The Bonneville Power Administration (BPA) recently announced financial results that exceeded expectations for fiscal year 2022 that ended Sept. 30 and proposed to hold power and transmission rates flat overall.
The results outlined in the agency’s annual report “demonstrate the agency’s financial strength, supported by record setting revenue performance and continued cost management in the face of supply chain constraints and inflationary pressures,” BPA said.
BPA met all of its annual performance targets and finished the year with higher-than-expected net revenues totaling $964 million against a target of $172 million.
“Each quarter, we have signaled our expectations that Power and Transmission were expected to have a solid year, and I’m happy to report that was in fact the case, with both business lines significantly beating net revenue targets,” said Marcus Harris, BPA’s acting chief financial officer in a statement. “And after making our planned 39th consecutive U.S. Treasury payment of roughly $950 million, reserves balances ended the year well above our Reserves Distribution Clause thresholds.”
The Reserves Distribution Clause is a component of BPA’s financial reserves policy that triggers when reserves, measured in days cash on hand, reach pre-established targets.
At the end of FY 2022, agency days cash on hand was 233 days, with both Power Services and Transmission Services well above their 60-day lower thresholds.
Reserves were high enough to trigger the Reserves Distribution Clause in the amount of $500 million for Power Services and $63.1 million for Transmission Services.
At a recent quarterly business review, BPA announced it will consider repurposing financial reserves for Power and Transmission rate reduction in FY 2023, as well as for other high-value business unit specific purposes. BPA will make the final decision in December after it reviews customer and stakeholder feedback.
For transmission rates, a portion of BPA’s strong FY 2022 financial performance is being proposed to keep BPA’s 2024 and 2025 rates flat.
For power rates, that financial performance provided an opportunity to include in power rates $129 million per year in additional risk protection without a rate increase.
The additional risk protection increases the chances that BPA will see continued strong financial performance during the 2024 and 2025 rate period by building a financial buffer against the increased market volatility that the region is observing, it said.
As a nonprofit entity, BPA is legally required to cover its costs and adjust rates accordingly. BPA establishes those rates for two-year periods through administrative proceedings called for by statute. Similarly, BPA makes adjustments to the non-rate terms and conditions of its open access tariff for transmission service through a separate administrative process.