“We worked very hard on behalf of our customers to manage our costs and make changes that will strengthen our finances and improve our competitive position in the rapidly changing electricity market,” said BPA Administrator and Chief Executive Officer Elliot Mainzer. “However, despite aggressive cost-management actions, costs beyond our direct control continue to place significant upward pressure on our power rates. BPA will further address these cost pressures through the completion of a long-term business strategy later this year in collaboration with customers and regional partners.”
The 5.4 percent increase results in an average wholesale power rate of $35.57 per megawatt-hour, an increase of 2.7 percent annually. The overall rate increase is primarily due to a lower-than-expected demand for power, a declining forecast of surplus power sales revenues due to lower market prices, and escalating costs of programs driven by legal requirements. BPA is working with regional partners to identify new revenue streams and continued cost-containment strategies that may help mitigate these rising cost pressures.
BPA has also adopted a new Financial Reserves Policy. This policy establishes a framework for setting and managing financial reserves levels to support BPA’s credit ratings, liquidity, equity between business lines and rate stability. Approximately 1 percent of the power rate increase will be used to replenish Power’s financial reserves levels, while transmission’s financial reserves remain stable.
Transmission rates will decrease in the next rate period by an average of 0.7 percent. This is due to cost-management efforts and savings from debt-management actions. Looking forward, BPA is working to address the significant impact of long-term capital costs and develop a sustainable investment strategy for pending transmission system capital needs.
BPA created a spill surcharge to recover the costs associated with increased spill that is anticipated as a result of a ruling issued this past spring by the U.S. District Court for the District of Oregon. The court indicated that it will order increased spill at eight Federal Columbia River Power System dams on the lower Columbia and Snake rivers for the 2018 spring fish passage season. The surcharge will be in addition to the new power rates and will be implemented once sufficient information becomes available regarding planned annual spill levels. As part of the surcharge calculation, Bonneville is committed to working with its regional partners to find program cost savings, including in our Environment, Fish and Wildlife spending, to help offset the costs of increased spill.
The new rates also include investments to modernize core utility operating systems that will enable BPA to maximize the efficiency of grid operations and provide the option to participate in emerging markets.
“This rate case is ultimately about investing in our future and continuing to deliver value to our customers and the broader region for many years to come,” said Mainzer.
