12/4/13 19th Annual Report to Congress, document 99-14
rion ANY WabtwLire 2299UcD

A. Columbia River Basin fish and wildlife decision-making

The Council is working with state, federal and tribal governments to improve the coordination of fish and
wildlife mitigation and recovery planning, and decision-making, while at the same time implementing and
preparing to amend its own Columbia River Basin Fish and Wildlife Program. Efforts are under way to improve
the coordination of existing fish and wildlife mitigation and recovery processes and also to discuss
alternatives for improving decision-making and governance in the future.

As well, in July 1999, the Governors of Idaho, Montana, Oregon and Washington asked the Council to
prepare an annual report that provides an accounting and assessment of Bonneville’s fish and wildlife
expenditures. The Governors asked that the initial report also document, to the degree possible, past
expenditures, program successes and failures. Through the annual report on the program, the Governors
intend that the region be assured that the best results are being achieved for the significant investment in
the Columbia River Basin.

Here is a brief review of major efforts the Council undertook or participated in this year:

1. Review of major capital improvements for salmon passage at_ mainstem dams

In the Conference Report on the Fiscal Year 1998 Energy and Water Development Appropriations Act,
Congress directed the Council, with assistance from the Independent Scientific Advisory Board (ISAB), to

review the mainstem capital construction program of the U.S. Army Corps of Engineers at hydroelectric
projects on the Columbia and Snake rivers. In the review, the Council and the ISAB evaluated the technical
need for various fish- passage strategies at the dams. In its review of the Corps’ program, the ISAB
reported, in part:

"Regional salmon restoration plans and their implementation by the Corps can benefit from more
biologically driven decisions addressing a broader diversity of life history types and species.
Other grounds for decisions, such as the desire to retain familiar technologies, politically driven
choices of projects and sites, and narrow concepts of the species and stocks to be protected,
need to be exchanged for tests based on the criteria of biological effectiveness. Some of the
projects we reviewed met these criteria very well, although others did not. Common principles
from our review of projects need to be incorporated into revised plans. A process for developing
and incorporating new biological and ecological insights of value for fish passage should be part
of the fish passage decision process."

The report is available from the Council (Document ISAB-99-4).

2. Review of artificial production of fish in the Columbia River Basin

In the same conference report, Congress asked the Council, with the assistance of the ISAB, to review all
federally funded artificial production programs in the basin and report to Congress with "a formal
recommendation for a coordinated policy for the future operation of federally funded hatcheries" and a
recommendation for "how to obtain such a coordinated policy." The Council and the Scientific Review Team,
which included four ISAB members, two additional scientists with expertise in fish production and a scientist
from the Council staff, completed a draft set of recommendations for public comment in May 1999. The
draft, document ISAB 99-7, is available from the Council or at the Council's web site. In general, the
Council recommends that the purposes and rationale for fish hatcheries in the Columbia basin be reviewed
over the next three years in the context of current scientific thinking about the role of artificial production
for both harvest purposes and to rebuild naturally spawning runs. The Council planned to submit its
recommendations, which are based on an application of scientific and management principles, to Congress
in October.

3. Review of the Bonneville Power Administration's reimbursable account programs

In the Fiscal Year 1999 Conference Report on Energy and Water Development Appropriations, Congress
asked the Independent Scientific Review Panel, which conducts an annual review of projects proposed for
funding by Bonneville through the Council's fish and wildlife program, to begin an annual review of programs
that are reimbursed in whole or in part by Bonneville. These include projects funded through the Corps of
Engineers (fish passage facilities at dams, wildlife mitigation and hatcheries) and the Bureau of Reclamation
(the Leavenworth hatchery complex), and by Bonneville outside the Council's program, such as the Lower
Snake River Compensation Program. The purpose of the annual review is to determine the consistency of
the reimbursable projects with the scientific criteria included in Section 4(h)(10)(D) of the Northwest Power
Act, the section that directed the Council to create the ISRP in 1996. In general, the section directs the
ISRP to determine whether projects proposed for funding through the Council's program are based on sound
science and have provisions for monitoring and evaluation. With this review, all Columbia River projects

funded in nart ar in ushalea hy Rannavilla will ha cubiact ta annual eciantific raviaw Thic vaar haranea it

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19th Annual Report to Congress, document 99-14

