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BPA's Rate Adjustment Measures Not Enough to Protect Salmon, Clean Energy
The Bonneville Power Administration
(BPA
) last month released the agency’s estimates of potential rate changes for the upcoming year. In its just-completed ratecase, BPA adopted three rate adjustment mechanisms, a Load-Based
(LB) Cost Recovery Adjustment Clause
(CRAC
), a Financial-Based (FB) CRAC
and a Safety Net (SN) CRAC
. None, however, provide the agency with adequate alternatives to halting salmon saving dam operations or cutting back investments in energy efficiency and new renewable resources, in the face of predicted financial difficulties.
Every six months BPA will adjust its rates, under the agency’s Load-Based (LB) CRAC, to reflect the cost of purchasing market power to meet all of its customer contract obligations. BPA will implement the LB CRAC every April and September and the agency will have to raise rates under the LB CRAC even if market prices are low.
Intuitively, low market prices should allow the agency to reduce rates. But the agency was relying on revenue from surplus power sales to moderate upward pressure on rates from relatively high-priced long-term contracts, buy-down of aluminum loads at fixed prices and other factors. Thus BPA’s financial health is actually being undermined by current low market prices.
As a result the agency is forecasting it will only be able to lower rates this April to 42 percent more than its base rate, down just slightly from the 46 percent boost the agency implemented at the beginning of its current five-year rate period. The forecast for September is for another small increase.
BPA also announced a “high likelihood” the agency will need to trigger its second Financial-Based (FB) CRAC in September in addition to its LB CRAC. That forecast would bring rates up to 48 percent above the base rate the agency charged during the previous five-year rate period which ended in September, 2001.
The FB CRAC triggers when BPA’s reserves are projected to be below $300 million at the end of the agency’s fiscal year (September 30) when BPA’s Treasury payment is due. Financial reserves of only $300 million leave the agency with little margin for error, particularly in today’s unstable power market. And even if the agency forecasts dropping below the $300 million threshold in one fiscal year, the FB CRAC doesn’t go into effect until the next fiscal year, which means the agency could end a fiscal year with very spare reserve levels. If the FB CRAC triggers this year, it is a sign BPA is likely to have serious problems in October when the agency's next fiscal year begins.
That leaves BPA’s last resort Safety Net CRAC. The SN CRAC can react to financial liabilities within a fiscal year, however, it only triggers under the worst conditions, when the agency’s operating revenues fall to $50 million or less. And because the SN CRAC can only trigger in response to financial troubles within a fiscal year it can’t help the agency react to the problems already predicted for October.
When asked about this problem at a recent public meeting, Bonneville responded by saying the agency would have to resort to cost cutting. Public interest advocates fear the agency’s investments in conservation and new renewable resources will be first on the chopping block because the agency’s other costs are essentially fixed.
And the agency can suspend salmon saving dam operations by declaring a so-called power emergency if either money or power generation resources get tight. Fish adsvocates fear salmon protection is falling through the CRACs.
— Steven Weiss & Mark Glyde