In the final record of decision released July 28 for its BP-22 rate case and TC-22 tariff proceeding, BPA affirmed its June 25 draft decision to decrease power rates by an average of 2.5 percent per year over fiscal years 2022-2023, and cut the earlier proposed average transmission rate of 11.1 percent to 6.1 percent annually.
In addition, the TC-22 proceeding adopted new language in the agency's Open Access Transmission Tariff that will enable participation in the Western EIM if BPA chooses to do so.
The decision on whether to join the EIM, being considered in a separate proceeding, is slated to be made by October. However, the draft close-out letter for the decision released July 29 calls for Bonneville to join the market (see story).
The BP-22 rate case caps a decade in which the power rate trajectory increased by less than 2 percent annually, "which is in line with historical inflation rates," Bonneville said
"Rates that have matched inflation—not just in a single rate case, but over a sustained period—is proof of BPA's commitment to bending the cost curve and driving down rate pressures on our power rates," BPA Administrator and CEO John Hairston said in a statement. This "demonstrates we are financially strong, competitive and responsive to our customers' needs," he said.
The BP-22 rates were determined under a settlement reached in April between BPA and two customer groups (CU No. 2002 ).
The final transmission rate increase—roughly half of the initial proposal—will allow BPA to continue keeping its transmission commitments and reinvest in its transmission infrastructure "in a fiscally sound and responsible manner," Hairston said.
Actual rates during the BP-22 rate period will depend on the levels of net secondary revenue from hydropower sales and net revenues for risk, which are subject to BPA's Financial Reserves Policy.
BPA committed to conduct workshops beginning in the fourth quarter of fiscal year 2021 as part of a "refresh" of the agency's 2018 Financial Plan. The refresh will include consideration of Bonneville's financial health, such as access-to-capital issues, sustainable capital funding approaches, long-term debt management and other financial objectives.
It will also focus on issues related to Bonneville's borrowing authority and the use of revenue financing as a source of capital funding, and will devote at least one workshop prior to BP-24 rate case proceedings to discuss the accounting and ratemaking treatment of revenue financing.
Regarding allocations of Western EIM costs, BPA said that if it decides to join that market, it would hold workshops prior to the BP-24 rate case with stakeholders on how Power Services will include EIM benefits in power rates.
On transmission issues, Bonneville said it would not adopt a capacity charge for the delayed return of transmission losses, but would adopt charges for financial returns of transmission losses and a "Financial for Inaccuracy Penalty Charge" consistent with the latest staff proposals of these.
The agency will also "work toward" implementing a concurrent loss-return service by the start of the BP-24 rate period or sooner and share an implementation plan with customers by the end of the first quarter of FY 2022.
Along with some balancing services rate caps, BPA committed to address rates and related issues associated with BPA's Eastern Intertie (the eastern segment of the Montana Intertie) in at least one workshop prior to the BP-24 proceeding, acknowledging the interests of the Montana Intertie parties and BPA transmission customers, "and taking into account the projected long-term firm demand" for BPA's portion post-2025.
Other terms in the settlement include a cap of $40 million on annual revenue financing included in power rates to help pay BPA's debt obligations. Bonneville had initially proposed setting this at $95 million.
A $40 million revenue financing cap was also applied to transmission rates, down from an initial $45 million proposal.
The settlement adopted by the ROD stemmed from proposals submitted in April by two customer groups—Public Power Council in one camp and 11 of BPA's Power and Transmission customers, including PNGC Power, in the other.
Scott Simms, PPC executive director, praised the ROD, which he said in a statement delivers an average power rate decrease for the first time in more than a decade, largely in response to the approach proposed by PPC members.
"The Northwest public power community came together with a unified voice to focus on a core set of high-impact issues with BPA on its upcoming power and transmission rates," Simms said. "To come to agreement in the BPA rate case, we knew we needed a strategy that delivered meaningful savings to public power and was reasonable for BPA to run its operations."
Simms said PPC's members still had concerns over whether BPA will "quantify the benefits" of its potential participation in the EIM and include those benefits in power rates, or establish "expectations for the metrics, transparency, and accountability" associated with participation.
"Given that BPA passes all of its costs to customers, it's a matter of equity," Simms said. "Excluding EIM benefits from rates ensures customers will see no net rate benefits of potential EIM participation without limiting potential risk exposure of financial losses associated with BPA's EIM participation."
Roger Gray, PNGC Power executive director, said "like any settlement, everybody got a little bit of what they want and had to hold their nose on other things."
He said he was glad to see the ROD's adoption of measures to address some cost-allocation issues and to increase customer interactions.
The settlement proposals were rooted in customer concerns that many aspects of the rate case weren't adequately discussed or explained to customers, particularly the use of revenue financing.
Revenue financing "was sprung on us," Gray said. "Nothing about it was mentioned in previous financial discussions," adding that there was a "pretty uniform pushback" among customers, and insistence that there would "honest discussions going forward" about it and the reasons BPA took that approach to address its fiscal issues.
"Frankly, it was bad enough to have this sprung on us," Gray said. "The more troublesome aspect is that if BPA is in this dire situation, we need to fix that now."
For that reason, he said, the region, with power and transmission groups "locking arms, went to Washington [D.C.] to try to get increased borrowing power. We had asked BPA for this, but it was not ultimately part of settlement."
There is now a chance this will happen. The Senate's Energy Infrastructure Act, S.2377, initially proposed increasing BPA's Treasury borrowing authority by $2 billion, but during markup Sen. Maria Cantwell (D-Wash.) bumped it up to $10 billion in response to concerns the region brought to her.
BPA's borrowing authority is now capped at $7.7 billion. Bonneville has said that if nothing changes, it could hit that cap in the next few years.
Gray said it is essential to resolve BPA's financial issues, particularly as the current 20-year customer contracts will expire in 2028 and BPA will need to stay competitive.
"BPA remains competitive, but things are way too close to sign a '20-year blank check' again," he said.
Gray was also happy to see Bonneville for now did not adopt a capacity charge for the delayed return of transmission losses, as it had originally proposed, and he views the charge as a "blunder" in the long run. While there is a short-term gain in terms of power rates from this, he said, "strategically we see access to the market of increasing importance in future," and expects this charge and others like it would make that access increasingly expensive.
While PNGC Power is principally a power utility, he noted, it also relies 100 percent on BPA and IOU transmission for receiving that power. "In terms of money, we're 80 percent power and 20 percent transmission," he said, but without return losses being tied to cost causation—transmission customers paying for actual "concurrent" costs rather than delayed costs—"we'd be cutting our own throats in the long run."
This concern is the reason PNGC Power aligned itself with a group of public power and transmission customers, he said.
The new rates and terms of the ROD will go into effect at the start of FY 2022, on Oct. 1. BPA will file the rate case with FERC, requesting interim approval to start on that date while awaiting final FERC approval.