# Presentation: 765457

## 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:
- Develop criteria based on reliability and financial considerations to trigger a different operation of the river
- Actual:
- Triggering of power system emergency resulted in reducing spill by 4,700 MW-mo and saved BPA approximately $780 million.

## FY 2002-06 Power Rate Case

- Plan:
- Manage power rate increase to acceptable level with increased flexibility for the future.
- Actual:
- 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.

## 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.

## 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.

| FY 2001 Treasury Payment |  |
| --- | --- |
| Interest |  $ 458 m |
| Principal |    210 m |
| O&M, Fish and Wildlife and other obligations |      57 m |
| Bond premium |        4 m |
| Total |   $729 m |

| FY 2001 Credits |  |
| --- | --- |
| 4(h)(10)(c) | $342 m |
| FCCF |   239 m |
| Fish credits true-up |     12 m |
| Other credits |     85 m |
| Cash payment |     51 m |
| Total |   $729 m |

## 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.

## Outlook for Fiscal Year 2002

## 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.

## Forward Price Curve

## System Augmentation

- Plan:
- 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.
- Actual:
- 					_**FY2002-FY2006**_		_**Price 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

## 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

## BPA is Moving Forward With aRenewed 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.