BPA's fiscal year 2021 brought "positive results across the board" that included triggering a reserves distribution clause (RDC) for Power Services in the amount of $13.7 million, Administrator John Hairston said, and $398 million of net agency revenues that blasted past the BP-20 rate case estimate of $38 million.

Speaking Nov. 23 at Bonneville's quarterly business review, Hairston said he would propose using the RDC funds to lower FY 2022 Power rates, with a final decision issued by Dec. 15 after reviewing customer and stakeholder feedback.

Acting CFO Marcus Harris, also speaking at the QBR, noted that the $398 million of net agency revenues was largely due to lower costs and higher revenues.

The end-of-year outcome was driven by several factors exceeding rate-case expectations, with only one category—other expenses—falling short, by $139 million, mainly because of the higher cost of power purchases due to higher market prices and dry weather experienced throughout the year, Harris said.

The biggest boost to the bottom line was $254 million in operating revenues, largely from higher-than-expected trading revenues driven by higher-than-forecast prices, he said.

The results also reflect increased liquidity, with agency reserves of cash on hand at 130 days, and both Power and Transmission services well above the 60-day lower threshold for each business unit to avoid triggering surcharges included in BPA's Financial Reserves Policy.

While Power's reserves of 134 days cash on hand were high enough to trigger the RDC, Transmission's 121 days cash on hand fell just short of what would have triggered the clause.

"Ending the year $35 million below rate case is an accomplishment worth noting," Harris said. "This is the fourth year that agency program costs have remained flat, including absorbing the effect of inflation. The challenge is to continue to meet our strict cost targets," he said, adding, "Additionally, wage and supply-chain-related inflation have surged recently. But we have remained intently focused on our cost discipline internally, looking to where we can save, what we can do less of, and what we can stop doing altogether."

Hairston said that while BPA had faced challenges during the year, "along the way we advanced all of our strategic goals while delivering the reliable power and transmission services that are so vital to the region's economy and quality of life."

Among the strategic goals was lowering the agency's debt-to-asset ratio, which ended the fiscal year at around 83 percent, near the high end of the 75-85 percent target by 2028, Hairston noted, although it had been 90 percent in September. BPA's long-range goal is between 60 and 70 percent.

"Debt service is still a large cost for our customers and we need to maintain this downward trend by continuing to focus on strategic asset management and regional commitment to debt reduction," Hairston said.

This includes Bonneville's continued efforts to green its power portfolio, which will require it to balance the need to maintain existing infrastructure while devoting capital to new projects, he said.

And while Congress recently provided an additional $10 billion of U.S. Treasury borrowing authority, so access to capital should not be an issue in the foreseeable future, but this "does not mean that we can relax our focus on our long-term financial goals," he said. "We will continue to prioritize prudent debt management and sustainable capital funding practices. These are the focuses of our financial plan refresh, and I look forward to working with you all to make sure BPA is well positioned to maintain financial strength over the long term."

Nevertheless, he said, this means "we will have flexibility and funding certainty to meet our near-term and future capital funding needs."

All this has helped keep the agency's credit ratings "very strong," Harris said, with high scores from all three rating agencies unchanged from the prior quarter.

"BPA is maintaining high investment-grade credit ratings with all three major ratings agencies—Moody's, Fitch and S&P Global," he said. "Earlier this year, Fitch changed BPA's outlook from negative to stable. Moody's and S&P maintained BPA's stable outlook."

FY 2021 saw "quite a bit of debt activity for Power," Harris noted, issuing $712 million in bonds for Energy Northwest under the first transaction of the Regional Cooperation Debt program's second phase (CU No. 2004 [6.4]).

The bond sale facilitated new capital and fuel purchases for the Columbia Generating Station, as well as refinancing existing bonds for savings. "This enabled $332 million of additional federal bond repayment, which restored borrowing authority," Harris said. "We expect to get new ratings in the April to May time frame in advance of the spring 2022 Energy Northwest Debt Optimization transaction."

In addition, BPA's net activity for U.S. Treasury bonds dropped by $204 million in the amount outstanding, largely driven by the Regional Cooperation Debt program, Harris said. "We'll continue to see this pattern repeat as the Regional Cooperation Debt program plays out."

In September, BPA kicked off an initiative to refresh its financial plan, released in 2018 as a companion to its five-year agency strategy, Hairston said. Bonneville will continue its financial plan refresh workshops into the winter and spring, and will publish a final financial plan in September 2022 following a comment period over the summer.

The refresh had been requested by customers and agreed to by BPA during the BP-22 rate case. It was also mandated in the bipartisan infrastructure bill passed in early November that gave the agency an additional $10 billion of Treasury borrowing authority.

Regarding the Provider of Choice initiative, which addresses customer power contracts after current agreements expire in 2028, BPA had planned the year-end release of a concept paper outlining its vision for future contracts. However, based on customer feedback, it has pushed that off to March 2022 to "support customer-to-customer engagements," Hairston said.

Hairston also provided an update on compliance with President Joe Biden's COVID-19 vaccination mandate, which required federal employees to be fully vaccinated by Nov. 22, noting that about 86.2 percent of BPA's workforce were fully vaccinated, a number that "continues to climb," he said.

The majority of unvaccinated employees are "actively going through a reasonable accommodation process," he said, adding that BPA is "working with the Department of Energy to ensure a fair and consistent approach to reviewing those requests, and we will work diligently to bring them to closure fairly soon."

In addition, Bonneville's contract workforce, which also falls under a federal mandate, has a timeline that is slightly different and "will be driven through contract modifications," Hairston said.

© Copyright 2021 NewsData, LLC, 5625 NE Elam Young Pkwy, Ste 100 Hillsboro, OR | Terms of Use | Privacy Policy Powered by BLOX Content Management System from TownNews.com.

News Editor - Clearing Up

Rick Adair has been with NewsData since 2003, and is news editor for Clearing Up and editor for Water Power West. Previously, he covered environmental and energy issues in the Lake Tahoe area. He has a doctorate in earth sciences.