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109th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     109-693




 September 28, 2006.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed


  Mr. Pombo, from the Committee on Resources, submitted the following

                              R E P O R T

                        [To accompany H.R. 4857]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Resources, to whom was referred the bill 
(H.R. 4857) to better inform consumers regarding costs 
associated with compliance for protecting endangered and 
threatened species under the Endangered Species Act of 1973, 
having considered the same, report favorably thereon without 
amendment and recommend that the bill do pass.

                          PURPOSE OF THE BILL

    The purpose of H.R. 4857 is to better inform consumers 
regarding costs associated with compliance for protecting 
endangered and threatened species under the Endangered Species 
Act of 1973.


    In response to concerns that various species had become or 
were in danger of becoming extinct, Congress passed the 
Endangered Species Act (ESA) in 1973. Under the ESA, the 
Secretary of the Interior, through the U.S. Fish and Wildlife 
Service (FWS), has responsibility for plants, wildlife and 
inland fishes. The Secretary of Commerce, through the National 
Oceanic and Atmospheric Administration (NOAA), is responsible 
for implementing the ESA with respect to mostly marine and 
anadromous species. Each agency follows a regulatory process to 
list a species as ``endangered'' or ``threatened'' based on the 
best available scientific and commercial data. More than 1800 
species have been listed under the ESA, with 1300 being 
domestic species. If federal actions, including approval or 
funding actions, may affect a listed species, Section 7 of the 
ESA requires federal agencies to consult with the FWS or NOAA 
to ``insure that any action authorized, funded or carried out 
by such agency * * * is not likely to jeopardize the continued 
existence'' of a species.
    The ESA impacts the four Power Marketing Administrations 
(PMAs), their wholesale customers and, ultimately, the end-use 
retail customer through regulatory impacts on hydropower 
generation. The PMAs (Bonneville Power Administration, Western 
Area Power Administration, Southwestern Power Administration 
and the Southeastern Power Administration) market and deliver 
wholesale excess power generated at Bureau of Reclamation and 
U.S. Army Corps of Engineers (Corps) hydropower facilities. The 
Bureau is a major source of electricity for the western United 
States. The agency operates 58 hydroelectric powerplants 
averaging an annual total of 42 billion kilowatt-hours of 
electricity. The Corps is the Nation's number one source of 
federal hydroelectricity, operating 75 powerplants for an 
annual total of 100 billion kilowatt-hours. Federal power 
generated by both agencies provides up to 5% of the Nation's 
electricity supply. In certain regions of the country, such as 
the Pacific Northwest, the Intermountain West and the Upper 
Midwest, federal power generation and transmission services 
play a very significant regional role in their respective 
electricity markets.
    Electricity marketed by the PMAs is sold on a wholesale 
basis to ``preference'' customers, which include non-profit 
municipals, rural electric cooperatives, public utility 
districts, irrigation districts and Native American tribes. 
These wholesale customers then ultimately serve over 55 million 
retail customers. Under numerous authorizing statutes, 
preference power is sold at ``cost-of-service'' based rates, 
which are designed to repay the federal capital investment in 
federal electricity generation and transmission facilities, 
annual operation and maintenance of such facilities and federal 
staffing. Cost-of-service based rates also include the costs of 
environmental mandates and replacement power services resulting 
from these mandates.
    One major environmental cost stems from the ESA. Over the 
years, the ESA's Section 7 requirements have ultimately altered 
and decreased some federal power generation due to modification 
of water releases from dams. Since the PMAs are typically under 
contract with their customers to provide a set amount of power, 
the PMAs have to purchase replacement power on the open market 
to make up for lost federal hydropower generation and to meet 
contractual needs. This replacement power generally costs much 
more than federal power and is often fossil-fuel based power. 
Additionally, the PMAs experience direct costs for habitat 
restoration and protection, structural modifications to 
facilities, fish hatcheries, and other on-the-ground work. Much 
of these costs are built into the rate base and have been 
factors in recent rate hikes.
    In light of rising and uncertain ESA compliance costs, 
particularly in the Pacific Northwest, some PMA customers have 
called for greater transparency in the way such costs are 
reported. A May 2005 poll conducted for the Northwest 
RiverPartners found that ``more than 70% either don't know much 
they pay for salmon recovery or believe less than 5% of their 
monthly bills go to salmon recovery'' in the Northwest. All 
four PMA Administrators testified before the Committee on 
Resources that their agencies do not itemize these costs on 
monthly wholesale customer bills. Wholesale customer utility 
representatives also testified before the Committee that 
consumers are generally not aware of ESA compliance costs and 
that ESA cost information is not readily available. One utility 
which receives wholesale electricity from the Bonneville Power 
Administration testified that it lists environmental costs on 
monthly retail consumer bills. However, the utility faced 
considerable difficulty in acquiring the necessary data and was 
fortunate to have a retired Bonneville Power Administration 
official who could understand the information. The Committee 
understands that the vast majority of PMA customers do not have 
the financial or technical means to acquire and decipher ESA 
cost information and that legislation is necessary to provide 
more transparency on these costs.
    H.R. 4857 requires the PMAs to estimate and report the 
direct and indirect ESA costs to each wholesale firm power 
customer on a monthly billing basis. Under the bill, the PMAs 
provide the information to their wholesale customers, who can 
then decide how or whether to list this information to their 
retail consumers. Since all PMA operating costs are recovered 
through wholesale electricity rates, the bill does not seek to 
add costly operating mandates on the PMAs. As currently 
drafted, H.R. 4857 would not result in the hiring of new staff 
or the purchase of new computer software.
    The legislation focuses on ESA costs, which are some of the 
most volatile and uncertain costs faced by many electricity 
ratepayers today. The PMAs testified that the agencies could 
implement the ESA cost requirements under the bill at 
``negligible cost.'' However, the addition of other monthly 
costs, such as measuring irrigation diversion costs on 
hydropower production and certain debt costs, would result in 
significant staff and technical costs that would ultimately be 
passed on to the consumer. For example, PMA staff have 
indicated that it would require very complex analyses and staff 
time to measure monthly irrigation diversion impacts when many 
of the diversions end up flowing back into the basin of origin, 
depending on the type of water year. It would also be very 
difficult for PMA staff to measure ``benefits'' associated with 
ESA compliance, rather than costs. In the Pacific Northwest, 
for example, there are many disputed studies on the benefits of 
endangered salmon restoration. These benefits are very 
subjective in nature as opposed to the hard numbers associated 
with costs such as replacement power, foregone generation and 
    Ultimately, the point of the legislation is to list the ESA 
costs so a consumer will have better access to information. 
This transparency will allow the electricity consumer to make a 
more informed decision on ESA costs.

