BPA Integrated Program Review comments
August 10, 2012
Claudia Andrews, Chief Financial Officer
Bonneville Power Administration
PO Box 14428
Portland, OR 97293
Via electronic submission at www.bpa.gov/publiccomments
Dear Ms. Andrews:
We appreciate the opportunities Bonneville Power Administration (BPA) provided for stakeholders to engage in discussion and comment on the Integrated Program Review (IPR). However, we are frustrated by what we perceive as a lack of meaningful consideration to the issues we have raised that argue for an increased investment in energy efficiency and low income weatherization programs. We also reiterate herein some of our requests related to the Columbia Generating Station and the Fish & Wildlife Program that remain unaddressed.
ENERGY EFFICIENCY PROGRAMS
We continue to believe that revenue, generated by a program that has only been characterized by BPA as an expense, is relevant to the discussion during the budgeting process. We urge you to complete the revenue analysis of energy efficiency programs that we understand is currently underway and incorporate the results into the final energy efficiency program budget decisions for FY2014 – 15. We believe this analysis will show the tremendous economic benefits BPA’s energy efficiency programs provide to the region. These program investments keep rates low for utilities, reduce bills for end use customers, and provide jobs and other financial benefits to small and large businesses through program efficiencies and improvements gained along with energy savings. In short, BPA’s energy efficiency programs are a smart fiscal investment.
With the close of the public comment period now at hand, we want to once again state the need for BPA increase its investment in energy efficiency programs in FY 2014-15. We urge you to give meaningful consideration to the following points:
1) BPA energy efficiency programs benefit BPA customers and all bill payers. Bypassing cost-effective, achievable conservation due to under-funding energy efficiency programs ultimately adds to costs for all BPA customers and end users.
2) BPA has an obligation to meet the public power share of the Council’s targets for energy efficiency outlined in the 6th Plan. Significant questions have been raised about the adequacy of the current proposed budget levels to achieve this commitment and about BPA’s proposal to carry forward savings from the 5th Plan achievement. And Bonneville does not have a specific backstop plan to ensure the targets are met.
3) Despite the growing and substantial need, Bonneville has not increased funding for low-income weatherization in over five years. Low-income ratepayers contribute to the cost of conservation programs through their rates, but are not able to take advantage of program benefits because most programs require substantial participant contributions. It is a simple matter of equity that low- income households have access to conservation programs that are available to other customers. Further, it is a far better long-term investment for BPA and utilities to reduce the need for rate assistance through weatherization.
Energy Efficiency Programs Benefit the Region
Savings achieved keep electric bills affordable for customers throughout the Pacific Northwest and help BPA utility customers stay in Tier I (the lowest power purchase rate) as long as possible. Energy savings lead to surplus power that BPA sells on the open market, increasing sales revenues and helping to keep rates low.
Energy efficiency programs create and sustain jobs in our local economies. In addition to the direct jobs generated through energy efficiency implementation, these investments help local businesses and households increase their bottom line, freeing up money to spend in other areas and contributing to the overall health of the Northwest economy.
Bonneville’s Obligation to the Region
The Northwest Power Act defines energy efficiency as the priority resource. That means that when acquiring resources to meet anticipated future loads, the BPA Administrator first must pursue cost-effective energy efficiency in accordance with the Northwest Power and Conservation Council’s regional plan. Additionally, BPA’s Long-Term Regional Dialogue Policy is to pursue all cost-effective conservation, identified by the Council’s regional plan, in the service territories of public utilities served by BPA. BPA contributes substantially to regional progress on energy efficiency by coordinating and helping achieve public power’s share of the Council targets during each planning period.
Proposed expense spending (along with capital expenditures outlined in Section 9 of the 2012 Capital Investment Review initial publication) is insufficient to achieve either BPA’s asset management objectives or the agency’s overarching commitments under the Long-Term Regional Dialogue Policy to meet public power’s share of cost-effective conservation under the Council’s regional plan. Proposed spending levels fall short of near and long-term energy efficiency investment needs and fail to deliver all the long-term financial benefits of the cost-effective energy efficiency available to us.
Low Income Program Investments
BPA provides $5 million for weatherization programs for low-income households across the region. This funding level is an important component of local delivery efforts yet has not changed since 2007. Demand for low-income assistance is reaching record levels throughout the Northwest. In Oregon alone, 30% of the population is eligible for low-income assistance. At the same time, Federal low-income weatherization assistance (U.S. Department of Energy, Weatherization Assistance Program and LIHEAP) funding is falling dramatically. WAP’s budget took a 63% cut in 2012; LIHEAP has been cut 32% over the past two years. This funding has represented a large proportion of the weatherization dollars serving BPA’s service territory.
Low-income weatherization assistance helps people across the region reduce their energy bills. The U.S. Department of Energy estimates that low-income households receiving weatherization services see their energy bills drop by an average of $437 a year. These savings make all the difference for Northwest families and communities struggling through tough economic times.
Five million dollars for BPA’s entire service territory is too little. Low-income agencies providing weatherization services indicate a strong need for additional funding given their long waiting lists. In BPA’s Oregon territory alone, the waitlist for services includes enough families that at current budget levels it would take more than 10 years to reach them all – and the waitlist continues to grow each year. Increasing this budget by $5 million would have very little effect on overall BPA rates, but it would mean a great deal to many struggling families. Currently, the low-income program spending proposed for FY2014 represents just 4% of the overall (including capital investments) energy efficiency budget.
