Electricity co-ops say they're owed for diverted water

By Kristi E. Swartz

The Atlanta Journal-Constitution

As Georgia tries to figure out how to win back the use of Lake Lanier, a group of Southeastern hydropower users is hoping to get back something as well. Millions of dollars.

That money, if it’s ever paid, would come out of your pocket if you live in Atlanta, Fulton, DeKalb, Cobb or Gwinnett. That’s because you’ve been drinking water that, instead of running through your tap, should have been running through the turbines at Buford Dam, generating cheap power, according to a federal court decision.

In the back pages of that landmark ruling in the tri-state water litigation last month, Senior U.S. District Judge Paul Magnuson concluded that the U.S. Army Corps of Engineers has consistently shorted an obscure group of power users in favor of serving up water to metro Atlanta.

The group is known as the Southeastern Federal Power Customers, nearly two dozen electric membership cooperatives and municipal utilities that are supposed to get inexpensive power generated by dams on the Chattahoochee, among other rivers. Because the Corps diverted water from turbines to taps, the judge found, the Federal Power Customers didn’t get the electricity they needed and were forced to go out on the spot market and buy it for astronomically higher prices.

The Power Customers say that has cost them $59 million over the years, and they want the money back.

“The Power Customers seem to think that the water providers owe them something, and we don’t,” said Atlanta Regional Commission Director Chick Krautler. “We owe them for storage, and we would be prepared to pay a reasonable amount for storage” of the water at the dam.

In other words, the cities and counties don’t pay for the water, but they pay the Corps to store the water and to operate the dam so the water flows at certain times. The amount they pay varies, Krautler said.

“That’s Georgia’s water, but we pay for the storage,” he said.

The Power Customers hope that Magnuson’s ruling, which requires Congress to enact a law governing the use of the Chattahoochee River by Georgia, Alabama and Florida within three years, will lead to a resolution for them as well.

“We’re waiting to see if the parties can find a settlement that they all can agree to,” said Clinton Vince, a lawyer representing the hydropower users. “We want and would insist that if there is going to be a reallocation of water that the hydropower customers be made whole.”

A clue as to how the Power Customers might get their money — or some of their money — back lies in a settlement agreement that the parties entered into after the group sued the Corps in 2000. The agreement was later thrown out by a federal appeals court. But under that plan, water users in the cities of Atlanta and Gainesville and counties of Fulton, DeKalb, Cobb and Gwinnett were to pay extra for their water, and the additional revenue would be passed through to the Power Customers.

The not-for-profit hydropower customers group includes most of the consumer-owned power systems in eight Southeastern states. The group said it paid millions to build and operate dams and reservoirs managed by the Corps, which would sell its members hydropower as long as the water flowed over the turbines.

The court found that the Power Customers have been harmed in two ways:

First, the Corps hasn’t provided sufficient flows of water to generate hydroelectricity in the quantities it agreed to decades ago. The annual output from Buford Dam is supposed to be 170,000 megawatt hours, but the dam has hit that target only four times in the past 15 years, the court said. And in five years during that period, the dam generated less than 100,000 megawatt hours.

Second, the dam is no longer producing power at so-called peak times — between 4 p.m. and 8 p.m. — when people are home from work, children home from school, and people are using lamps, computers, stoves and other appliances. Instead, the water turns the turbines on Saturday and Sunday rather than Monday through Friday, when the hydropower users say their need is greatest.

“It’s a triple whammy for us. Some of the water doesn’t flow through the turbines — when it doesn’t flow through the turbines, it doesn’t generate electricity,” said Mark Crisp, a managing consultant with C.H. Guernsey & Co. “And it’s not flowing through at the times we need it the most.”

Magnuson agreed.

“Because nonpeak power is much less valuable than peak power, the harm to hydropower from this change in operations is obvious,” he said in the ruling.

The hydropower is marketed by the federal Southeastern Power Administration, which must turn to the open market to acquire the power it needs when it doesn’t get enough electricity from water power. Those costs are passed on to the Southeastern Federal Power Customers, who pass them along to their residential and business users.

The price for hydropower was set 60 years ago. Government regulators allow for the price to be as cheap as possible but to still cover the cost of operating the dam. That’s about 2 cents a kilowatt hour, said Crisp, a water expert in Atlanta who’s been involved in the tri-state water wars since they started.

If SEPA has to buy electricity generated from natural gas, for example, the cost balloons to about 85 cents a kilowatt hour.

“That’s why [hydropower is] so valuable,” Crisp said.

Krautler, at the Atlanta Regional Commission, points out that, like the cities and counties, the hydropower users are customers of the Corps of Engineers. And they have a nice deal in getting cheap electricity.

“The Power Customers have gotten a good deal by being able to buy cheap power, and they will continue to receive cheap power,” he said. “If the amount of power they receive is reduced for some purpose, that’s between them and the Corps.”

Whether the power users get reimbursed hinges on the outcome of the water-allocation negotiations.

“If we assume the best happens in this case ... then there will be recognition of compensation,” Crisp said.