Rates for power and transmission in fiscal years
2020-2021 reflect efforts to manage costs and strengthen financial health
(PORTLAND, OR) – The Bonneville Power Administration has
established rates for its power and transmission services for the 2020-2021
rate period that reflect the agency’s significant efforts to manage program
costs and strengthen financial health. BPA will not increase average wholesale
base power rates, while the average transmission rate will increase by 3.6% for
the two-year rate period beginning Oct. 1.
The flat base power rate keeps the average wholesale base
power cost at $35.62 per megawatt-hour and reflects BPA’s strategic objective
to keep program costs at or below the rate of inflation through 2028. The
flattening of the base power rate is largely due to reductions in the final
projected program costs for fiscal years 2020 and 2021 of $66 million per year.
“Through collaboration with our customers and partners
throughout the region, we have worked hard to bend the cost curve and keep base
power rates flat,” said BPA Administrator Elliot Mainzer. “It is also important
to note, however, that there is an increasing likelihood of the Financial
Reserves Policy surcharge being triggered in November. We want to signal this
to our customers because it is consistent with our commitment to transparency
and financial discipline.”
The Financial Reserves Policy surcharge was established to
strengthen BPA’s financial health in keeping with the agency’s strategic and
financial plans. It is designed to enable BPA to maintain at least 60 days cash
on hand for both its Power and Transmission business lines.
Under the policy, the analysis to determine whether and by
how much the surcharge will trigger will be completed in November of each year
and can result in up to $30 million per year being recovered for Power
Services’ reserves. If the surcharge is implemented, which at this time appears
likely, the effective power rate increase would be up to 1.5% for the two-year
rate period. This amount is below the rate of inflation and less than BPA’s
initial proposal for power rates.
“We have worked on fiscal discipline across the agency and
with the U.S. Army Corps of Engineers, the Bureau of Reclamation, U.S. Fish and
Wildlife Service, Energy Northwest and other regional partners,” said Michelle
Manary, BPA’s chief financial officer. “This has placed us on a trajectory to
meet our strategic plan commitment to hold program costs at or below the rate
of inflation through 2028. Along with our
disciplined approach to cost management, the ability of our trading floor to
bring in additional revenues from forward market sales of surplus power has
also been an important factor in helping to stabilize rates.”
The weighted average increase for transmission rates of 3.6%
was set through a settlement of transmission and ancillary services rates as
part of an effort by BPA to reach agreement with customers on terms and
conditions of a new transmission tariff. In the absence of the settlement, the
transmission rate increase was initially estimated to be 9.5%. The new tariff’s
terms and conditions are foundational for the achievement of BPA’s strategic
objective to operate a highly responsive and modernized transmission business.
“The base power rate, transmission tariff settlement and the
Financial Reserves Policy surcharge are all important steps in positioning BPA
for success in the rapidly changing energy industry,” said Mainzer. “BPA is
actively responding to financial and operational challenges, creating new
opportunities to leverage the clean and flexible attributes of the federal
hydro system, and working with regional partners to further enhance BPA’s role
as an engine of the Northwest’s economic prosperity and environmental
sustainability.”
The rates will be sent to the Federal Energy Regulatory
Commission for approval. The full approval process usually takes several months
to a year, but BPA can apply the rates beginning Oct. 1, once it receives an
interim approval order from FERC.
BPA is a federal power marketing administration 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’s rates on individual businesses and
residents.
