Cost Recovery Adjustment Clause (CRAC)
Dividend Distribution Clause (DDC)
The Cost Recovery Adjustment Clause, or CRAC, allows an adjustment to the base rates. The CRAC has been designed to be responsive to the financial risks BPA faces. It is an annual upward adjustment in energy charges of rates subject to the CRAC. The CRAC has a limit to the annual collection amount of $300 million.
As an offset to the risk of realizing higher than expected net revenues, BPA is also including the Dividend Distribution Clause (DDC), which will refund money to customers in the event BPA’s financial reserves exceed the amounts needed to maintain the TPP for all three years of the rate period. It is an annual downward adjustment to energy charges of rates subject to the DDC. There is no limit to the annual distribution amount.
The CRAC and DDC calculations will be made shortly before the beginning of each year in the rate period. A forecast of the year-end AMNR will be made after the 3rd Quarter Review and then compared to the thresholds for the CRAC and the DDC. If this AMNR forecast is below the CRAC threshold, an upward rate adjustment will be calculated for the duration of the upcoming fiscal year. If the forecast is above the threshold for the DDC, a downward rate adjustment is calculated to distribute dividends to applicable rates for the duration of the upcoming fiscal year.
The CRAC and DDC are described in detail in the WP-07 Risk Analysis Study.
Content provided by: Greg Gustafson, 503-230-5820, email@example.com.
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