|
|
PR 46 02
Bonneville Power Administration
FOR IMMEDIATE RELEASE:
WEDNESDAY, April 3, 2002
BPA has reduced wholesale power rates for now;
Rates might increase in the fall
PORTLAND, Ore. -
The Bonneville Power Administration said today that its wholesale power rate for public utilities went down approximately 4 percent on April 1 as expected but could return to the pre-April level or slightly higher in the fall.
“We are pleased that power rates have decreased for the second six months of this five-year rate period,” said BPA Administrator Steve Wright. “However, we remain concerned about our financial circumstances in the longer term. Lingering effects of the drought and lower market prices for our surplus nonfirm power are likely to push rates up in the fall.”
The decline in rates now reflects lower costs of market purchases needed to supply the firm power needs of BPA’s utility and industrial customers over the next six months. BPA adjusts rates periodically to reflect the actual costs of meeting its customers' needs. Each utility will decide whether a retail rate change is appropriate.
Both short- and long-term prices in the wholesale power market have fallen since last year. Spot market prices, for example, have tumbled from $300 per megawatt-hour to less than $30. BPA expects to have surplus nonfirm power to sell into the market this year. These revenues help keep rates lower for BPA’s firm power customers, the region’s utilities and direct-service industries. So the lower market prices that help on the cost side of the ledger are hurting on the income side.
“Unfortunately, with market prices down we are not realizing the revenues from these sales that we forecasted last June,” Wright explained. “Mostly as a result of this, we expect to lose money for the second year in a row.”
BPA retains financial reserves to cover such contingencies. Two consecutive years of losses will erode reserves to the point where a rate increase becomes likely this fall in order to cover costs next year and beyond.
Wright said he was discussing this situation with customers early so BPA and utilities can make plans. BPA is now cutting costs below the already aggressive reductions established last year during the rate-setting process.
“With the assistance of our utility customers, we continue to manage our way through this very unsettled time in the West Coast utility market,” Wright stressed. “We are confident that by efficient program management, we will maintain a high probability of meeting our Treasury payment this fiscal year.”
While many utilities’ bond ratings fell last year, BPA retained a strong rating because it took aggressive steps early to minimize financial damage from the volatile energy market. This high bond rating is saving money for ratepayers now as the agency refinances power plant bonds at lower interest rates.
BPA markets nearly half the firm power used in the Pacific Northwest. This power comes from the Federal Columbia River Power System. BPA functions on a not-for-profit basis. Proceeds from power sales cover operating costs and repay the federal investment in the system. If BPA were to deplete its reserves, it would be unable to meet its scheduled annual payment to the U.S. Treasury.
Because water conditions this year are about average, BPA expects to carry out fish operations as required under the Endangered Species Act. The agency also plans to stay on schedule on improvements to the regional electricity infrastructure – power lines, hydropower system improvements and efficient energy use. Failure to do so would threaten the reliability of the system and cause supply problems similar to those that precipitated the West Coast energy crisis last year. A significant portion of these costs is capitalized.
Submitted for distribution on 04-03-2002 at 3:38 PM
|
Bonneville Power Administration, 905 N.E. 11th Avenue, Portland, Oregon 97232
Mailing Address: Media Relations - DM7, P.O. Box 3621, Portland, OR 97208-3621
Phone: (503)230-5131 FAX: (503) 230-5884 Web Site: http://www.bpa.gov
|
|
|
|
BPA News