Aa iw. UySIs AVEHUS

Pendleton, Oregon 97801
Telephone: 541-276-0657
Fax: 541-276-0995

WASHINGTON

Frank L. "Larry" Cassidy, Vice Chair
Vancouver:

c/o Flo-Rite Products

P.O. Box 2187

Vancouver, WA 98668

Vancouver telephone: 360-693-6951
Vancouver fax: 360-699-4093

Olympia:

1111 Washington Street, Mail Stop 43200
Olympia, WA, 98501-1091

Olympia telephone: 360-902-2302
Olympia fax: 360-902-2319

Tom Karier

W. 705 First Avenue - MS1
Spokane, WA 99201-3909
509-623-4386

Fax: 509-623-4380

CENTRAL

851 S.W. Sixth Avenue, Suite 1100
Portland, Oregon 97204
Telephone: 503-222-5161

Fax: 503-820-2370

Toll Free: 1-800-452-5161

Executive Director: Steve Crow
Power Division Director: Dick Watson

Fish and Wildlife Director: Bob Lohn
Public Affairs Director: Mark Walker
General Counsel: John Shurts
Administrative Officer: Jim Tanner

* top

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12/4/13 19th Annual Report to Congress, document 99-14
Fiscal Year 2000 Annual Implementation Work Plan. Some 435 project proposals were submitted to
Bonneville for Fiscal Year 2000 funding. These were compiled by Bonneville in a common database and then
divided by the Basin Authority into subregions and subbasins for review by watershed and non-watershed
technical work groups and by three caucuses of managers representing anadromous fish, resident fish and

wildlife. The Basin Authority recommended projects for funding if the managers believed they met goals
established by the caucuses and the Council.

The Basin Authority recommended a budget for the coming fiscal year of $141,126,857. While this is higher
than the $127 million established for Bonneville's direct fish and wildlife program expenses in the 1996 fish
and wildlife budget memorandum of agreement, the managers recommended the Fiscal Year 2000 budget be
augmented with money froma contingency/inflation reserve, unobligated Fiscal Year 1998/1999 project
funds, interest on those unobligated funds, and unused capital investment funds.

Meanwhile, the ISRP report on Fiscal Year 2000 project proposals was completed in mid June, and a public
comment period on both reports was scheduled to last through August. The Council plans to make its Fiscal
Year 2000 funding recommendations when it meets in Spokane on September 20 and 21.

Of the initial 435 project proposals compiled by Bonneville, some were umbrella proposals that simply linked
groups of projects together. Thus, the ISRP reviewed a total of 397 project proposals. The panel placed
each proposal in one of five categories: 1) fund; 2) fund in part; 3) fund for one year; 4) delay funding until
deficiencies are corrected; and 5) do not fund. The panel also identified proposals that were particularly
innovative or adequate for multi-year funding approval.

The ISRP agreed with 68 percent of the Basin Authority’s recommendations to fund projects (Basin
Authority's category Tier 1) or fund if money is available (Tier 2). The ISRP recommended delayed funding
for another 19 percent of the projects assigned by the Basin Authority to Tier 1 or Tier 2. The
recommendation to delay funding means the ISRP identified some critical element of the project proposal
that needed to be supplied or corrected, but that overall the project likely would be sound when that need
was addressed.

In July, the Council and its staff conducted a series of meetings around the region with project sponsors to
discuss the ISRP recommendations. The Council also planned to conduct consultations with project
sponsors, as necessary, to address concerns raised by the ISRP.

The ISRP’s report (Acrobat PDF format) is available from the Council in two volumes. Volume One provides
an overview of the ISRP’s review process and the project recommendations; Volume Two contains summary
reviews of each project including specific comments from the ISRP and the scientific peer review group that
assisted the panel.. The Basin Authority’s draft Fiscal Year Annual Implementation Work Plan is available
from the Authority, 503-229-0191.

2. Fiscal Year 1999 and draft Fiscal Year 2000 work plans

The projects recommended to Bonneville for funding each year are compiled in a work plan. For the current
fiscal year’s work plan, the Council recommended $131.4 million in projects. Of this amount, about $92
million is devoted to anadromous fish (primarily salmon and steelhead) projects, $16 million to resident fish
(those that do not spend time in the ocean), $15 million to wildlife projects, and about $8 million is
dedicated to administrative costs.

