Empire Forced To Reduce Renewable-energy Output To Improve Trout Fishing

[Phil Lilley]

http://www.joplinglobe.com/local/local_story_241221332.html

To illustrate the impact of raising the water level in Bull Shoals Lake by 5 feet, and what that means for 167,000 customers of The Empire District Electric Co., Brad Beecher raises a pencil one foot above a table. He drops it. The pencil hits the table, but not hard. He then holds the pencil three feet above the table and drops it. It hits harder.

“Hydropower is not created by water, but by falling water,” explained Beecher, Empire’s chief operating officer for electricity. “Increasing the water level in Bull Shoals Lake will reduce how far the water falls at our hydroplant upstream on Lake Taneycomo.

“It will take away from what we call our ‘head’ at the plant,” Beecher said.

In other words, Empire won’t be able to generate as much electricity from its dam on the White River.

“When you only have 20 feet of head at Lake Taneycomo, 5 feet equals a 15 to 16 percent drop in generation,’’ he said.

Changing water levels and generation at Taneycomo could cost tens of millions of dollars. How much, exactly, is a matter of dispute.

Premier fishery

The objective of what is known as the White River Minimum Flows project is to put more water into Bull Shoals Lake on the Missouri-Arkansas line. That water, in turn, would be used to create a more continuous flow of water downstream in the White River in northern Arkansas. The river is one of the premier trout-fishing destinations in the country.

The U.S. Army Corps of Engineers operates dams that form Bull Shoals and Norfolk lakes, which are downstream of Bull Shoals on the North Fork of the White River, as peak-power production sites. The turbines are turned on to create electricity when it is needed most, but when electricity is not needed, virtually no water flows from the federally controlled dams. The White River Minimum Flows project would also reduce the capacity of Bull Shoals and Norfolk to produce electricity.

Trout flourish in flowing, cold streams that are stable. When water pools and warms below the dams, the trout suffer. The theory is that with a consistent flow of cold water, trout will grow larger and become more abundant, and that will attract more fishermen, who, in turn, will spend more recreational dollars.

Cut by nearly half, Empire originally was to have received $41.3 million in a one-time compensation for the power it won’t be able to produce as a tradeoff for improved downstream trout habitat. That compensation was based on calculations by the Southwestern Power Administration (SWPA), a federal agency in the U.S. Department of Energy that is one of four Power Marketing Administrations in the United States.

Southwestern markets hydroelectric power in Arkansas, Kansas, Louisiana, Missouri, Oklahoma and Texas from 24 U.S. Army Corps of Engineers flood-control dams. By law, Southwestern’s power is marketed and delivered primarily to public bodies, such as rural electric cooperatives and municipal utilities.

When the $41.3 million in compensation was unveiled by the SWPA in January, it was viewed as a low but acceptable offer by Empire and the Missouri Public Service Commission, which regulates Empire. In June, the SWPA put out a proposed addendum that cut that compensation almost in half to $22.3 million.

Empire’s customers are on the hook for $19 million difference, which has Empire and Missouri Public Service Commission officials fuming.

Jeff Davis, a member of the PSC, sent a letter dated Aug. 5 to U.S. Rep. Roy Blunt, R-Mo., who supported the minimum-flow project initially, but who is now expressing concerns.

Davis wrote: “The revised decision proposed by the SWPA could ultimately cost the affected Missouri consumers more than $135 per customer.’’

‘Start with you’

Davis, who praised Blunt for helping Empire and the PSC reach an initial settlement with the SWPA that he viewed as more equitable, also wrote: “Congressman, it’s time somebody started asking the management of SPWA about how they conduct their business and since all of these (Empire) customers are located in your congressional district, I wanted to start with you.’’

Blunt, last week, said he is “extremely concerned about the escalating cost for Missouri ratepayers and we take Empire’s concerns very seriously on this.’’

Dan Wadlington, a spokesman for Blunt, said Blunt’s staff is working with the staff of the Missouri Public Service Commission as well as the U.S. Department of Energy “to make sure they know about the congressman’s reservations.’’

Davis, in his letter, accuses the SWPA of bending to political interference. He wrote: “Although I have no proof, my concern is that shortly after publishing its final determination on Jan. 23, 2009, SWPA received political pressure from members of the Arkansas congressional delegation and/or other federal agencies to lower the amount of compensation Empire would otherwise be entitled to receive and contrived the proposed methodology to achieve the desired result.’’

The addendum, he said, used a revised forecast for wholesale power prices at a time when current power prices have been depressed by the worst economic recession in decades. That change lowered Empire’s compensation from $41 million to $29 million. The SWPA, he said, then selected a discount rate that was much higher than the discount rate used for the federal dams at Bull Shoals and Norfolk. That dropped the compensation to $22 million.

