BPA Issues Formal Notice of to Suspend the Financial Reserves Policy Surcharge
BPA just distributed the attached letter from Administrator Elliott Mainzer. The letter confirms our announcement in the Portland Update earlier this afternoon.
NRU will be attending the workshop referenced in the letter and will report out in the update next Friday.
Have a safe and happy weekend!!!
NRU Expects BPA to Announce Suspension of Financial Reserves Policy (FRP) Surcharge
On May 15th, NRU coordinated with PPC to simultaneously submit letters to the BPA Administrator asking the agency to suspend the FRP surcharge from the time of the national emergency declaration through the end of fiscal year 2021. Our letters explained that suspension of the surcharge would offer immediate and tangible relief to utilities facing financial pressure due to economic and societal impacts of the COVID-19 pandemic. After many follow up conversations with BPA executives, NRU anticipates BPA will formally announce suspension of the surcharge today or early next week. We will forward the formal announcement as soon as we receive it from BPA.
BPA has initially indicated suspension of the surcharge will be effective as of the date FERC approval can be obtained; BPA will not be pursuing retroactive suspension of the surcharge. A change in rates requires the Agency to conduct a 7(i) rate proceeding and to obtain FERC approval. If the 7(i) process is not contested, we could see the suspension take place prior to the beginning of FY2021.
NRU will closely track the process and keep members informed of progress via the Portland update.
Feedback Requested – NRU’s Proposed Comments to Extend Timeframe to Allow for Increases to CHWMs for New Tribal Utilities
Concurrent with the BP-22 RHWM Process, BPA released a letter proposing to extend the expiration date for New Tribal Utilities’ load growth CHWM augmentation. Below is background on this issue and NRU staff’s proposed position. Comments are due to BPA on June 3rd, so please email Megan (email@example.com) with any questions or concerns by COB Tuesday, June 2nd.
The TRM currently allows the CHWMs for New Tribal Utilities to increase for load growth and expansion of service territory, up to a total of 40 aMW in aggregate. The TRM states that this exception will expire at the earliest of the end of FY 2021, when the 40aMW limit is reached, or when the 250aMW overall limit for New Public Utilities is reached.
Even though the TRM provides for such expiration, the July 2007 Regional Dialogue Record of Decision says that “if the 250 aMW [overall cap for New Publics] has not been reached, BPA is not precluding reconsidering the FY 2021 [expiration of the New Tribal Utilities exception].”
The Affiliated Tribes of Northwest Indians (ATNI) submitted a letter to BPA asking for the expiration to be extended to the end of FY 2028, still subject to the 40 aMW cap. This would allow further load growth or expansion of New Tribal Utilities to be able to serve that load at the Tier 1 rate.
In its letter to the region, BPA proposed to adopt the ATNI proposal to extend the expiration of the policy until the end of FY 2028. The 40 aMW cap would still be in place, as would the 250 aMW limit for New Public Utilities. Neither cap is close to being met: 8 aMW out of 40 aMW of the New Tribal Utilities cap have been used, and 69 aMW of the 250 aMW overall New Publics cap have been used.
Potential Impact of Removing Expiration Date:
Any increase to CHWMs for New Tribal Utilities increases the amount of firm power sales and revenues at the Tier 1 rate. Currently, BPA is forecasting 219 aMW of Tier 1 headroom as part of its BP-22 RHWM Process. If New Tribal Utilities increase their CHWMs, BPA will first use this firm surplus power to serve those loads. This would result in increased firm power sales at the Tier 1 rate, which is higher than market prices, meaning an overall positive impact to the Tier 1 rate (firm surplus is sold at a rate higher than dumping it into the wholesale market).
If, in the future, no Tier 1 head room exists, BPA would need to make augmentation purchases. Assuming the market purchases are less than the cost of Tier 1, this would also have an overall positive impact on the Tier 1 rate. Given that there has been Tier 1 headroom for a number of years, and load growth continues to stay fairly depressed due to economic conditions and/or energy efficiency, NRU staff would be surprised if BPA would need to augment the system in order to serve any increased CHWM for New Tribal Utilities.
NRU Staff Recommendation:
NRU staff recommends submitting comments to BPA in support of extending the expiration of the policy until the end of FY 2028, still subject to the 40 aMW cap for New Tribal Utilities and the overall 250 aMW cap for New Public Utilities. We believe this is consistent with the spirit of the original policy. Additional CHWM would help offset the continued diminishment of firm Tier 1 power sales and revenues, especially given Tier 1 headroom of over 200 aMW. NRU staff believes the risk of BPA needing to go to the market to augment the firm system is very low, and if the market price continues to be below the Tier 1 rate, this would also provide a positive benefit to the Tier 1 rate. Note that two of NRU’s members are New Tribal Utilities – Yakama Power and Kalispell Tribal Utilities.
Changes to Your BP-22 Load Forecasts? Submit to BPA ASAP
With the start of the BP-22 RHWM Process last week, the clock is ticking on getting changes to your load forecast for BP-22. Unlike previous years, BPA is releasing its restrictions on the size and type of changes to load forecasts to be more responsive to potential COVID-19 impacts. If you believe your BP-22 load forecast should be changed, submit your request to BPA here: https://publiccomments.bpa.gov/OpenCommentListing.aspx. Requests should be submitted by Wednesday, June 3rd.
The Preliminary RHWM Outputs for BP-22 (including your load forecasts) are available here: https://www.bpa.gov/Finance/RateCases/RHWM/Pages/Current%20RHWM%20Process.aspx