NRU Seeks Feedback on BPA Customer Financial Support Proposal
In response to the economic pressures the COVID-19 crisis has put on customers, NRU has been working with BPA and others in public power to consider ways of easing utilities’ financial pressures. As discussed during the Board meeting this week, NRU will submit a letter to BPA asking it to absorb inflationary pressures and keep costs flat for the next rate period (BP-22).
For nearer term relief, there are at least two options we are actively considering providing comment to BPA on, which are not mutually exclusive. These are described below. We are looking for your feedback by COB Monday, May 11th as we have a meeting scheduled with BPA executives on Tuesday morning.
Option 1 – Suspend Collection of Financial Reserves Policy (FRP) Surcharge for Balance of Rate Period
Retroactive to March 2020 (when the national emergency declaration was made) through the end of the current rate period (9/30/2021), BPA would cease collecting the FRP Surcharge on customers’ monthly power bills.
NRU believes that the short-term rate relief this would provide would more than offset the potential risk of an impact to BPA’s credit rating, which was one of the original reasons BPA adopted the FRP. Also recall that Power’s financial reserves received a big boost ($182M) at the start of this fiscal year when BPA corrected the longstanding error in financial reserves allocation between Power and Transmission.
Option 2 – BPA would provide customers the option to shape a portion of FY 2020 Composite Charge into FY 2021
BPA has formulated a short-term cost shaping proposal to offer as an option to customers in an effort to mitigate near term pressures on its customers. BPA is proposing to shape 5% of the annual composite charge for customers from FY2020 into FY2021. Shaping 5% of the FY2020 annual composite charge, rather than just the remaining months in FY2020, effectively amounts to moving 10% of the remaining FY2020 composite charge into FY2021. BPA’s initial thinking is that the shaped composite charges from FY2020 would be added back to FY2021 bills over 12 equal installments. Participation would be optional. If all customers participated, $120m to $150m would be shifted to FY2021.
Key considerations when crafting this proposal were maintaining equity among customers and ensuring a CRAC does not trigger. The details of the proposal are bulleted below for ease of reading.
Shaping of the composite costs must be contained to the current rate period to avoid triggering a CRAC
Any additional costs incurred by BPA, primarily interest expense estimated to be around 2%,must be recovered in proportion to charges deferred from participating customers
Parameters of the program must be uniform for all participants to minimize administrative burden
Participation is optional with a defined opt-in period. Important to allow for maximum benefit and provide time for administrative implementation
Deferment would be backstopped by reserves or US Treasury note
NRU staff’s initial thoughts are that this can provide a viable and equitable means to help customers in the short term by supplementing liquidity tools already at their disposal. However, this proposal does not offer the rate relief utilities need in light of reduced revenues from loss of load, suspension of disconnects and waiving of late fees; the latter two will certainly result in higher bad debt levels for utilities.
We also feel BPA is not leveraging all options at their disposal. We are specifically referring to the Financial Reserves Policy (FRP) or postponement of the policy. When first contacted regarding the shaping proposal, NRU immediately brought up delaying the FRP surcharge as a relief tool that would have significant impact for BPA customers and would meet the equity criteria as well. We also mentioned the irony in backstopping any composite charge shaping with reserves while collecting additional monies to enhance BPA reserves during a time when customers are experiencing significant reductions in their own reserves to combat the COVID-19 crisis. PPC has arrived at the same conclusion with the FRP and we can mutually lean on BPA to act.
NRU Staff Recommendation – Your Feedback Is Requested
NRU staff proposes to voice support for the proposed shaping concept as a mitigation measure. We will also continue to push for suspension of the FRP Surcharge for the balance of the rate period, as this is much more impactful, appropriate and represents a positive and collaborative step with customers in these unprecedented times. We are scheduled to discuss NRU’s position on Tuesday morning next week and would like to hear member feedback prior to that discussion. Please direct feedback, or questions, via email using this link.
BPA/Public Power Carbon Forum – Monday, May 11
On Monday, May 11th, 2:30-4:30pm Pacific time, BPA, NRU and PPC will host our monthly carbon forum. The first hour or so will focus on CETA-related happenings (rulemaking, markets working group). The second hour will focus on wholesale market trading and availability of carbon-free products, including a panel of traders from public power and BPA. Webinar and phone bridge information are below.
JOIN WEBEX MEETING
Meeting number (access code): 902 219 584
Meeting password: upMkiC8J4P3
JOIN BY PHONE
+1-415-527-5035 US Toll
Meeting number (access code): 902 219 584
Follow-up from NRU Board Meeting – IPR and Non-IPR Cost Breakdown
As a follow-up to the discussion we had during this week’s Board meeting, attached are a few slides that show the cost components of BPA Power’s revenue requirement. WE show which costs are set via the Integrated Program Review (IPR) process and which are set in the rate case or other. Although the data are slightly old (from BP-18), the relative amounts are still approximate to today. Please let Megan know if you have any questions or would like more information.
NRU Participates in BPA-Transmission’s Network Operating Committee
BPA held a Network Operating Committee last week to provide updates on the finalization of its Network Operating Agreement and the upcoming kickoff of its 2020 load and resource forecast process.
After more than a year of deliberations, BPA and its NT customers have agreed on a final Network Operating Agreement template. NRU staff has been representing the membership on this front, and we have kept you apprised of the changes to the document via webinars, Portland Updates, and at board meetings. We believe the final draft is an improvement on the existing one currently in place between BPA and its NT customers. BPA intends to roll out the new agreement during the remainder of 2020.
BPA also tipped out the 10-year load and resource forecast templates it will use to kick off its 2020 annual load and resource forecast process in early June. It is important to note this is the starting point for forecasts that will be finalized at the end of this calendar year—so, you will have the opportunity over the next six months to update anything you provide this June. It should also be pointed out that this is confusing timing since BPA is launching its Rate Period High Water Mark process for FY 2022-23 on May 19. The load forecasts used in the RWHM process are based on what your utility finalized with BPA this past winter and will not be changed unless you file separate comments in the RHWM process.