Independent scientific review is a cornerstone of the Council's program, albeit a relatively new one. The
current fiscal year is only the second in which the Independent Scientific Review Panel (ISRP) has made
recommendations to the Council, and the first year in which the panel reviewed individual project proposals.

In Fiscal Year 1999, the ISRP drew the Council’s attention to the quality of project proposals. In reviewing
them, the ISRP found that fully 40 percent did not contain adequate information for a thorough review. The
Council responded by directing Bonneville and its contractors to address the scientists’ concerns when
implementing those approved by the Council. Meanwhile, the ISRP asked the Council to make it clear that
project information must improve. The panel conducted workshops with project proponents so that
proposals for Fiscal Year 2000 and beyond contain adequate information.

For Fiscal Year 2000, the Basin Authority has recommended some $141 million in projects (see above). The
annual budget for the work is set at $127 by memorandum of agreement between the federal government,
Indian tribes and the Council. If the Council approves the higher budget, the additional money would come
from carryover funds, as it did this year, and reprogramming some elements of the current budget.

C. Other fish and wildlife initiatives in Fiscal Year 1999
1. Caspian tern relocation

In an effort to protect the region’s multimillion-dollar investment in salmon mitigation and recovery, the
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12/4/13 19th Annual Report to Congress, document 99-14

PUNUCU HE Pare UF HE HUNG Uy DUNNE WING WH UG SUUJCLL LU aiUa! SUIEHUNE FeVIEW. Fina year, UELaUsE IL
was the first for the ISRP review of reimbursable programs, the panel's report focuses on how best to
structure the review in future years. The report is available from the Council (Document ISRP 99-1).

4. The Multi-Species Framework Project

The Multi- Species Framework Project is bringing state, federal and tribal governments together with
stakeholders to review alternative approaches to fish and wildlife policy from a basin-wide perspective. The
Framework Project responds to recent scientific advice urging emphasis on restoring environmental
conditions for multiple species, rather than individual populations. The project is particularly timely in light of
recent Endangered Species Act listings, which cover almost the entire Columbia River Basin and include
species other than salmon. Framework analysts and stakeholders have been working together to evaluate
the ecological and human effects of alternative policy initiatives that range from status quo river operations

to major operational changes including breaching mainstem dams. A final report is expected in November
1999.

The Council also has been tracking the work of a Federal caucus of river and power agencies that is
preparing to make decisions on the operation and configuration of the federal Columbia River dams as part
of the Endangered Species Act process. The caucus’ work builds on several areas of federal study,
including: 1) the PATH (Plan for Analyzing and Testing Hypotheses) analysis of the biological effects of
hydropower, which is part of the Corps of Engineers’ Lower Snake River Juvenile Salmon Migration Feasibility
Study; 2) the Drawdown Regional Economic Work Group’s appraisal of the economic impacts of removing
the four federal dams on the lower Snake River, which also is part of the Corps’ Snake River Feasibility
Study; and 3) a study of the effects of restoring one million acre-feet of water in the Snake River Basin to
augment flows for salmon and steelhead migration. The caucus is cooperating with the Multi-Species
Framework Project, and will integrate land, water, hatchery and harvest considerations in the federal
analysis. Federal hydropower and land management agencies are participating.

5. The Columbia River Basin Forum

As information is generated, the Council is participating in efforts to coordinate state, federal and tribal
policy discussions. In addition to ongoing discussions within the Power Planning Council and federal
agencies, the Columbia River Basin Forum operates under a state, tribal and federal agreement committing
the parties to coordinate policy development, eliminate duplicative efforts and improve the financial
administration of fish and wildlife programs. The Forum is expected to review the information that emerges
from the Multi- Species Framework Project, the Federal Caucus and other sources, discuss policy options
and develop recommendations to decision-making bodies.

6. Preparing for major policy decisions

The results of this information-gathering and policy discussion will inform decisions by agencies that have
statutory authority regarding Columbia River Basin fish and wildlife. These include the Power Planning
Council, the National Marine Fisheries Service and the U.S. Fish and Wildlife Service. By the end of 1999,
the Power Planning Council will begin amending its fish and wildlife program, which guides the investment of
Bonneville Power Administration fish and wildlife revenues and other federal hydropower actions. The Council
expects to rely heavily on the Multi-Species Framework Project analysis, any recommendations that emerge
from the Columbia River Basin Forum, and recommendations from others. Meanwhile, in early 2000 the
National Marine Fisheries Service and other federal agencies are expected to make Endangered Species Act
decisions regarding the operation and configuration of the federal hydropower dams.

