Proposed Oregon bill addresses dam removal funding

The summary of the bill, Senate Bill 76, reads, “Directs Public Utility Commission to determine depreciation schedules for Klamath River dams based on assumption that dams will be removed in 2020. Requires affected public utilities to use depreciation schedules to establish rates and tariffs for recovery of undepreciated amounts prudently invested by public utility in Klamath River dams.

“Directs Public Utility Commission to require affected public utility to collect surcharges from customers for purpose of recovering costs incurred by public utility for removal of Klamath River dams. Imposes limit on amounts collected as surcharges. Provides that if commission determines that Klamath River dam will not be removed, commission may terminate collection of all or part of surcharges and direct refund of amounts collected or use of amounts collected for benefit of customers.

“Directs Public Utility Commission to allow affected public utility to include in rates and tariffs costs that are prudently incurred by utility by reason of changes in operation of Klamath River dams before removal of dams, or for replacement power after dams are removed. Declares emergency, effective on passage.”

The bill states that PacifiCorp, the “affected public utility,” can establish rates for recovering undepreciated amounts invested in Klamath dams, such as return on the investment, capital improvements required by the United States for continued operations of the dams, amounts spent in seeking relicensing of dams before the effective date of the bill, amounts spent by PacifiCorp under a settlement of the issues of relicensing or decommissioning of dams and amounts spent for decommissioning in anticipation of dam removal.

Also covered are the establishment of two surcharges “for the purpose of recovering the costs incurred by the public utility for removal of Klamath River dams,” one surcharge for the costs of removing the J.C. Boyle Dam and one surcharge for the costs of removing the Copco 1, Copco 2 and Iron Gate dams.

According to Oregon Natural Resources Policy Director Mike Carrier, having regulated public utilities go before their respective Public Utilities Commission (PUC) with rate increase requests is nothing new. The reason for bringing legislation, he said, is to ensure that the process will be done with parameters in mind.

“What we are trying to achieve is certainty for the company, shareholders and ratepayers,” Carrier said.

One important parameter is the inclusion of a cap on the surcharges that will be passed on to the ratepayers.

The language of the bill states, “The commission shall set the amount of the surcharges under this section to ensure that the total amount collected in a calendar year under both surcharges does not exceed more than two percent of an affected public utility’s gross annual revenue from rates as determined by the last general rate case for the public utility decided by the commission before January 1, 2010.“

Initial calculations point to a cap on the amount of the surcharges, equaling $200 million over 10 years, spread among all of PacifiCorp’s Oregon ratepayers.

The bill does not set a cap on rate adjustments by the company, which Carrier explained was a result of the uncertainty of the various costs that may be incurred in the future regarding the dams. He stated that regardless, any rate increase requests must go before the PUC, which will determine whether or not the increases can be shown to be reasonable and prudent.

The bill also features stipulations which require that in the event there are excess funds after dam removal, or if funds are collected and dam removal is no longer pursued, those funds be refunded to customers or to “otherwise use those amounts for the benefit of those customers.”

One other stipulation is that the Oregon PUC may enter into an agreement with representatives from the state of California to apportion costs fairly between residents of California and residents of Oregon that are affected.

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