the cost savings directly to their residential customers.(73) In practice there is no actual power transfer; BPA simply pays to participating IOUS the difference between their respective power generation costs.(74)

The Northwest Power Act also established the Pacific Northwest Electric Power Planning and Conservation Council,(75) more commonly known as the Northwest Power Planning Council (NPPC), to coordinate the development and implementation of both a regional power plan and a fish and wildlife program.(76) However, NPPC cannot implement its plan and program alone, nor can it direct BPA to take specific action. Instead, the Northwest Power Act requires only that BPA act consistently with NPPC's plan and program.(77)

D. Deregulation and its Effect on BPA

While Congress was exploring solutions to the Pacific Northwest's energy problems, it also sought to introduce competition into the monopolistic utility industry. Congress's first step was the Public Utility Regulatory Policies Act of 1978 (PURPA).(78) PURPA empowered the Federal Energy Regulatory Commission (FERC) to help nonutility generators, commonly known as either independent power producers or "qualifying facilities" (QFs), enter the power supply business.(79) PURPA requires public utilities to purchase power generated by QFs at a price equal to or below the utility's avoided cost of building generating resources,(80) and, perhaps more importantly, relieves QFs from burdensome Public Utility Holding Company Act (PUHCA) regulations.(81) QFs experienced a decade of growth following PURPA's enactment, for the most part replacing large utilities in constructing new generating capacity.(82) However, by the end of the 1980s it was evident that nonutility generators, without increased transmission access, could develop no further.(83)

This dead-end under PURPA, in part, persuaded Congress to adopt the Energy Policy Act of 1992 (Energy Act).(84) This Act further encouraged competition in the wholesale power market by changing the structure of the utility industry in two important ways. First, the Energy Act exempted from PUHCA wholesale electric power generators limited in their operations to owning and/or operating facilities and selling wholesale electricity.(85) In the Pacific Northwest, this exemption has led to the proliferation of new power generating resources by independent power producers - primarily low-cost natural gas combustion turbine generators.(86)

Second, the Energy Act granted FERC the authority to order transmission line owners to provide wheeling access for power generated by other wholesale suppliers.(87) Wheeling access makes it easier for nonutility entities to generate and market power and prevents transmission line owners, such as BPA, from denying market access to potential wholesale competitors. The Energy Act also specifically addressed BPA's operations, empowering FERC to order BPA to open its transmission lines to competitors(88) and prohibiting discrimination in transmission services and rates.(89)

Deregulation is having a profound impact on BPA's role in the power marketplace. With the entrance of independent power producers, brokers, power marketers, and other utilities into the Pacific Northwest power market,(90) BPA's customers are now actively shopping for lower-cost power.(91)

Before deregulation, utilities made a number of long-term investments designed to meet regulatory requirements and the power needs of all customers within their respective regions, and reasonably expected to be able to recoup their investments from a generally stable customer base.(92) With the advent of open access and deregulation, however, wholesale utility customers may switch to power providers unburdened by these historical investments. When a switch is made, that customer effectively "strands" its pro rata share of the utility's investments, and the utility must either incur the loss or pass it on to remaining customers.(93) In any event, such stranded investment places utilities at a competitive disadvantage as compared to new market entrants.(94)

To remedy this situation, FERC issued a notice of proposed rulemaking regarding stranded investment for wholesale and retail transactions.(95) FERC recognizes that a measured transition from a regulated to a competitive market is appropriate - reliance on past, prudent investments must be protected.(96) As promulgated, the rules would allow utilities, under limited circumstances, to recover some stranded investment from departing customers through transmission charges, such as exit fees.(97)

Although the proposed rules do not apply directly to BPA,(98) they signal that stranded costs at the federal level may be recoverable through reasonable transmission charges. As the regional mission provider, BPA could impose a wire tax on entities using BPA's mission system to wheel power. If allowable, BPA should be able to recoup from departing customers their pro rata portion of BPA's investment in the Hydro-Thermal Program, under which Washington's nuclear facilities were constructed.(99) It also may be possible to recover fish and wildlife costs, which, NPPC argues, represent internalized environmental damages resulting from past investment in the hydroelectric system.(100) However, BPA dropped plans to conduct public hearings on stranded cost matters, deciding instead that it will not need to recover stranded costs if it can effectively market its power to cover all costs for the next five years.(101) Should BPA be unsuccessful, it will consider the most appropriate stranded cost recovery mechanism for the BPA system, subject to FERC's review and approval.(102)

It is unclear, however, whether BPA can recover generation costs through transmission rates. Section 9 of the Transmission Act provides that transmission rates shall be fixed "having regard to the recovery of the cost of producing and transmitting such electric power."(103) The plain meaning of section 9 appears to permit BPA to include generation costs in transmission rates.(104) Section 7 of the Northwest Power Act also provides the BPA Administrator with broad authority to set rates so as to recover total Federal Columbia River Power System costs, including acquisition, conservation, and transmission.(105) Because Congress intended the Northwest Power Act's definition of "federal base system resources" to include the net billed nuclear power plants,(106) BPA is obligated to recover those costs from customers whether they remain with or depart from BPA. On the other hand, section 7(g) of the Northwest Power Act expressly provides that the costs and benefits of fish and wildlife measures must be allocated to power rates.(107) While there still has been no mass exodus, BPA's ratesetting principles present difficult competitive challenges.

E. BPA's Ratesetting Dilemma

BPA's ratesetting is guided by two statutory directives. First, BPA must protect consumers by keeping rates as low as possible, consistent with sound business principles.(108) BPA satisfies BE mandate by striving for the most efficient operation of its electric power system.(109) Second, because the Agency is self-financed, BPA must ensure that its rates are sufficient to both recover its total system costs and repay the federal investment in the Federal Columbia River Power System.(110) This dual obligation to protect consumer interests and repay the federal treasury effectively requires BPA to operate on a break-even basis.(111)

Historically, BPA's cost recovery mandate resulted in low, stable rates.(112) With the advent of the Hydro-Thermal Program, the Northwest Power Act, and deregulation, however, this statutory rate scheme now threatens BPA's position as the region's cheapest and largest power supplier. Particularly troublesome is BPA's bond debt, most of which is attributable to nuclear power plant construction under the Hydro-Thermal Program.(113) This bond debt increased BPA's wholesale rate by six-hundred percent during the early 1980s(114) and currently totals nearly one-fourth of BPA's annual operating expenses.(115) Another major cost factor is the residential exchange program. Since its implementation in 1982, the exchange has cost BPA close to $2.5 billion, due primarily to high exchange loads and increased average system costs among participants.(116) Under BPA's rate scheme, these costs must be recovered from BPA's customers. The effect has been dramatic: BPA's four-hundred percent price advantage just ten years ago has fallen to only ten percent.(117)

This narrowing rate differential places BPA in a dilemma: how to recover its costs without losing its customer base. As competitors attract BPA's customers, BPA is statutorily obligated to recover its costs from a smaller customer base.(118) Remaining customers then face higher rates and have additional incentive to seek other suppliers, thereby exacerbating the problem. While BPA can sell power to other customers within and outside the Pacific Northwest, such sales are restricted by regional preference rights.(119) In addition, sales under the Pacific Northwest-Pacific Southwest Intertie will be difficult because California's market is experiencing surplus conditions.(120) Consequently, BPA's primary objective is to maintain its customer base.(121) However, even as BPA attempts to adjust to the deregulated market, recent salmon-related litigation added greater uncertainty to BPA's rate planning and threatens to impose significant new costs on BPA.

