No rate extension for irrigators

January 27, 2006

By STEVE KADEL

H&N Staff Writer

A recent federal ruling strengthens the chances that Basin irrigators will see major electricity rate increases this spring. And how much of a rate increase irrigators see could depend on which side of the Oregon-California border they're on.

The Federal Energy Regulatory Commission issued an order Jan. 20 denying a Department of the Interior request that current power rates charged by PacifiCorp be extended past the April 16 contract expiration.

“It was a punch in the gut,” said Greg Addington, executive director of the Klamath Water Users Association, which represents 17 irrigation districts in the Basin. “It's another hurdle, and we're getting used to hurdles.”

Oregon law provides a seven-year period to phase in big rate increases. But mitigation for the so-called “rate shock” doesn't exist in California, where the rate boost would be immediate.

A 50-year-old contract between irrigators and PacifiCorp's predecessor has held rates at six-tenths of a cent per kilowatt hour for Klamath Project farmers and ranchers. There are about 1,400 farms in the Project.

However, the regulatory commission's decision also would affect irrigators who are not part of the Project.

“Their rate is different from the Project, but is also low cost,” Addington said. “They are still looking at a rate increase.”

Those off-Project irrigators now pay three-quarters of a cent per kilowatt hour. PacifiCorp officials say Basin rates are about one-tenth the standard irrigation rate the utility charges users in the Willamette Valley and the Bend area, where the irrigation rate is about 5.5 cents per kilowatt hour.

Public utility commissions in Oregon and California ultimately will determine the rate structure for irrigators here, Addington said. That process is under way in Oregon and is set to begin next week in California.

Addington said the association believes Basin irrigators deserve lower power rates than those elsewhere.

“We will make our arguments that the Project provides a benefit to the (Klamath) river,” he said.

Water users contend the river has water year-round because of the Project, which regulates flow and water availability.

Addington noted that farmers near Medford and elsewhere around the state primarily use gravity irrigation. That's not the case in the Basin.

“You can't make a comparison to us and anywhere else in Oregon,” he said.

Association members realize that keeping the 1956 power rate might not be feasible, Addington said, although they hope for a compromise.

“There's still a chance we will pay a rate less than (PacifiCorp's) tariff,” he said. “We're trying to be realistic.”

PacifiCorp spokesman Dave Kvamme said the utility is talking to the California Public Utility Commission about establishing a phase-in process similar to Oregon's.

“We have been supportive of something that mitigates rate shock as long as it doesn't hurt our shareholders and other customers,” he said.

Kvamme said it's time Basin irrigators paid higher power rates because PacifiCorp's other ratepayers have been picking up the shortfall.

“The cost for this has been absorbed by all kinds of customers,” he said. “For 50 years they have had access to low power rates.”

Meanwhile, Bureau of Reclamation spokeswoman Rae Olsen said the regulatory commission's ruling isn't necessarily a done deal.

“Interior is requesting a rehearing of the order and will also continue to pursue efforts with the California PUC to encourage at least a phase-in of power rates,” she said. “Reclamation's position is that, if feasible, a cost-based power rate should be negotiated which recognizes the value of water control and availability for PacifiCorp's operation from the Klamath Project.”

Scott Seus, a Tulelake farmer who serves as chairman of the Klamath Water Users Association's power committee, agrees with Olsen that the issue isn't settled - particularly with decisions by the two states' public utility commissions still to come.

“I would not by any means say the nail is in the coffin for the irrigators,” he said. “I don't want irrigators to think we have given up the fight. The economics of the Basin are at stake, so we're keeping this alive.”

If the regulatory commission's decision stands, Seus said, it would have a damaging effect on local wildlife refuges and flows back down the Klamath River.

“The cost would be high enough that there would be an impact to Project operations,” he said.