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Rating Agency Meetings. October 16/18, 2001. Confidential – Sensitive Material. Summary of Fiscal Year 2001. The Water Situation. FY 2001 Market Prices. Managed Hydro System Under Crisis Conditions. Plan:

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Rating agency meetings

Rating Agency Meetings

October 16/18, 2001

Confidential – Sensitive Material

Summary of Fiscal Year 2001

Confidential – Sensitive Material

The water situation
The Water Situation

Confidential – Sensitive Material

Fy 2001 market prices
FY 2001 Market Prices

Confidential – Sensitive Material

Managed hydro system under crisis conditions
Managed Hydro System Under Crisis Conditions


  • Develop criteria based on reliability and financial considerations to trigger a different operation of the river


  • Triggering of power system emergency resulted in reducing spill by 4,700 MW-mo and saved BPA approximately $780 million.

Confidential – Sensitive Material

Fy 2002 06 power rate case
FY 2002-06 Power Rate Case


  • Manage power rate increase to acceptable level with increased flexibility for the future.


  • February 2001: BPA reached a partial settlement with many of its utility customers based upon their suggestion for flexible rates rather than fixed rates.

  • February-June 2001: BPA was expecting a first year rate increase of 250-300%, but due to an unprecedented load reduction effort by utilities and industries, it was cut to 46%.

  • The Region responded very positively and collectively to reach this goal for the common good of the Region, with little opposition.

  • It is estimated that 25,000 people will still be working who otherwise would have lost their jobs and this effort also saved ratepayers about $4 billion for the current fiscal year.

Confidential – Sensitive Material

Fy 2002 06 power rate case1
FY 2002-06 Power Rate Case

  • Load-Based CRAC:. It allows an adjustment in rates every six months, based on costs to buy power to serve the BPA load, which is then corrected after each six-month period for over- or under-collections, based on actual augmentation costs (loads and prices). The adjustment was set at 46% for October-March. The next review will be in February 2002, and at this time the rate level for the second six-month period is expected to change little from the current six-month period.

  • Financial-Based CRAC: This allows a temporary, one-year adjustment in the base rate in addition to the LB CRAC, if PBL’s accumulated net revenues fall below a preset threshold. The FB CRAC did not trigger for FY 2002. The decision for FY 2003 will be based upon BPA’s 3rd Quarter Review next August.

  • The Safety-Net CRAC: It triggers if BPA forecasts a 50 percent or greater probability that it will miss a payment to Treasury or other creditor or if BPA actually misses a payment. The SNCRAC review is ongoing, but it is too early to tell if it will trigger in FY 2002.

  • The Dividend Distribution Clause: The DDC allows BPA to distribute rebates to customers if accumulated net revenues at the end of the prior year exceed a pre-set threshold.

Confidential – Sensitive Material

Successful negotiation with treasury and omb
Successful Negotiation with Treasury and OMB

  • In FY 2001, significantly higher 4(h)(10)(c) credits were claimed than in previous years.

  • In FY2001, FCCF credits were claimed for the first time.

  • BPA will be engaging DOE in discussions to clarify the procedures for accessing these credits in the future.

Confidential – Sensitive Material

Court decision regarding listed fish
Court Decision Regarding Listed Fish

  • September 10, 2001 – In the Alsea Valley Alliance v. Evans case, the US District Court for the District of Oregon issued an order finding that NMFS exceeded its authority in listing only the wild-salmon portion of the Pacific Coastal Coho salmon as endangered or threatened.

  • The Court found that because NMFS did not include the entire “distinct population segment” which also includes hatchery fish, it acted arbitrarily and capriciously.

  • The court delisted the Pacific Coastal Coho salmon as endangered or threatened.

  • NMFS listings of other fish populations may have to be reconsidered if appeals of the decision are unsuccessful.

  • Other groups have commenced litigation to remove several species of salmon and steelhead located in the Snake and Columbia River basins from the endangered species list.

  • Federal appeal period ends November 9, 2001.

Confidential – Sensitive Material

Outlook for Fiscal Year 2002

Confidential – Sensitive Material

Hydro conditions and uncertainty
Hydro Conditions and Uncertainty

  • Potential scenarios for FY 2002 must consider the fact that the Region is starting from both a significant soil moisture and river flow deficit.

  • BPA is applying a conservative approach, giving heavier weighting to some of the below normal years for modeling purposes

  • Currently projecting about 90 maf runoff at The Dalles (January-July 2002), with a 95% confidence range of 65-120 maf

  • Would take roughly 115% of a normal water year to get the region back to “normal conditions”

  • Bottom line: It’s too early to draw conclusions.

Confidential – Sensitive Material

Forward price curve
Forward Price Curve

Confidential – Sensitive Material

System augmentation
System Augmentation


  • With about a 3,700 aMW projected shortage in FY 2002, BPA pursued conservation measures, load buy-downs, and up to 5-year power purchases.


    FY2002-FY2006Price Range

    Conservation and Load Buy-Downs 2,400 700 aMW $30-40/MWh

    Up to 5-Year Purchases 1,300 aMW $20-35/MWh

    Short-Term Market 0 1,400 aMW Market Price

Confidential – Sensitive Material

Current agenda for fy 2002
Current Agenda for FY 2002

  • Implement new rate and contract systems

  • Recover hydro system

  • Obtain additional borrowing authority or utilize the Debt Optimization program to fund infrastructure

Confidential – Sensitive Material

Bpa is moving forward with a renewed sense of mission
BPA is Moving Forward With aRenewed Sense of Mission

  • BPA is investing in infrastructure for the Region in both the Transmission and Power business lines.

  • BPA will engage the Region in a discussion of BPA’s obligation to serve load beyond FY 2006.

  • BPA will continue to be an active participant in a Northwest and possibly West Coast RTO.

  • BPA will continue to work with states, tribes, environmental interest, and others to reach agreement on a sustainable fish funding agreement.

Confidential – Sensitive Material