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Bonneville and the New Enterprise Risks

Allocating the Risks of the
Regional Power System

by Roy Hemmingway1

[ Regional Review | Steering Committee Papers | NW EnerNet ]

Introduction

This paper is about risk and how the risks of the federal power system, together with its benefits, should be allocated. Alternative models for the federal power system need to be analyzed in terms of whether the allocation of risks proposed for each model match standards of political and economic reality. In the current political climate, those models which allocate risks most like contemporary business standards are most likely to find the long-term political acceptance necessary for stability in the regional power system.

The changes in the electric utility industry have created dramatic new risks for all participants. If it were not for changes in the financial risks now encountered by the Bonneville Power Administration and other parties, it is doubtful the region would be engaged in the Comprehensive Review of the Regional Power System.

Risk itself is not new to the federal power system. The federal government took risks in initially establishing the hydroelectric system and in adding such elements to it as the storage dams and the Pacific Intertie. However, the degree of risk now facing Bonneville is unprecedented, particularly in view of the federal government's current low tolerance for enterprise risk. Moreover, the new risks must be weighed against the public purposes served by the federal power system. Whereas the federal government's acceptance of risk may have been appropriate during the economic crisis of the Great Depression, today's public purposes may not be sufficient to justify this degree of governmental risk-taking.

Any proposal on the future of Bonneville must be responsive to this change in risk condition. This paper does not propose solutions to the current situation; rather it creates a framework by which the major paradigms for restructuring the federal power system can be analyzed in terms of the risks assumed by the government and by customers. Whatever solution the Comprehensive Review decides upon will likely be a variant of one of those paradigms with an explicit assignment of risk among the regional parties.

Bonneville's Past - Risks And Public Purposes

During the 1930s, the federal government underwent a revolution in its involvement in the economy. Here in the Pacific Northwest, this revolution was manifest in the federal government's development of hydroelectric resources and its marketing of the electricity from those resources.

In the Depression, the federal government sought to solve a number of problems by constructing Northwest dams. First, it created jobs through publicly-funded construction projects on a massive scale never before seen in the United States. Then, upon completion, the dams were to contribute towards several other public goals of the New Deal.

Rural electrification was another of the early public purposes to which the dams were to be devoted. Rural areas had largely been ignored by the investor-owned utilities. Federal generation and transmission development, together with low-interest construction loans to rural cooperatives, made possible bringing electricity into the rural Northwest at affordable rates.

Another public purpose was served by the federal government's competing with investor-owned utilities to reduce monopoly forces in the industry. Bonneville dam was begun at roughly the same time as the passage of the Federal Power Act, which instituted rate regulation on wholesale sales of electricity, and the Public Utility Holding Company Act, which broke up the large, complex, and geographically inefficient electric utility holding companies. These federal initiatives set the framework for the competitive, cost-based, regulated investor-owned utilities we have today. Federal generation in the Northwest provided the "yardstick" by which the prices and performance of the investor-owned utilities could be measured.

Finally, construction of federal dams brought public benefits unrelated to electricity. These included flood control, increased river navigation, and rural development as a result of irrigation.

The government's financial risks in undertaking such huge public works projects in a region so underdeveloped were in fact discussed during the public and Congressional debate on funding Grand Coulee and Bonneville dams. Many opponents of federal dam development asserted that the government would not recoup its investment through sales of electricity. They alleged that Grand Coulee Dam would have to sell power to the jackrabbits of central Washington for the facility to be economic. However, the enormity of the crisis facing the nation overwhelmed opposition to the government's involvement in this kind of risk-taking. The rural development, anti-monopoly and public works benefits provided the rationale for federal hydroelectric development until World War II.

After the war, as prosperity came to the Pacific Northwest and the nation, the risk that the federal government would not be repaid for the hydroelectric and transmission development became minuscule. Although non-federal parties were willing to carry the burden of much of the further development of the Columbia, memories of investor-owned utility abuses of the 20s and 30s were still alive. Except for the brief "partnership" policy of the Eisenhower Administration, which resulted in non-federal parties building the mid-Columbia, middle-Snake, and Deschutes River dams, the federal government continued to be the developer of choice for hydroelectric projects in the Columbia basin. With electric loads growing at 7 percent per year and the projects financed at terms far more favorable than available in the private financial market, there seemed little risk to the Treasury of default. Although the crisis of the Depression was passed, using the federal government as the engine of economic development seemed an appropriate use of public resources.

