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Power Council Continues to Struggle with BPA Budget Crunch by Bill Rudolph NW Fishletter, January 31, 2003

Members of the Northwest Power Planning Council received more sobering news from BPA officials last week. During an emergency council meeting, BPA representatives said that just paying for programs related to the BiOp may eat up most of this year's $139 million fish and wildlife budget. Though some council members pointed out that the NW Power Act spells out a broader mission--to enhance fish and wildlife throughout the region, not just salmon and steelhead stocks listed under the ESA--they had to agree that ESA stocks are the power agency's top priority.

BPA is projecting a deficit of $1.2 billion through 2006, largely due to lower-than-expected demand and prices for surplus power. The situation has put the agency in a major cost-cutting mode, and a dismal snow pack this winter may add at least another $250 million to that deficit and lead to a double-digit boost in power rates that may be announced next week.

Sloppy accounting in the fish and wildlife division added to agency woes when more than $40 million in continuing obligations from previous years' contracts appeared in FY 2003. Such a deferral would normally be no problem at all, but the agency's severe cash flow difficulties have changed the situation.

The budget crunch is expected to have severe repercussions outside of the ESA arena. Fish managers have suggested using some of BPA's potential $700 million in additional borrowing authority, which the Senate added to the omnibus spending bill to help bail out the fish and wildlife program.

Faced with cutting an original fiscal year 2003 fish and wildlife budget of $174 million down to $139 million, BPA has estimated that $120 million will be needed to pay for proposals and projects that satisfy the BiOp obligations to improve ESA-listed fish stocks. The agency says the $120 million is an "overestimate" because some projects included elements not necessary to address "critical needs."

The agency is also faced with development of a huge monitoring and evaluation program that will measure progress towards improving fish runs at three- and five-year check-in points. If listed fish runs on the Snake River don't show adequate improvement, studies would be triggered to investigate breaching the lower Snake dams. Estimated cost for the new monitoring plan alone is $15 million for FY 2003, $22 million for FY 2004 and over $27 million in FY 2005, with some of those costs already embedded in current proposals.

That means budget cutters have to trim about $40 million from the $59 million worth of other fish and wildlife projects in the Columbia Basin. In regions where little BiOp money is spent, like Montana, the burden of reducing costs would be relatively high compared to other areas (called "ecological provinces" in council lingo), where more projects are focused on improving ESA-listed stocks.

More Number Crunching Ahead
Washington's Tom Karier, the power council's new vice chair, is worried about impacts to non-listed species, but he's even more concerned about getting the budget numbers right. "BPA hasn't processed the numbers," Karier told NW Fishletter.

He said there is evidence of some double-counting and miscounting in BPA's admittedly cursory review that pegged its BiOp obligations in the $120 million range for this fiscal year. Karier said reality could be "plus or minus 20 percent or more." The power agency "needs to identify the critical elements of the BiOp," he said, suggesting that some monitoring and evaluation costs could be reduced. Such costs now account for more than half of project totals, Karier noted.

Montana member John Hines said it's essential to maintain some flexibility in spending, especially in the carry-forward area. But he admitted that if BPA sticks to its original designations for funding priorities, his own group could be in an awkward position. "I don't know where that leaves the council," he said, acknowledging that BPA has the ultimate word when it comes to paying for the fish and wildlife program.

The Council is developing its own set of principles for prioritizing projects and selecting deferrals to cope with the crisis. At the top of the list developed by staff is maintaining critical elements of the BiOp check-in requirements. Second in importance is maintaining past investments in tributary passage and protection of productive habitat, along with paying for hatchery operations.

Funding for research projects that don't help BiOp check-ins will likely be deferred, along with other proposals that "do not immediately contribute to the productivity of a species affected by the hydro system," and projects that were not reviewed by the independent science panel and/or explicitly approved by the council.

Council staffer Doug Marker, who heads the group's F&W division, said high-level officials from both agencies went over some proposals last week to get a sense of what they are in for. Although it was still unclear why some proposals satisfied BPA's obligations while similar ones did not, he said the preliminary exercise whittled down BPA's BiOp budget to about $93 million from its original $120 million. He said the agency was working on an updated list to produce more concrete numbers.

Council staffer Mark Walker has been charged with soliciting members' opinions about the debt ceiling issue. With the Senate recently giving the nod to the $700 million bump in BPA's borrowing authority from $3.75 billion to $4.45 billion, some fish managers have already suggested using it as a way out of the budget mess, even though it has yet to make it through the House.

If passed, most of the expanded debt authority will allow BPA to upgrade its transmission system to reduce congestion and improve reliability. But the Columbia River Inter-Tribal Fish Commission has asked the council to consider sending a letter to both the House and Senate Appropriations committees and the Northwest congressional delegation, requesting that some of the new borrowing authority be earmarked for fish and wildlife capital projects, such as hatchery modifications and operations, irrigation diversion, and land acquisitions. CRITFC wants $180 million to be available over the life of the rate case period, including $36 million a year to fund the BiOp. But the Senate deal includes BPA's promise not to use the additional authority until 2004 or 2005 when it expects to reach the current debt limit (see story 4).

Council members were still mulling over the issue at press time. Council chair Judi Danielson of Idaho said she wanted to confer with her Senator, Republican Larry Craig, one of the sponsors of the legislation to boost BPA's debt, before commenting.

Craig staffer George O'Conner told NW Fishletter that fish managers shouldn't count on any money from the potential boost to BPA's debt ceiling. "It is not for that purpose," he said. O'Conner said it had been a "brutal battle" to get the deal through the Senate and any attempt to pay for fish costs could be used by political opponents to kill it in conference.

"It would be a shame if the region was punished over the fish issue," O'Conner said, noting that the region was lucky to convince the Administration of the need for the debt boost to pay for services the Northwest will need in two or three years. "This is for hospitals and schools, not for fish," he added.

Washington's Karier said the budget analysis has to be pinned down before anything else happens. BPA wants the Council to finish its prioritization process by Feb. 21. To that end, members agreed to meet in another emergency session Feb. 13, less than a week before their regularly scheduled monthly meeting.