Economist: Missouri River flow changes help electricity consumers

(Lincoln, NE; Washington, DC) A report released today by Environmental Defense and American Rivers concludes that Missouri River flow changes required to protect endangered species will not increase -- and may in fact slightly reduce -- consumer electricity rates in the region. Prepared by noted energy economist David Marcus, the report cites several instances where the U.S. Army Corps of Engineers included outright errors or used key data inconsistently in its August 2001 economic analysis that reform opponents cite when asserting that dam operation reform will raise consumer rates.

FOR IMMEDIATE RELEASE
July 9, 2002
               
Contact:                        
Chad Smith, (402) 477-7910
Eric Eckl, (202) 347-7550

Economist: Missouri River flow changes help electricity consumers

Get the full text of the report at: http://www.americanrivers.org/docs/Marcus%20hydro%20report%20final.pdf

Reforming Missouri River dam operations could save endangered species AND save consumers three to five cents on their monthly electricity bill.

(Lincoln, NE; Washington, DC) A report released today by Environmental Defense and American Rivers concludes that Missouri River flow changes required to protect endangered species will not increase -- and may in fact slightly reduce -- consumer electricity rates in the region. Prepared by noted energy economist David Marcus, the report cites several instances where the U.S. Army Corps of Engineers included outright errors or used key data inconsistently in its August 2001 economic analysis that reform opponents cite when asserting that dam operation reform will raise consumer rates.

"Reforming dam operations will not only benefit endangered wildlife, but as this report proves, it will also help lower the power bill each month for consumers living in the upper Midwest and Great Plains," said American Rivers' Nebraska Field Office Director Chad Smith.

The Army Corps generates hydropower at its six Missouri River dams, which the Western Area Power Administration (WAPA) then markets to utilities serving residents and businesses. When preparing the analysis for its August 2001 draft environmental impact statement on dam operations, the Corps included calculations that incorrectly assumed that electricity rates in the Midwest would remain comparable to those in California at the height of its energy crunch in early 2001.

In addition Marcus's review of the Army Corps' analysis revealed that that agency acknowledged that the proposed reforms would increase its flexibility to generate hydroelectricity from most of its Missouri River dams in one section - but did not acknowledge this in another. This "peaking" operation of the hydropower generators has relatively few impacts on downstream reservoirs and would allow WAPA to avoid purchasing more expensive power off the grid during periods of high demand.

"Assuming these savings are passed on to consumers, it would mean an average reduction in monthly electric bills for a typical consumer in the upper Missouri River Basin states of between 3 and 5 cents," concluded economist David Marcus, who conducted the study on behalf of the two organizations.

In addition, the Corps made two errors in a third analysis of how more natural seasonal water levels would affect operations costs for downstream coal and nuclear plants, which must meet river temperature standards when discharging water used for cooling. The first error is that a number of the projects cited are in fact upstream of the last Missouri River dam -- and therefore unaffected by the proposed reforms. The second is that none of the proposed reforms would drop river levels below what is specified in the permits of the most important power plants along the river where most of the impacts were forecasted (by the Corps) to occur.

For example, the most aggressive reform scenario would drop river levels to 21,000 cubic feet per second (cfs) during the late summer. The Corps speculated that this could impact the operations of the Neal coal-fired power plant near Sioux City, Iowa, even though the Neal plant's permit allows for normal operations at river levels as low as 10,500 cfs.

"This report should put to rest irresponsible allegations that saving endangered species means blackouts and sweltering through a hot Midwest summer," said Chad Smith, director of American Rivers' Nebraska Field Office. "With this new analysis showing the benefits to energy production, we hope that the White House recognizes that this is another reason to get behind the modest dam operation reforms proposed for the Missouri River."

About David Marcus
David Marcus has a Master's Degree in Energy and Resources from the University of California at Berkeley. He has worked as a staff member and as an advisor to a Commissioner at the California Energy Commission, and as a staff economist for Environmental Defense. Since 1985 he has been a full time independent energy consultant. He has performed economic analyses of electric power issues for a variety of clients, including the California Attorney General, the U.S. Department of the Interior, environmental groups, labor unions, electric utilities, and alternative energy developers. He has testified as an expert witness before state regulatory commissions in California, Arizona, Colorado, and New Mexico, and before Congressional subcommittees. This analysis was commissioned by the non-profit national conservation groups Environmental Defense and American Rivers.

For More Information

Save the Missouri Coalition: http://www.savethemissouri.org

American Rivers: http://www.americanrivers.org/missouririver/default.htm

Environmental Defense: http://www.environmentaldefense.org/home.cfm

Izaak Walton League: http://www.iwla.org/pressrel/release.asp?p_releaseid=48