Council Communication

Title:	Update on BPA Electric Rates
Dept:	Electric & Telecommunication
Date:	December 3, 2002
Submitted By:	Dick Wanderscheid
Reviewed By: ........................	Brian Almquist, Interim City Administrator

Synopsis:	BPA has decided at this time not to trigger the Safety Net Cost Recovery Adjustment Clause (SNCRAC), but to wait until more information on water supply and power prices are available. They will reconsider it again in January 2003. A decision to trigger it in January would probably result in an additional wholesale rate increase to the City in October 2003. Therefore, there is no need to increase our electric rates until July 2003, if at all.
Recommendation:	This report is for informational purposes only and no council action is required.
Fiscal Impact:	The fiscal impact will vary depending if the SNCRAC is triggered, when it triggers, and the amount of the increase. This information should be available during the budget process and can be used to determine rates for July 2003.
Background:	The City of Ashland has a 1 O-year power sale contract with BPA to purchase wholesale electricity. This contract runs from 2001 to 2011. The current rate period runs from Oct. 1, 2001 through September 30, 2006. When BPA set rates for the period, they utilized a series of Cost Recovery Adjustment Clauses (CRAC) that could be used to revise rates to reflect changing circumstances. The three different CRAC's all serve different purposes. The Load Based CRAC (LBCRAC) allows BPA to adjust rates every six months to recover the costs of purchasing augmentation power- that is the firm power BPA needs to serve loads beyond what the federal system can provide. The Financial Based CRAC (FBCRAC) allows BPA to make annual adjustments to base rates if their accumulated net revenues fall below a preset threshold. The single largest influence in BPA revenues is the market for BPA's seasonal surplus power sales. The Safety Net CRAC (SNCRAC) is a last resort adjustment that goes into effect only if there is less than a 50% probability of BPA making it's treasury payment. The city's rates already include the current LB and FB CRAC's costs and these CRAC'S are projected by BPA to decrease over the remainder of the rate period. BPA's forecasts of these are as follows: Year ..... LB & FB CRAC % 2002 43% 2003 45.5% 2004 39% 2005 37% 2006 40% As you can see the highest forecast is for the current rate year (Oct. 2002 -Sept. 2003) at 45.5%. Ifthe SNCRAC were to trigger in Oct. 2003 it would be added into a lower LB-FB corrected rate than currently have and therefore could be as high as 6.5% and still not result in an actual increase above our current rates. However, we are going to see a 1.5% rate increase in transmission in October, 2003. This will need to be figured in with the latest power rate information during the budget process in order to set rates for the city's next fiscal year.

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