III. Salmon Litigation: The National Marine Fisheries Service's

Biological Opinion and the Northwest Power Planning Council's

"Strategy for Salmon"(122)

A. NMFS's Biological Opinion is Too Heavily Geared to the Status Quo 

In November 1991, the National Marine Fisheries Service (NMFS) listed the Snake River sockeye as an endangered species,(123) and in April IN@, it listed the spring/summer and fall runs of Snake River chinook as threatened.(124) In accordance with section @ of the Endangered Species Act of 1973 (ESA),(125) the federal agencies that operate the Federal Columbia River Power System - the BPA, the Army Corps of Engineers (Corps), and the Bureau of Reclamation (BOR) - consulted with NMFS on the annual river operating plan to ensure that operations would not further jeopardize threatened and endangered species.(126) NMFS's resulting biological opinion concluded that the proposed actions were unlikely to jeopardize existing salmon or their population recovery.(127)

In Idaho Department of Fish & Game v. National Marine Fisheries Service (IDFG),(128) the Idaho Department of Fish and Game and the State of Oregon, joined by four treaty Indian tribes(129) and several power users,(130) challenged the adequacy of NMFS's 1993 Biological Opinion. The challenge by Idaho, Oregon, and the Tribes focused on the federal agencies' solutions to stabilize dwindling salmon populations.(131) Judge Malcolm Marsh closely scrutinized NMFS's methodology, finding that NMFS used a two-step process in reaching its no-jeopardy conclusion.(132) First, NMFS considered whether the proposed hydro operations would achieve an interim goal of reducing mortality relative to an environmental base period (186-90).(133) Second, NMFS considered whether all proposed Columbia River actions (hydropower operations, harvest, hatchery releases, and habitat modifications) are reasonably likely to reduce salmon mortality over the long term such that populations will stabilize.(134) Without finding NMFS's methodology inappropriate, Judge Marsh found NMFS's biological opinion arbitrary and capricious and not in accordance with section 7(a)(2) of the ESA.(135) According to Judge Marsh, NMFS disregarded low range assumptions without well reasoned analysis and failed to consider the full range of risk assumptions.(136)

In addressing NMFS's efforts to "create a rational, reasoned process for determining"(137) how the federal agencies were progressing in their efforts to save the endangered species, Judge Marsh criticized the process as "seriously [and] `significantly' flawed,"(138) and too heavily geared towards a status quo that has allowed all forms of river activity to proceed in a deficit situation."(139) Marsh then concluded, without specification, that "the situation literally cries out for a major overhaul."(140) Finally, Marsh criticized NMFS and the other agencies for narrowly focusing their attention on operating with minimal disruption, rather than determining how to protect salmon species from jeopardy.(141)

Whereas Idaho, Oregon, and the Tribes maintained that the Biological Opinion did not go far enough in changing hydroelectric operations, the power users made several unsuccessful arguments that the Biological Opinion went too far. First, they asserted that the onus for change was unfairly placed on the hydrosystem instead of being shared equally with other activities such as harvest, habitat, and hatcheries.(142) Second, the power users claimed that recovery measures belonging under section 4 of the ESA were included in the section 7 jeopardy measures under the guise of reasonable and prudent alternatives.(143) Third, they maintained that NMFS's biological opinion action analysis process should be based on survival.(144) Fourth, they claimed that an agency action resulting in "improved `survival' as a matter of law could not be said to have reduced both the likelihood of survival and recovery' so as to constitute jeopardy."(145) These arguments were rejected because NMFS analyzes proposed actions for reduction in mortality, not for improved survival.(146) Agency actions reviewed by NMFS relate to the operation of the hydro system, rather than the life-cycle of the species.(147)

B. The Ninth Circuit Remands NPPC's "Strategy for Salmon"

In Northwest Resource Information Center, Inc. v. Northwest Power Planning Council (NRIC),(148) environmental interests, the Yakama Indian Nation, and various power users challenged the Northwest Power Planning Council's (NPPC) final amendments to the Columbia River Basin Fish and Wildlife Program, commonly known as the Strategy for Salmon.(149) The Ninth Circuit Court of Appeals held that NPPC violated the Northwest Power Act in at least two ways: 1) it failed to explain a statutory basis for rejecting the recommendations of fishery managers; and 2) it "failed to evaluate proposed program measures against sound biological objectives."(150) The Ninth Circuit remanded the Strategy for Salmon to NPPC, which was to provide written findings for any rejected recommendations.(151) In addition, the NRIC court favorably cited IDFG in expressing concern that NPPC's approach improperly focused on maintaining the status quo in hydropower operations.(152)

Finally, the court rejected the power users, argument that NPPC improperly favored salmon over energy by not performing a cost-benefit analysis of each program measure.(153) Such an analysis would involve "an evaluation of whether each of the Program,s measures imposes costs on the hydropower system that exceed the fish mitigation benefits each measure should achieve."(154) The Ninth Circuit, however, concluded that: 1) Congress did not intend for NPPC to perform such analyses; 2) "a fish and wildlife measure cannot be rejected solely because it will result in power losses and economic costs;" and 3) NPPC "must assess overall power and economic impacts so that the Program does not cause an inadequate, inefficient, uneconomic, and unreliable power supply."(155)

C. The Aftermath of IDFG and NRIC

In response to IDFG and NRIC, both NPPC and NMFS revised their respective fish recovery plans. NPPC amended its Strategy for Salmon in December 1994,(156) while NMFS issued a draft biological opinion in February 1995.(157) Both plans would improve in-river migration conditions, calling for changes in dam operations and water diversion to benefit fish - water that historically was devoted to hydropower generation, irrigation, and other commercial uses. The economic impact is likely to be significant. The plans themselves will cost between $170-200 million, bringing total annual fish and wildlife costs to nearly $500 million.(158)

The draft 1995-1998 NMFS Biological Opinion relies heavily on NPPC-developed biological data, but it is more cautious than NPPC's plan. The draft Biological Opinion calls for several measures aimed at improving the survival of both juvenile salmon migrating downstream and adult salmon migrating upstream. Included among these measures is river flow augmentation by increasing spillage in concert with each species' peak migration,(159) and continuing to barge juveniles from upstream dams to below the Bonneville Dam.(160)

