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BPA Calls for Deep Cuts to FY 2003 Fish Spending

by Bill Rudolph
NW Fishletter, December 17, 2002

BPA went public last week with more bad news on its current financial crisis. With payments snowballing to fund projects from previous years, the agency said it needs to cut the Columbia Basin's fish and wildlife direct program's estimated $180 million budget by $40 million or more for this fiscal year.

The Northwest Power Planning Council heard the news straight from BPA Administrator Steve Wright, who addressed the members Dec. 10 at their monthly meeting in Portland. Wright outlined the power agency's fiscal problems and ongoing attempts to resolve them--mainly by slashing budgets in all areas. In November, he had told the region that BPA faced a $1.2 billion deficit through 2006. In addition to cutting spending and entertaining the possibility of a rate increase, that meant significant cuts to fish and wildlife budgets were likely.

Earlier this year, Wright sent shock waves through the fish and wildlife community when he told the council he was looking to reduce all BPA budgets, including funding for the F&W program. BPA spends about $500 million annually on fish-related programs, a sum that includes the direct program, capital reimbursements and hydro operations to improve fish passage, along with power purchases to make up for energy foregone from spill operations. At that time, Wright said BPA needed to cut its total fish-related costs by $200 million over the life of the rate case, or about $50 million a year.

But last week, Wright said $137 million in expense accruals to the fish and wildlife program--previous obligations to spending that have finally come due--threaten to derail this year's budget. And with the poor start for the water year, he said the odds were increasing that power rates would go up even if the agency could cut overall spending by $500 million through 2006.

Wright asked council members for their help in prioritizing the F&W budget, outlining steps to make sure that FY 2003's expense accruals don't exceed $139 million and to prioritize spending to keep annual costs of the direct program below that level throughout the ongoing rate period.

Wright said spending for core projects that help the agency comply with the hydro BiOp should be at the top of the priority list, especially spending that helps the agency meet NMFS requirements for fish survival at the 2003 and 2005 check-ins. Wright wanted the council's prioritized recommendations by Feb. 21.

Earlier that day, Sarah McNary, head of BPA's Fish and Wildlife Division, briefed the council's Fish and Wildlife committee on the agency's finances. McNary said the latest draft of BPA's expected FY 2003 expenses comes to almost $180 million, a total that includes spending for contracts already issued and BPA overhead. Another $6 million is expected to fund contracts in the mainstem/systemwide category that haven't yet completed the approval process, along with $14.5 million in capital spending. The bad-news bottom line was that the total topped earlier budget estimates in the rate case by a whopping $40 million.

McNary said 2002 carry-over obligations were $45 million, up from $15 million in 2001. Over the past year, many new contracts have been added to the program to begin implementation of BiOp measures that help the hydro system meet fish-related commitments required under the Endangered Species Act.

To cut costs, BPA has already decided to put all purchases of land or conservation easements on hold, she told the committee. As for contracts coming up for renewal, the agency was in "kind of a holding pattern" to fund enough to preserve existing investments.

Council staffer Doug Marker said his own people would be working with BPA staff on a "project-by-project" basis and would bring in staff from the Columbia Basin Fish and Wildlife Authority as well.

In October, Marker warned the council about the accruals. He told members that BPA needed to change its accounting methods because its financial crisis made tracking accruals "essential." Until now, the federal power agency has kept track of its fish and wildlife spending "obligations," he told the council. An obligation, Marker said, recorded the commitment of funds to a contract, but an accrual actually recorded the payment for the contract. Marker said all other sections of BPA were managed by accruals accounting.

On Thursday morning, McNary addressed the full council and took a fair amount of heat from members. Washington's Tom Karier said the entire policy must be addressed. "It won't be resolved by a project-by-project review," he said.

Some council members criticized BPA, saying the agency had never reached the upper limit of funding commitments in the previous rate period. BPA has long argued that those commitments represented the upper limits of spending, not a real pot of money that could be shifted to a future year's fish budget if it wasn't used. Oregon's Eric Bloch said the numbers need to be checked, "to know exactly what is the problem."

Council Chair Larry Cassidy called for a special meeting this Thursday to deal with the issue--something he hasn't had to do in his three years of leading the group. He pushed for BPA to finalize its numbers. "I have no conception how anybody can run any agency with existing contracts not fully defined. I've run a lot of businesses--and if you had unsigned ones out there--undefined--I'd understand it."

Cassidy said the council needs to know exactly what the bottom line is so they can choose whether to weigh in or not. "The way the Administrator [Wright] put it to us, my personal view is we don't have any choice but to get involved because I think we could do a lot better job than Bonneville."

Tribal entities were predictably outraged at the potential cuts. "BPA is showing an appalling lack of consistency and trust," Justin Gould, chair of the Columbia River Inter-Tribal Fish Commission, said in a press release. "Former BPA Administrator Judi Johansen repeatedly promised the tribes that BPA would meet its fish and wildlife obligations," Gould said, "even if it had to miss a Treasury payment."

Bill Rudolph
BPA Calls for Deep Cuts to FY 2003 Fish Spending
NW Fishletter, December 17, 2002

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