U.S. utilities say Columbia River Treaty payments to Canada are excessive

Under terms of a treaty negotiated 50 years ago, the United States sends $250 million to $350 million worth of electricity from Columbia River dams to British Columbia each year.

That’s way too much, a coalition of 85 Northwest utilities says.

The payments were intended to reimburse Canada for building storage dams in the Upper Columbia basin to benefit downstream power generation, but an outdated formula overpays Canadians tenfold, the utilities wrote in a Friday letter to the Bonneville Power Administration and the U.S. Army Corps of Engineers.

The Northwest could use that energy itself, reducing greenhouse gas emissions and lowering bills for the region’s electric ratepayers, said Gregg Carrington, managing energy director for the Chelan County Public Utilities District.

The 85 utilities in the coalition include Avista Corp., Kootenai Electric Cooperative, and Inland Power and Light.

The so-called “Canadian entitlement” has become a sticking point as stakeholders struggle to find consensus for updating the 1964 Columbia River Treaty, which coordinates operations along the 1,200-mile river and its tributaries.

If the United States and Canada can’t agree on key points for a new entitlement formula by next summer, the U.S. State Department should consider giving Canada a 10-year notice for terminating the existing treaty in 2024, and start from scratch, the utilities said.

Environmental groups, including the Sierra Club, Save Our Wild Salmon and Pacific Rivers Council, oppose the hard-line stance, saying treaty termination could lead to significant drawdowns of U.S. reservoirs.

“The utilities are taking a position that I would say is extreme,” said Rachael Paschal Osborn, a water attorney and adjunct law professor at Gonzaga University. “To them, it’s all about the money. We have some of the lowest energy costs in the country, even with paying out the entitlement every year.”

Time is running out for stakeholders to resolve their differences. U.S. State Department officials want BPA and the Army Corps to provide them with a regional consensus on the treaty by mid-December. That would give the State Department nine months to evaluate the Northwest’s priorities for treaty negotiations and assess whether they match national interests, said Mike Hansen, a BPA spokesman.

The September 2014 date is strategic. Although the Columbia River Treaty doesn’t have an expiration date, either country can cancel most of its provisions after September 2024, with a 10-year minimum notice.

The Canadian entitlement totals 500 megawatts of electricity, or roughly enough energy to meet half of the city of Seattle’s needs. In a recently released statement, British Columbia’s provincial government said the entitlement is too low.

The United States isn’t reimbursing Canadians for benefits beyond power, such as flows for recreation in U.S. reservoirs, river navigation and fish passage over dams, B.C.’s government said.

The Columbia River Treaty is widely hailed as a model of international cooperation.

“I think the U.S. is more likely to work out an agreement with Canada than to terminate the treaty,” said the Chelan County PUD’s Carrington. But if the U.S. and Canada can’t find common ground on the entitlement payments, U.S. negotiators should be ready to give notice, he said.

BPA also supports reducing payments to Canada, but uses milder language in a draft recommendation.

The entitlement pays British Columbia for holding back the spring runoff and releasing the water when it is more valuable for power production. It was negotiated in the 1960s, when the outlook for Northwest energy production was much different, Carrington said. Nuclear power and gas-fired electrical generation were expected to increase, with dams playing a smaller role in the future. As a result, Canadian entitlements were expected to drop over time.

Neither prediction came true. Dams still supply the majority of the Northwest’s electricity needs, and the payments have increased. Through a quirk in the formula that calculates the payments, the Northwest gets penalized for 4,000 megawatts of wind energy added in recent years, Carrington said.

The United States paid $254 million to Canada during the treaty’s first 30 years, which funded construction of three storage dams in the Upper Columbia basin.

“When we originally signed the treaty, there was an expectation that when those projects were paid off, we’d be paying off the mortgage,” said Hansen, the BPA spokesman.

The U.S. expected later entitlement payments to fall sharply, Hansen said.

Both BPA and the utilities have calculated what they think the entitlement payments should be after 2024.

“Significantly less than half of what we’re paying now,” is BPA’s position, Hansen said.

The utilities are advocating for $25 million to $35 million annually, which represents half of the downstream power benefit from B.C.’s storage dams, Carrington said.