While NPPC's plan similarly calls for increased spillage(161) and continued, but limited, barging,(162) it also recommends controversial phased-in drawdowns of Snake River reservoirs.(163) By reducing reservoir size behind Snake River dams, the downstream water velocity will increase and, it is hoped, enhance juvenile survival during migration.(164) NPPC is also mindful of the difference between NMFS's responsibilities under the ESA and NPPC's obligations under the Northwest Power Act.(165) Specifically, NPPC is concerned that NMFS's biological opinion relies too heavily on single species management at the expense of biological diversity and stable ecosystems in upstream storage reservoirs.(166) Water releases from upstream storage reservoirs could jeopardize trout, kokanee, and other resident fisheries in those reservoirs. Furthermore, NPPC warns that NMFS reliance on additional flows is more expensive than NPPC's plan and increases annual costs to the power system.(167)

IV. The Salmon Cases' Impact on BPA's Competitiveness

A. Incompatible Mandates

The salmon cases signal the courts' growing dissatisfaction with status quo salmon recovery measures, which both courts essentially characterized as taking small steps toward recovery while too quickly heeding economic hardship complaints by established river and power users.(168) In combination with the NRIC court's rejection of a cost-benefit approach to balancing power mandates against fish and wildlife benefits,(169) these findings and holdings strongly signal impending, dramatic changes in hydrosystem operations that are geared more toward salmon survival and recovery. However, in seemingly contradictory language, the Ninth Circuit stressed that in "[a]ttempting to balance environmental and energy considerations, the [Northwest Power] Act states that fish and wildlife protection measures cannot jeopardize an `adequate, efficient, economical, and reliable power supply.'"(170) In addition, the court recognized NPPC's inability to dictate federal river management.(171) Yet, tipping the scale again toward fish and wildlife programs, the court also noted the Northwest Power Act's mandate that BPA revenues finance biological restoration, with Congress fully expecting hydropower users to bear increased costs and lost profits to the extent the system is responsible for damaging regional fish and wildlife.(172) These seemingly incompatible mandates present difficult balancing issues for BPA and are currently being tested as BPA responds to challenges posed by deregulation.

B. An Adequate, Efficient, Economical, and Reliable Power Supply

As the Ninth Circuit recognized, the Northwest Power Act requires that there be an "adequate, efficient, economical, and reliable power supply."(173) According to NPPC, "adequate" and "reliable" are similar concepts differing primarily in their time horizon. Power supplies are "adequate" when current and planned power resources can meet long-term demand forecasts with a sufficient reserve margin.(174) NPPC believes that generating projects under construction, along with new and proposed generating projects, are adequate to offset any necessary reductions in hydropower operations designed to facilitate fish recovery measures.(175) Power supplies are "reliable" when there is short-term ability to meet load."(176) That is, except under the most extreme circumstances, BPA can meet all firm load requirements without interruption. Both NPPC and BPA maintain that reliability depends upon the ability of "power system operators ... to draft storage projects notwithstanding fish needs in emergency circumstances that threaten firm loads."(177)

NPPC views "efficient" as a more ambiguous term, particularly since true operational efficiency conflicts with fish and wildlife objectives.(178) NPPC therefore concludes that efficiency must be evaluated in light of the Northwest Power Act's dual objectives.(179) That is, the power system should be operated in the most efficient manner possible while fully implementing fish recovery measures.(180) Ultimately, however, economic inefficiency will impact the ability to provide an economical power supply.(181)

Perhaps the most troublesome term is "economical" which NPPC considers the "overriding consideration"(182) and is where the salmon cases' impact is most significant. According to NPPC, and as seems clear from the salmon cases, Congress intended in the Northwest Power Act to impose on BPA's customers the costs of fish and wildlife protection.(183) However, at some point the resulting power and revenue losses become "unreasonable;" that is, they burden consumers, discourage energy conservation and efficiency, preclude BPA from passing its costs through to customers, and threaten to undermine BPA's ability to repay the federal investment in the Federal Columbia River Power System.(184)

NPPC concludes that "from the standpoint of the region's economy and power system as a whole, it is unlikely that fish recovery measures would result in an uneconomical power supply, when compared to the rest of the nation.(185) However, NPPC is concerned with the effect that fish recovery costs will have on BPA's market position.(186) As discussed above, to the extent that new fish recovery measures increase BPA's costs, these increases will be reflected in BPA's rates.(187) In the now competitive wholesale market BPA's customers are largely free to seek other power supplies if BPA's rates become too high. A shrinking customer base only makes matters worse and eventually will threaten BPA's ability to repay the federal Treasury.(188) Consequently, having an economical power supply as compared to the rest of the nation does not necessarily mean BPA will remain competitive in the Northwest power market.

C. BPA's Response

1. Business Plan EIS 

In response to these legal and market pressures, BPA drafted a business plan that sets forth policies to guide "pricing, power marketing, transmission, and fish and wildlife activities," with the overall goal of improving operational efficiency and flexibility.(189) Specifically, the plan analyzes five business alternatives and their impacts.(190) BPA's proposed, or preferred, action is termed "Market Driven BPA," under which BPA is to be a "full participant" in the competitive marketplace, selling power, transmission, and energy services.(191) BPA believes this option will provide the financial strength required to meet its obligations under the Northwest Power Act.(192) However, the option is dependent upon the development, implementation, and success of marketing practices, and keeping costs down.

BPA believes that if it establishes a market position, it is more likely to retain customers and stabilize funding for fish and wildlife measures.(193) However, BPA cautions that even stable funding cannot ensure effective salmon restoration where the measures themselves are unproven.(194) At the same time, BPA is fully aware that failure to enhance salmon survival, along with the possibility that additional species will be listed as threatened and endangered, will lead to tighter constraints on hydropower operations.

BPA's proposed Market Driven action includes a new and important marketing program offering "unbundled products and services." "Unbundled products and services" refers to sales of power products and services traditionally sold in single "bundles" at the priority firm power rate to firm requirement customers.(195) That is, BPA's customers were required to pay for a bundle of products and services regardless of their need for the individual components. However, in anticipation of proposed FERC rules that will seperate BPA's power and transmission functions and competition, from other power suppliers offering more specialized power and service contracts, BPA is unbundling and repackaging its power and transmission products.(196) BPA's Market Driven action therefore offers products and services separately in proportion to the amounts customers use them.(197)

2. 1996 Rate Case

BPA is currently in its 1996 five-year rate case, the outcome of which is critical to BPA's future power sale contract commitments with its Direct Service Industrial (DSI) and public utility customers. The rates will impact pending decisions by these customer's concerning newly executed and future contracts with BPA. Nine of BPA's DSI customers signed block sale contracts in the Fall of 1995, committing to purchase approximately 2100 megawatts of power.(198) This sale, however, is conditioned upon approval of a satisfactory rate ceiling in the rate case.(199) BPA also is beginning to negotiate new five-year contracts with its preference customers.(200) Although five years remain on their existing contracts, BPA would like to offer flexibility to preference customers so that they may diversify their power resources.(201) By allowing preference customers access to the competitive power market, BPA hopes to retain a solid customer base into the near future.(202)