Energy Efficiency Budget Recommendations
1) BPA must incorporate sufficient funding in FY2014-15 to ensure the 6th plan targets are met and all cost-effective conservation is achieved. BPA should budget to the Council Plan’s high case energy savings target instead of to the medium case used in current practice. Budgeting to the high case for energy efficiency ensures that funds are available to capture all available cost-effective savings. If the cost-effective savings are not available, any leftover funding can carry over to future years or be credited back to customers. It is better to prepare for meeting the demand for cost-effective energy efficiency than to end up turning away good energy saving projects.
For the 2010-2014 period covered by the Sixth Northwest Power and Conservation Plan, the high case for regionwide energy efficiency is 1,400 average megawatts for the region. Public power’s 42% share would be 588 aMW (as opposed to the 504 aMW share calculated under the medium case). BPA should budget to acquire the additional cost-effective savings in 2014. This type of budgeting will mitigate for the risks involved in BPA’s current plan to meet the 6th Plan targets, including the planned 25% direct utility contribution and the estimated cost of conservation. In addition, the higher funding would secure savings without having to use carryover savings from the 5th Plan period.
2) BPA should use the plan’s high case efficiency savings to recalculate expense and capital budgets for 2015 through the end of the IPR’s 10-year period.
3) The 5-year savings achievement calculation for energy efficiency programs should not include carry-over savings from the previous 5-year budget and savings target period (Council’s 5th Plan period).
4) Low-income weatherization funding should be increased to $10 million per year.
While we understand that the agency faces short-term budget challenges, it is in the interest of BPA, utilities and utility customers to maintain focus on long-term energy efficiency benefits. BPA should be proud of the energy efficiency programs it has developed and their contribution to the region’s economic strength. We ask you to maintain robust funding for these programs to ensure a steady growth in programs.
COLUMBIA GENERATING STATION
BPA’s customers and consumers in the region deserve a clear assessment of whether CGS is operating in an economically beneficial manner considering system and market conditions, season-by-season and year-to-year. We continue to assert that BPA should run a sensitivity analysis using AURORA or other suitable tools to assess the net revenue impact of the operation of the Columbia Generating Station (CGS) during non-refueling years, as well as the effect on oversupply conditions requiring thermal and renewable energy curtailments under the Oversupply Management Protocol.
After a modest start last fall, regional precipitation and snowpack accelerated throughout the spring and continued well into the summer. For months, hydro system managers have been fine-tuning the operation of the region’s dams to avoid flooding, maintain power production and protect fish passage. Occasional activation of the Oversupply Management Protocol has stretched from early May to late July. Even as this is written, the water elevation behind Grand Coulee dam is only 4 feet below maximum pool.
Although CGS has operated for some hours at a reduced output of 950 MW to accommodate potential oversupply conditions, for most of this year it has been at rated capacity of about 1100 MW. Assuming a variable cost of about $15/MWh, CGS has often been “out of the money” with regional markets at or below that price, and even pushing briefly into negative pricing territory. Furthermore, adding CGS output to other surplus power during this period has likely decreased the price for all BPA nonfirm sales, since supply has increased relative to demand.
Another price-depressive effect is the impact of more than 1000 MW of supply on the major constrained system resource for nonfirm sales, the Pacific Interties. Despite having nearly 8000 MW combined capacity (aside from occasional derates for maintenance), for almost all of the last six months, the Pacific Interties have been very heavily loaded. BPA figures for July show capacity utilization across all hours of 86.9%. Given the receptivity of the California and Southwest market for inexpensive BPA nonfirm power, especially with the outage of the San Onofre nuclear plant and other factors, it stands to reason that CGS has helped saturate Intertie capacity and driven down prices.
Finally, even considering the reduced level of 950 MW, CGS output has coincided with at least 80% of the MWh curtailments under the Oversupply Management Protocol.
Of course, all this has happened in the current year under very specific conditions. In other years, with higher market prices and/or below-average runoff, CGS may well play a beneficial role for adequate supply and system reliability. Without a more detailed analysis, we do not have a fair assessment.
COSTS OF FISH & WILDLIFE PROGRAM
BPA’s budget for the Fish & Wildlife Program has always included a category called “foregone revenues,” the notional value of hydro generation not undertaken because of legally required changes to river operations, including spill, to help fish passage. In the current IPR, this is combined into a category designated as “UNSLICED Annual Average Hydro Operations Effects (Power Purchases & Foregone Revenues).”
NWEC objects to blending real and direct costs for the Fish & Wildlife Program with “foregone revenues” that by definition cannot be generated in order to follow the laws protecting fish and wildlife. We again request that Bonneville separate out any estimation of “foregone revenues” from actual Fish & Wildlife program costs. This is important to avoid confusion and allow fair consideration of what those program costs actually are, and focus attention on how best to pay for the important work legally required under the Northwest Power Act and other relevant statutes for fish and wildlife protection and recovery.
Furthermore, the Northwest Power Act contemplates assessing monetary costs and power losses (thereby distinguishing between them; see section 4(h)(8)(D), noting that the language is problematic because it is stated within the context of principles the Council should consider in developing its fish and wildlife program, rather than a direct mandate to the Administrator). This helps formulate the “4(h)(10)(C) credit,” under which expenditures attributable to fish and wildlife mitigation and enhancement are allocated among the various hydroelectric project purposes. Such “non-power” purposes have included around 20% of BPA’s real fish expenses in the past, as well as power purchases attributed to salmon recovery operations at federal dams. Thus, a substantial portion of BPA’s costs associated with power purchases and actual expenses are rightly borne by federal taxpayers on a cost-causation basis, not by BPA and its customers and consumers. The 4(h)(10)(C) credit should be included in the assessment of direct Fish & Wildlife Program monetary costs.
Again, we urge BPA to give meaningful consideration to these issues and would be happy to discuss them with your further.
Senior Policy Associate