Under Pressure, BPA Cuts Costs,
by Pete Danko
One big problem: Surplus power sales that once bolstered the bottom line have fallen,
hit by flat demand and cheap fracked natural gas and renewables.
The Bonneville Power Administration will hold rates steady in the two-year period beginning in October. The agency called it a sign of progress in an effort to control costs and hang onto customers when contracts come up in 2028.
An official at the Public Power Council, which represents consumer-owned utilities -- key buyers of Bonneville power -- agreed.
"The outcome represents a substantial step toward changing the cost and rate trajectory," Irene Scruggs, the group's interim executive director and general counsel, said. "(But) in order for BPA to be competitive come 2028, a lot of additional work is needed."
BPA trimmed $66 million a year from its projected costs in the 2020 and 2021 fiscal years to avoid an increase in the average wholesale base power cost of $35.62 per megawatt-hour.
"Through collaboration with our customers and partners throughout the region, we have worked hard to bend the cost curve and keep base power rates flat," BPA Administrator Elliot Mainzer said in a statement.
Mainzer added that a surcharge of up to 1.5 percent for the two-year period was likely in order to give BPA the 60 days cash on hand required under its Financial Reserves Policy. But that would be small potatoes compared to the hikes customers endured in the previous three rate cases: 9 percent in 2013, 7.1 percent in 2015 and 5.4 percent in 2017.
BPA sells power from 31 federal dams and the Northwest's only commercial nuclear plant, and owns and operates 15,000 miles of transmission lines and associated infrastructure, comprising about three-quarters of the region's high-voltage grid.
It's been counted on for years to provide cheap power to public utility districts, but that's become ever more challenging over the past decade. One big problem: Surplus power sales that once bolstered the bottom line have fallen, hit by flat demand and cheap fracked natural gas and renewables. At the same time, costs -- for a struggling salmon recovery program, an aging hydro fleet and a transmission system that demands modernization -- have increased steadily.
In early 2018, Mainzer put out a five-year strategic plan that calls for reducing costs and debt, modernizing systems, developing new products and operating key assets more efficiently.
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