Indicators Point to Rising Rates
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Although specifics will not be available until summer, I feel it important to keep you, our members, advised of developments at the Bonneville Power Administration likely to affect your electricity rates.
Several issues at BPA, the provider of Central Electric’s electricity, make it clear wholesale rates will go up. This inevitably means Central Electric Cooperative’s rates to members also will likely increase.
BPA Rate Case
Every two years, BPA adjusts its rates due to increased operating costs and capital spending. BPA’s preliminary announcement late last year called for an average increase to BPA’s utility customers— including CEC—of 3.5 percent for electricity and 1.1 percent for transmission services.
Final numbers will be determined in July following hearings. CEC representatives will actively work to keep the BPA rate increase as low as possible.
A recent federal court ruling will add to any resulting rate increase. Judge Michael Simon ordered BPA and two other federal agencies to conduct a spring spill test in 2018 at the Columbia River system’s federally operated hydroelectric projects. This increases the amount of water bypassing the turbines and flowing through
the dams to test impacts on salmon and steelhead migration. The resulting three months of lost energy production will cost BPA $40 million. This will have a $500,000 negative impact on Central Electric, and is equivalent to an additional 2 percent rate increase for the coop.
Financial Reserves
Also likely to impact CEC’s electric rates another 1 percent is a BPA charge to utility customers to generate $180 million over the next nine years to build BPA’s financial reserves. BPA says this will lower the agency’s exposure to financial risk, strengthen its balance sheet and support debt repayment.
Cost Recovery Adjustment Clause
BPA is alerting the region it may need to exercise this contractual clause and implement a one-year upward rate adjustment due to reduced revenues from surplus power sales. BPA counts on making significant power sales to other states and using the revenue to lower rates for Northwest customers.
Low natural gas prices’ influence on electricity markets combined with reduced demand for energy is creating the revenue shortfall.
The size of the increase is unknown and it is not certain to happen, but is a distinct possibility.
All of these moving parts will impact CEC beginning October 1—the start of the next two year BPA rate period. Once we learn specifics in July, we will conduct a full review with your board of directors to determine when and how the costs will affect CEC rates.
The news of these rate increases from BPA is disappointing because CEC employees work hard to keep your electric rates low. I will keep you informed of developments as we learn more.
Sincerely,
Dave Markham
President and CEO
