[env-trinity] Smith River estuary + toxics [Disease killing young Klamath River salmon]

[Greg King]

While I've got you all here, send your friends to speak at the Del Norte Supes meeting this Tuesday. Here's our ad that ran in yesterday's Triplicate. The time is actually 10 a.m., not 9.





On May 24, 2015, at 7:49 AM, "Kier Associates" <kierassociates at att.net> wrote:

> Tom and Greg
>  
> I’ll get off of/quit abusing that ‘env-trinity’ list, but I do want to share with you just how goofy is the 100-yr-old utility regulatory process, for your own edification/use
> --
> The ‘goofiness-by-the-numbers’ layout below is from Guy Phillips, who is vacationing in Ireland with his wife as we speak and shouldn’t be responding to my emails – but his passion/commitment to environmental protection/restoration is why I’ve maintained my 40-yr association/friendship with him.
>  
> Walk through it and you’ll see why I’m trying to get the word out that heaping costs on these hydro projects doesn’t hurt the projects/make them want to vacate public waterways – it benefits them – a hard concept for us linear thinkers to wrap our brains around.
>  
> Sixteen years ago we had a contract to plan/assist the restoration of winter-run chinook salmon on Battle Cr (which comes near-freezing off the flanks of Mt Lassen) with some decommissioning of the PG&E hydro project there. There came a pt in the planning process/negotiations with PG&E where we fish-types were clearly over our heads. So I brought Guy Phillips in and, in short order, PG&E told my clients they could have what they wanted – but only if they got rid of Kier and Phillips.  Which they did (and got screwed in the bargain)
> --
> When the ‘stakeholders’ began their what-to-do-with-the-Klamath Hydro Project conversation we brought Guy into the Klamath via a CA Coastal Conservancy grant to the fishermen’s PCFFA/IFR
>  
> Guy was frankly loath to come into the Klamath discussion after the inglorious manner we were shown the door on Battle Cr – but he’s a good soul and accommodated us.
>  
> In short order Guy determined that the most sensible route would be to form a non-profit, buy the KHP from PacifiCorp (it would have been dirt cheap – see Guy’s valuation of it below) and use the energy proceeds to dismantle the project. Guy explored the idea with his friends at both the CA and OR PUCs. They supported. I shopped for charitable donations among some of the older SF Bay Area enviros (all Republicans – sigh, those were the days) with some promising success.
>  
> But we ran into a brick wall with the enviros who had joined the (82-, 84-?) stakeholder Klamath restoration group-grope. The best established among them ran us and our idea off. Guy says, below, that he doesn’t know why. He does – it’s just too painful to talk about. It was about billable hours for the key enviro – the leader of the enviro pack
>  
> That, as much as anything is why we’re going at KHP decommissioning at glacial speed with iffy legislative prospects
>  
> ‘Best,
>  
> Bill
> From: Guy Phillips [mailto:phillipsguy1 at gmail.com] 
> Sent: Sunday, May 24, 2015 1:40 AM
> To: Kier Associates
> Subject: Re: FW: [env-trinity] Disease killing young Klamath River salmon
>  
> OK Bill, here goes.  (I think that you may have a copy of the powerpoint that I used to brief the "settlement" parties on this).
> 
> 1.  The PUCs care more about what a utility is required by law (statute, regulation, order) to do than they care about whether implementing the law is cost effective.  Every utility, every regulator, knows that the PUCs are NOT going to second guess regulatory orders.
> 
> 2.  So the game is "make me do it" whereby the utility's incentive is to get regulators to order the utility to do expensive capital projects.  Then the utility goes to the PUCs and says "the ratepayers must pay for this because we have no choice".  The PUCs duly require the utility to do it and roll the costs into something called the "ratebase".
> 
> 3.  This thing called the ratebase is the "remaining book value" of the total capital expenditure by the utility on all assets they own.  This is the depreciated net remaining value.  That is the source of the ONLY profits that the utility earns--the ONLY profits.  The utility does NOT make one thin dime on actual electricity sales--except as how these built-in profits are calculated on the basis of the ratebase.
> 
