NRU Rebuttal Testimony – Recap of this Week’s BPA Rate Case Webinar
Thank you for everyone who participated in the February 23 rate case webinar, where we discussed the current status of the BP-22 and TC-22 proceedings. We received guidance on our rebuttal testimony, due March 16, with respect to the five issues NRU is actively litigating. Below is our rebuttal strategy, based on members’ direction:
Quarterly Business Review
During this week’s technical workshop on the Quarterly Business Review (QBR) results from the first quarter of FY 2021, BPA shared the following:
Secondary revenues have been strong due to higher than expected selling prices. These higher revenues were partially offset by lower PF revenues due to decrease in loads, but Power’s gross revenues are looking strong.
Transfer service expense is coming in $12M lower than rate case due to lower third-party transmission rates compared to rate case forecast.
Q1’s end of year FY 2021 forecasted Power’s total net revenues are $93M greater than rate case forecast.
BPA continues to struggle to execute its planned capital projects for both Power and Transmission, resulting in capital expenditures quite a bit below rate case forecast.
Financial reserves are very strong. Power is projected to finish FY 2021 with $472M in financial reserves, which is 93 days cash on hand, far in excess of the lower threshold of 60 DCOH. Transmission is projected to have $150M of financial reserves at the end of FY 2021, which translates to 86 days cash on hand.
Looking ahead to FY 2022, BPA’s modeling indicates 0% probability of a CRAC or Financial Reserves Surcharge triggering for FY 2022. There is a 7% modeled probability of a Power Reserves Distribution Clause triggering, with an expected value of $3M. In other words, Power’s financial reserves are very robust.
Remember – we are still very early in the water and operating year and these figures may change based on water, load and market price conditions.
Integrated Program Review (IPR) 2
At the request of customers, BPA is holding an IPR 2 process to address two issues for the BP-22 rate period: (1) capital spending for Transmission, and (2) the impacts of the Columbia River System Operations (CRSO) Environmental Impact Statement finalization.
BPA will hold one workshop on the afternoon of March 2nd, with comments due March 24th. NRU will participate in the workshop, share the information, and seek your guidance to inform our comments.
Carbon Regulation Legislation in Oregon and Washington
NRU staff is continuing to track developments as the Oregon and Washington legislatures consider significant carbon regulation proposals.
In Washington, an economy-wide cap and trade bill passed out of the Senate Environment, Energy, and Technology Committee on February 25. Committee work on the legislation is not done, however. To see a vote in the full Senate, the bill would also need to pass the Ways and Means Committee, and, possibly, the Transportation Committee. Public power and many other stakeholders continue to try to refine the bill as it makes its way through the legislative process. For public power, integrating Bonneville’s treatment of market purchases, providing a fair allocation of allowances to utilities in the early years of implementation, and improving the way a cap-and-trade regime would integrate with the existing Clean Energy Transformation Act (“CETA”) are top priorities.
The Washington legislature is also considering a carbon tax bill, which could serve as an alternative to the cap-and-trade bill. The Senate Environment, Energy, and Technology Committee will hold a hearing on the carbon tax bill on March 4.
In Oregon, stakeholders are negotiating a “100% clean” bill that appears somewhat similar to Washington’s CETA. The 100% clean bill would put Oregon utilities on a path to obtain all electricity from carbon-free sources by some future date, possibly 2040. The Oregon approach differs from Washington’s CETA in that, at least for now, there would be exceptions to the 100% clean requirement for market purchases and reliability events. Public utility representatives, including NRU, are engaged in discussions with the IOUs and environmental advocates to ensure that our interests are advanced if the legislation moves through the Oregon legislature.
Columbia Basin Collaborative Organizational Workshop
On February 24, Oregon, Washington, Montana, and Idaho hosted an organizational workshop to formally begin the Columbia Basin Collaborative (“CBC”). The CBC is the next step arising from the Columbia Basin Partnership Task Force and the subsequent 4-State Agreement to coordinate salmon recovery efforts among the four states, tribes, federal entities, utilities, environmental groups, and other stakeholders.
More than 250 people attended the workshop. Representatives from the four states explained that the CBC will seek to be a three-year collaboration project designed to create consensus around outcomes that will lead to the recovery and sustainability of all salmonid species in the basin. The CBC will not have implementation authority, but will instead make recommendations to Bonneville, other federal agencies, the states, and other entities that have existing implementation authority and budget.
During the extensive public comment portion of the workshop, tribes, environmental interests and other stakeholders expressed repeated support for Congressman Simpson’s proposal to breach the Lower Snake Dams and provide associated compensation with federal funds.
The slides from the workshop are attached to this Update.
Congressman Simpson Concept
Official news regarding the proposal from Congressman Simpson to address “the unsustainable status quo” of fighting over salmon and the four lower Snake River dams (LSRD) has been hard to come by. I think It is safe to assume most stakeholders have hunkered down with the proposal and are analyzing the numerous assumptions and valuations made within the proposal.
While official news is scarce, it seems nearly every conversation in public power ultimately turns to this topic. As expected, opinions on the proposal vary widely but most agree that it is time to ask the question of “what is the solution to this problem”? Simply asking this question recognizes an important shift in our regional thinking. By asking the question we are acknowledging that maintaining the status quo and defending our actions in court is likely to lead to too much future uncertainty for an industry that requires long term planning and reliance on firm resources to provide reliable power. This is a problem that needs to be addressed and ultimately solved. I would like to note that we are not asking the question of whether or not the LSRD’s should be breached. The answer to that question is a simple and resounding no!
Regardless of the fate of his proposal, Simpson has started the conversation around identifying a solution and it will be crucial for us to remain engaged. The conversation regarding potential solutions to the problem identified above will be challenging at a minimum and divisive at worst. We, the entirety of public power, will need to find common ground that we can coalesce around to ensure collaboration, inclusion and a solution that is acceptable.
An area common to virtually every interaction I have around this topic is agreement on the necessity for other stakeholders, river users and governments to bear financial responsibilities for decisions and actions effecting the river that are out of our control. To date, public power has shouldered the vast majority of expenses, even as our generation capabilities have steadily eroded. A second area is the need for our elected officials at all levels to engage in an earnest effort to solve the problem and be a part of the solution, rather than the current unsustainable path of maintaining historical positions.
I urge each reader to mull over the words above and consider the importance of engagement on this issue that will impact all of us and those who we ultimately serve in our communities. My intention with this update is primarily to inform but also to lay the groundwork for agreement within the membership on foundational concepts should an opportunity for positive action present itself. If you have any questions or would just like to visit with me regarding the Simpson proposal and the resulting conversations happening around public power, please do not hesitate to contact me directly via email to email@example.com or call me at (509) 993-4088.