Further improvements in these processes are needed, but real progress in coordination has occurred. The
impending decisions involving the operation and configuration of the hydropower system, and the
investment of the system's revenues, will have immense impact on the Columbia River and its resources.

B. The Columbia River Basin Fish and Wildlife Program

1. Annual project review

Each year in September, the Council recommends projects to the Bonneville Power Administration to
implement the Columbia River Basin Fish and Wildlife Program. These recommendations culminate a nearly
year-long process of project proposal and review. Project proposals are reviewed by the Columbia Basin
Fish and Wildlife Authority, which represents the region's state, federal and tribal fish and wildlife agencies,
and by the Independent Scientific Review Panel, a group of 11 scientists nominated for this specific task by
the National Academy of Sciences. The Basin Authority and the ISRP rank projects using criteria approved
by the Council, and the reviews and rankings are made available for public comment before the Council
recommends projects to Bonneville for funding.

The Basin Authority submitted its project-funding recommendations to the Council in mid-April in its draft

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The Council's Fiscal Year 2000 budget is $7,091,000 compared to the Fiscal Year 1999 budget of
$7,155,000. The Council will seek cost savings in order to further reduce its budget in Fiscal Year 2001 to
$6,874,000. )We will do this by:

+ Constraining the personal service budget with workload adjustments and maintaining the current
service level budget.

+ Maintaining a reduced level of energy system analysis contract services by reallocating staff
workloads and deferring projects to other entities where possible, and re-prioritizing resources for
only the most essential studies and analyses.

+ Further reducing travel costs by restricting both regional and out-of-region travel for staff, and by
absorbing inflationary impacts as well as additional travel for work sessions.

+ Increasing efficiencies in operations and administration, in general, to absorb approximately 2 percent
projected inflation for Fiscal Year 2000 and Fiscal Year 2001.

+ Reallocating staff where possible.

The Council's proposed budget for Fiscal Year 2000 is $7,091,000, an increase of $367,000 from our initial
budget for the fiscal year. The increase results primarily from increases in central office budgets for
operating costs, contract services, travel and staffing in support of added responsibilities. A detailed
analysis of the revised Fiscal Year 2000 budget is available in Section J, Table 19, and Appendix A of the
Councils budget, which is available as Document 99-8 from the Council's central office.

More Information

For additional details about the Northwest Power Planning Council's activities, budgets, meetings, comment
deadlines, policies or bylaws, call 1-800-452-5161 or visit our web site. Copies of our publications are
available at the web site or by calling the 800 number above. All Council publications are free.

Council Members and Offices
IDAHO

Todd Maddock, Chair

601 224 Avenue
Lewiston, Idaho 83501
Telephone: 208-798-8956
Fax: 208-799-5123

Mike Field

450 W. State (UPS and DHL only)
Box 83720

Boise, Idaho 83720-0062
Telephone: 208-334-2956

Fax: 208-334-2112

MONTANA

John Etchart

Stan Grace

Capitol Station

Helena, Montana 59620-0805
Telephone: 406-444-3952
Fax: 406-444-4339

OREGON

Eric Bloch

851 S.W. Sixth Avenue, Suite 1020
Portland, Oregon 97204
Telephone: 503-229-5171

Fax: 503-229-5173

John Brogoitti

Northwest Power Planning Council
14 CW Ruare Avania

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12/4/13 19th Annual Report to Congress, document 99-14

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19th Annual Report of the Pacific Northwest Electric Power and Conservation
Planning Council

September 1999 | document 99-14

SUBMITTED TO THE
COMMITTEE ON ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE
COMMITTEE ON COMMERCE
UNITED STATES HOUSE OF REPRESENTATIVES
AND
COMMITTEE ON RESOURCES
UNITED STATES HOUSE OF REPRESENTATIVES

October 1, 1998 through September 30, 1999

Letter: Judith A. Johansen
Administrator and Chief Executive Officer of Bonneville Power Administration

September 1999
Dear Citizens of the Pacific Northwest:

As we enter the new millennium, the Pacific Northwest Electric Power Planning and Conservation Act enters
its 20th year. Through the Act, the governors of Idaho, Montana, Oregon and Washington continue to
have valuable tools to use in addressing regional fish, wildlife and energy issues. The Northwest Power
Planning Council, authorized by the Act and created by the four states in 1981, gives citizens a voice and a
forum, and ultimately significant influence, over the investment of Bonneville Power Administration revenues
in energy, fish and wildlife initiatives.