In the meantime, BPA initiated a stipulated rates, process. "Stipulated rates" is an interim measure that allows BPA time to cut more costs while it develops a competitive rate structure. The present stipulated rate is a four percent increase over the prior year's rate, effective from October 1, 1995 to October 1, 1996.(203) It imposes on customers a minimal rate increase, provides BPA with needed revenue, and gives BPA time to work on pending two-year and five-year rate schedules.(204) Initially, BPA proposed a two-tiered rate structure that imposed larger increases for aluminum companies and utilities with growing energy demand.(205) BPA has not entirely dropped tiered rates from its long-term market plans, but they have been shelved for the time being.(206) Three factors are behind this decision. First, due to lower prices, the tiered rate differentials are negligible.(207) Second, because customers are pursuing conservation measures, there is no need for BPA to provide a price for further incentives.(208) And third, tiered rates are a disincentive to doing business with BPA.(209)

The rate case also has impacted the residential exchange program. Although the exchange has been successful in eliminating rate discrepancies among residential customers, built into the program is Congress's concern that it not adversely affect BPA's "preference customers."(210) If there is such an adverse effect, BPA must downsize or eliminate the exchange so as to offset the harm.(211) In the present rate case, BPA has proposed reducing the exchange from about $200 million per year to an annual average of $65 million.(212) Investor-owned utilities currently benefitting from the exchange will feel the impact, possibly increasing residential customer rates by forty-five percent.(213)

D. Help From Congress and the Administration

No matter what steps BPA takes to adjust to deregulation and its fish and wildlife obligations, there still are market conditions working against BPA. The competitive wholesale market price for electricity for a five-year period is approximately 18 to 19 mills,(214) and BPA's competitors are offering to sell power at this price to BPA customers.(215) Although BPA's rates are competitive, it is difficult to guarantee rate stability. As discussed above, the Northwest Power Act requires BPA to both recoup its operating costs and repay the federal investment in the hydrosystem.(216) With the Ninth Circuit now suggesting that a major overhaul of federal hydro operations is necessary in order to implement effective salmon recovery plans, it seems clear that BPA's rates will face significant upward pressure. BPA's customers, in turn, are inclined to shop elsewhere for more stable pricing.(217) Thus, even though BPA's power is considered economical in comparison to the rest of the nation, the uncertain prospect of higher rates lessens the value of an immediate rate advantage.

Since this uncertainty is largely beyond BPA's control, BPA is looking to Congress and the Administration for relief. Currently, there are three major initiatives: 1) legislation to transform BPA into a government corporation; 2) government assistance in paying fish and wildlife costs; and 3) refinancing BPA's debt to the Treasury Department.

The draft legislation that would transform BPA into a government corporation is designed to enable BPA to operate in a more business-like fashion in order to better respond to market conditions.(218) BPA would be free of laws and regulations that govern agency management and administration, as well as laws affecting budgets, personnel, accounting, finances, property management, acquisition of supplies and services, and legal representation.(219) Free of these restrictions, BPA should operate more efficiently and at lower cost.(220) At the same time, however, the legislation would not weaken BPA's social and statutory obligations.(221) BPA's rates still will be subject to FERC approval, BPA must continue to meet regional load requirements, and BPA still must act consistently with NPPC's power plan and fish and wildlife program.(222)

With respect to federal appropriations the Administration and the Northwest's congressional delegation agreed in October 1995 to limit BPA's financial fish and wildlife obligations, establishing a so called "fish cap." Two principles underlie the agreement: 1) helping BPA attain greater financial certainty; and 2) assuring stable funding for BPA's fish and wildlife obligations. The agreement caps. BPA's annual fish and wildlife expenditures at $435 million for the next six years, which should be sufficient to ensure adequate financing of salmon recovery plans.(223) BPA will have access to another $325 million if poor water conditions or additional court-ordered mitigation drives BPA's costs above the cap.(224) The initial $435 million will be allocated between operations, capital investment repayment, annual operation and maintenance, and direct programs.(225) Operations include lost revenues and power purchases resulting from the 1995 Biological Opinion's river flow augmentation and spill requirements.(226) Capital investment repayment includes the cost of fish passage improvements at mainstem dams on the Columbia and lower Snake Rivers.(227) BPA will be responsible for certain annual operation and maintenance costs incurred by other agencies for fish and wildlife recovery activities, including lower Snake River compensation plan hatcheries.(228) Finally, direct program funding covers BPA's contracts with agencies and tribes in implementing measures required by the NPPC's Fish and Wildlife Program and NMFS's 1995 Biological Opinion.(229)

The fish cap is important for a number of reasons, including its unprecedented funding level for recovery of an endangered species. The cap also helps BPA remain a competitive power supplier by ensuring BPA's customers that skyrocketing fish and wildlife costs win not be passed through in the form of higher rates. Cost certainty also has beneficial environmental effects, primarily in that it refocuses the debate, at least in part, toward what is biologically best for fish recovery and away from what is best for the power industry and its customers.

Finally, Senator Mark Hatfield (R-Or.), Chair of the Senate Appropriations Committee, sponsored a bill to refinance part of BPA's debt to the U.S. Treasury.(230) The bill would allow BPA to refinance its pre-1974, congressionally appropriated debt at current Treasury market rates.(231) The bill passed both houses of Congress, but currently is hostage to the budget stalemate between Congress and the President.(232) When implemented, the rate impact is expected to be minimal, but it will supersede alternative refinancing plans that threatened significant rate increases.(233)

V. CONCLUSION

The salmon cases portend change in the status quo operation of federally-owned hydroelectric dams on the Columbia and Snake Rivers. This change will impose significant economic losses on BPA, other federal agencies, and other users of the rivers' resources, whether power- or fish-related.(234) Unfortunately, it comes at a time when BPA, the major funding source for both fish and wildlife restoration and economic development, is experiencing economic uncertainty in the midst of a changing utility markeplace. However, despite the market pressures, BPA is not shirking its statutory responsibilities under the ESA and the fish and wildlife provisions of the Northwest Power Act. BPA remains committed to these responsibilities.

In the next ten years, the Pacific Northwest will see a growing number of new generating facilities that the region would otherwise not have seen in a regulated market. These new competitors will vie with BPA for BPA's customer base, yet this competition must not tip the balance between regional loads and resources.(235) This new era of energy competition is similar to other periods in which BPA and the region's utility and environmental interests faced long-term change and uncertainty. In the 1970s, the region, based upon projected energy deficits, was committed to the development of nuclear power. In the 1980s, following the collapse of the nuclear power period, there was renewed uncertainty about regional energy planning and fish and wildlife decisions under the Northwest Power Act.

