V. Rate Credit
In D.06-04-034 a four-year transition plan was adopted to bring Klamath Irrigation Project customers that no longer qualified for substantially discounted fixed rates (of approximately $0.006 kWh under a 1956 Contract between PacifiCorp and the Interior) up to full PA-20 Irrigation tariff rates of $0.07928 kWh being charged to all other PacifiCorp irrigation customers.2 The history of that substantial rate differential, which has existed since 1917, is discussed in numerous exhibits and briefs in this proceeding, including interim D.06-04-034, and will not be repeated in this order.
As part of the authorized transition plan, KWUA and Interior were authorized to challenge the proposed level of generally applicable PA-20 Irrigation tariff rates for Project irrigation customers in this proceeding and to present proposals for a separate tariff classification.
A. Proposal
KWUA and Interior seek compensation to Project customers through a form of rate credit for providing a benefit to PacifiCorp and its other customers. KWUA identified that benefit as providing additional water flow to the Klamath River, which allows PacifiCorp to generate more inexpensive hydro power from its Klamath facilities. Although no specific rate was proposed, KWUA and Interior want the Commission, as a matter of policy, to determine a fair allocation of the benefits PacifiCorp receives between Project customers and PacifiCorp's remaining customers and provide Project customers a rate credit based on kWh usage or direct payments for Project customers' share of benefits received from PacifiCorp. 3
To assist the Commission in determining the perceived benefit that PacifiCorp receives from the additional water flow, a KWUA witness calculated that Project customers provide approximately 228,700 to 261,000 acre feet annually for the benefit of PacifiCorp, which enables PacifiCorp to generate, on average, an additional 116,190 to 136,441 megawatt-hours of energy. That witness used a hydrogeneration incremental generation model to determine that this additional water flow has a useful value of $5.3 to $6.1 million to PacifiCorp and that if the entire value was allocated to Project customers, the result would be a credit against its PA-20 Irrigation tariff rate of 5.67 to 6.50 cents per kWh.4
B. Source of Benefit
In 1957, California and Oregon entered into the Klamath River Compact, which was approved by the United States Congress. That Compact, codified into the California Water Code (Section 5900 et seq.), facilitates and promotes the orderly, integrated and comprehensive development, use, conservation and control of the Klamath River for various purposes including the use of water for domestic purposes; the development of lands by irrigation and other means; the protection and enhancement of fish, wildlife and recreational resources; the use of water for industrial purposes and hydroelectric power production; and the use and control of water for navigation and flood prevention.5 The Compact specifically notes that its intent is to remove causes of present and future controversies by providing for the preferential rights to the use of water after the effective date of the compact for the anticipated ultimate requirements for domestic and irrigation purposes in the Upper Klamath River Basin in Oregon and California.6
There is no free flowing of Klamath River water through Oregon and California because of specific water right claims for use of the natural flow and storage of Klamath River water. Although no party identified the specific water rights or order of each party having rights to the Klamath River water flow, it appears that PacifiCorp is at the bottom of the list. We do know that Interior Project customers have senior water rights to PacifiCorp; Irrigation Project customers have senior water rights to Interior and PacifiCorp; Indian Tribal rights are senior to Irrigation Project customers, Interior Project customers, and PacifiCorp; and endangered species act water rights are senior to Indian Tribal, Irrigation Project customers, Interior Project customers and PacifiCorp.7 Those parties having the most senior water rights have a right to all of their individually authorized water needs prior to the remaining senior right holders taking water for their individual authorized uses. In other words, Project customers have a right to satisfy all of their authorized water needs from the Klamath River before PacifiCorp is entitled to any of that water.8 Because of weather and droughts, and senior water rights, there is no certainty that the Klamath River water flow will be sufficient to meet the water requirements of all senior water rights holders. For example, in four of the last 15 years, the Lower Klamath National Wildlife Refuge did not receive its fully allotted water deliveries.9
KWUA perceived that PacifiCorp benefits from Project customers providing additional water flow to the Klamath River, which allows PacifiCorp to generate more inexpensive hydro power from its Klamath facilities. The sources of that additional water flow are water storage, the Lost River diversion channel (tributary), and return of diverted water.
Klamath water is diverted for storage in the Upper Klamath Lake during high run-off periods for later use. Since storage captures water during relatively high flow periods, water is being conserved that would or could otherwise spill at PacifiCorp's generation facilities.10 Stored water is released in late spring and summer when natural flows are reduced. 11 The released water is used by Project customers for authorized irrigation and wildlife purposes. The natural water flow and released water not recaptured by Project customers for reuse is available to PacifiCorp for generating incremental hydro power downstream.
The Lost River tributary was constructed to divert floodwaters and excess irrigation flows from the Lost River to the Klamath River to reduce flooding in the Tule Lake area.12 Water flowing from this tributary is from an entirely different river basin. It is not a natural tributary of the Klamath River.
