The Bonneville Power Administration issued a final Record of Decision June 29 to suspend its financial reserves policy surcharge on power rates through September 2021, in response to financial impacts due to the COVID-19 pandemic.
"This decision is the result of a strong collaborative partnership with our customers," said BPA Administrator and CEO Elliot Mainzer in a statement. "The steps we have taken in recent years to sustain BPA's financial health make it possible for us to provide some measure of relief to our power customers as they work to address the economic consequences of the pandemic."
The BP-20E surcharge suspension, if approved by FERC, will provide relief to BPA's power customers totaling about $3 million per month for the remainder of fiscal year 2020, and $30 million over the 10 months it was slated to be in place during FY 2021.
The relief would be retroactive to July 1 if FERC issues an interim rate approval.
In the run-up to the ROD release, comments from BPA customer utilities overwhelmingly urged BPA to suspend the surcharge, citing financial hardships of their retail customers.
The Public Power Council, representing 88 Northwest public-power utilities that rely in part or entirely on BPA for wholesale power, said in an email to members it was grateful to Mainzer and his team for their response to requests for relief.
In comments to Water Power West, Simms said PPC had been concerned the tight schedule would delay relief until Oct. 1, but continued to press for more immediate help in conversations with BPA and with parties having doubts about the wisdom of suspending the surcharge.
"We're always in an environment where every penny helps, but now we're in one where every penny is critical," Simms said.
Those with reservations about the proposal expressed concern about how the suspension would affect transmission customers. Northwest and Intermountain Power Producers Coalition shared a concern it "allows BPA to achieve financial stability by disproportionately leaning on transmission rates and customers to achieve those Financial Reserves goals. The economic recession caused by the COVID-19 pandemic has affected all BPA customers, not just power customers, and NIPPC believes that any relief from BPA should reflect that fact."
Despite these qualms, none of the parties to the case filed comments in the BP-20E rate case by a June 26 deadline, so the matter was deemed uncontested and its record certified June 29.
The next day, BPA filed a request with FERC asking for expedited approval of the tariff changes [EF20-2].
In the filing, Bonneville asked for interim approval no later than July 31 and for a July 1 effective date for the rates, as well as "final confirmation and approval" of the rates through Sept. 30, saying it anticipated no opposition.
BPA uses financial reserves to help maintain financial health and mitigate financial risk, because it allows BPA to continue to meet payment obligations when sales revenues fall short of forecast. Financial reserves—defined as cash on hand, short-term investments and deferred borrowing—also play a role in how ratings agencies assess BPA's creditworthiness.
The financial reserves policy surcharge was established to build up cash reserves that fall below critical thresholds. The surcharge triggered for BPA power customers for FY 2020 and was expected to trigger again in FY 2021, but did not trigger for transmission customers in FY 2020 and is not expected to trigger in FY 2021.
"Maintaining reserves is a staple of financial strength," said BPA CFO Michelle Manary in the statement. "But given the significant challenges customers are facing, we agree this is not the time to be building up cash reserves."