                            COMMITTEE ACTION

    H.R. 4857 was introduced on March 2, 2006, by Congresswoman 
Cathy McMorris (R-WA). The bill was referred to the Committee 
on Resources. On March 16, 2006, the Committee held a hearing 
on the bill. On July 19, 2006, the Committee met to consider 
the bill. No amendments were offered and the bill was ordered 
favorably reported to the House of Representatives by a 17-10 
vote, as follows:

                      SECTION-BY-SECTION ANALYSIS

Section 1. Short title

    This section cites the bill as the ``Endangered Species 
Compliance and Transparency Act of 2006.''

Section 2. Endangered Species Act compliance estimation and reporting

    This section requires the Administrators of the Bonneville 
Power Administration, the Western Area Power Administration, 
the Southwestern Power Administration and the Southeastern 
Power Administration to estimate and report on firm power 
customers' monthly power bills compliance costs associated with 
the Endangered Species Act of 1973 and related activities. 
Since the Committee understands that it could be cost-
prohibitive for each PMA to assess ESA compliance costs on a 
real-time basis, this section allows each agency to simply 
estimate and report these costs. The Committee strongly 
encourages the PMAs to work closely with firm power customers 
in how costs are estimated and reported.
    The Committee understands that the Bonneville Power 
Administration has many ESA-related activities in the agency's 
implementation of the Pacific Northwest Power Planning and 
Conservation Act. These ESA and Pacific Northwest Power 
Planning and Conservation Act costs are currently incorporated 
into the Bonneville Power Administration's total ``Fish and 
Wildlife'' costs. As a result, the Committee understands the 
need for the agency to include these total ``Fish and 
Wildlife'' costs that will be reported under this legislation.
    This section defines ``direct costs'' to include federal 
agency obligations related to study-related costs, capital, 
operation, maintenance and replacement costs and staffing 
costs. The section also defines ``indirect costs'' to include 
foregone generation and replacement power costs, including the 
net costs of any transmission. In hearings before the 
Committee, the PMAs testified that foregone generation is a 
cost that is passed on to the wholesale customer, and 
ultimately, the retail electricity consumer. The Committee 
agrees with this assessment and expects the power marketing 
administrations to estimate and report foregone generation 
costs as a cost of compliance.
    This section requires the Bureau of Reclamation and any 
other affected federal agencies to assist the Administrators 
with cost identifications for purposes of this Act.

