Power

BPA Rate Case

Administrator Issues Final ROD in BPA's WP-07 Power Rate Case.  On July 17, 2006, BPA issued the Administrator’s Final Record of Decision (ROD) and General Rate Schedule Provisions in the WP-07 Power Rate Case, the proceeding through which BPA is setting power rates for the FY 2007-09 rate period.   PPC will continue to analyze the decision over the next several weeks, but here are the highlights:

BPA has not officially announced the precise final rate, but PPC understands the PF rate for average load under average conditions is 27.30 mills/kWh.  This rate is approximately 3% lower than the current base PF rate (i.e., 28 mills/kWh for average load under average conditions) and about 10% lower than the rate BPA put forth in its Initial Proposal.

For FY 2007, there is a low likelihood that the base rate will be adjusted by a cost recovery adjustment clause (CRAC) or DDC.  There is only a 4% probability of the CRAC triggering for that year, and only a 7% probability of the DDC triggering.  Those probabilities change in later in the rate period, with a nearly equal probability in FY 2009 of having a CRAC, having no CRAC and having a DDC. 

Other highlights of the Final ROD include the Administrator’s decision to include the availability of the Customer Pre-pay arrangement, which allows BPA’s liquidity reserve levels to be lowered from $175 million to $89 million. 

BPA did not change its assumption about hydro system operations during the rate period, assuming they will be similar to those currently ordered by Judge Redden.  PPC had argued that BPA should assume operations in accordance with the 2004 BiOp and allow the NFB Adjustment and NFB Surcharge to collect the difference in costs, if any, between the 2004 BiOp and actual hydro operations during the rate period.

The Administrator’s Final ROD can be found at http://secure.bpa.gov/RateCase/Uploads/Exhibit/WP-07-A-02.pdf. 

The Final General Rate Schedule Provisions can be viewed at http://secure.bpa.gov/RateCase/Uploads/Exhibit/WP-07-A-02_Appendix_A.pdf.   

BPA issued its draft rate case ROD June 2.  To view the draft ROD, click here. Other 2007 rate case filings can be found in the Power Archives.

BPA Reaches Settlement with Southern California Edison in Litigation Over 1988 Power Sale and Exchange Contract.  BPA announced June 15, 2006 that it has reached an agreement with Southern California Edison (SCE) to settle most of the claims SCE made against BPA regarding a 1988 20-year power sale and exchange agreement.  SCE brought three claims, totaling around $240 million.  BPA reached a settlement of two of the claims, accounting for about $220 million of that total.  The settlement contains three conditions:  1) BPA will conduct a public comment process on the settlement, after which the Administrator will have the ability to cancel the settlement if he chooses; 2) SCE must be able to obtain approval of the settlement from the California Public Utilities Commission; and 3) BPA will not pay the settlement until the California refund litigation is resolved with respect to BPA.   

BPA expects to issue a press release soon, inviting public comment on the settlement.  PPC will work to determine what comments it will file.  It is currently unclear how the settlement will affect rates in the 2007-09 rate period, if at all.  

BPA Issues Supplemental ROD, Detailing DSI Benefits in the 2007-11 Period.  On June 1, 2006, the BPA Administrator issued a Supplemental Record of Decision, detailing the benefits BPA will provide to the DSIs during the 2007-11 period.  The ROD outlines a monetized firm surplus power sale to certain local public utilities, with a pass-through of the money to the aluminum smelter DSIs.  The arrangement will provide DSI benefits up to $59 million per year.  Click here to view the Supplemental ROD.   

BPA Closes Out PFR Process.  On June 1, 2006, BPA concluded its Power Function Review (PFR) process by issuing its PFR II Final Closeout Report.  BPA utilized the PFR process to determine its revenue requirement for the FY 07-09 rate period.  Through the PFR, BPA identified a total of $122 million in annual reductions from its original revenue requirement proposal.  $96 million of that total was identified in the PFR I process, and $26 million was identified in the PFR II follow-up process.  To read the Closeout Report, click here.

On April 26, 2006, PPC filed its initial comments in response to BPA's draft closeout report; view them here.  PPC filed additional clarifying comments regarding its initial recommendations on May 5, 2006; view them here.  On May 5, 2006, PPC also sent BPA a letter on behalf of a large crosssection of BPA customer and stakeholder groups complimenting BPA on the Power Function Review process; view that letter here.

President proposes using BPA's Secondary Revenues to pay off its Federal debt early.  The Fiscal Year 2007 budget proposal released by the Bush Administration in early February would have BPA use Secondary Revenues above $500 million to pay down its Treasury debt early.  The Administration argues that the proposal would give BPA greater flexibility by freeing up some of its borrowing authority.  Public Power and the NW Congressional delegation strongly oppose the proposal, which would skim off revenues in BPA's good financial years but provide no offsetting support during bad financial years.  According to an analysis by the Northwest Power and Conservation Council, BPA's wholesale power rates would increase by about 7% in 2008, and by unknown amounts in future years.  

BPA anticipates beginning an expedited rate case in July to implement the proposal, with workshops to address technical issues starting in March.  However, in response to the outrage expressed by the Northwest Congressional delegation in a February 9 Senate Energy and Natural Resources Committee hearing on the budget, Department Secretary Samuel Bodman has agreed to delay - but not cancel - implementation of the proposal.  For more information, see:

• NW Delegation Letter to House and Senate Appropriations Chairs (5/16/06)
• Letter from Steve Wright to NWPPA and PPC (4/5/06)
• Senator Craig Appropriations Amendment, and press release (4/4/06)
• Three-Governor Letter to OMB (3/23/06)
• Budget Resolution Amendment offered by Mr. Wyden
• Northwest IOU Response to President's Budget
• City of Seattle Letter to Secretary Bodman 
• Memo to Congressional Budget Office from Northwest Senate Delegation Offices
• Trade Heads Letter to Secretary Bodman
• PPC Talking Points on the proposal;
• A letter from NW senators to the Senate Budget Committee;
• BPA's press release supporting the proposal;
• A statement by Marilyn Showalter, PPC Executive Director, opposing the proposal;
• An analysis by the Northwest Power and Conservation Council of the effects of the President's proposal, showing increased rates for consumers and lost jobs in the NW; 
• The Washington PUD Association's press release opposing the proposal;
• A statement by Senator Cantwell and letters from NW Members of Congress and Senators to Office of Management and Budget Director Joshua Bolten;
• The Oregon Municipal Electric Utilities' Association's statement opposing the proposal;
• A press release expressing opposition to the President's budget proposal by the Oregon Rural Electric Cooperative Association and the Pacific Northwest Generating Cooperative;
• Criticisms of the proposal by the editorial boards of the Columbian and Seattle Post-Intelligencer newspapers;
• A Seattle Post-Intelligencer article describing Energy Secretary Bodman's response to the NW Congressional delegation;
• Energy Secretary Bodman's testimony from the Committee hearing on the DOE's 2007 budget  (BPA is discussed on page 10.); and
• The Administration's summary of its FY2007 Budget Proposal for the Department of Energy, describing the possible change.

For more information regarding the rate impact of the proposal, contact Kevin O'Meara.  For information regarding the coordinated response to the proposal in Washington, D.C., contact Marilyn Showalter.

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