Klamath Dams Debate - What do the economists say?

A news report published in Siskiyou County's two main newspapers - The Daily News and South Siskiyou Papers - reported on consideration of the Klamath Settlement deal by the Siskiyou Board of Supervisors. Opposition to dam removal is popular in Siskiyou County and includes representatives of the local Grange, People for the USA and Shasta Indian descendants calling themselves the Shasta Nation.

One of the speakers before the Siskiyou Supervisors was Jim DePree who recently retired as Siskiyou County's Natural Resources Specialists. Few are aware that at one time Depree worked for the Klamath Forest Alliance and that he has also worked for The Wilderness Society.

Depree, a forester by training, was part of the closed-door Klamath Settlement negotiations for about two years. His remarks are quoted as including the following statement:
“there is no indication that dam removal is the least costly solution.”

It is difficult to determine where DePree came up with that conclusion. The California Energy Commission and other entities have published economic studies indicating that removal of four Klamath River dams is likely to be significantly cheaper than the mitigations necessary to secure a license. Here’s what the studies say:

Estimated Relicensing Mitigation Cost

Mitigations likely to be required	Low estimate (millions of dollars)	Mid-line estimate (millions of dollars)	High estimate (millions of dollars)
Fish passage	$164	$235	$305
Other Fish mitigations	$14	$20	$26
Water Quality	$45	$65	$84
TOTAL	$223	$320	$415

Estimated Replacement Power and Decommissioning Cost
(using PacifiCorp’s figures for replacement power)

Low estimate (millions of dollars)	Mid-line estimate (millions of dollars)	High estimate (millions of dollars)
$189	$206	$222

Source: Economic Modeling of Relicensing and Decommissioning Options for the Klamath Basin Hydroelectric Project (Klamath Report available at http://www.energy.ca.gov/klamath, along with other Energy Commission Klamath materials).

Bottom line is that - if the estimates of the Commission and its economists are correct - it will be better for both the health of the Klamath River and PacifiCorp’s ratepayers (customers) if the dams come out and modern replacement power is developed. Here’s how the Energy Commission put it in a letter to the California Public Utilities Commission.

“The Klamath Hydro Project is presently a low-cost energy resource for PacifiCorp’s ratepayers because the legally-required investments in mitigation measures needed to meet modern environmental regulatory standards have not yet been made (KPAAM2 estimates current production costs at $19 per MWh). PacifiCorp’s ratepayers across six Western states will have to pay either to relicense the project and install substantial mitigation measures, or to decommission the project and procure replacement power elsewhere. Should PacifiCorp prevail in securing a new FERC license that allows for continued operation of the Klamath Hydro Project with the required mitigation, ratepayers will be paying for reduced levels of intermittent power from an old, nominal energy resource at high production costs: KPAAM2 estimates that relicensing with mitigation will increase production costs three-fold to $60.78 per MWh for the midline case, with a potential range of $48.12 to $73.19 per MWh.

Based on this information, we question the wisdom of investing hundreds of millions in ratepayer money to sustain a nominal and environmentally damaging power plant when a lower cost, environmentally superior project alternative is available and feasible.”

The economic studies that have been done indicate that the dams will come out because it is in PacifiCorp's financial interest to take them out. There is, therefore, no need for the bad Water Deal being promoted by special interests to fleece the taxpayers - and maybe the ratepayers too.