4. Should the Commission Authorize a
Surcharge to Recover the Costs of
Removing the Klamath Assets?

Pursuant to Section 4.1.1 of the KHSA, PacifiCorp requests that the Commission establish a non-bypassable refundable rate surcharge to collect $13.76 million from its California customers to fund the removal of the Klamath assets. PacifiCorp's proposed total surcharge estimate of $13.76 million represents California ratepayer's approximately 8% share of customer contributions (Oregon and California customers combined) and an approximately 3% share of the $450 million cap on the total removal cost, settled upon in the KHSA.

PacifiCorp states that the surcharge and the terms of the KHSA provide significant benefits to PacifiCorp's customers, in particular the cost cap which protects ratepayers from the uncertain costs of relicensing, litigation, decommissioning, and removal that customers may be responsible for absent the KHSA. More specifically, PacifiCorp references the benefit of cost protection regarding dam removal cost, and the avoidance of the risks of possible litigation due to controversies in the Klamath Basin region regarding the operation of the dam's and FERC relicensing costs.

The Conservation Groups agree with PacifiCorp's recommendation, stating that implementation of the KHSA will provide substantial benefits to ratepayers in comparison to the alternative of relicensing the Klamath assets. In support of its position, the Conservation Groups state that the cost of removal was established based on the terms of the KHSA and is shared among a number of parties, while in the case of relicensing, the total cost, including such items as compliance with water quality certifications, legal costs, and possible decommissioning, would most likely be borne alone by PacifiCorp and its ratepayers.²⁵

We find that authorization of the proposed surcharge pursuant to the terms of the KHSA provides the most cost effective method of collecting the funds necessary to resolve conflicts over resources in the Klamath Basin. Through the use of the KHSA cost cap, ratepayers are protected from the uncertain costs of relicensing, litigation, and decommissioning that customers may be responsible for sans the KHSA. If the KHSA surcharge is not instituted, the KHSA may be terminated,²⁶ and ratepayers would then be exposed to an uncertain amount of costs in addressing what to do with PacifiCorp's Klamath assets.

²⁵ Exhibit CG-1R at 5-15.

²⁶ KHSA at Section 8.11.1.D.