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BPA Sets 7.8-Percent Average Rate Increase

by Ben Tansey
NW Fishletter, August 5, 2011

Power lines above Bonneville dam. BPA released its final record of decision in the WP-12 wholesale power and transmission rate case July 26, establishing an average 7.8-percent wholesale increase in power rates. The increase will mainly cover costs for rehab of the federal hydro system, BiOp operations and fuel costs at CGS--which is now more than a month overdue from returning to service from its scheduled 78-day refueling outage.

( See Energy NW Nuclear Power Restart Delayed Again by Annette Cary, Tri-City Herald, 8/3/11)
The two-year rate period, the first under the new Tiered Rate Methodology, begins Oct. 1, 2011.

The actual amount of the rate increase for individual wholesale power customers will vary widely, from as little as 1.8 percent to as much as 47 percent.

"Unlike previous rate cases, the range is going to be much broader, given the 72 variables in the rates that drive a customer's actual rate charges," said BPA spokesman Doug Johnson. Agency account executives (AEs) were poised to fan out over the region this week to discuss impacts with individual utility customers.

About 85 percent of each utility's Tier 1 bill is based on the size of its Tier 1 eligibility, Johnson noted. The new load shaping and demand charges are on top of that, but can be substantially influenced through the use of various strategies such as demand-side management, energy efficiency and load-shifting. Johnson said the AEs and BPA's energy efficiency reps will be "partnering with utility customers to help them use energy as efficiently as possible" to help lower their costs.

Last week, many parties said they were still wading through the 519-page ROD, which contains discussions and decisions on over 150 specific policy matters raised during the rate case. The largest share of the policy matters deals with generation inputs and the ancillary and control area services (ACS) rate schedules. Generation inputs are the power and capacity needed to provide many of the products offered by BPA's Transmission Services, such as reserves and balancing, and which are collected through the ACS rates.

Transmission rates are for the most part staying steady due to a partial settlement under which BPA is using some reserves to cover transmission costs. The agency will lower the Montana Intertie rate by 54 percent. It is also adopting a new balancing service rate applicable to non-federal thermal generators (DERBS) and new balancing service rates aimed at wind and other variable resources (VERBS) that will replace the existing Wind Balancing Service.

BPA, which expects 34 MW of installed solar capacity in its control area by the end of the rate period, set a solar VERBS rate based on one-half the VERBS rate for wind, which is expected to top out at 5500 MW of installed capacity by the end of the rate period.

Bonneville will reduce its wind integration rate by 4.7 percent, to $1.23/KW-month from $1.29. It said even though the total cost of wind integration is increasing, the reduction was possible due to the "geographic diversity" of the wind fleet and changes to the calculation of reserve needs. Most of the wind fleet is in the Columbia Gorge, explained BPA's Johnson, but as additional wind outside the Gorge comes on, it will smooth out some of the more "violent" ramping required to balance loads and resources, requiring fewer reserves and therefore lower costs.

While glad that BPA's renewable energy integration rates will remain "relatively stable" and supportive of the ROD's implementation of incentives for half-hourly scheduling of renewables, the Renewable Northwest Project was mostly critical of the ROD. "We continue to believe that BPA's integration rates overstate BPA's costs of providing integration services to wind energy producers," said Rachel Shimshak, executive director. She said BPA and the region still have some of the highest renewable energy integration rates in the country.

The Montana Intertie rate should have been entirely eliminated, the solar energy integration rate is "premature and not cost-based," and RNW is "disappointed that BPA chose to give itself the unilateral right to increase the wind integration rate during the two-year rate period," Shimshak said. Much more work needs to be done to establish a more robust renewable energy market, she noted, including establishment of an energy imbalance market and greater balancing area coordination.

Stephen Hall, attorney for the Northwest Wind Group--which includes RNP, the American Wind Energy Association, Vestas, enXco, BP Wind Energy and others--said NWG is pleased BPA decided against using transmission dollars to subsidize power rates, but is still concerned about its application of the cost recovery adjustment clause (CRAC) to the wind integration rate. The CRAC is supposed to allow BPA to raise rates if its surplus sales forecasts are wrong, but wind integration rates "do not get credit for surplus sales . . . [and] it is discriminatory for BPA to impose an obligation when there is no corresponding benefit."

Customer groups were less harsh. "We never like to see any increase in power costs, especially in this economy," said Scott Corwin, executive director of the Public Power Council. "However, this is along the lines of, and slightly lower than, recent projections." Customers worked hard with BPA to lower the increase considerably from last year's projections, which ranged from 12 percent to 20 percent, he noted.

"We hope that with BPA's rate increase, the planned re-investment in the infrastructure of the federal hydropower system and the Columbia Generating Station pays future dividends in increased reliability for the region," said John Prescott, president and CEO of PNGC Power. "This rate case process went more smoothly than expected and we thank BPA for that. However, in the midst of this difficult economic time, it's disappointing to have any wholesale power increase."

Related Pages:
Energy NW Nuclear Power Restart Delayed Again by Annette Cary, Tri-City Herald, 8/3/11

Ben Tansey
BPA Sets 7.8-Percent Average Rate Increase
NW Fishletter, August 5, 2011

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