(PORTLAND, OR) – The Bonneville Power
Administration today released its initial
rate proposal, which will support investments in the Federal Columbia River
Power System that provides renewable hydropower to 142 Northwest public
utilities. The proposed rates for fiscal years 2018 and 2019 will also support
investments to sustain and expand the federal transmission system. BPA is
proposing a 3.5 percent average wholesale power rate increase and a 1.1 percent
average increase to transmission rates for the two-year rate period.
“These
rates represent months of work to reduce budgets and focus on cost-management
measures to lower expected rate increases,” said Elliot Mainzer, BPA’s
administrator and chief executive officer. “The steps we have taken so far for
the 2018-2019 rate period have begun to shift BPA onto a more sustainable rate
trajectory and demonstrate our commitment to remaining our customers’ wholesale
provider of choice.”
BPA
started discussions on expense and capital spending levels for fiscal years
2018 and 2019 in June during the Integrated
Program Review and Capital Investment Review process. Customers,
constituents and stakeholders from around the region participated in the
process by taking a thorough look at BPA’s proposed spending levels. BPA has
used aggressive cost management, disciplined budgeting practices, operational
efficiency and revenue enhancements to lower expected costs in the final
spending levels released in October.
The
average proposed wholesale power rate is $34.94 per megawatt hour, an increase
of 3.5 percent for the rate period, or 1.7 percent annually. About half of the
rate increase is due to higher program costs such as the operations and
maintenance expenses BPA pays to the Corps of Engineers and the Bureau of
Reclamation to run the federal hydro facilities, and increased costs of the
fish and wildlife program. The other half of the rate increase is due to lower
forecast sales due to general regional load loss and a slight reduction in
forecast system generation. In addition, many power customers will see a lower
proposed rate increase of 2.3 percent due to a one-time credit that was
generated from savings created from Regional Cooperation Debt transactions that
were initiated in 2014.
Transmission
Services was able to minimize spending increases by focusing on
mission-critical work and planning investments that provide the greatest
benefit to ratepayers, which is reflected in the 1.1 percent average
transmission rate increase for the rate period or 0.5 percent annually. BPA
believes it will still be able to provide reliable transmission service to its
customers and invest in substantial capital projects during the upcoming rate
period while delivering a rate increase that is less than the rate of inflation.
BPA
is also proposing a new financial reserves policy in this initial rate proposal
that will set targets for financial reserves levels. The proposed policy is
intended to maintain and strengthen BPA’s financial health, as well as support
BPA’s credit rating.
“BPA
is committed to working with customers and other constituents to identify
additional cost-management alternatives through the IPR 2 process,” said Mainzer.
BPA will hold an IPR 2 process in February to discuss a few unresolved cost
areas where the greatest potential exists to further reduce near-term spending
as BPA continues to focus on cost containment.
The
rate-setting process begins in November and will culminate with final rate
decisions in July 2017; the new rates will take effect on Oct. 1, 2017.
BPA
is a nonprofit federal wholesale utility that receives no congressional
appropriations and must recover its costs through its rates. The new rates will
affect local retail utilities differently depending on the amount of power and
type of services they purchase from BPA. Local utilities ultimately determine
the impact of BPA rates on individual businesses and residents.