BPA's present uncertainty is based upon its inability to predict the rising costs of protecting and promoting the recovery of endangered salmon, in combination with BPA's inability to predict its success in a deregulated and competitive marketplace. An improved, efficient, and flexible response to the changing market conditions will help BPA maintain the financial strength needed to meet fish preservation costs without significantly increasing its rates. Over the long-term, current low-cost fossil fuels are likely to increase in price as supplies tighten. In contrast, BPA's hydropower is inflation-free and a virtually unlimited domestic resource. Thus, to sustain balance between fish and power, BPA must, instead of merely coping with change, lead the region into the present competitive era. (1) See infra text accompanying note 117. (2) 42 U.S.C. [sections] 13201-13556 (1994). (3) See generally Martin F. Medieros, Note, A Permissive Wheeling Scheme: Qualifying Facility Transmission Access Strategies and the Energy Policy Act of 1992, 28 Tulsa L.J. 521 (1993); see also Randy Hardy, Guest Editorial, Inland Country, Feb. 1995, at 1 ("The combination of more natural gas at lower prices, open transmission access and deregulation over the past several years means BPA now faces increasing competition from new, independent power producers, power marketers and brokers, and from existing utilities which are seeking new customers."). (4) See infra text accompanying note 117. (5) See Idaho Dep't of Fish & Game v. National Marine Fisheries Serv., 850 F. Supp. 886 (D. Or. 1994), vacated and remanded on other grounds, 56 F.3d 1071 (9th Cir. 1995); Northwest Resource Info. Ctr., Inc. v. Northwest Power Planning Council, 35 F.3d 1371 (9th Cir. 1994), cert. denied, 116 S. Ct 50 (1995). Spring/summer and fall Chinook and Snake River sockeye have been listed as endangered and threatened, respectively. 50 C.F.R. [sections] 17.11 (1995). (6) BPA ratepayers have invested over $1.7 billion in fish recovery projects since 1980. Bonneville Power Admin., 1994 Annual Report 23 (1995) [hereinafter 1994 Annual Report). (7) In Idaho Department of Fish & Game, 850 F. Supp. 886, the plaintiffs included the Idaho Department of Fish and Game, the State of Oregon, four treaty Indian tribes, and several powers users. In Northwest Resource Information Center, Inc., 35 F.3d 1371, and plaintiffs included environmental groups, power users, and Indian nations. (8) Northwest Power Planning Council, Columbia River Basin Fish and Wildlife Program (1994) [hereinafter F&W Program]. (9) 16 U.S.C. [sections] 839-839h (1994). (10) Id. [sections] 839(6). (11) Id. [sections] 839(2). (12) National Marine Fisheries Serv., U.S. Dep't of Commerce, Biological Opinion on 1993 Operation of the Federal Columbia, River Power System (May 26, 1993). (13) 16 U.S.C. [sections] 1531-1544 (1994). (14) See infra note 110 and accompanying text. (15) See 16 U.S.C. [sections] 839b(10)(a) (1994) (The Administrator shall use the Bonneville Power Administration fund ... to protect, mitigate, and enhance fish and wildlife to the extent affected by the development and operation of any hydroelectric project of the Columbia River and its tributaries ..."). (16) 1994 Annual Report, supra note 6, at 6-7. (17) 16 U.S.C. [sections] 839(4) (1994). (18) See infra notes 56-59 and accompanying text. BPA owes $7.3 billion for financing the construction of three Washington Public Power Supply System nuclear projects, along with other smaller generation and conservation investments. 1994 Annual Report, supra note, 6, at 19. (19) Although BPA has made efforts to lower its power costs, a recent draft National Marine Fisheries Service Biological Opinion estimates that proposed salmon preservation actions will cost up to $165 million dollars a year. National Marine Fischeries Serv., U.S. Dep't of Commerce, Biological Opinion: Reinitiation of Consultation on 1994-1998 Operation of the Federal Columbia River Power System and Juvenile Transportation Program. in 1994-1998 (Draft) (Jan. 1995) [hereinafter 1995 BO]. (20) Senator Slade Gorton (R-Wash.) recently suggested that three Columbia and Snake River salmon runs, currently protected by the Endangered Species Act, may be too expensive to save and, therefore, should no longer be maintained. Les Blumenthal, Gorton Would Let Some Runs Die, Kennewick Tri-City Herald, Jan. 20, 1995, at 8. (21) State of the Agency (Bonneville Power Admin., Portland, Or.), Jan. 1995, at 2 [hereinafter 1995 State of the Agency]. (22) 850 F. Supp. 886 (D. Or. 1994), vacated and remanded on other grounds, 56 F.3d 1071 (9th Cir. 1995). (23) 35 F.3d 1371 (9th Cir. 1994), cert. denied, 116 S. Ct. 50 (1995). (24) For a discussion on BPA's New Deal roots, see Michael C. Blumm, The Northwest's Hydroelectric Heritage: Prologue to the Pacific Northwest Electric Power Planning and Conservation Act, 58 Wash. L. Rev. 175, 191-200 (1983) (discussing how New Deal policy goals culminated in the establishment of BPA). (25) Bonneville Power Admin., Columbia River Power for the People: A History of the Policies of the Bonneville Power Administration 37-38 (1981) [Hereinafter BPA History]. In 1934, President Roosevelt was in a battle against privately owned utilities that were exercising monopolies. To combat these monopolies, reduce rates, and expand service to domestic and rural customers, Roosevelt introduced the federal government into the electric utility business. See Blumm supra note 24, at 194 (discussing how the New Deal federalized electric and water utility services). (26) BPA History, supra note 25, at 35. (27) public power advocates favored a large, Tennessee Valley Authority-type agency controlling power generation and transmission, establishing a uniform rate, and granting preference rights to publicly owned utilities. Blumm, supra note 24, at 198-99. private power interests, however, favored a more limited federal role, with the Army Corps of Engineers responsible for dam operation and power sales, limited federal transmission line construction, and rates based on transmission costs. Id. at 199. (28) 16 U.S.C. [sections] 832-832l (1994). (29) BPA History, supra note 25, at 63. (30) 16 U.S.C. [sections] 832a(b) (1994). (31) Id. (32) Id. [sections] 832c(a). (33) Id. (34) Id. [sections] 832e. (35) Id. [sections] 832d(a). (36) Blumm, supra note 24, at 203. (37) BPA History, supra note 25, at 124; Exec. Order No. 8526, 3 C.F.R. 704 (1938-1943), amended by Exec. Order No. 12,038, 3 C.F.R. 136 (1978). (38) BPA History, supra note 25, at 124. (39) Id. at 127-28. "Circuit miles" refers to "[t]he total length in miles of separate circuits or transmission lines." Bonneville