Davis also noted in his letter to Blunt that the SWPA refuses to recognize any increased value of the lost hydroelectric power associated with proposed legislation to create a carbon cap-and-trade system. The SWPA also refuses to consider the value of the lost hydropower in terms of renewable-energy credits, which are of significant value to Empire under Missouri’s Renewable Energy Standard adopted by referendum last November.

Determining value

George Robbins, director of the SWPA’s division of resources and rates in Tulsa, in a telephone interview, said last week, “After we completed a study on it and made a final determination in January, we found some things we needed to correct and in early June we put out an addendum to reflect the changes.’’

A 30-day comment period accompanied the addendum.

Robbins said, “We’re evaluating the comments and preparing responses, and looking at whatever changes we need.’’

Robbins said the SWPA “developed a method for computing what energy and capacity loss will be. The value of that is based on several economic parameters, including energy prices and interest rates. The value depends on the market and the economy.’’

Robbins said those parameters were decided solely by the SWPA, which will get a $61 million federal credit or offset from the federal government for the loss it will sustain from the White River Minimum Flows project. It’s initial credit was closer to $80 million, but that has since been revised downward.

He said the revised formula wasn’t motivated by an attempt to reduce the federal government’s payment to Empire or to improve the cost-benefit ratio of the White River Minimum Flows project.

Robbins also said the $22 million in compensation to Empire is not set in stone.

“The exact compensation will be set at the date of implementation (which could be in 2010 or 2011),’’ he said. “We’ll look up all the parameters we used with this method and see what the numbers are at that time.’’

Robbins said the SWPA did consider a credit for a carbon tax or a cap-and-trade credit, and the renewable-energy credit when it revised its compensation criteria.

“We found these things that needed some attention and we are addressing several specific points. All of this has been a public process,’’ Robbins said. “We have striven for something that is rate neutral for the customers. We do not think Empire’s electric customers should be paying for a recreational trout facility downstream from the project. We are sympathetic to their situation.’’

Davis, in a telephone interview with the Globe, said he sees it another way.

‘Got to them’

“Somebody got to them. I’m not sure who,’’ he said. “They issued a final report and then all of a sudden a proposed addendum comes out of nowhere without any consultation with the regulatory agencies from the affected states. The first we knew about it is when it appeared in the Federal Register.

“This is something the SWPA thought up on their own. We had one shot to compensate Empire and ultimately their customers for losing this electric capacity. The first offer was a little low, but acceptable. The addendum cut it in half, which is not acceptable.’’

By cutting Empire’s hydropower capacity, the federal government is forcing it to rely more on other power plants that are less carbon-friendly, thus more costly, under a new national energy policy.

Davis said the White River project is coming at a time when the federal government and the Obama administration are pushing renewable energy. For the SPWA to deny any compensation for the increasing value of the renewable energy that Empire is losing “makes no sense.’’

“We’re trading renewable electric capacity that can’t be replaced for year-round trout fishing on the White River. That’s not so repugnant, but they don’t want to fairly compensate the ratepayers of Missouri for the electricity,’’ he said.

Reallocation

The fishery, recreation and flood-control aspects of the lakes along the White River and its tributaries are controlled by the Corps of Engineers in the Little Rock (Ark.) District.

P.J. Spaul, spokesman for the Corps in Little Rock, said the Water Resource Development Act passed by Congress in 1999 authorized reallocation of storage on five lakes in the White River system. The reallocation would increase storage by 1.5 feet in Beaver Lake, 2 feet in Table Rock Lake, 5 feet in Bull Shoals Lake, 3.5 feet in Norfork Lake and 3 feet in Greer’s Ferry Lake, which is in Arkansas.

The language of the bill was unusual in that authorization was completed before the study was done, which is not the norm. Usually, a study is completed and then a project is authorized, Spaul said.

The language of the act said reallocation would occur if a study by the Corps found that the work was “technically sound, environmentally acceptable and economically justified,’’ he said.

As the study progressed, it became apparent that Beaver, Table Rock and Greer’s Ferry would be removed for technical, environmental and economic reasons. Subsequent legislation removed them. But Bull Shoals and Norfork were left in, though their ability to control flooding and produce energy were reduced.

A cost analysis by the Corps also found that providing a minimum flow on the White River for trout would have a total annual net benefit of nearly $1.6 million for Bull Shoals. The Norfork project would have a total annual net loss of $20,600.

“This is not something that the Corps did on its own. This is something Congress directed us to do in an unbiased and impartial manner. We let the science and economics drive the study and the conclusions we came to,’’ Spaul said.

For the minimum-flow project to go forward, it will still have to be funded by Congress.

Said Spaul: “If Congress does not fund, we cannot implement.’’

The Associated Press contributed to the report.