TREATY POWER GROUP MARCH 2012

The Columbia River Treaty Power Group (Power Group) provides a forum for Through the Columbia River electric utilities, industry associations, and other Treaty review process, the Power entities that depend upon power produced by Group wants to ensure a fair Columbia River generating plants to engage in the and equitable outcome for the ’ evaluation of whether to continue or estimated 6.4 million Pacific terminate the Columbia River Treaty with . Northwest electric customers • Alcoa Inc. FOR MORE INFORMATION, we serve. Based on our shared • Avista CONTACT: • Chelan PUD [email protected] • Douglas PUD Andrew Munro: (509) 668-0430 interests, the Power Group Brad Hawkins: (509) 881-2225 • Grant PUD Jeff Smith: (509) 669-2309 supports the following: • Idaho Power • Northwest Requirements Utilities • A dependable, usable, renewable and • PNGC Power carbon-free hydropower system. • PacifiCorp • Pacific Northwest Utilities • A balance of economical and reliable service Conference Committee • Pacific Northwest with social and environmental objectives. Waterways Association • Portland General Electric • Alignment of any payments for power with the associated • Public Generating Pool benefits going forward. Specifically, customers should not • Public Power Council be required to pay for power benefits that are not received. • Puget Sound Energy • Seattle City Light • River operations that favor power generation • Snohomish PUD while protecting natural resources. • Tacoma Power • Western • Clarification that flood control, as a broad public Generation & Transmission Cooperative benefit, is a general government obligation.

1961 1964 2014 2024 Treaty Treaty Canada or U.S. may Earliest possible termination date and signed implemented give notice to terminate current flood control operations end 1 COLUMBIA RIVER TREATY POWER GROUP

The Columbia River Treaty is an international agreement between Canada and the United States for the cooperative development and operation of Columbia River Basin water resources to reduce the effect of floods and to increase dependable and usable amounts of hydropower generation. It was signed in 1961 and implemented in 1964. After September 15, 2024, Canada and the United States each have the option to terminate most of the Treaty provisions by providing a 10-year advance written notice.

While the costs and benefits are borne by all Pacific Northwest utility customers, the U.S. Army Corps of Engineers (Corps) and Bonneville Power Administration (BPA) represent the United States as the U.S. Entity in official Treaty discussions with Canada. The Corps operates federal dams in the Columbia River Basin and BPA markets federal hydropower to regional utilities. Neither BPA nor the Corps represents the interests of utilities that purchase federal hydropower, operators of non-federal hydropower facilities directly affected by the Treaty, or other river users. The Power Group was formed to ensure that Northwest electricity customers would have their interests represented in the Treaty review process.

The earliest the Treaty can be terminated is 2024, although notice must be given by 2014. The current Treaty flood control operations, which provide significant benefits to the U.S., will expire in September 2024. Terms and conditions for ongoing flood control will need to be renegotiated, regardless of whether the Treaty is terminated or not. In addition, U.S. operations of the Columbia River system for fisheries management have significantly reduced the original downstream power benefits of the Treaty. If the Treaty continues without modification post-2024, U.S. power utilities would remain obligated to deliver Canadian Entitlement, a continuous power and energy delivery to the Canadian government paid for by Northwest electricity customers. The value of the Entitlement is estimated to be $250-$350 million annually, while the value of the actual benefit realized by U.S. hydro generators is estimated to be $50-70 million. The Power Group is concerned these payments will continue even though the power benefits have significantly decreased.

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Potential U.S. Entity recommendations as a result of the Treaty review process may include:

1. Terminate the Treaty.

2. Terminate the Treaty and negotiate separate new agreements with the Hydro and Power Authority.

3. Modify the current Treaty.

4. Continue the Treaty.

In any scenario, the U.S. and Canadian Entities are expected to negotiate operating criteria to implement Called Upon Flood Control. The Power Group is participating in modeling work that must be performed to assist the U.S Entity and U.S. power interests in exploring how Canada might operate the Columbia River within its border in a post-Treaty world. Modeling and analysis are being performed by the Bonneville Power Administration and U.S. Army Corps of Engineers, in consultation with BPA customers and non-federal hydropower operators. Topics should include:

• An evaluation of Treaty costs and benefits for both Canadian and U.S. operations.

• A determination of the impacts of Canadian post-2024 Called Upon Flood Control operations on U.S. power generation.

• A determination of the impacts of U.S. post-2024 flood operations on downstream power generation.

• An analysis of how the U.S. government will pay for flood control.

• An analysis of how flood control operations will impact fish operating criteria and mitigation costs.

This information will help the U.S determine whether the existing Treaty should continue or be terminated to make way for a different arrangement post-2024.

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