Portland, Ore. – Four Bonneville Power Administration customers will provide nearly $350 million in electricity prepayments that BPA will use to fund capital investments at the Northwest’s 31 federal hydroelectric dams. The customers’ prepayments will be reflected as credits in their monthly power bills through 2028.
“We appreciate the collaborative efforts of our customers in developing this program and the offers submitted by those that elected to participate,” said BPA Administrator Steve Wright. “The amount of money we can borrow from the U.S. Treasury to run this very capital intensive business is limited. This program will help maintain the tremendous value of our aging hydro system for Northwest ratepayers.”
The funds will be used primarily to refurbish aging federal hydropower facilities in the Pacific Northwest, such as Grand Coulee Dam.
Through the 2012 Power Prepayment Program, BPA provided customers the opportunity to bid on blocks of power worth $50,000 per month. BPA accepted offers at $6.8 million for each of the 51 blocks. In exchange for each block, BPA will provide a prepayment credit of $50,000 per month, which will be reflected on each participating customer’s bill. The transaction results in a 4.26 percent return for participants, which is slightly higher than the 3.63 percent 30-year rate BPA would otherwise use to make hydro improvements through Treasury borrowing. BPA's ability to borrow from the U.S. Treasury is limited by statute.
“Our goal has always been to raise the right amount of capital at the right price,” said BPA Chief Financial Officer Claudia Andrews. “While this implied rate is slightly higher than other sources of funding, it is still lower than the average rate of BPA’s current outstanding debt on our generating sources.”
BPA’s forecast for capital spending includes $1 billion a year or slightly more through 2016. If BPA were to use only its Treasury borrowing authority to fund its capital activities, it projects it could exhaust that low-cost source of funding as early as 2017. The Customer Prepayment Program, as well as other potential financing mechanisms BPA is exploring or employing to optimize use of Treasury borrowing authority, is outlined in its draft 10-year access to capital strategy.
Acceptance of these prepayment offers is the product of two years of collaboration between BPA and its power customers. After presenting the concept to its customers, BPA and a regional team of representatives from its customer utilities worked to design the program. Additional information about the process that resulted in the program is available on BPA’s Power Prepayment Program website.