In this 19th annual report, we discuss our major activities during the past year. The report is brief because
details of our efforts are provided in Council issue papers and other documents.

Much has changed in 19 years. The electricity industry is being deregulated and opened to market
competition, an important shift that has unique implications in the Northwest because a major portion of our
electricity comes from the federal hydropower system. The Power Planning Council is helping the region

and its decisionmakers understand and prepare for changes in the electricity industry.

In 1999, the Council completed several important reviews requested by Congress to help improve public
accountability of fish and wildlife expenditures. These included a review of the U.S. Army Corps of
Engineers’ capital construction projects at mainstem dams, a review of Bonneville’s reimbursable fish and
wildlife programs, and a review of artificial production of fish in the Columbia River Basin. This is the third
year in which the Independent Scientific Review Panel (ISRP), responding to a 1996 amendment to the
Northwest Power Act, has reviewed projects proposed for funding with Bonneville ratepayer funds through
the Council's Columbia River Basin Fish and Wildlife Program. And also this year, the four Northwest
Governors asked the Council to begin annual reporting on the progress of efforts funded through the fish
and wildlife program to assure that Northwest electricity ratepayers are receiving the best results for their
considerable investment.

The complexity of fish, wildlife and energy issues, and the potential impacts of large-scale change on the
environment and economy of the Pacific Northwest, underscore the importance of the Council’s role in the
region. The Council continues to provide high-quality, objective analysis of energy issues, oversee the

region's largest fish and wildlife mitigation and recovery program, and inform and involve the public in
decision-making.

Sincerely,

Todd Maddock
Chair

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12/413 19th Annual Report to Congress, document 99-14
Council in November 1998 approved a request from the region’s state, federal and tribal fish and wildlife
managers to contribute $235,000 to an effort to relocate a nesting colony of Caspian terns near the mouth
of the Columbia River. In the spring, the terns — as many as 10,000 nesting pairs — lay their eggs on the
open sand of Rice Island near Astoria, Oregon. Rice Island is a disposal site for sand dredged from the
bottom of the river’s shipping channel by the U.S. Army Corps of Engineers. The birds prey on juvenile
salmon in the Columbia River estuary. Scientists estimate that between 1997 and 1998, Caspian terns
consumed as many as 25 million young salmon.

With the Council's contribution, and contributions from other agencies, vegetation was planted on the
island and low fences were erected to deter the terns in the hope they would nest elsewhere — away from
the concentration of salmon smolts in that area of the estuary. By the spring of 1999, it appeared the
effort had some success. Fewer terns nested on Rice Island, and more were nesting at an alternative site
on East Sand Island, which is located about eight miles west of Rice Island and owned by the Corps of
Engineers. Because the terns are protected under the Migratory Bird Treaty Act, they cannot be lethally
removed unless the U.S. Fish and Wildlife Service issues a permit.

The National Marine Fisheries Service, U.S. Fish and Wildlife Service, Corps of Engineers and researchers
from Oregon State University and the Columbia River Inter-Tribal Fish Commission are working on a plan to
further reduce the size of the Rice Island tern colony in 2000. Part of the plan includes investigating
alternative nesting sites. The Council is continuing to monitor the relocation effort and, in September,
notified the Fisheries Service that a management plan for 2000 should be in place by November, or the
Council would be unable to approve future project funding.

2. Ocean conditions symposium

In July 1999, the Council hosted a day-long symposium in Portland on the consideration of ocean conditions
in management of Columbia River salmon. Invited scientists gave presentations on the effects of climate on
salmon populations, the impacts of estuary conditions on salmon and ideas for management strategies that
account for ocean conditions. The Council is required by law to account for ocean conditions in making its
annual project funding recommendations to the Bonneville Power Administration to implement the fish and
wildlife program.

PUBLIC INVOLVEMENT

One of the Council’s primary tasks is to fulfill the directive of the Northwest Power Act to inform and involve
Northwest citizens about the Council’s activities. Section 2(3) states a purpose of the Act is "to provide for
the participation and consultation of the Pacific Northwest states, local governments, consumers,
customers, users of the Columbia River System (including federal and state fish and wildlife agencies and
appropriate Indian tribes) and the public at large within the region" in the Northwest's planning for electrical
power and protection of fish and wildlife resources. Section 4(g)(1) of the Act requires the Council to
develop "comprehensive programs" to ensure public involvement and to "inform the Pacific Northwest public
of major regional power issues."