Flow from the Lost River tributary to the Klamath River occurs most significantly outside the irrigation season.13 This period includes times of high precipitation and runoff. Hence, the additional flow at times of high precipitation and runoff would more likely be spilled than used for incremental hydro power. During the irrigation season, minimal flow enters the Klamath River from the Lost River tributary due to a variety of hydrological and hydraulic conditions.14
Water diverted from the Klamath River for Project customers' use is used, recaptured and reused by Project customers. Return flows and operational spills from one project area become the source of supply to other project areas. Project customers pump water back to the Klamath River to prevent low elevation lands in the Klamath Irrigation Project from flooding, which, if allowed to occur, would reduce the amount of acreage available for agricultural production.15 Unused water returned to the Klamath River is available for the generation of incremental hydro power downstream.
C. Discussion
Project customers do not compensate, and there is no known requirement for Project customers to compensate, holders with water rights senior to theirs for Project customers' use of those senior holder rights surplus water or benefits that Project customers may receive from those senior water holders. Irrespective of this, Project customers seek a rate credit for perceived benefits that PacifiCorp receives from Project customers for providing additional water flow to the Klamath River that allows PacifiCorp to generate incremental hydro power from its downstream Klamath facilities.
There is no dispute that Project customers' Klamath River water rights are senior to those of PacifiCorp. Absent a detailed explanation of the rights Project customers have over water that Project customers return to the Klamath River, we look to the California Water Code for guidance. Section 100 of that Code provides that the right to water or to the use of flow of water in or from any natural stream in this State is and shall be limited to such water as shall be reasonably required for the beneficial use to be served; and such right does not and shall not extend to the waste or unreasonable use or unreasonable method of use or unreasonable method of diversion of water. As testified to by various parties, Project customers' beneficial use of water is for irrigation and reclamation purposes. It was held in the City of Pasadena v. City of Alhambra (1949) 207 P.2d 17, 33 Cal.2d 908 that any water not needed for reasonable or beneficial uses of those having prior rights is excess or surplus water. Section 1202(d) of that same Code, defines water having been appropriated or used that flows back to a river to be unappropriated water. The Court held in Stevenson Water Dist. V. Roduner, 36 Cal. 2d 264, 270, 23 P.2d 209 (1950) that surplus water may be used without compensation. Hence, it appears from the water code that Project customers' have no claim to water flow that they return to the Klamath River or to receive any benefit from the returned water flow.
Irrespective of what the Water Code says or may say, we look to who benefited from the Project customers' water rights. Clearly, Project customers benefited through their ability to irrigate farm lands and to reclaim land for wildlife and other purposes. They were also the primary beneficiary of water storage, the Lost River tributary, and returning of diverted water to the Klamath River. That returning of water to the Klamath River serves a necessary purpose for Project customers, to avoid flooding and to preserve farm land.16 Project customers drain their lands to prevent flooding and to maintain their land for farming. 17
There is insufficient evidence to substantiate that PacifiCorp benefited from the additional water flow of the Klamath River. In part, this is because the return water flow has been volatile, unpredictable, unmanaged and often occurred during high-water periods. 18 In such instances, PacifiCorp can not use that flow to generate electricity and it often results in spillage. Further, there is no evidence of the quantity, if any, of the increased flow that PacifiCorp has been able to take advantage of to generate incremental hydro power. Project customers have not substantiated the need to establish a rate credit. The rate credit request is denied.
That Project customers failed to meet their burden of proof in proffering their unique proposal for using a discount rate as an inducement for water reclamation does not per se mean that a novel approach to conservation has been summarily rejected by this Commission. It may be that there is ultimate merit is the approach suggested. Because it entails reconsideration of existing notions of how water rights and rates are administered, and because, if it were to be done fairly and correctly, it would involve substantial evidentiary and analytical endeavor, such a notion is more appropriately addressed in a generic rulemaking proceeding, with adequate notice to the myriad interests that such a substantial policy revision would affect. Such a rulemaking would permit adequate expert opinion and systemic analysis, with sufficient rigor to assure that many differing perspectives are considered. This ratemaking proceeding is not, and was not intended to be, the vehicle for such an inquiry.
2 The discounted rate of $0.006kWh has essentially remained unchanged for nearly 90 years, since 1917.
3 Exhibit 35, p. 8.
4 Id., p. 9.
5 Water Code Section 5901, Article I.A.
6 Id., Section 5901, Article I.B.(2).
7 Reporter's Transcript Vol. 5, p. 772.
8 Exhibit 11, p. 15.
9 Reporter's Transcript Vol. 5, p. 768.
10 Spill refers to water that is released past hydro facilities without generating any power with that water.
11 Exhibit 33, p. 4 and 5.
12 Exhibit 41, p. 4 and 5.
13 Exhibit 33, p. 5.
14 Exhibit 34, p. 2.
15 Reporter's Transcript Vol. 4, page 545 and 546. Also Exhibit 41, p. 5.
16 Reporter's Transcript Vol. 5, p. 743.
17 Reporter's Transcript Vol. 4, p. 546; and, Exhibit 41, p. 5.
18 Exhibit 23.
