For a more in depth summary, as well as all three phases of our full report, please follow this link:
Full Study_Power Economic Consulting_7_26_2016
THE IMPACT OF THE LOSS OF ELECTRIC GENERATION AT GLEN CANYON DAM
Summary of Study Findings
Background
The vast Colorado River system of dams, reservoirs, and diversions is facing an unprecedented water supply crisis. The 1922 Colorado River Compact, the legal foundation of this water system, was based on flawed assumptions that seriously overestimated Colorado River flow, underestimated public demand, and could not have foreseen the impacts of climate change. As a result, more water is allocated today than actually flows in the river. This water deficit is projected to increase significantly in the years ahead.(1)
The two main Colorado River reservoirs, Lake Powell, behind Glen Canyon Dam (GCD), and Lake Mead, behind Hoover Dam, are symptomatic of this crisis. These reservoirs have been hovering around half-full for the past decade. Studies have concluded that they are unlikely to both ever fill again, and could go dry within the next decade.(2) The stakes are high because the Colorado River supplies water to 40 million people and 4.5 million acres of agricultural lands.
GCD was authorized in 1956 as a part of the Colorado River Storage Project (CRSP). The primary purpose of the dam is to store excess water in Lake Powell for the upper basin states of Wyoming, Colorado, Utah, and New Mexico, which can be released, as needed, to Lake Mead downstream. A secondary purpose of the dam is to generate hydroelectricity, which is used to help fund operation of the Colorado River water delivery system and is sold at a discount to selected contractors.(3) As river flows continue to decline, Colorado River managers are increasingly concerned about maintaining Lake Powell to elevations that allow hydropower generation.
Some conservationists have questioned the benefits of attempts to preserve the status quo, and propose instead, fundamental changes in the management of the Colorado River system. For example, Glen Canyon Institute (GCI) has put forward the Fill Mead First (FMF) plan which would change the operation of GCD, allowing water to fill Lake Mead reservoir downstream before impounding it in Lake Powell. Others, such as former Commissioner of Reclamation, Daniel Beard, call for decommissioning and tearing down GCD, and permanently draining Lake Powell. These advocates contend that their plans could conserve large amounts of water now lost to seepage from Lake Powell, promote the restoration of Grand Canyon ecosystems, and allow the recovery of once-flooded portions of Glen Canyon.
Colorado River system managers are critical of such proposals because they argue that they would violate the Colorado River Compact. They also warn that these plans would jeopardize or eliminate hydroelectric power generation at GCD. They claim that this would cause spikes in rates for electric power customers and drastically reduce funding for the protection of endangered Colorado River fish species.(4) These contentions, however, are not well documented and questions have been raised about their accuracy.
Establishing an understanding of the economic impacts of a potential loss of electric generation at GCD is vitally important. Water managers and policy makers are now making far-reaching decisions on the management of the Colorado River, including how to allocate water between Lake Powell and Lake Mead. They need the best possible information on which to base these decisions.
The Glen Canyon Dam Hydropower Studies
In an effort to gain a greater understanding of these issues, Power Consulting, Inc. conducted a detailed analysis of the economic impacts to ratepayers in the region if Glen Canyon Dam (GCD) were to cease generating hydroelectric power. This research was reviewed by an independent panel of distinguished economists: David Marcus, Gail Blattenberger, and SpencerPhillips.(5)
The study was done in three phases:
• Phase I, focuses on the economic value of current production of the electricity at GCD as well as the impact that not generating electricity at GCD would have on the electric grid and on the regional economy.
• Phase II, focuses on the impact of the loss of GCD electric generation on the people and entities who directly or indirectly contract through the CRSP and Western Area Power Administration (Western) to receive their electricity.
• Addendum to Phase II, focuses on the financial costs and offsetting benefits if GCD were no longer able to generate hydropower.
Summary of Findings
The study concludes that, if Glen Canyon Dam stopped generating hydropower, it would have a negligible impact on the western power grid, would raise electric rates by an average of 8 cents per month for residential customers of hydropower, and could save tens of millions of dollars each year in taxpayer subsidies and water lost to system inefficiencies.
• The average annual value of Glen Canyon Dam’s electric energy represents less than one half of one percent of the sales value from electric generation in the western grid, and that the grid could readily absorb the loss of hydropower from the dam.
• The total impacts would be an increase of $16.31 million in electricity costs for consumers of Glen Canyon Dam power, but because they would be spread among 3.2 million customers, the individual impacts would be small in the vast majority of cases.
• The average annual value of the GCD electric energy is $153.3 million. This value is less than one half of one percent of the close to $31 billion in sales value from electric generation in the Western Electricity Coordinating Council (WECC).
• Average yearly cost increases would be $.08 per month for residential customers, $.59 per month for commercial customers, and $6.16 per month for industrial customers of Glen Canyon Dam electricity.
• A discontinuation of Glen Canyon Dam operations could have offsetting benefits of
approximately $74.8 million annually, including savings of $34.9 million in management costs and potential earnings of as much as $39.8 million annually due to increased hydropower at Hoover Dam and conservation of water that would have otherwise seeped into the banks of Lake Powell.
References:
(2) https://scripps.ucsd.edu/news/2487
(3) Theses contractors include publicly owned electric utilities, municipalities, irrigation districts, military bases, and
native American tribes
(4) Oritz, K. Western Slope is Refusing to Divert More Water to Front Range. New Channel 5 Grand
Junction, Montrose, Glenwood Springs. Accessed 10.29.2015.
https://web.archive.org/web/20140715021756/http:/www.krextv.com/story/western-slope-is-refusing-todivert- more-water-to-front-range-20140711
more-water-to-front-range-20140711 and Harvey, N. To protect hydropower, utilities will pay
Colorado River water users to conserve. High Country News. 8.4.2014. Accessed on 10.29.2015
https://www.hcn.org/blogs/goat/doi-and-utilities-partner-to-stave-off-colorado-river-power-woes and U.S.
Bureau of Reclamation. Flow Regimes and Glen Canyon. Accessed on 10.29.2015.
http://www.creda.org/Documents/Messaging2.pdf
(5) David Marcus, an independent energy consultant with union, government, and NGO clients
Gail Blattenberger, Ph.D., Professor Emerita at the economics Department of the University of Utah with fields in
Econometrics and Environmental Economics
Spencer Phillips, Ph.D., principal of Key-Log Economics, LLC; lecturer at University of Virginia Department of
Economics and Batten School of Leadership & Public Policy; and adjunct faculty, Goucher College graduate program
in environmental studies.