Power Admin., BPA Definitions 13 (1994) [hereinafter BPA Definitions]. (40) BPA'S load dropped from 9 billion kilowatt hours in fiscal year 1945 to 6.2 billion kilowatt hours in fiscal year 1946. Id. at 128. (41) Id. at 134; Blumm, supra note 24, at 206. The revival began when the Defense Plant Corporation sold its aluminum facilities at bargain prices to attract new entrants and encourage competition. BPA History, supra note 25, at 135. (42) BPA History, supra note 25, at 136. (43) Id. (44) Id. at 200. (45) Id. (46) Id. at 203. (47) Id. at 203; Blumm, supra note 24, at 213. The Regional Solicitor's opinions were based in part on a 1940 opinion by BPA's then general counsel concluding that wheeling was allowable because the revenues generated could reduce the cost of public power. BPA History, supra note 25, at 203. (48) Columbia River Treaty, Jan. 17, 1961-Sept. 16, 1964, United States-Canada, 15 U.S.T. 1555. (49) Blumm, supra note 24, at 217. (50) Id. (51) Id. (52) Id. (53) Id. at 218. (54) Pub. L. No. 88-552, 78 Stat. 756 (codified at 16 U.S.C. [subsections] 837-837h (1994)). (55) BPA History, supra note 25, at 243. (56) Blumm, supra note 24, at 222. (57) Id. at 223. (58) Id. at 221. (59) Id. (60) Pub. L. No. 93454, 88 Stat. 1276 (codified at 16 U.S.C. [subsections] 837-838k (1994)). (61) 16 U.S.C. [sections] 838i(b) (1994) (62) BPA History, supra note 25, at 206. (63) 16 U.S.C. [sections] 838h (1994). (64) Pacific Northwest Electric Power Planning and Conservation Act of 1980 (Northwest Power Act), 16 U.S.C. [subsections] 839-839h (1994). (65) For a more thorough analysis of the Northwest Power Act, see Northwest Power Act Symposium, 13 Envtl. L. 593 (1983) (discussing the Northwest Power Act and its implications). (66) "[W]e are on the verge of a decade-long legal and administrative battle over the allocation of the large but limited pool of low-cost Federal power. Unless the allocation issue is resolved promptly through legislation, no utility will be able to dependably plan it's future needs and power supply." 126 Cong. Rec. S14,690-91 (daily ed. Nov. 19, 1980) (statement of Sen. Henry Jackson (D-wash.)). (67) "The conservation and enhancement of the great migratory fish and wildlife populations of the Pacific Northwest, ... are, for the first time, a matter of urgent priority under this legislation. They are place [sic] on a par with other purposes for Federal facilities in this area." 126 Cong. Rec. H10,680 (daily ed. Nov. 17, 1980) (statement of Rep. John Dingell (D-Mich.)). (68) 16 U.S.C. [sections] 839d(a) (1994). (69) Id. [sections] 839d(b). (70) Id. [sections] 839c(1). (71) What's New and How to Get Involved: Residential Exchange Program Defined, Journal (Bonneville Power Admin., Portland, Or.), Sept. 1995, at 2 [hereinafter What's New]. (72) Id. (73) 16 U.S.C. [sections] 839c(c)(3) (1994); What's New, supra note 71, at 2. (74) What's New, supra note 71, at 2; Edward A. Finklea, Bonneville Power Administration Ratemaking: An Analysis of Substantive Standards and Procedural Requirements, 13 Envtl. L. 929, 944 (1983). (75) 16 U.S.C. [sections] 839b(a)(2)(a) (1994). (76) See id. [sections] 839b(a). (77) Id. [sections] 839b(h)(11)(A). (78) 16 U.S.C. [sections] 2601-2645 (1994). (79) QFs include cogenerators and "small power producers," neither of which may exceed eighty megawatts in generating capacity. 16 U.S.C. [sections] 824a-3(a) (1994). Cogenerators simultaneously produce electricity and steam or some other form of useful energy. 16 U.S.C. [sections] 796(18)(a) (1994). "Small power producers" must use certain fuels, such as "biomass, waste, renewable resources, geothermal resources, or any combination thereof" 18 C.F.R. [sections] 292.204 (1995). (80) 16 U.S.C. [sections] 824a-3(b) (1994). "Avoided cost" is synonymous with the term "incremental cost of alternative electric energy," which PURPA defines as the "electric energy purchased from a qualifying generator or qualifying small power producer, the cost to the electric utility of the electric energy which, but for the purchase from such cogenerator or small power producer, such utility would generate or purchase from another source." Id. [sections] 824a-3(d). This provision is intended to promote alternative power production methods, such as small capacity generating plants and renewable resources. Leonard S. Greenberger, The Birth of Independent Power, 129 No. 6 Pub. Util. Fort. 17, 18 (1992); Jeffrey D. Watkiss & Douglas Smith, The Energy Policy Act of 1992 - A Watershed for Competition in the Wholesale Power Market, 10 Yaw J. Reg. 447, 452-53 (1993). (81) 16 U.S.C. [sections] 824a-3(e) (1994); see Public Utility Holding Company Act of 1935, 15 U.S.C. [subsections] 79 to 79z-6 (1994). (82) Greenberger, supra note 80, at 19. (83) Id. ("But IPPs have come about as far as they can under the existing regime, and we find ourselves at something of a turning point .... As you read these words, members of Congress are debating the future of the independent power industry."). (84) Pub. L. No. 102-486, 106 Stat. 2776 (codified in scattered sections of 15, 16, 38, and 42 U.S.C.). (85) 15 U.S.C. [subsections] 79z-5a(a)(1) (1994) (defining "exempt wholesale generators"); id. [sections] 7.9z5a(e) (exempting "exempt wholesale generators" from all PUHCA provisions). The proliferation of QF power in the 1980s, increased regulatory disallowance of utility investment in generating plants, and the success of state competitive bidding laws were viewed as sufficient safeguards in lieu of PUHCA. Watkiss & Smith, supra note 80, at 454. (86) See F&W Program, supra note 8, at C-17 (discussing the competitive effects of the Energy Act). (87) 16 U.S.C. [sections] 824j (1994). (88) Id. [sections] 824k(i)(1). (89) Id. [sections] 824k(i)(1)(ii). (90) Gas-fueled generating resources such as the natural gas fired combined cycle combustion turbine are the primary technology employed by BPA's wholesale competition. F&W Program, supra note 8, at C-17. Its low capital cost, small scale, efficiency, and low pollution aspects combine with low gas prices make this resource highly competitive. Id. (91) For example, the Clark County Public Utility District of Vancouver, Washington agreed to buy the output of a 245-megawatt combustion turbine unit, and the Snohomish County Public Utility District of Everett, Washington, shifted" part of its load away from BPA. 1995 State of the Agency, Supra note 21, at 5; Georgia-Pacific Switches 75% of Load to BPA, While Three firm Opt to Leave, Electric Util. Wk., Sept. 25, 1995, at 13. BPA's direct service industrial customers also are tempted by the new market to consider moving their loads elsewhere. (92) See William