This role continued even as the region moved into the era when hydropower development was reaching its limit. The hydroelectric system constituted an enormous asset controlled by the federal government, and relatively little generation equity or expertise had been built up in the public power utilities of the Northwest. It was only logical that attempts would be made to use the "equity" of the federal system to finance non-hydro generation development. "Net-billing" was Bonneville's attempt to continue its role as marketer to publicly-owned utilities and the aluminum industry. Little attention was given to the risks the government was undertaking by placing ultimate financial responsibility on federal taxpayers for nearly all the costs of WNP 1, 2 and 3, as well as 30 percent of Trojan, with very little ability to control those costs.

At the time, however, risks appeared small. Nuclear plants were experiencing a scale-up in size to take advantages of economies of scale, and the nuclear industry was seen as finally reaching maturity. With electricity demand continuing at high levels, construction inflation not yet an issue, and Three Mile Island still years in the future, Bonneville felt it was assuming a prudent level of risk.

Bonneville's New Risks

Not until today has Bonneville encountered financial risks as significant as when it first began operation. In a short time Bonneville's risk situation has shifted dramatically for the worse. A portion of Bonneville's risks today are ones it has always faced, but others are new and threaten to reduce the "equity" of the federal system to near or below zero.

Bonneville is subject to four kinds of risk: hydro variation, machine, market, and fish. The hydro variation risk is one Bonneville has had to deal with since its inception. In any one year, Bonneville can have up to 4,000 average megawatts of energy above or below its average output to sell. Since prices tend to sink when hydro output is high and rise when it is low, the years of hydro shortage may be more consequential and may not be outweighed by the additional revenue gained during high hydro years. Bonneville often dealt with hydro variation before the 1980s by slipping its repayment obligation to the Treasury when low water years produced poor revenues. Since the early 1980s, Bonneville has been collecting additional amounts in rates to assure Treasury of a high probability of meeting the repayment schedule, even in below-average water years.
Machine risk is the standard utility risk that a generator or transmission line goes out of service unexpectedly, forcing the utility to buy power elsewhere. Bonneville, by virtue of its power supply contract commitments must spend money to buy power in the marketplace when an element in the power system fails. An additional element of machine risk that has not yet shown up in costs is the risk to Bonneville from bearing cost responsibility for an operating nuclear plant. An accident at WNP-2 could cause Bonneville to bear significant uninsured clean-up costs. In addition, at this time decommissioning costs are speculative and may cause future ratepayers to bear higher than expected costs. If Bonneville were an investor-owned utility, its securities would be somewhat discounted to reflect its nuclear risks.

Although some market risks are not new to Bonneville, new market risks have placed Bonneville in an unfamiliar and threatening environment. Bonneville has always had to bear the risk that the non-firm market would not support the price that Bonneville had assumed in its revenue projections for its short-term surplus. Also, Bonneville has had to bear some risks around its firm loads. Many of Bonneville's contracts are for utility requirements, subjecting Bonneville to risk of load being either above or below expectations. In addition, the high percentage of Bonneville's resources that are committed to DSI loads has created risks of lower revenues in the past when aluminum markets have softened and DSI load has dropped off. However, this market risk was relatively small in comparison to the market risk Bonneville faces today. Virtually all of Bonneville's load is now at risk, particularly after 2001 when nearly all power supply contracts expire. This is a fundamentally different situation than Bonneville has ever faced before.

Fish risk derives from the fact that the extent of the power system's fish and wildlife obligation is unknown. While the region has a medium-term agreement to hold federal power system fish and wildlife costs to $435 million annually, in the long term this amount could go higher. If this period of adaptive management on the Columbia is successful, what needs to be done to make the Columbia more fish-friendly will be identified. Then, it is likely that one or more high capital cost programs will be necessary to make the required changes. If adaptive management is unsuccessful, and we continue to be unable to identify the actions that will restore Columbia River fisheries, the federal power system will need to continue to spend money into the distant future under the "all remedies" approach currently in place. Either way, fish costs on the Columbia could well increase (assuming the political process continues to give a high priority to salmon restoration), costs which the federal power system for the most part will have to bear.

Hydro, machine and some market risks were always borne by the federal government, either Bonneville or the Treasury, and not in the short run by customers. However, Bonneville was always able to raise its prices to cover those costs in subsequent rate cases to ensure that the Treasury would not continue to pay those costs. When Bonneville's prices were substantially below market, Bonneville had no trouble accepting the fish cost risks, as well. Bonneville could raise its prices to compensate for the added costs.

