BPA concludes FY 2023 reserves distribution clause process

The Bonneville Power Administration has concluded its decision process on the application of the fiscal year 2023 reserves distribution clause for Power and Transmission. After careful consideration of the feedback received during the comment period, BPA Administrator John Hairston adopted staff’s proposal to apply the Power Services RDC amount of $285.4 million toward rate reduction and other high-value purposes. The Transmission Services RDC amount of $130.4 million will go toward debt reduction and investmentment in the transmission system.

The final decision was shared in letters to the region posted on BPA’s website.

Power will use $165.4 million to reduce FY 2024 power rates, $90 million will be applied as flexlible debt reduction, retaining the ablity to use these funds for liquidity preservation if needed reduce debt, and $30 million will be used to accelerate certain maintenance needs of existing fish and wildlife mitigation assets, that would otherwise be addressed in future rate periods.

Transmission will use $80 million to reduce debt and hold $50.4 million to reflect cost pressures not included in the Integrated Program Review process. The debt reduction component of the Transmission RDC is flexible in nature, which could  allow BPA to preserve liquidity if needed, in lieu of debt reduction.

“This decision balances the needs of our Power and Transmission customers, while advancing BPA’s financial strategy,” said Hairston. 

The RDC, a rate mechanism that implements an element of BPA’s Financial Reserves Policy, triggered for Power and Transmission based on FY 2023 end-of-year results. It allows the administrator to repurpose financial reserves when certain conditions are met. The primary condition is that both the agency and the business line must exceed their upper days-cash-on-hand thresholds: 90 days cash on hand for the agency and 120 days cash on hand for a business line. Days cash on hand is the number of days a business can continue to operate using its own cash on hand with no new revenue. 
The amount above the thresholds can be used for debt reduction, incremental capital investment, rate reduction through a dividend distribution or any other high-value, business-line-specific purpose determined by the administrator.

Originally scheduled for Dec. 15, 2023, the final decision on the Power and Transmission RDC was delayed to allow time for BPA to fully consider and respond to the extensive comments received during the public comment period. The rationale for the administrator’s decision is available in Attachment A: BPA’s Response to Comments on BPA’s website.