Oregon Rural Electric Coop

Directors Education SeminarThe Future for BPA

Jim LitchfieldJune 2, 2015

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Discussion Topics – The BPA Challenge• End Game in 2028 – Current Power Sales Contracts Expire• BPA’s Statutory Mandates• Loads are no longer rapidly growing• Governmental Mandates• Aging Power & Transmission Assets• Fish and Wildlife Mitigation Risk• Competition in Western Power Markets• California Independent System Operator – CAISO

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The Current Power Sales Contracts• BPA’s Power Sales Contracts Expire in 2028• Current Customers are Diverse:• Full Requirements Customers• Block Power Customers• Slice and Slice/Block Customers

• Rates are Now Tiered• High Water Mark Limits Tier 1 – Existing System Cost-based Rates• Tier 2 – Power Purchased in Markets or from New Resources• Tier 1 - $31.50/MWhr and Tier 2 could now be lower than Tier 1

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BPA’s Statutory Mandates

• Bonneville Project Act – 1937• Market the output of federal dams – just Bonneville at the time• Construct Transmission necessary to market the power• Gave preference to public bodies and cooperatives• Sell power at the cost of federal generation

• Regional Preference Act – 1964 – Priority to NW Customers• Transmission System Act – 1974 – Self Financing Agency• NW Power Act – 1980 • The Council and the Power Plan & the Fish and Wildlife Program

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PNUCC Load Growth Projections

51961

19631965

19671969

19711973

19751977

1979

1981 NRF1983

19851987

19891991

19931995

19971999

20012003

20052007

20092011

20132015

0

5,000

10,000

15,000

20,000

25,000

30,000

MWa

Council’s Load Forecast from 1983 Power Plan

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Current Loads

2015 PNUCC’s Regional Forecast

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BPA’s Load Forecast from 2013

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Governmental Mandates

• Electric Power Planning is a Complex Business• Driven by Reliability at the LOWEST Practical Cost• Mandates are caused by POLITICAL Drivers• Renewable Portfolio Standards in MT, OR, WA and CA• Regulatory PURPA Policies in all States• Incentives Provided by Government to Subsidize Renewables• Large and Rapid Development of Wind and now Solar resources

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Wind Integration is a Challenge

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CAISO Actual Renewable Generation May 20th

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Federal System is OLD

• Aging Infrastructure Cannot be Ignored• The Hydropower system was built between 1938 and 1974 when

Libby Dam was completed• The Youngest Dam is over 40 years old and the Oldest is almost 80

years old!• Transmission System is also Old because it was built to market the

power produced by dams and other generators• Changes in Loads and Resources (coal plant shutdowns) will require

New Transmission to be built to maintain reliability

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Power Markets Provide Competition• BPA’s Statutory Mandate is to Sell Federal Power at Cost• Competitive Power Markets are now Providing Realistic Alternatives• Natural Gas Prices Have Dropped Due to Fracking• Large Amounts of New Renewable Generation is now being Sold into

Power Markets with ZERO or even Negative Operating Costs• Market Prices are Low Even in this Poor Water Year• BPA Is Forced to Sell its Excess Power at Lower Market Prices which

will increase Preference Rates

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BPA PF Rate

Fish and Wildlife Mitigation Continues• Fish and Wildlife Expenditures Continue to Increase• Direct Expenditures are Greater than $260 million/year• The Current “Fish Accords” are Expending about $100 million of that

Annual Expenditure – WILL THEY CONTINUE?• In Addition there are Significant Costs from Lost Power Generation due

to Fish Requirements for Flow and Spill• The Current Biological Opinion for the FCRPS Expires in 2018 – There

will be a New Biop with New Requirements• Total Fish and Wildlife Expenditures since the NW Power Act are more

than $14 BILLION!23

Fish & Wildlife Total Expenditures - 2013

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Fish & Wildlife Expenditures Over 31 YearsMore Than $14 Billion Today

BUT THERE IS HOPE!

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