Calif. utility sues Reclamation over environmental payments

E&E News
By Debra Kahn
September 16, 2014

A California utility and three cities are suing the Obama administration in a bid to lower payments for habitat restoration in the Sacramento-San Joaquin River Delta.

The Bureau of Reclamation owes the utilities roughly $45 million, says the lawsuit by the Northern California Power Agency (NCPA) and the cities of Redding, Roseville and Santa Clara. The suit was filed earlier this month in the U.S. Court of Federal Claims.

The power agencies are paying to repair environmental damage done by the federal Central Valley Project, a sprawling Depression-era plumbing project that delivers water from the Sacramento and San Joaquin rivers to farmers in the Central Valley.

The 1992 Central Valley Project Improvement Act sought to compensate for the dams' impacts on salmon and habitat by putting limits on pumping and also creating a fund to restore wildlife refuges, install fish screens and other environmental measures.

Water agencies and hydropower users put $873 million into the fund through 2012. Their fees are based on benefits they get from the project, but irrigators' contributions are capped, forcing power users to make up the difference when water supplies are curtailed by drought or a need to protect aquatic species.

The imbalance in payments has been going on for about a decade, but this year's drought has made it more consequential, said Jane Cirrincione, NCPA's assistant general manager.

Power customers' share of the restoration bill should mirror their share of the Central Valley Project's overall benefits, which are about 24 percent, the lawsuit says. Instead, they have paid about 40 percent over the past six years, and their share could rise to 60 percent this year and 75 percent next. The charges are costing NCPA customers $200,000 per week, Cirrincione said.

"It's been a problem for about 10 years, but with the drought taking these numbers to such high levels ... it was impacting ratepayers," she said.

Cirrincione said that the group had talked to several California members of Congress about the imbalance, including Sen. Dianne Feinstein (D) and Reps. Jared Huffman (D), Doug LaMalfa (R) and George Miller (D), but that they had failed to get a legislative fix in this year's energy and water appropriations bill.

NCPA is made up of smaller municipal users, including the Port of Oakland and the city of Palo Alto, that can't afford to absorb increases in rates like larger Central Valley Project power customers can, she said. Across all CVP power users, this year's deliveries of about 2 million megawatt-hours of hydropower cost about $70 million, or $35 per MWh. The restoration charge this year is $33 million, with an additional $12 million deferred until 2015, which raises the cost of power to about $50 per MWh.

"When there's no water deliveries, water customers don't pay into the fund, and they're capped at $6 per acre-foot," she said. "Power customers have been sort of the pressure valve."

Irrigators still paying project tab

Cirrincione stressed that the utilities were not arguing that irrigators should be paying more. Irrigation districts are still paying off their share of federal dams and reservoirs from decades ago, the Government Accountability Office said in a report released last week (Greenwire, Sept. 10). They still owe more than half their share of the Central Valley Project, GAO says.

"Our question to the court doesn't have anything to do with what the irrigators pay," Cirrincione said. "The irrigators pay what they pay in accordance with the act. We believe we're being far overcharged in accordance with the act."

Rather, she said, Reclamation needs to charge power users less, as well as account for what it has been doing with all the money. The refund would come from a separate federal account reserved for lawsuits, she said, not the restoration fund itself.

A Reclamation official said the agency had been working with power users and other parties to figure out how to rebalance the payments. Its current restoration projects, which include automating pumps for a fish bypass system and buying water to supplement in-stream flows for fish, will continue, he said.

"We'll be able to complete all the ongoing projects," said David Mooney, the Central Valley Project administrator. "We don't really know how it might change our future collections as a result of this lawsuit. That's what we were trying to work through as part of that finance plan."

Mooney said the other funding sources envisioned under the project, including charges for water transfers and renewal of long-term contracts, haven't panned out. "When we look at all the funding sources that are allowed for under the [Central Valley Project Improvement Act], the other ones just aren't all that significant," he said.

Water contractors that receive their supplies from the project echoed the utilities' criticisms of Reclamation.

"There seems to be a lot of money spent on studies that haven't necessarily resulted in any substantial ecosystem improvements," said Ron Jacobsma, general manager of the Friant Water Authority, which sued Reclamation earlier this year over supply cutbacks (Greenwire, May 21).

"There's very much a critical eye as to whether the restoration fund has been managed as effectively as it could have been."