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Our Support - Puget Sound Energy
November 7, 1999: Puget Sound Energy has created a new
website specifically for the White River Project, check it out:
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White River Project Map - Provided by Puget Sound Energy |
White River Q&A
This Q&A was prepared in response to requests from the public for
general information about the White River Project. This Q&A is dated Sept.
27, 1999. Please be advised that the information contained in this document is
time-sensitive, and circumstances bearing upon the information provided below
may have subsequently changed. If you desire more current information
concerning the White River Project, please contact Puget Sound Energy, Inc. at
1-888-CALLPSE, extension 81-2400.
- What is the central issue regarding the White River Hydroelectric Project?
It costs substantially more to generate electricity at the Project than it
does to purchase electricity on the wholesale market. PSE cannot, consistent
with legal obligations to its customers, operate an uneconomic project as a
means of subsidizing non-power benefits for the community. The cost of
generating electricity must be competitive with other resources on the market.
PSE is committed to working with the community and appropriate government
agencies to find a way to balance costs and benefits in a way that is fair to
all.
- How expensive is White River Project electricity?
The cost of generating electricity at the Project (with proposed license
conditions) over the next 20 years is presently expected to be somewhere
between $35 million to $80 million above market. The "market" for
purposes of this analysis is the Northwest Power Planning Council's 20-year
predicted range of market prices for power. The license conditions proposed by
the Federal Energy Regulatory Commission (FERC) and other agencies make the
economic picture worse. However, even if the cost of proposed license
conditions is eliminated from the economic analysis, the cost of generating
electricity at the Project still would be above market.
- Isn’t hydroelectricity supposed to be an inexpensive form of power?
Yes. However, the Project is a small, complex project, with extensive
water-conveyance facilities and limited generation capacity. The Project also
has been required to make significant capital improvements in recent years
(e.g., approximately $25 million in fishery-enhancement measures). More
recently, deregulation and the falling price of natural gas have substantially
reduced the cost of power on the wholesale market. Taken together, these
factors have driven the cost of generating electricity at the Project well
above market alternatives. Additional costs associated with licensing the
Project, such as more fish-enhancement protection measures and dike
improvements, will make the economic picture worse.
- So you’re saying PSE can’t afford to operate the White River Project?
PSE cannot ask its other customers to subsidize non-power values and
benefits enjoyed by local residents. However, PSE will not walk away
from this Project, unless forced to do so. Keeping the Project in operation
and maintaining the benefits the Project provides to the community will
require the cooperation of PSE, federal, state and local agencies, and the
willingness of others to help pay for the benefits they receive.
- How much additional money does PSE need to operate the White River
Project?
PSE needs to offset a deficit of somewhere between $35 million (high
market) to $80 million (low market) to generate power at market over the next
20 years. This estimate is based on Northwest Power Planning Council market
assumptions. Pinpointing a specific deficit depends upon what market
assumptions one makes relative to the cost of generating electricity. The
Project’s federal licensing requirements and fish-enhancement protection
measures would create an estimated annual operating deficit in the
range of $3.5 million to $5 million.
- Is PSE willing to make more than a 20-year commitment to the Project?
Yes. If the Project is to continue to generate electricity, a 50-year
commitment to the Project likely will be required. The proposed FERC license
has a 50-year term. However, there are no reliable 50-year market assumptions.
So a 50-year plan must allow for further allocation of the costs, risks and
benefits of continued operation after the first 20 years of the FERC license
have expired. Another consideration to be addressed is the allocation of
costs, risks and benefits at the end of the FERC license. Assuming that these
issues can be worked out, a 50-year plan of operation would need to be reduced
to a binding agreement among interested parties, and the agreement would have
to be approved by FERC and other agencies with jurisdiction.
- Couldn’t PSE just pocket any Project contribution it receives from
outside interests?
No. If a 50-year plan of operation is reduced to a binding agreement, this
agreement presumably would commit resources received from outside interests to
the Project.
- What happens if PSE cannot obtain the third-party contributions it would
need to continue operation of the White River Project?
PSE would attempt to sell the Project. If there were no interest in
acquiring the Project, PSE ultimately may be required to discontinue
operations.
- How much would it cost to buy the White River Project from PSE?
