BPA could implement CRAC fee

By JOHN McCALLUM

Editor

An above-normal snowpack and a historically wet spring has led to a lot of water in the Pacific Northwest. In many ways, that’s a good thing.

Those conditions have also created a lot of power via the region’s dams — not necessarily a good thing, especially when it comes to the Bonneville Power Administration selling power on the open market. The excess has driven prices down, leading BPA officials to consider implementing a provision that could mean additional charges to area utilities and their customers.

The provision, called the Cost Recovery Adjustment Clause (CRAC), is a “cost recovery mechanism,” BPA spokeswoman Sarah Burczak said, that allows Bonneville to attach a one-year fee on top of its regular rate to make up for declining income. The supplier is already negotiating a rate case with a proposed 3.5 percent average wholesale power rate increase and a 1.1 percent average transmission rate increase, which would go into effect Oct. 1.

The yet-to-be-determined CRAC rate would go on top of those increases. It’s a situation Cheney Light Department Director Steve Boorman alerted the City Council to at its March 14 meeting as the potential for a rate increase to the department’s customers.

“For me, in my world, I want the council to know that up front,” Boorman said.

Inland Power and Light’s chief of energy resources, John Francisco, said the utility is eyeing a potential rate increase from BPA’s proposal, which wouldn’t likely be implemented until spring 2018. The potential for CRAC fees on top of that has created uncertainty.

“We’re not committing to anything; we just need to see (what happens),” Francisco said.

An article in the March 23 issue of Longview’s The Daily News noted BPA hasn’t invoked the provision since 2006, and only does so when cash reserves are projected to “dry up.” Burczak said on Jan. 1 they projected that power cash reserves would be $2 million and transmission cash reserves $393 million by the end of the current fiscal year.

Burczak said Bonneville sets its rates to operate on a “net zero” basis, meaning they’re designed to cover the costs of producing and transmitting power. Those costs range from administration to maintaining transmission lines and power sources.

“We kind of act like a non-profit,” she added.

BPA’s reserves are linked to how much money it can make selling power on the spot market. According to the Daily News article, it has earned far less profit so far from those sales than projected.

One reason is low natural gas prices. Another is the amount of water, thanks to the large snowpack and wetter than normal spring.

“When there’s a lot of supply, there’s a lot of people trying to move water through the (Columbia) river,” Burczak said. “So, where do you put that water?”

Boorman equated it to a farmer who has a year with a high yield per acre. That would also drive the price down, but the farmer has the option to store the excess until market conditions are favorable.

“Power is worse, you can’t store it,” Boorman added.

One option is to let dams send excess water over their spillways. Burczak said there is a limitation with this remedy, however.

Water over spillways creates gas bubbles, too much of which can be harmful to fish migration. The water must be spilled so that gases dissolve, and Burczak said they have a level of “total dissolved gas” which they cannot exceed.

“(Water above this) must be pushed through the turbines, creating more power,” she added.

Throw into this mixture renewable energy sources such as wind and solar.

“There’s definitely more (renewables) on the market than needed,” Inland’s Francisco said. “That’s pushing non-renewable prices down.”

Boorman said there wouldn’t be anything definite regarding the CRAC provision until August or September. If it came down to a rate increase in Cheney, that would be done through the normal budgeting process.

Francisco said the just-concluded cold winter helped Inland’s revenues, allowing them to also take a wait and see approach. He added that BPA’s utility customers are working with the federal agency to find ways of cutting costs to avoid the provision’s implementation.

“What it really is, is it’s more power than we need,” Francisco said. “There’s power everywhere.”

John McCallum can be reached at jmac@cheneyfreepress.com.