Section 3. Endangered Species Act compliance report

    This section requires each Administrator, in coordination 
with the Bureau of Reclamation and other relevant federal 
agencies, to submit an annual report to the House Committee on 
Resources and to the Senate Committee on Environment and Public 
Works. This report, to be submitted no later than January 30 of 
each year, will estimate direct and indirect costs associated 
with ESA compliance on a project-by-project basis for the 
Western Area Power Administration and on a system-wide basis 
for the other PMAs.


    Regarding clause 2(b)(1) of rule X and clause 3(c)(1) of 
rule XIII of the Rules of the House of Representatives, the 
Committee on Resources' oversight findings and recommendations 
are reflected in the body of this report.


    Article I, section 8, section 3 of the Constitution of the 
United States grants Congress the authority to enact this bill.


    1. Cost of Legislation. Clause 3(d)(2) of rule XIII of the 
Rules of the House of Representatives requires an estimate and 
a comparison by the Committee of the costs which would be 
incurred in carrying out this bill. However, clause 3(d)(3)(B) 
of that rule provides that this requirement does not apply when 
the Committee has included in its report a timely submitted 
cost estimate of the bill prepared by the Director of the 
Congressional Budget Office under section 402 of the 
Congressional Budget Act of 1974.
    2. Congressional Budget Act. As required by clause 3(c)(2) 
of rule XIII of the Rules of the House of Representatives and 
section 308(a) of the Congressional Budget Act of 1974, this 
bill does not contain any new budget authority, credit 
authority, or an increase or decrease in revenues or tax 
expenditures. According to the Congressional Budget Office, 
enactment of this bill would have a ``negligible'' net effect 
on direct spending and spending subject to appropriation.
    3. General Performance Goals and Objectives. This bill does 
not authorize funding and therefore clause 3(c)(4) of rule XIII 
of the Rules of the House of Representatives does not apply.
    4. Congressional Budget Office Cost Estimate. Under clause 
3(c)(3) of rule XIII of the Rules of the House of 
Representatives and section 403 of the Congressional Budget Act 
of 1974, the Committee has received the following cost estimate 
for this bill from the Director of the Congressional Budget 

H.R. 4857--Endangered Species Compliance and Transparency Act of 2006

    H.R. 4857 would require the Department of Energy's four 
federal power marketing administrations (PMAs) to report how 
much they spend to comply with the Endangered Species Act. 
Those agencies--the Bonneville Power Administration, and the 
Southeastern, Southwestern, and Western PMAs--market the 
electricity generated at federally owned dams. Under this bill, 
the agencies would be required to give their wholesale 
customers a monthly estimate of the customer's share of the 
PMA's direct and indirect costs to comply with the Endangered 
Species Act. The agencies also would have to submit annual 
reports to Congressional committees on this issue.
    CBO estimates that enacting H.R. 4857 would have a 
negligible net effect on direct spending and on spending 
subject to appropriation. Based on information from the PMAs, 
CBO estimates that the department would spend less than 
$500,000 a year to develop the information and systems needed 
for the new reports. Expenses incurred by the Bonneville Power 
Administration would increase direct spending, but such costs 
would be offset in the future by higher receipts from the sale 
of electricity. Likewise, any increase in the amount 
appropriated to the other PMAs to implement the bill would be 
offset by a corresponding increase in offsetting receipts from 
their sales of electricity.
    H.R. 4857 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would not affect the budgets of state, local, or tribal 
    The CBO staff contact for this estimate is Kathleen Gramp. 
This estimate was approved by Peter H. Fontaine, Deputy 
Assistant Director for Budget Analysis.

                    COMPLIANCE WITH PUBLIC LAW 104-4

    This bill contains no unfunded mandates.


    This bill and report contain no provisions which require 
disclosure under this authority.


    This bill is not intended to preempt any State, local or 
tribal law.

                        CHANGES IN EXISTING LAW

    If enacted, this bill would make no changes to existing