Bonneville - Are Changes Necessary To Deal With Risk?

Although the environment in which Bonneville operates has now drastically changed, is that reason enough for considering major changes in the way the federal assets are treated in the region? To answer this question, it is important to keep in mind that because Bonneville in the past offered a competitive product in the marketplace, it never had to compete for customer business.

In the past, Bonneville's products were so competitively priced that it had more customer orders than it could fill. Nothing need change if Bonneville's products were as competitive as they once were. However, Bonneville's products do not have the clear edge they had in the marketplace in the past -- when federal legislation was needed to ration the products among competing buyers. Because Bonneville's products can no longer enjoy the cost advantage, Bonneville now is competing against other participants in the marketplace.

This situation was not of Bonneville's making, and it may not be fair to Bonneville's employees. That other market entrants are now competing for Bonneville's customers may suggest to some people that Bonneville ought to be able to compete too, for its traditional loads and, out of fairness, for loads Bonneville has not previously served. But to solve Bonneville's troubles through competition puts Bonneville in a fundamentally different role than it has been in since its founding, a role fraught with new risk.

The current market conditions have changed Bonneville's ability to handle these risks. For the first time in its history, Bonneville has a market ceiling on its ability to raise prices for its firm power. Therefore, even the relatively modest hydro, machine and non-firm market risks may cause Bonneville to place additional burdens on the Treasury. In addition, the market risks that its firm power may not be competitive place a new category of extraordinary risk onto Bonneville and the federal Treasury. The uncertainty of future fish costs only compounds Bonneville's risk situation.

New Risks - Is The Northwest The New Poland?

Bonneville has adapted to the new risk situation by taking appropriate actions in the medium term. It has reduced costs through reductions in force similar to those that have taken place throughout the utility industry. It has worked to fix its fish costs for the next several years, reducing that level of uncertainty. Footnote2 It has accepted the market's preference for shorter term contracts, offering five-year contracts to its utility and DSI customers at largely fixed prices.

However, Bonneville will be able to meet its Treasury payments only if its assumptions in its rate case about hydro output, non-firm market conditions, machine availability, and fish costs come true. Bonneville will not be able to recover in subsequent rate cases any shortfalls from this rate period if market conditions continue to be near Bonneville's costs. But more importantly, all bets are off in five years time. Bonneville has no certainty that it can meet market prices once the contracts negotiated in 1995 and 1996 expire. All Bonneville's load, and consequent revenues, are at risk.

Is there anything wrong with Bonneville and the federal Treasury bearing these new risks? Yes. First of all, in the past Bonneville bore its risks (much smaller than today's risks) on behalf of its customers. There were real Northwest beneficiaries from having Bonneville in the position of cost spreader (over the region and over time) and risk averter. Today, however, the number one risk the federal government faces is that there will be no Northwest customers for its product. With only potential beneficiaries, Bonneville is bearing enhanced risk only so that customers can have a choice in the future whether to buy product from Bonneville or to leave Bonneville without customers. For whom then is Bonneville carrying this risk?

The market risks Bonneville is now facing are not the kinds of risk that government in the United States has historically carried. These are enterprise risks, normally carried by the owners of a business, its stockholders. Since Bonneville's only stockholder is the federal government, it is the only one to bear these enterprise risks. While government carries risk all the time - risk of disaster, risk of economic recession, etc. - it does so to enhance critical public values, such as public health and safety or the overall health of the economy. Bonneville assumed relatively high financial risk in its early years in order to provide the rural development and anti-monopoly values promoted by the New Deal. However, conventional enterprise risks are handled in our society by the free enterprise system, where non-governmental entities and persons accept the profits and losses from taking those risks.

The Northwest has never had to face these kinds of questions before, the same ones that are being faced throughout Europe as government-owned enterprises are being re-examined. Whether it is the companies of the formerly socialist economies of Eastern Europe or the government-owned major industries of Western Europe, nations are inexorably moving to convert those enterprises to private ownership so that enterprise risks can be borne by non-governmental parties.

