Testimony of George Caan, Executive Director

Colorado River Commission of Nevada

on behalf of

Colorado River Energy Distributors Association (CREDA)

On S. 1258

Senate Water and Power Subcommittee

Thursday, July 26, 2007

Mr. Chairman, Members of the Subcommittee, I am George Caan, the
Executive Director of the Colorado River Commission of Nevada. I am
appearing here today on behalf of the Colorado River Energy Distributors
Association (CREDA), of which the Colorado River Commission is a member.
CREDA is one of the members of the coalition of water and power users
who are actively supporting this legislation.

I am pleased to appear before you today to testify in support of S.
1258, a bill to amend the Reclamation Safety of Dams Act to include
express authorization, oversight and cost sharing by water and power
customers of the costs of site security. I would also like to express my
appreciation to Senator Cantwell for taking the lead on this important,
bi-partisan legislation and to Senators Wyden, Smith, Hatch and Allard
for co-sponsoring it.

CREDA is a non-profit organization representing consumer-owned electric
systems that purchase federal hydropower generation of the Colorado
River Storage Project (CRSP). CREDA was established in 1978, and serves
as the \"voice\" of CRSP power customers in dealing with resource
availability and affordability issues. CREDA represents its members in
working with the Bureau of Reclamation (Reclamation), as the owner and
operator of the CRSP, and the Western Area Power Administration (WAPA),
as the marketing agency of the CRSP.

CREDA members are all non-profit electric utilities and organizations
and serve over four million electric consumers in the six western states
of Arizona, Colorado, Nevada, New Mexico, Utah and Wyoming. Through
long-term power contracts with WAPA, CREDA members purchase over 85
percent of the CRSP hydropower generation and ensure repayment of the
federal investment in the CRSP.

Mr. Chairman, the safety and security of the facilities operated by
Reclamation are critical to millions of Americans. The issue of how to
pay for the costs of post 9/11 security measures at multi-purpose dams
owned and operated by Reclamation is not a new one.

Immediately following the September 11, 2001 terrorist attacks,
Reclamation initiated an aggressive program to protect its dams against
terrorist attacks. Based on World War II precedent and internal legal
analysis by the Department of the Interior, the Commissioner of
Reclamation in April 2002 issued an administrative determination that
the costs of increased security measures should be a federal obligation,
non-reimbursable by project beneficiaries. Beginning in Fiscal Year
2005, however, the Administration's position shifted, and Reclamation
began to assign a significant portion of the security costs to water and
power customers.

CREDA and virtually all other water and power customers objected to this
change in policy, on several grounds. One was the deviation from
historical precedent.

Other important concerns, however, included the lack of cost controls on
the security program, its lack of transparency and the fact that
Reclamation assigned reimbursable costs only to water and power users,
not to other project beneficiaries. In fact, approximately 94 percent of
the reimbursable costs were allocated to power customers in our region.
We did not think this was fair and do not believe Reclamation's
allocation of costs was based on any objective, fair allocation of the
costs and associated benefits of the security measures.

Our efforts to modify Reclamation's policy on reimbursable costs peaked
at the oversight hearing the House Water and Power Subcommittee held on
June 22, 2006. At that time, an array of witnesses representing water
and power customers from virtually all regions testified, with one
voice, about the need to expressly authorize the site security program
to provide: 1) effective Congressional oversight; and 2) an equitable,
durable allocation of costs.

Following that hearing, CREDA and other power and water interests worked
to develop a consensus on legislation that would be clear, fair and
consistent with existing Reclamation policy. Although we discussed other
alternatives, the power and water representatives jointly decided that
amending the Reclamation Safety of Dams Act to authorize the site
security program made good policy sense. The approach embodied in S.
1258 and the principles (see attachment) on which the legislation is
based, are supported by organizations representing over 80 million
Americans.

The Reclamation Safety of Dams program was first authorized in 1978,
following the Teton Dam failure. It authorized modifications needed as a
result of new hydrologic or seismic information or changes in state of
the art dam technology. The safety and the security of these facilities
are critical, regardless of the cause. Therefore, we think the site
security program fits nicely into the existing policy and legal
framework of the Safety of Dams program.

We also think the 15 percent cost share, which was added to the Safety
of Dams program in 1984 and has been reaffirmed by Congress since then,
is reasonable, appropriate and fair. The remaining site security costs
would remain a non-reimbursable, federal obligation.

CREDA endorses S. 1258 because it contains the following:

-   An express authorization of the site security program, as part of
    the Safety of Dams program;

-   Application of the existing Safety of Dams Act 15 percent cost share
    for water and power users for all site security costs, including
    capital and O&M costs; and

-   A requirement that Reclamation report annually to Congress on site
    security activities undertaken for each fiscal year. Those reports
    shall include information relating to a five year planning horizon
    for the program and will show both pre 9/11 and post-9/11 costs for
    building and site security activities.

