Uneasy balance

Time is almost up for an amicable settlement between the Sacramento Municipal Utility District and state and federal agencies regarding SMUD’s license-renewal application for its Upper American River Project. At stake is a 688-megawatt network of dams and reservoirs along the American River and its tributaries, which provides about 15 percent of SMUD’s electricity supply.

SMUD filed a license renewal in 2001 with the Federal Energy Regulatory Commission to continue its operation of the system for what could be the next 30 to 50 years. Its current license expires in July of 2007.

On the other side of the negotiating table, with its own alternative proposal, sits a group of state-resource agencies and non-governmental environmental- and recreational-advocacy groups. They have been waiting for this once-in-30-years opportunity to significantly reduce the project’s environmental impact. They also want to ensure a more viable system for the rivers’ many rafting and boating businesses. Both sides have until November 17 to negotiate a settlement, the last date before SMUD must submit a formal hearing request to the FERC.

The debate is centered squarely on the area’s river-flow levels that are dictated by SMUD’s dam diversion. The California Department of Fish and Game and the environmental groups want increased flows through the rivers that more closely mimic natural conditions. They contend that increasing flows would protect fish and wildlife. Under the present flow conditions, fish and other river wildlife have been decimated by severe water shortages and unnatural flow schedules, according to the state agency.

They are hoping that the environmental-protection measures will be adopted by SMUD, which enjoys a reputation as a “green” utility.

“This is a battle for SMUD’s soul,” said Ron Stork, president of Friends of The River, a statewide river-conservation group and one of the opposing parties to SMUD’s renewal application. “They have a responsibility to not just squeeze every possible kilowatt-hour out of a river; there has to be something left.”

River-dependent businesses also want a more-reliable and adequate flow regimen.

“We’re asking for roughly three hours of water per day,” said Steve Liles, owner of W.E.T. River Trips, which maintains white-water-rafting tours along the American River. “We have now had days where we’ve been told we would have water delivery, where we would have multiple flows, and we haven’t,” Liles said.

“The last time that happened, we had clients from England and they had planned their trip three months in advance. They were left with a real negative impression about California in particular,” Liles added.

But SMUD contends that a balance must be struck between the needs of the ecosystem and the demands of its ratepayers. Increased flows means a loss of electricity, according to SMUD, which equates to higher rates.

“Our standpoint is that it’s a balancing act and it always has been,” said Jim Shetler, SMUD’s assistant general manger of energy. “We always felt, and continue to feel, there’s a balance that can be met, that can satisfy the interest for the recreation community and the environmental community as well as retaining the benefit to SMUD ratepayers of this very reliable resource.”

Bill Center, president of Camp Lotus (a campground for whitewater rafters) and representative for several local rafting and boating businesses, sees SMUD’s balancing argument as giving too much weight to the bottom line.

SMUD ratepayers, Center contended, are willing to pay what he thinks would amount to no more than a 1- to 2-percent increase in rates in order to cover the difference between the two proposals.

“I am hopeful that they’ll say, ‘Boy, that’s a cheap investment for us to re-establish our position as community leaders, as environmental stewards, and to ensure we go through the next 50 years in a healthy partnership with the people who regulate our business,’ ” Center said.

“Rivers need water,” he added. “SMUD has, over the last 45 years, been in charge of a situation where it has drained over 90 percent of the water from virtually every river that is affected by the project.”

Both sides have expressed a willingness to come to a settlement before the November 17 deadline. If they do not, the negotiating process could take on a substantially more adversarial format, similar to a civil trial, including formal hearings, expert testimony and discovery motions. This could significantly increase costs and could place the final decision in the hands of a federal administrative judge.

“It’s certainly advantageous for all parties not to go to Las Vegas and throw the dice, which is what a judicial hearing [would be] with an unknown appointed judge,” Center said.

Center conceded that SMUD could prevail on its present application before a Bush-appointed judge. There is also the new Environmental Protection Act of 2005, which the president signed into law last November, making it more difficult for federal agencies to place conditions on re-licensing applications—a law that SMUD lobbied heavily on.

However, Center warned that SMUD’s environmentally friendly image would be better served by a negotiated settlement rather than a court victory afforded by Bush energy policy.

“Maybe they could win the battle,” Center said. “But even if they win the battle, what they bought is the undying enmity of the people who are regulating them for the next 30 to 50 years. What they’ve done is become the poster child for one of the most anti-environmental administrations in recent history. If I were an elected board member of SMUD, that’s not a legacy that I would want to have.”

Shetler said SMUD does not wish this case to be decided by a federal hearing, and added that an agreement may be near. “In the vast majority of areas I think we have agreement,” Shetler said. “We’re probably down to maybe five to 10 issues that we need to work our way through.”