In the Pacific Northwest, Bonneville was neither seen nor treated as a questionable socialist enterprise, simply because its risks were so low. In fact, Bonneville for most of its past served primarily not as a risk-taker but as a means of allocating the tremendous benefits of the Columbia River hydroelectric system. The output of that system, because it was so far below the costs of alternatives, would have been oversubscribed had it been allocated according to rules allowing all potential customers to take a share. Although Northwesterners have argued for decades whether the allocation system (DSIs plus public preference) adopted by the government for distribution of the system benefits was fair, it had a reasonable rationale and withstood the test of time. Today, however, the question is not one of allocation of the benefits of the federal power system but one of allocation of the risks.

The new risks experienced by the federal power system create a fundamental instability in Bonneville, one that could catapult Bonneville into crisis upon very short notice, particularly after 2001. The region has a short period of time to remedy this situation and propose a new arrangement for the federal generating assets, or else it may find itself trying to manage extremely complex technical, financial and political issues in a crisis environment.

Dealing With Risk - Options

Bonneville's instability calls for new thinking about management of the federal generation assets. Any proposal must explicitly deal with the current new risk environment. Following are major options for restructuring the risk with respect to the federal assets: Footnote3

Option One: Bonneville As Competitor

This option is preferred by Bonneville leadership at this writing. Under this option, Bonneville would be allowed to be a full competitor for retail and wholesale load against other market participants in the western power market. This option may or may not require additional legislation. Certainly, Bonneville's cumbersome current rate-setting process would work against its ability to compete. One suggested variant would have Bonneville continue to sell its products to its traditional customers at cost and any surplus at something above cost. Whether this alternative makes economic sense and is legally feasible will need to be explored.

The main issue with respect to this option is the degree to which it deals with the risk problem that is the subject of this paper. Bonneville argues that its products would be fully competitive in an open western power market and that the risk of its not being able to meet its obligations is minimal, if only it were allowed to compete. There may be very strong disagreement on the degree to which Bonneville is able to reduce its risks through being a competitor. In the region, Bonneville has not been very successful in making sales in fully competitive environments.

Perhaps more importantly, there are likely to be powerful political forces at work to prevent Bonneville from assuming this role -- for example, taxpaying, investor-owned entities that find competing against the federal government to be unacceptable given the risks they are taking. If Bonneville is successful in taking load away from investor-owned companies, or perhaps even from public agencies, it is likely that these entities will seek Congressional direction to Bonneville to cease this activity. Although Bonneville may argue that it feels it has no choice but to market throughout the western power market in order to stay viable, there may be little political tolerance for such a role.

Some may see Congress as having no choice but to allow Bonneville to compete, because the alternative is to allow Bonneville to slip Treasury payments (Option Five). However, as this paper describes, there are other alternatives besides competition or missing Treasury payments. Congress may seek a solution outside these two alternatives, particularly as Northwest political influence in Congress reaches a low ebb. Hostile political attention to Bonneville from outside the Northwest may result in a resolution to the political problem that does not serve Northwest interests. It is important to remember that there are no precedents for a federal agency competing on a large scale against private businesses. There may be little sympathy for allowing Bonneville to assume this role in a conservative, pro-business political environment.

If Bonneville does compete, an ancillary issue here is whether Bonneville would be able to charge market rates for its products, rather than cost-based rates. Bonneville may need the ability to charge above-cost market rates (and claim to FERC it is not exercising market power) in order to be able to enhance the return from some of its products and offset losses elsewhere. Without that enhancement Bonneville may not be able to mitigate the risks it now faces. One price Bonneville may have to pay for the right to compete is submission to plenary FERC rate regulation. In that case, Bonneville would no longer get the cursory regulatory review under Sections 7(a)(2) and 7(k) of the Northwest Power Act but would be subject to full FERC scrutiny. Whether the strategy of selling at perhaps below cost market rates to its traditional customers while selling at above cost market rates to others would meet legal tests before FERC and the courts is speculative.

Option Two: Disposing Of The Federal Assets

The classic response of economies seeking to transfer enterprise risk away from government is to offer the assets for sale, often to the highest bidder. Privatization would put the federal dams into the hands of non-governmental parties, similar to the ownership of the Hells Canyon dams by the Idaho Power Co. Under that paradigm, the responsibility for determining the obligation of the system for coordination, navigation, flood control, and fish would transfer to FERC, as well as the price regulation of the power output. With ownership in private hands, all the risks discussed above would transfer, as well. A more moderate option that would still transfer virtually all risks to buyers would be to sell only the generation equipment at the dams, while the federal government retained ownership of the dams, locks, and fish bypass equipment.

