BPA seeks to raise wholesale power rate
November 16, 2012
The Bonneville Power Administration has proposed
a 9.6 percent average wholesale power rate
increase to compensate for reduced revenue
expectations from surplus power sales and to
continue funding needed investments in the
Federal Columbia River Power System.
BPA is also proposing a 13 percent increase in
its transmission rates mainly due to continued
efforts to maintain system reliability and meet
increasing demands for transmission in the
Pacific Northwest. BPA initially managed these
increasing costs without rate increases. If
adopted, it would be the first transmission rate
increase in eight years.
In January, BPA began a discussion with the
region about its proposed programs, future costs
and potential rates for fiscal years 2014 and
2015. At the outset of those discussions, BPA
forecast that its power rates could increase
between 12 and 21 percent for those years.
Transmission rates were forecast to increase by
approximately 12 percent.
“We are acutely aware of the economic impact of
our rates and have worked closely with the
region to develop a plan that keeps rates as low
as possible while making needed investments in
infrastructure,” said Steve Wright, BPA
administrator and chief executive officer. “We
remain committed to covering all our costs and
providing timely repayment to the U.S.
The rate proposal will be considered during a
public rate setting process in the coming
months, culminating in a July 2013 decision on
final rates to take effect Oct. 1, 2013. BPA is
a nonprofit federal wholesale utility that
receives no Congressional appropriations and
must recover its costs through its rates. The
new rates will affect retail utilities
differently depending on the amount of power and
type of services they purchase from BPA. Local
utilities ultimately determine the retail impact
of BPA rates on individual businesses and
Cost levels are not established in the rate
case. Instead, before issuing this initial rate
proposals, BPA conducted a public process called
the Integrated Program Review. The Final IPR
Close-Out Report (October 2012) projects power
program cost increases that account for about 4
percent of the proposed wholesale power rate
The most significant contributing factor to the
proposed wholesale power rate increase is
reduced revenue expectations from surplus power
sales. Market prices have been, and are forecast
to continue to be, suppressed primarily by low
natural gas prices. Reduced net revenue from
market purchases and sales adds about 8 percent
to the proposed rate increase.
Another 1.6 percent increase is due to a variety
of non-IPR cost increases.
To offset a portion of these increases, BPA has
been able to take advantage of unique
opportunities that decrease capital-related
costs for the upcoming rate period.
In particular, BPA was able to capture ratepayer
benefits in regard to fuel financing for Energy
Northwest’s Columbia Generating Station, the
region’s only nuclear power plant. This fuel
purchase agreement, the Depleted Uranium
Enrichment Program, reduces costs by $22 million
per year. In addition, Energy Northwest and its
governing boards also agreed to extend the
Columbia Generating Station bonds due in 2014
and 2015 and reduce the annual contributions to
the plant’s decommissioning fund due to a
Nuclear Regulatory Commission decision to extend
the license for the plant for another 20 years.
These actions resulted in an additional $95
million each year in cost reductions during the
The combination of all these actions results in
the proposed 9.6 percent increase.
Consistent with existing policy, the proposed
power and transmission rates are each set to
provide a U.S. Treasury payment probability of
at least 95 percent over the two-year rate
period. The Cost Recovery Adjustment Clause is
included in power rates as a proposed risk
mitigation tool that can address under-recovery
by adjusting fiscal year 2014 or 2015 wholesale
power rates after the rate case concludes.
The proposed wholesale power rate would affect
Northwest consumer-owned utilities including
public utility districts, tribal utilities,
cooperatives, municipalities and federal
If adopted, this would be the first transmission
rate increase in eight years. A number of
factors are leading to increased spending and
the proposed transmission rates.
-- Construction of new lines and replacements to
maintain reliability and facilitate the
integration of renewable resources, such as
wind, accounts for approximately 7 percent of
the proposed transmission rate.
-- Increased mandatory compliance requirements
and additional cyber and physical security
requirements and other operational and
maintenance expenses account for approximately 6
percent of the proposed transmission rate.
Variable Energy Resource Balancing Service rate
BPA’s rate to balance renewable resources,
primarily wind generation, is going down
slightly. But, BPA’s rate also has built-in
flexibility to recover any additional costs that
may be needed to keep the system reliable as the
wind fleet increases.
BPA holds a portion of the hydro system in
reserve to move up and down with wind and other
renewable resources as their production varies
to ensure that the amount of power being
produced matches the amount being consumed to
maintain system reliability.
BPA has been actively pursuing new tools and
strategies to manage the occasional seasonal
oversupply of electricity that comes from large
concentrations of renewable generation. As part
of the oversupply (OS-14) rate case that will be
held at the same time as the power and
transmission (BP-14) rate case, BPA is proposing
to collect 50 percent of the oversupply costs
from its power customers and 50 percent from the
BPA is a nonprofit federal agency that markets
hydropower from federal Columbia River dams,
operates three-quarters of high-voltage
transmission lines in the Northwest and funds
one of the largest wildlife protection and
restoration programs in the world.
Questions or comments about this
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So BPA says they have to increase rates because
of surplus power sales, then they say they have
to increase also transmission rates to meet the
demand, so which is it . I would think if we
were using more electric, then they would need
more infrastructure and then I could see higher
cost, but they say they have surplus, I guess I
don’t get it, I must be missing something.