Bonneville Gives NPCC Update on Financial Conditionby Mike O'Bryant
Columbia Basin Bulletin - February 20, 2004
The Bonneville Power Administration is about where it expected it would be financially through the first quarter of fiscal year 2004. Even though revenues are slightly down, cost savings are keeping the federal power marketing and transmission organization in the black.
That is following a year (FY 2003) of even larger cost cuts in the agency. In addition, the agency found cost savings by refinancing Energy Northwest debt, getting a prepayment for fiber optic contracts held by the agency's Transmission Business Line, deferring some payments to investor owned utilities and getting $70 million in fish credits from the Fish Cost Contingency Fund.
But overall through the agency's 2002-06 rate period, it continues to lose money, said Jim Curtis, BPA's chief financial officer.
Net revenues at the end of FY 2003 (Sept. 30) were $555 million on total revenues of $3.6 billion. However, if not for the refinancing and other actions, net revenues would have been $36.9 million. The agency sent to the U.S. Treasury more than $1 billion last year, including an early payment of $328 million designed to reduce overall debt costs.
With a $511 million reserve going into FY2004, along with a good water supply (one of BPA's largest risks each year), there is a very high probability of BPA also making its Treasury payment this year, Curtis told members of the Northwest Power and Conservation Council this week.
"With hydro near normal, we are far more confident than we would have been earlier in the year that we can make our Treasury payment," said Curtis. But he added that there won't be extra money for fish and wildlife programs.
Curtis warned that the reserve level is expected to decline in the next couple of years. The agency began the current rate case period with $762 million in reserve, the largest Curtis remembers at BPA, but that level now stands at $511 million, a $251 million drop in financial reserves. It had dipped to $188 million in 2002. BPA is projecting reserves to drop to $451 million for fiscal year 2004, in FY2005 to $364 million and ending up the rate period in 2006 at $328 million.
Council members questioned Curtis about the invoices for fish and wildlife work from as far back as 2000 that have been arriving at the agency, seriously depleting this year's $139 million budget.
"I look at Bonneville as a $5 billion agency, so this may seem like chump change," said Washington Council member Larry Cassidy. "There's a nightmare going on in the fish program with bills coming in from 2000 and 2002. How do we get comfortable with this?"
Curtis said that Therese Lamb, BPA vice president for Environment, Fish and Wildlife, is putting systems in place quickly to get billing under control and "I'm confident these systems will be in place shortly."
Council Chair Judi Danielson of Idaho said the Council is frustrated because it provided BPA with a working budget. "All we do is set the fish and wildlife budget and what goes out the door we have no control over," she said. "We don't do the contracts or write the checks."
Curtis replied that revenues are down and to a large extent that's been fixed with cost reductions, but there are no extra funds for fish and wildlife.
"The Fish and Wildlife program didn't cause those things to happen and so it shouldn't be hampered with that," said Ed Bartlett, Montana Council member. "We need your help. We need a little more flexibility from Bonneville to solve our problems," specifically referring to a capital funding issue.
The issue is whether BPA will borrow money to fund the acquisition of fish and wildlife habitat rather than having them be expense items in the fish and wildlife budget. Curtis said that the rules on what it can and cannot capitalize were set in its 2002-06 rate case.
The Council had asked in its 2004 budget that about $20 million in planned land acquisitions be capitalized instead of being forced into the $139 million fish and wildlife expense cap.
"Our rules have to be stated and applied consistently," Curtis said. "The evidence is that we've been very flexible in capitalizing these assets, to the extent we may lose the ability. We're trying to manage this so that doesn't happen."
He said under federal accounting rules for BPA to capitalize habitat purchases, put them into rates and recover the costs over time, it must show that the purchases have a long-term value to the agency. Fish and wildlife lands are not revenue producing purchases.
"You've said there needs to be a fish credit system in place before BPA can make land acquisitions, but we have yet to see such a system," said Washington Council member Tom Karier. "You do it now for wildlife acquisitions, but not for salmon."
"We are trying," Lamb said. "The reason we've gone forward with wildlife is because the habitat credit system was in place." At this point, there is no such credit system for fish. Lamb said she may release an initial concept for the salmon credit system in the next couple of months.
"We want to move valuable habitat into perpetuity and we can't do it because of Bonneville," Karier said.
"We lost $500 million so far this rate case and we're all hurting," Curtis said. "Until things turn around, we'll continue to ask you to help us."
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