Power companies face murky future as public units lay claim to dams

Investor-owned power companies operating hydroelectric plants on US rivers are facing what could be one of the greatest uncertainties in the history of the electric industry.

An action taken by two Washington State utility districts has posed this question for investor-owned power companies: Does a 1920 federal law give a public-utility district (PUD) the right to acquire a privately owned hydro-power dam when the original 50-year federal operating license granted to the investor-owned company expires?

And, if a utility district does have this right, how much does it have to pay to acquire the hydro project?

At risk are 3,209 federally licensed, investor-owned hydro projects across the United States, now under the jurisdiction of the Federal Energy Regulatory Commission (FERC), and possibly subject to future acquisition by public-utility districts upon expiration of their licenses.

Opponents in what is likely to become a benchmark case are the Joint Operating Agency of neighboring Cowlitz County and Clark County Public Utility Districts in Washington State, and the investor-owned Pacific Power & Light Company (PP&L), headquartered in Portland, Ore.

At stake immediately is future ownership of the 136-megawatt Merwin Dam on the Lewis River in Washington, licensed in 1929 and serving 100,000 PP&L customers in the state. The license was first granted to Inland Power & Light Company, but passed to Pacific Power when the latter acquired the dam in 1941. Both Inland and PP&L were at one time owned by Electric Bond & Share Corporation , a utility holding company which subsequently divested itself of its operating companies.

Issued by the then-Federal Power Commission, and now under FERC, the Merwin Dam license expired in 1979. It has since been renewed annually, although the PUDs' Joint Operating Agency had initiated steps in 1977 to have the license transferred from Pacific Power.

In its arguments for transfer of the license, the Joint Operating Agency says its operation of the Merwin Dam would save each Cowlitz County PUD customer $103 a year, and those of Clark County, $35. On the other hand, Oregon Public Utility Commissioner John Lobdell has stated publicly that Pacific Power's customers would pay $2 to $9 more for electricity for every dollar saved by the PUD customers, if the license is transferred.

Simply stated, the Joint Operating Agency says the Federal Power Act of 1920 gives those utility districts ''the opportunity'' to acquire Merwin Dam upon expiration of the license and payment to PP&L of its ''net investment'' in the project, which would be original cost, more than 50 years ago, less depreciation , or around $10.8 million, according to the PUDs.

PP&L contends that it was not the intent of writers of the 1920 power act ''to turn over every privately licensed hydro project to public agencies when the license expires'' and also that remuneration for such license turnover should be the cost of a replacement coal-fired power plant, at today's cost levels, which are said by PP&L to be more than $800 million.

In January, the FERC staff recommended that the utility districts be granted the license for Merwin Dam, and in February reply briefs were filed with the administrative law judge for FERC, Jon Lotis, after a two-week hearing. Judge Lotis is expected to make his decision in May or June.