Archaic law may cost dam builders billions

Associated Press

EPHRATA – The Grant County Public Utility District might have to sell its two hydroelectric dams on the Columbia River for a fraction of their value if it loses its operating license in 2005.

The Priest Rapids and Wanapum dams are worth between $4 billion and $5 billion today, but a never-used federal law would require that they be sold for net book value, or about $400 million.

PacifiCorp, an investor-owned utility based in Portland, Ore., and the Yakama Nation have teamed up in hopes of winning the license. The utility district, which built the dams, will seek a renewal.

“If they are awarded the license, it is stealing from Grant County,” said Bill Judge, president of the PUD’s Board of Commissioners.

Applications are due in 2003.

U.S. Rep. Doc Hastings, R-Wash., said if the dams were sold, it ought to be at fair-market value.

He said the issue of compensation isn’t clear-cut.

“It’s not a black-and-white issue,” he said. “Nobody really knows because it hasn’t been done.”

Competition for existing hydropower licenses are rare, and the Federal Energy Regulatory Commission said a license has never been transferred under such circumstances.

Sections 14 and 15 of the Federal Power Act address compensation if a license is transferred. The law says the new license holder “shall pay the net investment” of the project to the previous license holder.

William Madden, the utility district’s attorney in Washington, D.C., said the Federal Power Commission issued a rule in 1969 interpreting net investment as the net book value, which is the original cost of the project, plus improvements, minus depreciation.

The utility district built the dams in the 1950s and 1960s. Priest Rapids cost $166 million, while Wanapum cost $195 million. District officials said other improvements would bring the total net book value to $400 million.

In addition to net book value, a new license holder would have to pay severance damages, under the Federal Power Act, but no one really knows what that means, Madden said.

The law was enacted in 1920, and Congress at the time was worried about deflation – that the dams, at relicensing, would be worth less than what it cost to build them.

“They thought they were doing people a favor so that they would get their original investment,” Madden said.

The debate also focused primarily on a federal government takeover of dams, rather than a competing utility, he said.

“They said, ‘By golly, the only person that is going to take over the projects is the federal government. And, by golly, the federal government isn’t going to pay more than the original cost,’ ” Madden said.

Copyright ©2001 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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