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BPA's Rate Impact of Declining Runoff Uncertain

by Ben Tansey
NW Fishletter, May 11, 2004

Runoff figures for the Columbia and Snake Rivers continue to look dismal, but the Bonneville Power Administration says there are too many other factors in play to draw any conclusions about where its rates will go come next October. "We haven't got a clue," said BPA spokesman Bill Murlin.

January-through-July runoff at the Dalles was projected at 79.5 million acre-feet, or 74 percent of the 30-year average. Northwest federal dams operated by the Army Corps of Engineers generated only 3700 GWh [billion watt-hours] in February, less than 70 percent of average. BPA's secondary revenue is also taking a hit. As runoff has declined by over 20 MAF since the last quarterly review, secondary revenue projections have come down $90 million.

Herald Opitz, hydrologist in charge at the Northwest River Forecast Center, said the 81.6 MAF figure from the May earlybird forecast would make 2004 the fifth worst runoff year since 1961. A revised forecast out last Friday cut the water supply even more, down to 79.5 MAF.

According to the NRFC's monthly summary, "Basinwide snow water equivalents on May 1st range from 85 percent in the Upper Columbia in Canada to 40 to 50 percent on the east slopes of the Cascades in Washington, The Big and Little Wood basins and Lost river in Idaho and on the Malheur and Owyhee rivers in Oregon."

The poor runoff is the result of too much annual precipitation falling early in the year and too little falling too late. Region-wide, precipitation for the October-through-April period ranged between 80 percent and 108 percent, but most of that fell in October, November, and December, while the normal months of accumulation--February through May--were much drier. Precipitation for April, for example, came in between 60 percent and 70 percent of normal as of April 26, Opitz noted. Hence, most of the precipitation fell as rain and didn't get stored as snow, leading to the low runoff volumes. v BPA's recently released second quarter review forecast $3.31 billion in total FY 2004 revenue, compared to the agency's $3.43 billion target. But its forecast expenses, $2.89 billion, are also down from a target of $3.04 billion target. Modified net revenues (excluding the effect of non-federal debt management and SFAS 133) for FY 2004 are projected at $40.6 million, compared to the $145 million target. Last year, BPA's total revenues came to $3.56 billion, and its modified net revenues to $36.9 million.

"The major reason for the decline in agency finances is the dry spring," Murlin said, adding that, so far BPA has been able to meet all its contract loads because the uncertainties of the coming season have not yet affected BPA's power purchase decisions.

If it were just a function of water, the pressure on BPA's wholesale rates would plainly be upward, Murlin said. But BPA has too many balls in the air at the moment to know how things will play out. A BPA/Customer collaborative is still working on cost cutting ideas that could lower the upward pressure by at least $100 million. And a proposed deal--"settlement lite"--to close out a drawn-out dispute over IOU benefits may come to fruition in the next few weeks, also reducing BPA's current rate period costs by over $100 million. In addition, a federal decision to end summer spill--itself an "iffy" proposition, Murlin noted--could help, but if runoff continues to decline, the benefit for rates will too.

With the three cost recovery adjustment clauses in effect, BPA's average rates are currently 47 percent over the base set in May 2000. That is scheduled to increase to 52 percent Oct. 1, not counting the impacts of the above listed uncertainties.

Ben Tansey
BPA's Rate Impact of Declining Runoff Uncertain
NW Fishletter, May 11, 2004

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