To involve the public, the Council arranges consultations and public meetings to discuss and explain key
issues. For example, in 1998 the Council arranged public meetings and consultations regarding the
recommendations of the Columbia Basin Fish and Wildlife Authority and the Independent Scientific Advisory
Board for projects to fund through the Council's fish and wildlife program in Fiscal Year 1999. This is an
annual effort, which culminates in September with the Council’s project recommendations to Bonneville. As
well, the Council's staff worked with the Multi- Species Framework Project management committee to
arrange public meetings around the region to solicit comments on framework activities. The Council also
convened public meetings around the region to explain progress and receive comments on the review of
artificial production of fish in the basin.

To inform the public, the Council produces a newsletter as well as special informational materials, media
briefings and several types of news releases, including a periodic report on successful fish and wildlife
projects. The Council also regularly updates its Internet web site (www.nwcouncil.org) and uses other
approaches to inform interested citizens about fish, wildlife and energy issues. The Council also holds all its
regular meetings, committee meetings and working sessions in public. In addition, the Council holds public
hearings and consultations on many issues.

Fiscal Years 2000 and 2001 Council Budget overviews

The Council's role is changing, particularly in power planning, as the result of restructuring in the electricity
industry and efforts to improve the accountability of fish and wildlife mitigation and recovery planning. We
recognize that as we go through these changes, it is important to ensure healthy financial conditions for
the Bonneville Power Administration. In an effort to be responsive, the Council will continue the budget
constraints it heaan in 1905

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Responding to another recommendation of the Comprehensive Review, Bonneville has proposed to sell its
power by subscription during the next rate period. The goals of the subscription strategy are to ensure that
Bonneville is able to meet its financial obligations, thereby helping secure the long-term benefits of
Bonneville power for the region, while spreading the benefits of the Federal Columbia River Power System as
broadly as possible, with special attention to residential and rural customers in the Northwest. Bonneville
hopes the subscription process will allow the agency to fulfil its obligations to mitigate the impact of the
hydropower system on fish and wildlife. Through the subscription strategy, Bonneville also intends to
provide incentives for the development of conservation and renewable energy.

As it has become increasingly likely that Bonneville will be an attractive supplier of power over the next
several years, the issues surrounding subscription have shifted to concerns regarding the allocation of
federal power among different customer groups. A successful subscription process is critical for Bonneville.
The Council and Transition Board have been monitoring development of the subscription process and will be
working over the coming months to help ensure its success.

3. Power planning
Reliability study

Recent studies of the Northwest’s power system loads and resources indicate that in some future months
the demand for electricity could outstrip both the capability of the existing resources within the region and
the ability to import additional power. This situation is not new, but the problem could be exacerbated by
increasing competition in the industry and continued growth in demand for power. In the past, when utilities
were less subject to competition, utilities acquired new power plants to provide an industry-standard level
of reliable service — including reserve generation and an adequate transmission and distribution system.
Regulators allowed utilities to recover these costs in rates — even for facilities that might be used only
during occasional periods of high demand. Today, wholesale power supply is dictated largely by market
conditions, many independent power suppliers — without captive customer bases — have entered the
market, and it is unclear whether industry-standard reliability can be maintained. In a competitive market,
many utilities are reluctant to include costs in their rates that might make them uncompetitive. There may

be little incentive to build new power plants to serve infrequent periods of higher than normal loads or
forced outages of some generating facilities. These concerns are exacerbated in the Pacific Northwest,
where we get most of our power from hydroelectric dams — a supply than can be highly variable from one
year — and season — to the next. Adding to these concerns are proposals for significant changes in river
operations that are being contemplated for fish and wildlife recovery efforts.

The Power Planning Council has initiated a study to address these concerns. Initially, the Council's study is
focusing on refining the analysis of future conditions to better define the likelihood and extent of the
reliability problem. Using a computer model of the entire West Coast electricity market, the Council will
assess the likely market response — for example, what level of resource development would we expect
market incentives to induce? Can the hydro system be used more flexibly without violating fish and wildlife
flow and reservoir elevation targets? Transmission system constraints and the role of demand-side
resources such as interruptibility and peak shaving measures also will be considered. If it appears the
market response to potential reliability problems is not adequate, the Council will identify policy alternatives,
including market incentives and potential regulatory actions.