CREDA believes that S. 1258 would be a "win-win" for the American
public, for water and power customers and other beneficiaries at
multi-purpose Reclamation projects and for the federal government. We
urge its swift passage.

Thank you for the opportunity to present these comments.

# Bureau of Reclamation Building and Site Security Program

*July 4, 2006*

## Position Statement

The Colorado River Energy Distributors Association (CREDA), the Northern
California Power Agency (NCPA), the Sacramento Municipal Utility
District (SMUD), the Washington Public Utility District Association
(WPUDA), the Mid-West Electric Consumers Association (Mid-West), the
Northwest Public Power Association (NWPPA), the National Water Resources
Association (NWRA), the American Public Power Association (APPA), the
National Rural Electric Cooperative Association (NRECA), the Family Farm
Alliance (FFA), the CVP Water Association, the Upper Colorado River
Commission and the four Upper Colorado River Basin States (collectively
"Parties") believe that Congress should expressly authorize oversight of
the Bureau of Reclamation's (BOR) Building and Site Security program to
ensure accountability to Congress and provide cost certainty to funding
stakeholders through an equitable, durable allocation of reimbursable
costs.

#### BACKGROUND

The Parties believe that security measures instituted at Bureau of
Reclamation Facilities as a response to the attacks of 9/11 should be
the cost responsibility of the United States Government and should be
funded through appropriated, non-reimbursable dollars. The Parties have
worked diligently with Congress, the administration, and other
stakeholders over the past five years on this issue.

The protection of these facilities benefits all project beneficiaries,
as well as the public. If power facilities were not part of the project
there would still be substantial security cost investments. If a portion
of security costs is to be a repayment responsibility of the power and
water customers it should be based on a fair share of the costs with
some level of certainty that these costs will remain reasonable, stable
and appropriate.

In its proposed FY 2006 budget as well as discussions with the Parties,
the Bureau of Reclamation (BOR) indicated that only the costs of guards
and patrols would be reimbursable, and that the costs of facility
fortification would remain nonreimbursable. However, in its 2006 Report
to Congress (issued in March), the costs of "facility fortification
upgrades"[^1] are also listed as reimbursable. The practical effect of
this approach is that ALL costs at some point are reimbursable. Not only
is this inconsistent with stated BOR direction, it is inconsistent as
well with the title of the report ("Reimbursement of Security Guard and
Patrol Costs on Bureau of Reclamation Facilities").

The Parties believe that authorizing legislation is necessary to ensure
appropriate Congressional oversight and to provide some certainty to the
funding stakeholders in terms of a fair, durable and equitable
allocation of costs.

The Parties take no position as to the mechanism used to generate funds
that are not funded through reimbursable revenues.

**LEGISLATIVE PRINCIPLES**

Authorizing legislation should include the following essential features:

1.  BOR will report annually to the House and Senate Committees on
    Homeland Security, Resources and Appropriations on security
    actions/activities taken in the prior fiscal year and proposed for
    the upcoming fiscal year and the sources and expected sources of
    reimbursable and nonreimbursable funding for each type of action.

## 

2.  The capital cost of security enhancements or fortifications
    ("hardening"), including the operation, maintenance and replacement
    of such enhancements or fortifications, shall continue to remain
    non-reimbursable.

3.  Funding stakeholders to reimburse costs of Guards and Patrols at
    National Critical Infrastructure (NCI) Facilities up to a level that
    does not exceed the FY 2006 Congressionally-approved level of \$10
    million[^2], indexed for inflation.

4.  Such reimbursable funds to be spent only on Guards and Patrols at
    NCI facilities and allocated among NCI Facilities in the same
    delineation as allocated in FY 2006.[^3]

5.  BOR is authorized to enter into bilateral contractual arrangements
    with funding stakeholders, if stakeholders are willing to do so, in
    lieu of seeking appropriated funds for Guards and Patrols.

6.  In the event of a change in the level of national security threat,
    BOR will immediately notify Congress and with the funding
    stakeholders seek approval of Congress to adjust the reimbursable
    costs for Guards and Patrols until such time as the threat level
    changes.

7.  BOR must facilitate appropriate actions to allow funding stakeholder
    review, input on and management of work program elements, including
    security enhancements, on at least a five-year planning horizon,
    detailed by pre- and post-9/11 and by category (fortification,
    guards and patrols).

[^1]: Report to Congress "Reimbursement of Security Guard and Patrol
    Costs on Bureau of Reclamation Facilities", February 2006, page 5.

[^2]: Id, page 1.

[^3]: Id, page 11.