http://www.heraldandnews.com/articles/2006/02/05/news/local_news/top2.txt

Paying for water

	H&N photo by Steve Kadel Tulelake Irrigation District manager Joe Sammis, right, and Macdoel alfalfa farmer Manfred Lutz discuss water pumping costs Thursday at Lutz’s farm.

February 5, 2006 by STEVE KADEL H&N

MACDOEL - Butte Valley farmers sometimes joke that they drive pickup trucks while their counterparts in Tulelake fly airplanes.

There's a little bite under the humor because of different electric costs paid to PacifiCorp by irrigators living just 20 miles apart. The utility charges 6.3 cents per kilowatt hour to farmers in the Butte Valley area who pump with 50 horsepower engines. Those to the east who are part of the Klamath Project pay PacifiCorp about a half-cent to pump water.

But that might change soon. PacifiCorp wants to increase power rates for Klamath Project farmers so they match the standard rate the company charges irrigators elsewhere.

The Federal Energy Regulatory Commission recently denied a Department of the Interior request that current low power rates for Project members be extended past the April 16 expiration of PacifiCorp's contract.

To people like Butte Valley Irrigation District manager Joe Sammis, increasing Project users' power costs would be the fair thing to do.

“We're in competition with them,” he said. “We're in exactly the same market and it hasn't been a level playing field. We've been subsidizing them.”

Butte Valley Irrigation District, founded in 1920, has 18 members. It delivers water through underground pipes installed during the last two decades, replacing open ditches.

Manfred Lutz of Macdoel, who farms 600 acres of alfalfa with his son Steve, is among farmers in Butte Valley who pay higher rates to PacifiCorp.

Lutz, who was born in Germany 66 years ago, was a World War II orphan. His father, a soldier, was killed in battle and his mother was taken to Siberia, where she died two months after the war ended.

Lutz came to California at age 13 through the Lutheran Immigration Service. He was raised by Ralph and Anna Lutz on their northern California ranch, learning early about hard work.

He has lived in his current home since 1961. Lutz and his wife Janet have faced some lean years along the way. They were audited by the Internal Revenue Service one year after reporting their farm income as $8,000.

“They didn't figure a family of five could live on that,” Lutz said.

His annual power bill totals about $43,000 for six irrigations during the growing season, including payments to PacifiCorp and the irrigation district. To make ends meet, he said, it's critical to avoid pipe leakage and “friction loss” of water.

“The biggest thing you have to watch is your plumbing on the pipes,” Lutz said.

He figures other farmers can survive an increase in power costs because he has done it all these years.

“You got to get your priorities right,” he said.

However, those involved in the Klamath Project say it's unfair to compare the two situations. Their lower power cost was negotiated with PacifiCorp's predecessor in return for increased water from the Project that provides hydroelectric power for PacifiCorp, they point out.

“We are being paid for what we provide to PacifiCorp,” said Scott Seus, chairman of the Klamath Water User Association's power committee.

That benefit to the utility helps keep non-Project farmers' power costs down, he said.

Seus added that most people don't realize Project members also pay for pump maintenance and operation that allows the Project to exist.

“By the time we get all the Project's component costs dumped on us, we'd be at nearly 13 cents” per kilowatt hour, he said.

Seus said the “D” pumping plant, a key facility in the Project's southern portion, now costs the Bureau of Reclamation from $30,000 to $40,000 per year to operate. That would go up to $1.3 million under PacifiCorp's desired rate increase, he said.

“That all gets passed on to the rate payers,” Seus said.

With everything factored in, he said, the increase PacifiCorp wants would increase Project farmers' costs by 2,600 percent.

The Tulelake farmer and other industry representatives returned Friday from talks with the California Public Utility Commission aimed at devising a phase-in for utility price increases. They're using Oregon's seven-year phase-in as a model, and Seus said progress was made last week.

“We're potentially on a path to the same rate structure as Oregon next year,” he said, adding that the PUC will answer by April 13.

Earl Danosky, manager of the 770-member Tulelake Irrigation District, laughs at the idea that increasing power costs on the Project would level the economic playing field with those in Butte Valley.

“I don't know if there's a level playing field in this world,” he said.

Danosky added that Butte Valley farmers might be hurt if their colleagues' power rates jumped. Higher electricity costs might push many farmers away from producing cereal grain, making alfalfa production more attractive.

“If you increase the alfalfa acreage in the Basin, there will be more competition and it could actually drag prices down,” Danosky said. “Nobody can afford to put in cereal grain crops and circle irrigate if electric prices go up.”

Danosky echoed Seus' words about the Project's benefit to PacifiCorp, which he believes justifies lower rates.

“By damming the Upper Klamath River they've been able to generate power,” he said. “If it were a free-flowing river, there would have been times they wouldn't have had any water at all. The Project has made it work.”

Those who support extending the current power rate point to a ripple effect on the Basin's economy they say would result from a big price increase.

Klamath County commissioners are putting numbers together to calculate the effect.

“You could be looking at 30 percent of our farmers and ranchers who'd be severely impacted,” commissioner Bill Brown said.

It's not just a problem for those who own farms or ranches, he added.

“A lot of land is leased and farmed that way,” Brown said. “With water cost and availability always an issue, if you add higher energy costs you have people who can't pencil out leasing farm land.”

Klamath County commissioners weighed in on the issue with a letter to the Federal Energy Regulatory Commission.

“Klamath County economics rely heavily on a productive agricultural industry,” they wrote. “Increased power costs would force many agricultural producers to sell, thus causing an economic downturn in the community.”

Although the commission has ruled against the Department of the Interior, the latter agency has asked that the case be reconsidered.

“Activity at FERC is ongoing and we will be a party to that discussion,” said Steve Kandra, president of the Klamath Water Users Association.

He also acknowledged that the Oregon and California Public Utility Commissions have not ruled on PacifiCorp's rate increase request. Kandra hopes those bodies strongly weigh what the Klamath Project gives to PacifiCorp.

“Storage on the (Upper Klamath) lake has allowed water to be dropped down during peaking times,” he said. “The Project provides that benefit and it has value.

“It's not like we just negotiated a darn good deal. The utility is paying for a benefit they receive.”

‘We're in exactly the same market and it hasn't been a level playing field. We've been subsidizing them.'

- Joe Sammis, Butte Valley Irrigation District manager

‘It's not like we just negotiated a darn good deal. The utility is paying for a benefit they receive.'

- Steve Kandra, Klamath Water Users Association president