Our current estimate puts the price of the Project in a range of $60
million to $80 million. In addition, if a purchaser wanted to keep operating
the Project, the purchaser should anticipate operation and maintenance
expenses of $3.5 million to $5 million per year.
- Does the proposed FERC license limit what options can be considered to
continue operation of the Project?
Not in PSE's opinion. PSE is willing to consider any option that results
in an economically viable Project, and PSE is willing to work with interested
parties to present options to FERC. To develop viable options, PSE will
continue to encourage state and federal agencies to review and reconsider
license conditions that add cost and reduce power generation. PSE estimates
that proposed agency conditions add approximately $31 million to the cost of
generating electricity at the Project. Reductions in these costs would
partially offset the deficit of somewhere between $35 million (high market)
and $80 million (low market) to generate power at market over the next 20
years. PSE also will continue to encourage others who receive substantial
benefits from the Project to consider ways to help pay for these benefits.
- Could someone else profitably generate power from the Project?
No. Another utility would have to purchase PSE’s real property, power
plant and equipment, and this would require an initial capital investment in
excess of PSE's sunken costs. Another utility would face the same obstacles
associated with future operations and deficits relative to the market value of
the power generated. It appears, from PSE's economic analysis, that another
utility would have to be paid to take the Project (which is not something PSE
is willing to do). PSE would be willing to purchase power from such an
operator at market prices.
- Who would contribute to making White River power economical?
The Project provides significant benefits to a variety of interests.
Boaters, swimmers, picnickers, water skiers, campers, bird watchers, and
sport-fishing enthusiasts all enjoy the use of Lake Tapps reservoir. Lake
Tapps homeowners benefit from enhanced property values. Using Pierce County
estimates as a guide, there is $130 million to $160 million in enhanced
property value attributable to the reservoir (just considering properties that
abut the reservoir). Approximately 3,000 acres are proposed for wildlife
habitat conservation. However, if the Washington Department of Fish and
Wildlife were to reduce this set-aside or allow timber harvesting, some of
this value could be returned to the Project to fund other public benefits.
Auburn and Sumner residents receive underground water supplies supported by
the reservoir, and Buckley and Enumclaw may increasingly look to the Project
to provide water-quality benefits. Bonney Lake and Pierce County have
waterfront parks that depend upon the reservoir, and King County residents
enjoy the Project's recreational amenities.
In addition, the Army Corps of Engineers depends upon the Project’s fish
trap to get fish past the Corps’ Mud Mountain Dam. The Muckleshoot hatchery
historically has received support from the Project, and the Project has
provided other significant fishery enhancements supporting the recovery of
Chinook salmon on the White River. All Washington residents benefit from the
$500,000 in Project property taxes that PSE pays each year. Pierce County
residents receive the services that $1.6 million in Lake Tapps-area property
taxes finance. PSE would expect conservation groups to support efforts to
preserve the reservoir, and perhaps federal or state funds could be made
available to support a plan to maintain the many public benefits provided by
the Project.
- How will the listing of Puget Sound Chinook salmon and bull trout affect
the Project?
The National Marine Fisheries Service (NMFS) is expected to issue a final
rule addressing what government agencies, businesses, and
private-property owners must do (or not do) to protect salmon and its habitat.
One likely Project requirement will be a reduction in the amount of water PSE
can divert from the White River to generate power. In June of this year, NMFS – along with the U.S. Fish and Wildlife Service and the
Washington State Department of Fish and Wildlife – identified interim
salmon- and bull trout-enhancement measures to be implemented by the Project.
The agencies believe the measures are necessary to protect Chinook salmon and
bull trout from jeopardy. The measures include a reduction in the amount of
water PSE can divert from the White River to generate power, more restrictive
ramp rates (ramp rates relate to changes in river stage associated with
project operations), limitations on when maintenance and repair operations can
be undertaken, and the development and implementation of a monitoring and
evaluation plan. It is anticipated that implementation of these measures will
cost between $300,000 and $400,000 per year. These agencies also have advised
PSE, FERC, and the Muckleshoot Tribe that the continued operation of the
Muckleshoot hatchery is critical to protecting Chinook salmon in the White
River from jeopardy Pierce County government, Save Lake Tapps Coalition, and
various other parties – agreed to support PSE’s request for endorsements
of an interim protection plan that would allow the Project to keep operating
in the near term after new salmon-protection rules go into effect. The Project
may face additional restrictions associated with the proposed listing of bull
trout. The effect of this listing on the Project is still being evaluated.
