The update this week has several topics and four attachments along with it. With the forecast temps creeping into the 100’s for much of the region, you should have plenty to read in the shade!
From all of us at NRU, please stay safe while enjoying summer and have a great weekend!
NRU Sends Letters to the Northwest Delegation and Deputy Secretary of the Department of Energy (DOE) Regarding Selection Process for Next BPA Administrator
This week, NRU submitted separate letters to the Deputy Secretary of the DOE, Mark Menezes, and the Northwest Delegation addressing the selection process and qualifications for the next Administrator of BPA. Both letters are attached to this update for your reference.
While the position is filled by DOE, there isn’t a clear process outlined for how they must do so. The delegation has traditionally advanced a preferred candidate and that consensus candidate is typically appointed by DOE. Our efforts at this point are focused on reminding DOE of the importance of the BPA Administrator position to the region and urging them to conduct a robust process to identify and appoint a candidate based on their qualifications to capably run the agency. At the same time, we are asking the Northwest Delegation to fill their traditional role of bipartisan support for a candidate favored by public power and asking they ensure that DOE or other interests do not politicize the Administrator position.
We don’t have a sense yet for how long DOE will take to appoint a new Administrator. Our letter to the Deputy Secretary asks for support of the transition team to allow time for a thorough process. We are hopeful there will be enough time to gather a list of qualified candidates who are interested in the position and once we have gathered that list, we can deliberate with NRU membership and others in public power with the goal of coming to a consensus on who to support for the position. Broad alignment across public power will be the best way to influence DOE to appoint an Administrator that has the qualifications to run the agency well and who will meet the needs of public power. We have been working on this daily and will continue to do so. Please reach out to me directly (firstname.lastname@example.org) with any comments, questions or feedback.
The Post 2028 Working Group Digs Into Tier One Rate Forecasts
The NRU Post 2028 Working Group met earlier this week to continue its work on the NRU/NEMS General Resource Investigation (“GRI”). The GRI is the tool that the Working Group is using to provide an analytical foundation for NRU’s negotiation positions in advance of the BPA Post 2028 contract deliberations.
This week, we dove headlong into the key focal point of the GRI—the Tier One Rate Forecast. This analysis incorporates load growth, market prices, and Tier One System size estimates to derive a range of potential Tier One Rate outcomes in the Post 2028 era. Said differently, this analysis will help the NRU membership compare and contrast the various expected Tier One Rate ranges under different Post 2028 contract options. Fortunately for us, NEMS’ newest hire, Jarek Oliver, who came from BPA’s Power Rates group, has been tasked with the analytical heavy lifting and is able to provide an immense wealth of knowledge and perfect skillset for this type of effort. We are extremely lucky to have him on board and the timing couldn’t be better.
The Working Group has also elected to incorporate several additional variables into the Tier One Rate Forecast, including various BPA cost sensitivities and other impacts like potential changes to the Residential Exchange Program. We are also including new variables that not only have Tier One Rate forecast implications but also directly impact many of the NRU members’ bottom line--transfer service, low density discount, and the irrigation rate mitigation product.
The Working Group is on track to present a final GRI to the NRU Board in November, and given the level of importance of this effort, we will be coming out with at least one webinar in the near future to provide the entire NRU membership with the opportunity to dig into the details with us. Specific details will be announced in future Portland Updates.
Q3 Quarterly Business Review
Here are key takeaways from BPA’s third-quarter Quarterly Business Review (QBR), shared this week:
The end of year forecast of Power’s financial reserves is $309M, which is equivalent to 65 days cash on hand, which exceeds the lower threshold.
The Financial Reserves Policy Surcharge has already been postponed for FY 2021, but even if that weren’t the case, it’s likely the surcharge wouldn’t trigger after all. This may also put a different spin on our previous conversations about postponing the surcharge in exchange for changing the net secondary revenues methodology, given that Power’s reserves are strong and appear to be above the lower threshold (meaning the surcharge wouldn’t trigger, regardless).
Capital execution is over 25% below rate case forecast, due in large part to COVID-19 stopping work on any non-essential projects, primarily on the Transmission side.
BPA is returning to a more restrictive status due to COVID-19, after having eased the restrictions in June. Employees are instructed to work remotely if possible. Additionally, BPA is deferring all maintenance and construction projects that are not directly tied to life safety or reliability.
BP-22 RHWM Comments Submitted
Consistent with direction received at last week’s Board meeting, NRU submitted comments in response to BPA’s BP-22 Rate Period High Water Mark (RHWM) Process. Our comments are attached and summarized below:
Concern over continued degradation to the carbon-free, affordable and reliable Tier 1 system.
Transparency and timely responses are necessary in a process as important as setting the size of the Tier 1 system. The BP-22 Process was lacking in both.
BPA should commit to initiating the process necessary to extend the opportunity for New Tribal Utilities to increase their CHWM.
Rate Case Workshop Comments Submitted
Attached are the comments NRU submitted in response to the July rate case workshops. In particular, we asked BPA to ensure there is sufficient time for them to read, respond to and incorporate customer comments on the comprehensive proposal that they plan to share later this month. The “comprehensive proposal” is where BPA hopes to share their full proposal on how joining the EIM will affect various rate designs on both the Power and Transmission side.
Once we have this proposal, NRU staff will host an NRU webinar to share BPA staff’s proposal and seek guidance on what comments to submit. Assuming BPA’s timeline stays intact, we expect to hold this webinar in the first two weeks of September.