In July, the Bonneville Power Administration—the supplier of nearly all of Central Electric’s wholesale electricity—announced its record of decision to set rates for the two-year rate period
beginning October 1, 2019, through September 30, 2021. While BPA’s wholesale power rate will remain flat, transmission rates will increase, as well the likelihood of a financial reserves surcharge. BPA’s decision, combined with our ongoing strategic investment initiative, will likely increase Central Electric members’ retail rates beginning in January 2020.
As I have shared with you throughout the year, this development is not unexpected, but it could have been worse. In February, BPA announced the probability of a 2.9% wholesale power rate increase. By summer, after further analyses, BPA decided to forego the increase due to its efforts to hold down program costs and bring in additional market sales revenues. BPA’s transmission rates will increase an average of 3.6% as planned, accompanied by a likely 1.5% surcharge for the two-year rate period to ensure BPA retains levels of financial reserves above the minimum required to remain solvent.
While BPA rate increases have become the norm every two years, CEC has bucked that trend. When BPA raised utilities’ wholesale electricity rates 5.4% in 2017, CEC successfully avoided passing it on to members. This time may be different. Although the co-op continues to maximize the efficiency of its operations and electrical system, components of this electrical system are nearing the end of their lifespan, and technological advancements are required to meet the growing demand for electricity in Central Oregon. CEC’s strategic investment initiative calls for the expenditures of approximately $147 million from 2019 to 2028 to replace and upgrade electrical infrastructure to increase capacity and ensure the continued safety and reliability of the electricity we provide.
While member rates will not change October 1 when the BPA rate increase becomes effective, it is almost certain we will need to increase them in January 2020 to maintain the co-op’s financial strength. The board of directors and management are analyzing the effects of BPA’s transmission rate increase and the financial reserves surcharge.
Through the years, we have successfully kept CEC’s rates low. The latest available statistics show CEC 33% below the national average and 19% below Oregon’s average. I assure you before there is an increase to electric rates, we will take every step to manage costs within our control without compromising the safety and reliability of the electricity we deliver to you. I will inform you of the final decision in December’s president’s message.