- When is PSE going to receive its federal license to operate the White
River Project?
The Federal Energy Regulatory Commission (FERC) issued a license in
December 1997. PSE has publicly stated its intention not to accept the license
as proposed and has appealed the FERC license order. FERC acknowledges in its
order that the proposed license would not allow the Project to operate
economically. State and federal fish-and-wildlife agencies also appealed the
FERC license because they believe the license needs to be more restrictive to
protect fish.
- Can PSE operate the Project without a FERC license?
No. A FERC license is required to generate electricity at the Project. If
PSE is unable to obtain a license that allows the Project to generate
electricity at a cost that is competitive with other resources on the market,
and if PSE then could not sell the Project, PSE ultimately would be required
to cease Project operations. PSE is a public-service company, in business to
provide gas and electric service to its customers. PSE cannot operate and
maintain a project that does not provide economic benefits to its customers.
- If PSE is forced by law to cease operations, will Lake Tapps reservoir be
preserved?
PSE is committed to work with the community to save Lake Tapps reservoir,
and PSE fully intends to keep the Project operating as it has for nearly 100
years. As long as PSE is permitted by law, regulation, and economics to
operate in this manner, the waters of Lake Tapps reservoir will not recede
back to historic Lake Tapps, Kirtley Lake, Crawford Lake, and Church Lake.
However, it is possible that PSE could be compelled to transfer ownership of
or to cease operation of this Project, and in such event, there can be no
guarantee by PSE that the reservoir would be maintained by PSE or anyone else.
- Has FERC agreed to PSE’s request for more time to negotiate a workable
settlement?
Yes. On June 30 of this year, PSE filed a joint motion asking FERC to stay
its license proceeding and allow interested parties to continue their work on
a long-term solution through a collaborative settlement process. The request
received broad-based support from members of the Lake Tapps Task Force, NMFS,
U.S. Fish and Wildlife Service, and others. FERC granted the two-year
licensing stay on July 28. PSE believes it will take at least 18 to 24
months to see if a 50-year plan of operation can be developed that would make
the Project competitive with other resources on the market. If this effort is
not successful, and if PSE could not sell the Project, at some point
thereafter PSE would have to discontinue Project operations.
- Would the Project be economically viable if FERC and NMFS agreed to PSE’s
position on FERC license requirements?
No. The license conditions proposed by FERC and other agencies make the
economic picture worse. However, even if the cost of proposed license
conditions (including new fish-enhancement protection measures and dates) is
eliminated from the economic analysis, the cost of generating electricity at
the Project still would be above the market price.
- What can the public do to help preserve Lake Tapps and solve the White
River Project problem?
The public can support efforts to bring interested parties together to
develop a 50-year plan of operation that makes the Project competitive with
other resources. The Lake Tapps Task Force is a group of government, utility,
and community representatives who are working together to solve this problem.
The Task Force can be contacted through Kelly Bast in the office of Pierce
County Executive Doug Sutherland. Lake Tapps homeowners also are participating
actively in the collaborative process.
- PSE has said it plans to get out of the power-generation business and
become a distribution-only utility. How does this business goal square with
the company's stated willingness to continue operating the White River
Project?
When two pending sales of PSE power-generating facilities are final, the
company will generate only about 7 percent of the electricity its customers
consume. The White River Project itself generates less than 2 percent of the
utility's electricity load. In PSE's view, retaining selected generation
resources that supply only a small percentage of our customers' total power
needs is not incompatible with being a "distribution-only" utility.
Moreover, PSE recognizes the White River Project's many public benefits beyond
electricity. Preserving those varied economic, social, and recreational
benefits is the reason PSE is working with Lake Tapps homeowners and other
interested parties to find a way to make the Project economically viable.
- Is it possible for the Lake Tapps reservoir to remain full year-round?
Yes, but retaining a "full" reservoir throughout the year would
reduce power generation, costing PSE between $50,000 and $400,000 per year in
lost revenue depending on water run-off availability. It’s worth noting that
lowering the reservoir’s water level for part of the year helps to reduce
the summertime growth of milfoil and other unwanted aquatic vegetation,
thereby promoting water quality.
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