Friday, April 01, 2005

Power rate hike threatens Klamath

Forgive the Klamath Basin area farmers for their frustration as they face potential ten-fold rate increases for electricity.

There is a sense of history in the area stretching back to 1917, when the farmers’ ancestors were first affected by dams, power company agreements and the original rate contract in the area.

At the time, California Oregon Power Co. signed a contract with the federal government to provide cheap power rates in return for operating the Link River Dam and its valuable downstream hydroelectric facilities.

Another contract, for 50 years, was signed in 1956 with the Bureau of Reclamation to extend those cheap electricity rates for the area. Copco, through a merger, became PacifiCorp which says the historic low rates in the region were subsidized by the company’s 1.6 million customers in six states. This includes other customers in Oregon, who pay 5.5 cents per kilowatt-hour for electricity, compared to farmers in the Klamath Reclamation Project who pay about 0.6 cents a kwh.

And there is a more recent history ever present in the minds of farmers in the Klamath Basin, from 2001 when irrigation water was cut off from their fields when salmon and suckerfish became a higher priority than their valuable crops, vegetables and hay fields.

This rate increase is more devastating than shutting off water for one season.

The electricity cost increase means more than just a few extra dollars paid each month to PacifiCorp, which provides power to about 1,300 irrigators in this part of southern Oregon and northern California.

It’s about potentially massive change in how agriculture is done in the region.

Now the farmers are being told to change the way they irrigate, what they grow, where they grow or perhaps they should give up their water rights or farming.

This is why this has the potential to become a larger, more passionate issue.

Klamath Basin area farmers are proud of what they grow in a semi-arid, high-desert climate that can get from about 7 inches to more than 20 inches of rain per year, and possible frost any day of the year: alfalfa hay, onions, potatoes, sugarbeets and cereal crops such as oats, barley and wheat can be grown with enough water.

According to Oregon State University research done in the area, alfalfa crops typically need about 30-32 inches of water, while potatoes and onions need 18-22 inches. Depending on how quickly it evaporates because of wind and temperature, and the stage of the crop, this can vary depending on the year.

So farmers in the area depend heavily on irrigation to be productive.

How much of a financial impact will an electricity rate increase have? That depends on who gives the estimates.

The Oregon Public Utility Commission estimated that Oregon pump operators in that area will pay $8.5 million per year for power, compared to $650,000 they paid for actual usage in 2003’s growing season.

The annual power bill for the Tulelake Irrigation District is expected to rise to $1.05 million in 2006 from $70,000 in 2003.

According to Klamath Water Users Association, if a farmer uses a 50 horsepower pump, it uses about 30 Kwh. An average irrigator would use that 50 hp pump for about 43,000 Kwh in a season.

At a KWUA meeting on March 3, farmers were told the price increase for a 50 hp pump within the Klamath Project area would rise from $140 per year to $3,049 per year. If the pump is 100 hp, it rose from $1,839 per year to $26,322 per year; and for a 225 hp pump, it went from $2,506 annually to $37,736.

KWUA also told producers that their operations and maintenance fees would rise to run pumping stations, for example, so irrigators with the Klamath Project could actually see a 2,500 percent farm expense increase.

William Jaeger, an economist with Oregon State University, has calculated that farmers using sprinkler irrigation will have annual costs rise by $40 per acre.

For those who have been there for generations, they aren’t taking these stark increases readily. The Klamath Water Users Association is lobbying in Washington, D.C., and urging that the Federal Energy Regulatory Commission mandate that reasonably low rates continue for irrigators in the area, especially as PacifiCorp has applied to FERC for relicensing.

KWUA and others are also attempting to influence the Oregon Public Utility Commission about the increases.

Why can’t PacifiCorp just extend the special rates for farmers in the Klamath Basin?

According to PacifiCorp, the contract is set to expire in 2006 and “in compliance with the contracts, state law and regulatory policy” it must discontinue the cheaper rates and proposes to provide “our standard approved irrigation tariff rates beginning April 2006,” the company said in its letter to customers.

The company added that as a regulated utility under the Oregon and California public utility commissions, “we must charge all irrigators rates based on the costs of generating and distributing electricity as approved by their respective state commissions.”

Klamath Basin producers are in a difficult situation. They have a power company that is probably eager to end the subsidy of $8 million to $10 million per year from that area that currently gets picked up by the rest of its customers. They have state utility commissions that will be under pressure to ensure that electricity rates be fair throughout the state and no area receive preferential treatment. And they will probably also face fellow farmers within the state and across the country who may not be as sympathetic to them as they were when water was shut off in 2001 in the Klamath area.

This doesn’t mean they deserve such staggering increases, no matter how long they were warned of change or were aware the 50-year contract was nearing an end.

The reality is that there will probably be less support for their cause politically at the federal or state level or from their peers at the grassroots level who have paid higher rates than them for years.

Will the ultimate decision-makers respect history and century-old contracts and good faith? If the courts become involved, as has been threatened and is probable, there remains a wild card chance.

In the meantime, farmers will need to seriously look at the options facing them.

Crops that require less water, altered watering times, different irrigation methods, more efficient equipment, solar energy or reduced use of marginal land are some of the business decisions farmers will consider to survive the rate increases.

In this area in the rain shadow of the Southern Oregon Cascade mountains, a large electricity rate increase next year threatens to cast a long, dark shadow on Klamath Basin’s agriculture.