One problem with this proposal is that given the risks associated with the power system today, the price offered the federal government might be below the unamortized value of the combined Treasury and WPPSS debt for which Bonneville is responsible. Questions would arise whether Treasury would be willing to accept less than full payment for its Bonneville debt.

If the federal government wants to be paid off in cash, rather than accept a stream of payments, electricity prices from the new owners would probably need to increase. Private owners would be unable to finance their purchase at anything close to the finance costs experienced by Bonneville, an interest rate averaging less than 5 1/2 percent.

One alternative under this option is for the Northwest states, together or as a compact agency, to purchase the assets of the federal power system. However, if this option is viewed in terms of governmental risk, there is no reduction in risk as a result of transferring ownership from the federal government to state governments. There may be even greater risk as a result of the fact that states cannot undertake deficit financing, and any failure to meet debt obligations might trigger default.

While the option of selling the assets to parties other than general government may seem unlikely, it is presented here as the one simple case where all risk is permanently transferred away from the federal government.

Option Three: Selling Marketing Rights

There are probably dozens of different variants of this option. In its purest form, this option would sell to bidders long-term marketing rights to the power system output, whatever it might be. This is similar to mid-Columbia PUDs selling off portions of the output of their dams. Whatever the output is, the bidder gets that amount. If the output is cut back due to low water conditions, machine failure, or fish constraints, then the purchaser must accept that cutback. In this form, this proposal would transfer all risks to the purchaser, and essentially put the purchaser of marketing rights in the same position as an owner, except that the purchaser would not have responsibility for maintaining the dams.

Other variants include: long-term lease of the marketing rights to non-federal parties; disposal of marketing rights with a right of first refusal by existing customers; disposal of marketing rights to only one party, or to several; etc.

Like the asset sale option, this proposal may not generate sufficient revenue to repay the federal government in full. Return to the federal government can be enhanced by its assuming increasing amounts of risk as opposed to the purchasers doing so. Possibilities for sharing risk between the federal government and purchasers include the federal government guaranteeing minimum output; payment by purchasers only for output; the government's acceptance of fish risk above a certain level; or establishing maximum costs above which purchasers would not have to take power.

It is entirely possible to structure a solution under this option that looks very much like Bonneville's current proposed customer contracts, with the exception of allowing purchasing utilities to resell power. Also, there are many other variations that retain the market and other risks in the federal power system.

However, it is important to remember that the objective of restructuring the federal power system is to reduce the enterprise risks now being carried by the government. Maximizing short-term revenue for the government may be possible only by allocating higher levels of risk to government, risks that bring the potential for higher costs later.

The value of both this option and the asset sale option will depend in large part upon how much potential bidders value the prospect of a power system free of WPPSS debt beginning after 2011. Although the system may have a negative cash flow until then, bidders may be willing to accept near-term losses in hopes of having the lowest cost power after the WPPSS debt is retired.

This issue raises the concern that at some time the bidders for the power system or its marketing rights may experience extraordinary profits from resale of federally generated power. There may be public resistance if and when these high profits become reality. Despite the fact that the bidders took entrepreneurial risk and could have just as easily taken a loss as a profit, public tolerance may be low for profits derived from publicly owned assets.

Further work will be necessary to create alternative models within this option, ones that provide different levels of risk allocation among the parties, as well as different levels of assurance to the federal government that its Bonneville debt will be paid.

Option Four: Reducing Market Risk

Another paradigm with many possible variants would be to find ways to return to Bonneville's past when it had much reduced market risk. This way, it would be again the clear low-cost provider with no risk of substantial loss of load due to competition from others.

Bonneville has been making stabs toward this goal, but it is unlikely that it can get there without major changes in Bonneville's debt obligations. Debt to the Treasury and WPPSS bondholders makes up 58 percent of Bonneville costs. Bonneville also experiences other large fixed costs. Market pressure is coming not so much from the fact that Bonneville's costs have gone up as much as from the fact that market prices have come down. Bonneville's efforts to reduce fish costs ended with those costs capped, but still at a higher level than in previous fiscal years.

The one set of costs that could put Bonneville back in its former advantageous position with respect to the market are the WPPSS debt costs, amounting to $500 to $600 million per year, 27 percent of Bonneville's revenue requirement. If these costs were allocated out to customers separately from the power price, then Bonneville could reduce its prices accordingly. That accomplished, Bonneville's problem would not be finding customers for its power but allocating its low-cost power among competing takers, as it has done in the past.