A committee of electricity industry experts is advising the Council. The study should be completed in the
fall.

4. Energy conservation and renewable resources

Regional Technical Forum

Responding to another recommendation of the Comprehensive Review, in April 1999 the Council approved
the formation of the Regional Technical Forum (RTF). The RTF is an advisory committee of between 12 and
15 persons who will develop evaluation protocols and track the region’s progress in acquiring energy
conservation and renewable resources. The Forum also will develop new approaches to achieving
conservation savings and prepare an annual report that profiles successful conservation and renewable
energy projects. In addition, the RTF will provide recommendations to Bonneville regarding implementation
of the Conservation and Renewable Resource rate discount. Bonneville will be providing a limited rate
discount for customer investment in conservation and renewables. The RTF’s recommendations will include
a list of recommended measures and savings estimates and criteria for renewables projects. The RTF will
track implementation of conservation and renewables associated with the discount. Members of the Forum
were selected for their technical expertise. The Forum's budget will be supplied by the Council in the first
year and shared by the Council and the Bonneville Power Administration in future years.

ETcu ANINAAITING Tee Tecuce

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12/4/13 19th Annual Report to Congress, document 99-14
Tne ortnwest. Lompetition also may aiscourage investments in conservation, or any otner resource tnat 1s
more expensive than the market price of power, may shift costs unfairly from one class of customers to
another, and may impact the reliability of power services.

To address these concerns, the governors of Idaho, Montana, Oregon and Washington convened in 1996
the Comprehensive Review of the Northwest Energy System. After approximately a year of intense meetings
and discussion, the Comprehensive Review Steering Committee proposed a set of recommendations. The
governors then appointed the Northwest Energy Review Transition Board to oversee refinement and
implementation of those recommendations. The Transition Board members are John Etchart, Montana
Council member; Todd Maddock, Council chairman and an Idaho member; Tom Karier, Washington Council
member; and John Savage of the Oregon Office of Energy, representing Oregon. The Power Planning Council
provides staffing to the Transition Board.

In 1999, the Transition Board focused on two issues: developing proposals for increased access to, and
regulation of, federal transmission lines, and drafting a contingent cost recovery mechanism for the
Bonneville Power Administration. In these efforts, the Transition Board has provided a regional forum to
address and support work by congressional staff, and other parties who are addressing these issues at the
national level, and will continue to work on them as the legislative process proceeds.

a. Transmission

To address a recommendation of the Comprehensive Review that Bonneville be separated into separate
transmission and generation organizations, the Transition Board adopted 11 recommendations for
implementing Federal Energy Regulatory Commission jurisdiction over Bonneville’s vast system of high-
voltage transmission lines. These recommendations propose specific changes in the Federal Power Act and
Bonneville’s organic statutes regarding FERC jurisdiction. They are intended to create federal oversight of
Bonneville's transmission that is similar to FERC’s regulation of privately owned transmission lines while at
the same time recognizing and accommodating the ways in which Bonneville and its situation in the region
are different than FERC-jurisdictional utilities. The purpose is to ensure open, non-discriminatory
transmission access that will support a competitive wholesale power market.

In a related development, in May 1999 FERC issued a Notice of Proposed Rulemaking that calls for regional
transmission organizations (RTOs) to be in place around the country by the end of 2001. FERC did not
specify how these organizations should be structured — as for-profit or not-for-profit transmission
companies or as independent system operators — but stressed that they should be independent, ensure a
fair market and assume responsibility for system reliability. While FERC addresses the role of non-
jurisdictional transmission owners, including a specific discussion of Bonneville’s unique circumstances, its
requirements for jurisdictional utilities are more specific. The Council intends to work with interests in the
region, characterized by a significant percentage of publicly owned transmission, to develop a constructive
response to FERC'’s call for the formation of RTOs.

b. Contingent cost recovery

In developing its recommendations regarding transmission, the Transition Board noted that Bonneville is
subject to uncertainties in its costs and its markets such that the agency might not be able to recover all
of its costs or ensure the security of its third-party debt. An important goal of the Comprehensive Review
and, thus, the Transition Board, is to align the benefits and risks of access to federal power. The Board
believes this is particularly critical when access to federal power is coveted but, of necessity, limited.
Bonneville’s current subscription proposal leaves the possibility, albeit small, that transmission customers
who are not able to benefit from federal power will be called upon to help meet Bonneville’s power costs
through surcharges on transmission rates while power customers still pay less than market power rates.
Were that to occur, it would be both unfair and adverse to the region's political cohesiveness. The Board
believes the chances of this occurring should be minimized to the greatest extent practicable.