J. Baumol & J. Gregory Sidak, Stranded Costs, 18 Harv. J.L. & Pub. Pol'y 835, 835 (1995). Examples of typical stranded costs include: facility construction, power and fuel expenditures under long-term contracts, low-income subsidies, and conservation incentives. Id. (93) See Recovery of Stranded Costs by Public Utilities and Transmitting Utilities, 59 Fed. Reg. 35,274, 35,276-77 (to be codified at 18 C.F.R. [sections] 35) (proposed July 11, 1994). (94) Id. (95) Id. For current rulemaking, see 60 Fed. Reg. 17,662 (to be codified at 18 C.F.R. [sections] 35) (proposed Apr. 7, 1995). (96) 60 Fed. Reg. at 17,663. (97) 59 Fed. Reg. at 35,279. (98) See F&W Program, supra note 8, at C-28. (99) Id. at C-28; see supra text accompanying notes 56-59. (100) F&W Program, supra note 8, at C-28. (101) Bonneville Power Admin., Direct Service Industrial Customer Requirements Power Sale Contract, Administrator's Record of Decision 13-16 (Sept. 28, 1995) (on file with author). (102) Id. (103) 16 U.S.C. [sections] 838g (1994). (104) Id. (105) Id. [sections] 839e. (106) S. Rep. No. 272, 96th Cong., 1st Sess., at 22 (1979). (107) 16 U.S.C. [sections] 839e(g) (1994). (108) 16 U.S.C. [subsections] 825s, 838g(1), 839 (1994). (109) Finklea, supra note 74, at 931; 16 U.S.C. [sections] 838g (1994). (110) Finklea, supra note 74, at 933; 16 U.S.C. [sections] 832f (1994) ("Rate schedules shall be drawn having due regard ... [for] the cost of producing and transmitting such electric energy, including the amortization of the capital investment over a reasonable period of time.") The practical effect is that any net increase in BPA's operating costs must be passed through to customers. (111) See Finklea, supra note 74, at 933. (112) Between 1938 and 1965, BPA's uniform "postage stamp" rate held steady at $17.50 per kilowatt year. BPA History, supra note 25, at 85-86. The kilowatt year rate was discontinued in 1974. Id. (113) See supra text accompanying notes 56-59. (114) N.W. Energy News (Northwest Power Planning Council, Portland, Or.), July/Aug. 1993, at 4. Most of BPA's nonfederal project debt repayment of $7.3 billion is attributed to the costs of Washington Nuclear Plants 1, 2, and 3 and Eugene Water and Electric Board's 30% interest in the Trojan Nuclear Plant. 1994 Annual Report, supra note 6, at 32. This is $7.3 billion out of the total $16.3 billion FCRPS debt. Id. at 27. (115) 1994 Annual Report, supra note 6, at 26. In 1994, debt service on these bonds totalled $469 million. Id. at 18. Prior to refinancing in 1990, the annual cost was over $600 minion. Id. (116) Interview with Bill Leonard, Bonneville Power Administration, Power Revenues Analyst, in Portland, Or. (March 1995). (117) 1994 Annual Report, Supra note 6, at 26. (118) See supra note 110 and accompanying text. (119) See supra notes 53-55 and accompanying text. (120) Midpoint of the Decade, State of the Agency (Bonneville Power Admin., Portland, Or.), forthcoming Apr. 1996 (draft at 6, on file with author) [hereinafter Midpoint of the Decade]. (121) Making a Case for Rates, Issue Alert (Bonneville Power Admin., Portland, Or.), Feb. 1995 [hereinafter Case for Rates]; Midpoint of the Decade, supra note 120, at 3. (122) For a more thorough analysis of the issues surrounding and the implication of the salmon litigation, see Colloquium: Who Runs the River?, 25 Envtl. L. 349 (1995). (123) 56 Fed. Reg. 58,619 (Nov. 20, 1991); Bonneville Power Admin. et al, Draft Columbia River Systems Operation Review Summary 6 (July 1994). (124) 57 Fed. Reg. 14,653 (Apr. 22, 1992); Bonneville Power Admin. et al, Draft Columbia River Systems Operation Review Summary 6 (July 1994). (125) 16 U.S.C. [subsections] 1531-1544 (1994). (126) See id. [sections] 1536(c). (127) National Marine Fisheries Serv., U.S. Dept. of Commerce, Biological Opinion on 1993 Operation of the Federal Columbia River Power System (May 26, 1993). (128) 850 F. Supp. 886 (D. Or. 1994), vacated and remanded on other grounds, 56 F.3d 1071 (9th Cir. 1995). (129) These included the Warm Springs Tribe, Yakama Nation, Pez Perce Tribe, and Umatina Tribes. Id. at 886. (130) The power users included the Pacific Northwest Generating Cooperative, Direct Service Industries, and Public Power Council. Id. They argued against Idaho's motion, but claimed that although the 1993 hydropower operations were unlikely to harm the listed species, NMFS acted arbitrarily and capriciously in recommending flow targets far in excess of amounts supportable by credible science. Id. at 891. (131) Id. at 890-91. (132) Id. at 891-92. (133) Id. at 892. (134) Id. (135) Id. (136) Id. at 898-99. (137) Id. at 900. (138) Id. (139) Id. (140) Id. (141) Id. (142) Id. at 894. (143) Id. (144) Id. at 899. (145) Id. (146) Id. (147) Id. (148) 35 F.3d 1371, 1375 (9th Cir. 1994), cert. denied, 116 S. Ct. 50 (1995). (149) Id. at 1375. (150) Id. at 1395. (151) Id. (152) Id. at 1391. The court later criticized NPPC's approach as starting from the "the premise that only small steps are possible, in light of entrenched river user claims of economic hardship." Id. at 1395. (153) Id. at 1394. (154) Id. (155) Id. (156) See F&W Program, supra note 8. (157) See 1995 BO, supra note 19. (158) 1995 State of the Agency, supra note 21, at 6. The Council estimates that its plan, together with the cost of the current program, will cost approximately $450 million. Id. The predicted increase in the typical Northwest monthly electric bill would be $2 to $3. F&W Program, supra note 8, at 1-12. (159) 1995 BO, supra note 19, at 31. (160) Id. at 47. "NMFS research on transportation of juveniles has shown that collecting fish at upstream dams and transporting them below Bonneville Dam is a means to reduce loss of juveniles through the existing hydropower system and enhance the number of returning adults." Id. (161) F&W Program, supra note 8, [sections] 5.6C. (162) Id. [sections] 5.8. (163) Id. [sections] 5.4C. (164) The Council's stated biological objective is to "improve conditions for salmonid production by increasing flow and water velocity, decreasing downstream migration time for anadromous fish and decreasing quantity of habitat for predatory and competing fish species, while endeavoring to provide in-river conditions to maximize adult fish survival between dams." Id. [sections] 5.4. (165) Letter from Angus Duncan, Northwest Power Planing Council, to William Stelle, National Marine Fisheries Service 1 (Feb. 10, 1995) (on file with author). (166) Id. (167) Id. at 3. (168) See Idaho Dep't of Fish & Game v. National Marine Fisheries Serv., 850 F. Supp. 886, 900 (D. Or. 1994), vacated and remanded on other grounds, 56 F.3rd 1071 (9th Cir. 1995); Northwest Resource Info. Ctr., Inc. v. Northwest