The Economic Costs and Benefits of the Bonneville Dam

US Army Corps of Engineers, Portland District, Columbia River Projects
Power production is the primary function of the Bonneville Dam. The two Bonneville powerhouses generate about 5 billion kWh of electricity each year. The Bonneville Dam supplies nearly 500,000 homes with electricity, assuming each household consumes 10,000 kWh of electricity per year. This makes the busbar -the dam's- cost of power to about 1.2 cents/kWh. This is fairly high when comparing the power costs throughout the years of operation of the Bonneville mainly because the Bonneville Power Administration (BPA) is still paying off the second powerhouse which was built in 1982. (Jim Clune BPA) In 1997 alone, the Bonneville Dam produced energy worth over $100 million. (Info Paper Usace, Aug 1998.) By using a renewable resource to produce massive amounts of energy, the Bonneville Dam also provides many other services to the surrounding areas.

The Federal Columbia River Power System (FCRPS) refers to the federally owned hydroelectric dams in the Columbia River Basin. Of the 29 dams in the Columbia River Basin the U.S. Army Corps of Engineers operates and maintains 21 of the dams and the Department of the Interior's Bureau of Reclamation operates 8 of the dams. The BPA is responsible for transmitting and marketing the hydroelectric power generated in the Federal Columbia River Power System. (Water Resources: "Corps of Engineers' Actions to Assist Salmon in the Columbia River Basin"; April 1998) The Bonneville Dam is just one of the components of the FCRPS. The average cost of power for all 29 hydroelectric projects in the FCRPS is about 0.7 cents/kWh. When factoring in the costs for transmission, conservation investments (protecting salmon runs), renewables, nuclear costs and the regional exchange the total cost of BPA's power is about 2.3 cents/kWh. This is the rate at which the regional ratepayers are charged.

The outstanding appropriations (debt) on the Bonneville Dam are about $783 million. This is the amount borrowed from the U.S. Treasury which has paid for projects and replacements on the Bonneville over the last 60 years. The payment of the $783 million is the northwest ratepayer's obligation for power related costs. This debt only includes costs related to power. Non-power costs such as navigation are paid for by US tax payers. The average cost of the current BPA debt is about 6.8%. The result is an annual repayment to the Treasury of the debt of roughly $52 million per year.

Maintaining and operating the Bonneville Dam costs about $10 million per year. This number is likely to increase in real terms (cost goes up with inflation) with the addition of certain projects such as improvements on the fish passage. When the costs involved in repaying the Treasury are added to the costs of maintenance and operations, the BPA ends up paying about $62 million per year.

The Bonneville Dam is also very important to the commercial sector of the northwest's economy. The dams along the Columbia and Snake Rivers allow imports and exports to travel 465 miles inland as far as Lewiston, Idaho. Because the Bonneville Dam is the first of a series of large dams on these two rivers, it plays an important role in the transactions of products traveling upriver. In 1997, the Bonneville lock granted upriver access to nearly 11 million tons of commodities.

Recreation is also a factor when compiling a list of the beneficial attributes of the Bonneville. The reservoir provides opportunities for fishing, boating, swimming, and windsurfing. There are also a large number of tourists who visit the Bonneville Dam every year. A monetary value of the willingness to pay for the recreational aspects of the dam is difficult to figure, so we will simply assume that recreational access is viewed as a benefit to its users.

Although the Bonneville is not a flood control project, it does help to tame the waters of the raging Columbia. Other dams upriver from the Columbia, such as the John Day Dam, which are designed for flood control, have allowed the people of the Columbia River Basin to live without fear of massive flooding. Floods were a frequent occurrence before the Columbia was dammed. This has helped to save millions of dollars and countless lives. The $1.2 billion flood storage projects on the Columbia, managed by the Army Corps of Engineers, has already resulted in the prevention of $15.8 billion in flood damages. (

Irrigation purposes are not attributes which the Bonneville Dam can claim directly, but the Bonneville does indirectly provide irrigation to farmers throughout the Northwest. The Bonneville subsidizes the other FCRPS dams which were specifically constructed for irrigation purposes. The BPA is responsible for paying an estimated $850 for irrigation costs. Essentially, irrigation from other dams in the FCRPS is subsidized by the revenues collected from the production of power. By producing and marketing power the Bonneville Dam indirectly allows farmers in the northwest (especially east of the Cascade Mountain Range) to irrigate the waters of the Columbia River Basin and produce crops.

Because the BPA is federally owned they are a non-profit organization. In summary, the BPA recovers their costs of the construction of the dam (first and second powerhouses), conservation debt, salaries, irrigation payments, transmission, maintenance and operation, fish and wildlife payments and any other costs by collecting revenue on the energy they produce. The BPA is still paying off large amounts of debt which were mainly incurred through the addition of the second powerhouse and other maintenance costs. The power that the Bonneville generates is essential to the people and businesses of the northwest. It would be difficult to imagine life in the northwest without hydroelectric power. Although the Bonneville Dam, when viewed from other disciplines, may present considerable disadvantages, from an economic standpoint it presents many benefits.

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