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BPA Ends Fiscal Year in Red by Kari Hanson NW Fishletter, December 20, 2001

Slight Loss Projected Next Year

BPA officials are not unduly concerned about the $375 million loss the agency experienced for FY 2001, noting that it represents a small fraction of BPA's $4-billion-plus budget and that the losses could have been much worse. CFO Jim Curtis said the agency is confident that it and its customers "took every prudent action to minimize" the loss. He also pointed out that credits for salmon recovery efforts, authorized under the Northwest Power Act, forestalled a much bigger financial hit. In FY 2001, those credits totaled $592.7 million.

Power purchases were by far the largest expense the agency incurred during the 12-month period that ended September 30. BPA spent $2.3 billion on purchased power, nearly four times the amount spent in FY 2000. Net operating revenues of about $127 million were offset by interest expenses of more than $333 million.

Added to this $206.6 million loss is an additional $168.5 million debit due to an accounting change. Spokesman Ed Mosey explained that this change involves the valuation of purchased power assets (that is, power bought in advance and paid for but not yet used at year's end). The agency's books must now reflect the actual market value of such purchased power rather than its cost or its value at the time of use.

Despite the loss reflected in its accounting statements, Bonneville has cash reserves of $636.7 million. Mosey pointed out that those reserves will be substantially depleted in the near future because several large payments--including a Treasury payment--are due around the first of the year. The agency is projecting $333.3 million in cash reserves for FY 2002.

Projected revenues for the coming fiscal year total $3.57 billion, slightly below the projected $3.66 billion in anticipated expenses. Were it not for the accounting change, expected revenues would be high enough to keep the projected loss to a negligible $8.9 million; with the change, however, BPA expects losses of about $86 million. Revenues and expenses are, of course, always "a moving target," said Mosey. The agency, however, is looking toward a year that appears to promise greater stability: "The combination of lower market prices for electricity, a more stable market going forward and dampening demand due to the economic slowdown should bring energy prices down next year," said Curtis.

Mosey said that projections for next year assume the 46 percent rate hike that took effect Oct. 1 will remain in place. The agency, however, will make efforts to decrease rates this year. It remains to be seen whether that will be possible, but he noted that so far, the weather is cooperating and that a healthy snowpack will certainly help the situation.