Power Planning Council, 35 F.3d 1371, 1395 (9th Cir. 1994),cert. denied, 116 S. Ct. 50 (1995). (169) NRIC, 35 F.3rd at 1394-95. (170) Id. at 1378 (citing 16 U.S.C. [sections] 839b(h)(5) (1994)). (171) "[T]he Council `can guide, but not command, federal river management." Id. (quoting John Volkman & Willis McConnaha, Through a Glass, Darkly: Columbia River Salmon, The Endangered Species Act, and Adaptive Management, 23 Envtl. L. 1249 (1993) (172) NRIC, 35 F.3d at 1395. (173) Id. at 1394 (citing 16 U.S.C. [sections] 839b(h)(5) (1994)). (174) F&W Program, supra note 8, at C-4. (175) Id. at C-8. (176) Id. at C-9. (177) Id. at C-11. Firm load is the load that is served, on a guaranteed basis, 100 percent of the time, and that BPA or another supplier has a contractual obligation to serve. BPA Definitions, supra note 39, at 48. (178) F&W PROGRAM, supra note 8, at C-12. (179) Id. at C-13. (180) Id. (181) Id. (182) Id. (183) Id. (184) F&W PROGRAM, supra note 8, at C-13. (185) Id. at 1-16. (186) Id. at C-27. The Council has concerns that, [g]iven the resources available, past investments in both power resources and fish recovery measures, the evolving competitive wholesale power market, and the possibility of additional fish recovery costs, it is conceivable that there could be an adequate, efficient, relatively economical and reliable regional power system in which Bonneville could not charge enough for its power to recover its costs. If that were to occur, Bonneville would be unable to make fun repayment of its debt to the federal Treasury or carry out its other purposes under the Act. If so, the Council could judge that the fish and wildlife program was not consistent with the purposes of the Act. Id. at C-17. (187) See supra note 94 and accompanying text. (188) F&W PROGRAM, supra note 8, at C-27. (189) Bonneville Power Admin., Business Plan: Final Environmental Impact Statement 1-3 (June 1995). (190) These alternatives are: 1) Status Quo (continue BPA's pre-1994 role in planning for long-term development of the regional power system, resource acquisition, transmission, and fish and wildlife activities as required by the Northwest Power Act); 2) BPA Influence (in addition to resource acquisition and fish and wildlife activities under the Act, BPA would use its position in the regional power market to promote customer compliance with the Act's goals); 3) Market Driven BPA (BPA would be a full participant in the competitive market for power, transmissions and energy services, and use success in those markets to ensure the financial strength necessary to meet the mandates of the Northwest Power Act and BPA'S other organic statutes); 4) Maximize BPA's Financial Returns (BPA would operate more like a private, for-profit business, and manage its resources to produce the most revenue while meeting energy conservation and fish and wildlife requirements of the Northwest Power Act); and 5) Minimal BPA Marketing (based on major changes in BPA's organic legislation, BPA would withdraw from the competitive market and confine its activities to meeting its revenue requirements through long-term sales of current federal system capability while meeting the fish and wildlife requirements of the Northwest Power Act). Id. at 2-9 to 2-13. (191) Id. at S-9. (192) Id. (193) See id. at 4-140 to 4-141. (194) Id. at 4-167. One example is the scientific debate surrounding the effectiveness of hatcheries and barging, which tend to be expensive. (195) Id. at 2-20. Typical products include energy and capacity, and typical services include load shaping and load following. Id. (196) Id. at 4-5. (197) Id. (198) Bonneville Power Admin., 1995 Pacific Northwest Loads and Resources Study (The White Book), Administrator's Record of Decision 124-125 (1995). (199) Bonneville Power Admin., Direct Service Industrial Customer Requirements Power Sales Contract, Administrator's Record of Decision 13 (Sept 28, 1995) (on file with author). (200) "Preference customers" are public utilities that by law are guaranteed access to federal power. BPA Definitions, supra note 39, at 65. (201) Midpoint of the Decade, supra note 12O, at 5. (202) Id. (203) BPA News: Agreement Reached One-Year Rate, BPA This Week (Bonneville Power Admin., Portland, Or.), Feb. 24, 1995. (204) Id. (205) Case for Rates, supra note 121, at 4. (206) Strategic Planning Results, Newsbreaker (Bonneville Power Admin., Portland, Or.), Feb. 24, 1995, at 2. (207) Id. (208) Id. (209) Id. (210) What's New, supra note 71, at 2. (211) Id. (212) Midpoint of the Decade, supra note 120, at 7. (213) Whats New, supra note 71, at 2. (214) 1.8 to 1.9 cents per kilowatt hour. (215) 1995 State of the Agency, supra note 21, at 5. (216) See supra notes 108-11 and accompanying text. (217) 1995 State of the Agency, supra note 21, at 5. (218) Northwest Power Planning Council, Draft Issue Paper: Draft Legislation to Make Bonneville a Government Corporation 4 (Oct. 25, 1994 hereinafter Draft Legislation]. (219) Id. (220) BPA estimates it would save $30 million annually and would have flexibility in making market decisions. See Give BPA Greater Flexibility, The Oregonian, Feb. 24, 1995, at B6 (editorial). (221) Draft Legislation, supra note 218, at 8-9. (222) See id. (223) Midpoint of the Decade, supra note 120, at 10-11 Status Report - Northwest Salmon Restoration and BPA (Bonneville Power Admin., Portland, Or.), Jan. 3, 1996 (draft on file with author) (hereinafter Status Report]. (224) Midpoint of the Decade, supra note 120, at 10; Status Report, supra note 223. (225) Status Report, supra note 223. (226) Id. (227) Id. (228) Id. (229) Id. (230) S. 92, 104th Cong., 1st Sess. (1995). (231) Id. (232) Midpoint of the Decade, supra note 120, at 4. The refinancing plan itself is not in dispute. Id. (233) Id. (234) The Columbia River System Operation Review look[ed] across the array of river uses and resources to discover which would benefit or suffer if system operations changed, [including] flood control, navigation, anadromous fish, resident fish, wildlife, hydroelectric power, recreation, irrigation, (observing that] [i]f you try to improve conditions for one river use, it may make things worse for others. Bonneville Power Admin. et al, Columbia River Systems Operation Review: Draft Environmental Impact Statement (Summary) 46 (July 1994). (235) A strong need for energy, standard will avoid the over-development of generating capacity due to an overly aggressive competitive market See Or. Admin. R. 345-111-025(1)(a) (1995). The Oregon "need for energy" standard provides that all energy must be demanded by customers. Id. Demand is shown by comparing firm energy demands with firm energy resources. Id.