I am pleased to tell you that despite an average 5.4 percent increase in the Bonneville Power Administration’s wholesale electricity rates effective October 1, we are keeping Central Electric’s rates at current levels.
Our board of directors in November approved a management recommendation to absorb the BPA cost increase in the coming year and defer any adjustment to CEC rates. The decision was based on an internal analysis that shows BPA’s increased power costs will not impair the coop’s financial strength through proper planning.
We will achieve this by constraining spending and reprioritizing our strategic initiatives in 2018. We are emphasizing projects that increase savings and efficiencies in both the short and long term. Chief among them are our ongoing pole and underground cable replacement programs and expansion of the Bend Substation, which increases reliability and serves growth on the east side of our 5,300-square-mile service area.
Our actions fall sharply in line with our dedication to efficiency. We have a workforce with approximately 15 percent fewer people than electric coops across the country the same size as CEC. In national ratings of cooperatives’ reliability and cost management performances, we consistently rank among the top performers. My point is, that we always run a tight ship and are able to hold off on a rate increase with just a little extra belt tightening and continually focusing on efficiency.
BPA’s October 1 increase affects our power costs through September 30, 2019. We will closely track our finances and report to our board, and ultimately our members, any rate changes that may become necessary due to changes in our outlook or further rate actions by BPA. The agency’s recent increase is due mainly to lower demand for power; low market prices, which means fewer outside dollars coming in to BPA to help reduce everyone’s power costs; and growing costs for programs driven by legal requirements. The agency also is dedicating 1 percent of the 5.4 percent increase to replenish a financial reserves account.
Spill, Financial Reserves Issues Outstanding
One of BPA’s legally driven requirements will happen this spring. Under a federal court order, hydroelectric production will be reduced to leave more water in the river to help fish migration. This could cost BPA customers about $40 million and CEC alone $500,000. BPA also indicates the likelihood of another increase in October 2018 under its Cost Recovery Adjustment Clause if its financial reserves are exhausted during the agency’s fiscal year. That could cost CEC another $580,000.
While I am pleased we could hold the line on CEC rates this time, the issues BPA faces in 2018 cause concern whether I can deliver the same good news a year from now.
President and CEO