How the WPPSS costs could be allocated can take many variations. A bill to each Bonneville customer, based on some historic usage, is one simple possibility. One proposal would allocate the costs across the entire transmission system, including to customers who have not traditionally taken from Bonneville. Given Bonneville's agreement not to charge the DSIs who signed new contracts for any stranded investment costs, some have suggested allocating the WPPSS costs exclusively to the public power agencies.

Whatever means are used to allocate a portion or all of the WPPSS debt outside of power rates, the result will be the same, reduction in the amount Bonneville charges for its products and restoration of Bonneville's competitiveness. The extent to which any of these options can be accomplished without new legislation needs to be explored.

Option Five: Ignoring Market Risk

Bonneville is attempting to sew up enough contracts with DSIs and public agency customers that it can provide a sufficient revenue stream for the next five years to meet its costs. To do so, and still accept its fish responsibilities, it has had to persuade its superiors in Washington, D.C., to accept a lower probability of federal Treasury repayment.

This option would continue this policy for the decade or more after the contracts that Bonneville is currently negotiating expire. As discussed above, this option would expose the federal government to substantial market risk, which in the United States government is unaccustomed to shouldering. The Treasury would have to accept substantially reduced likelihood of principal and interest payments during that period while Bonneville's revenues are reduced and allocated more to payment of the WPPSS debt.

However, a case can be made that after 2011, when the WPPSS debt begins to be retired, Bonneville's market risk will ease rapidly, and the hydrosystem will provide the lowest-cost power available in the western United States. Even with substantially increased fish costs, the hydrosystem, financed with low-cost debt and with no fuel costs, may be substantially below the costs of alternative power supplies.

This option would have Bonneville muddle through the period 2001-2011 and then resume the role of allocator of low-cost power. Muddling through means selling its power for what it can in a buyers' marketplace, within whatever restraints on competition are set by the political process. If no new legislation or other policy authorization is needed for Bonneville to be able to compete as described in Option One, then this option may not differ from that option in any significant way. It may be that "muddling through" differs from Option One only in that this option explicitly recognizes that Treasury payments are likely to be met less regularly and that Bonneville is not likely to be able to compete successfully. Given that other power marketing authorities regularly miss Treasury payments, and that Bonneville did so in the past, with little or no political penalty, the political repercussions from this option may not be so great as feared.

Dependence on this option may suffer from the fallacy of perfect knowledge of the future. Although one might predict that Bonneville's costs would be in the 15 mill range (today's prices) without WPPSS debt, it cannot now be predicted whether that price can actually be achieved, or more importantly how it would compare with market prices at the time. Technological innovation in the electricity industry could make even this price outside market limits. In any event, this option would likely involve Bonneville undertaking the politically treacherous role of competing against private businesses for load in the western power market.

Conclusion

Whether the Comprehensive Review succeeds will in large part depend on the extent to which it describes the risks likely to be faced by the regional power system and how those risks should be borne by regional participants. It may well turn out, if the region does nothing, that market conditions will be such that Bonneville can easily survive the next 20 years as a successful low-cost power provider. All the urgency of the Review may then look in hindsight like over-anxious hand-wringing.

On the other hand, there is great risk that the future will hold continuing and increasing uncertainties and market difficulties for Bonneville. If the experience in other deregulated markets is any guide, predictions of early price stability and market calm are not likely to come true. The region would be wise to find some means of lowering the market risk faced by the federal government and achieve a new balance of risk between the federal government and regional power retailers. Without a regional plan Bonneville may find itself in a political or financial crisis at some point in the future that may develop too quickly for the Northwest to address in a deliberative fashion.

Footnote1

Advisor to Oregon Governor John Kitzhaber on salmon and energy policy; Member, Steering Committee, Comprehensive Review of the Northwest Energy System. The views expressed in this paper are those of the author alone.

Footnote2

Although the $435 million negotiated fish budget gives budget certainty to Bonneville in the medium term, that certainty could be upset by future court rulings that the federal government's actions to restore fish on the Columbia River are insufficient. Administration commitments of funds under Sec. 4(h)(10)(C) of the Northwest Power Act might be insufficient to cover all those additional fish costs, putting additional burdens upon Bonneville.

Footnote3

While these options are analyzed here in terms of the financial risk borne by regional parties, they also should be evaluated in terms of their effect on public values and other criteria developed by the Comprehensive Review.