> 4.  The utility earns its "allowed" (by the PUCs) rate of return based ONLY on a percentage of the ratebase.  For example, if the ratebase is $100 million and the allowed rate of return is 9%, the utility gets to earn $9 million in profit--rate of return--each and every year as the assets depreciate over the lifetime of the assets.
> 
> 5.  So, why does the utility want to have regulators "make me do it"?  Because, as I said, they know the PUCs will simply authorize the costs and roll those costs into the ratebase because the PUCs understand that they cannot inhibit the utility's ability to comply with the law.
> 
> 6.  So the name of the game for utility managers is: find places in the whole system where we can get someone to order us to spend money on it.  It is the ONLY pathway to increase profits for the utility-- it is their growth strategy.
> 
> 7.  So what does/did that matter in the Klamath case?  As I laid out repeatedly to the Klamath parties (and had two experts from the Calif PUC come to the meetings to verify--don't just believe me!), the ratebase for the Klamath project when this all began (as I recall) was something on the order of $35 million (mostly due to a refurbishment recently completed that was also due to regulatory compliance--otherwise the ratebase would have been substantially lower).  At that time, as I recall, their allowed rate of return was on the order of 8%.  That means that the profit margin for the Klamath project was only $2.8 million per year.  Hardly an attractive asset in a company as large as this one.  So, being "forced" to spend $400 million on the Klamath project would increase its yield/profit for the utility by another $32 million PER YEAR!  The Klamath project would go from yielding $2.8 million per year to almost $35 million!  What a deal!  And we get to say that we're doing it for the environment as well!  What heroes we'll be!
> 
> 8.  But the catch here is that they have to look like they don't want to do it.  They have to look like they are being forced to, required to, do it by regulators.  Otherwise they run the risk that the PUCs will, in fact, look at the cost effectiveness and then there is some risk that they wont be allowed to earn a rate of return on the investment.
> 
> 9.  Hence all the posturing.
> 
> I pointed out to the parties that in California alone, ten times the entire size of the Klamath system gets routinely decommissioned each and every year by the utilities and the costs are routinely included in the ratebase.  No questions.  Why not do that for the Klamath?
> 
> And all the other hydros all across the country.  Let's actually change the game!  Let's stop nibbling at their toes.  Let's actually do something for the rivers and the fish.  No go.
> 
> This troubled me immensely.  Obviously still does.  The "enviros" and their compatriots will continue to lose or minimize opportunities all across the US in this game because they refuse to change their own game--they refuse to play hardball and instead get co-opted in the utilities' games.  The enviros et al need their own paradigm change and, based on my numerous experiences, they refuse to do so.  I have my own beliefs about why that is true but those are just my opinions.
> 
> My friends at the PUCs see this and are chagrined.  They are captured by the same game and would love to see the paradigm change and long for the enviros to change it.  The paradigm change has to come from the outside.  But it ain't gunna happen.
>  
> Those opinions, however, are why I got down off the pulpit and retired.  And I'll stop my sermon now.
> 
> I applaud you for hanging in there.  I am too heartbroken.
> 
> Guy
>  
> On Sun, May 24, 2015 at 12:21 AM, Kier Associates <kierassociates at att.net> wrote:
> Below my notes the Hoopa Valley Tribe’s respected att’y Tom Schlosser asserts that because the fish-passage would have been expensive relative to the productivity of the project the PUCs wouldn’t have allowed the fish-laddering/cost recovery – to which I respectively and respectfully disagree. But, ‘splain to me again why having to undertake a large capital improvement to the KHP would have been advantageous (not simply a neutral) for PacifiCorp
>  Bill
>  
>  

--
Greg King
President/Executive Director
Siskiyou Land Conservancy
P.O. Box 4209
Arcata, CA 95518
707-498-4900
gregking at asis.com
www.SiskiyouLand.org






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