The Board believes that the use of transmission charges as part of contingent cost recovery should be a
last resort and limited. It has proposed that FERC review transmission surcharges proposed by Bonneville.
Those surcharges would recover no more than $100 million in any year, up to a cumulative total of $600
million. The surcharge could be imposed only if Bonneville had fully utilized the authority available under
Section 4(h)(10)(c) of the Northwest Power Act. It could also be implemented only if Bonneville were
implementing or had implemented a cost-based rate adjustment mechanism that would bring power rates to
the lower of: (1) a level substantially equivalent to the rates paid by those who have not been able to
purchase from Bonneville, or (2) a level necessary to restore reserves to a point that will ensure a desired
certainty of Treasury repayment. These calculations should take into account the effects of any cost
reductions achieved through Bonneville’s cost management efforts. The Transition Board’s draft proposal
provides that any transmission surcharge be regarded as a loan from the transmission business line to the
power business line, along with repayment conditions and interest provisions.

2. Bonneville’s subscription process for the 2001-2006 rate case

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19th Annual Report to Congress, document 99-14

TABLE OF CONTENTS

THE NORTHWEST POWER PLANNING COUNCIL

POWER ISSUES

A. Adapting to the changing utility world
1. The Northwest Energy Review Transition Board
2. Bonneville’s subscription process for the 2001-2006 rate case
3. Power planning
4. Energy conservation and renewable resources

FISH AND WILDLIFE ISSUES

A. Columbia River Basin fish and wildlife decision-making
. Review of major capital improvements for salmon passage at mainstem dams
. Review of artificial production of fish in the Columbia River Basin
. Review of the Bonneville Power Administration's reimbursable account programs
. The Multi-Species Framework Project
. The Columbia River Basin Forum
. Preparing for major policy decisions
B. The Columbia River Basin Fish and Wildlife Program
1. Annual project review
2. Fiscal Year 1999 and draft Fiscal Year 2000 work plans
C. Other fish and wildlife initiatives in Fiscal Year 1999
1. Caspian tern relocation
2. Ocean conditions symposium

AuAWNE

PUBLIC INVOLVEMENT

Fiscal Years 2000 and 2001 Council Budget overviews
More Information
Council Members and Offices

THE NORTHWEST POWER PLANNING COUNCIL

The Council is an agency of the states of Idaho, Montana, Oregon and Washington, and was created as an
interstate compact agency by the legislatures of the four states following President Jimmy Carter's approval
of the Pacific Northwest Electric Power Planning and Conservation Act in December 1980. The Council's first
meeting was in April 1981.

The Northwest Power Act gives the Council three distinct responsibilities: 1) to assure the region an
adequate, efficient, economical and reliable electric power supply; 2) to prepare a program to protect,
mitigate and enhance fish and wildlife of the Columbia River Basin that have been affected by the
construction and operation of hydropower dams; and 3) to inform the Pacific Northwest public about energy
issues and involve the public in decision-making.

This annual report is organized around the Council's three key responsibilities.

There are eight Council members — two from each state. Council members are appointed by the Governors
to three-year terms. A list of Council members and their office locations is at the end of this report.

POWER ISSUES

A. Adapting to the changing utility world

1. The Northwest Energy Review Transition Board

The Council is adapting its power planning mission to continuing changes in the utility industry, changes
that primarily are the result of a trend toward greater market orientation, increased competition and less
regulation. This trend is the product of a number of changes including the low price of natural gas,
improvements in gas-fired generation technology, increasing access to transmission lines, increasing
competition in wholesale power sales and the beginning of competition among power suppliers at the retail
level.

These trends can be beneficial in many respects, but also cause some concern. For example, competition
could mean that consumers have more choices and greater flexibility to tailor their electricity purchases to
their needs. Some fear that competition, unless implemented correctly, will lead to higher rates for some in

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