BPA: Sales of transmission expected to be flat until mid-2013

The Bonneville Power Administration (BPA) forecasts demand for transmission and transmission sales will be flat until a modest economic recovery leads to sustainable growth in mid-2013.

Even when the recovery picks up, the agency is preparing for transmission demand growth that is much lower than the average growth rate from FY03 through FY09.

Those projections were shared with stakeholders attending a transmission rate case workshop held at BPA headquarters in Portland, Ore., July 25, in advance of a transmission rate case the agency intends to file in November to set transmission rates for FY14-15.

“We’re not seeing a rapid increase, or much increase, in [load, which leads to] sales and we are not expecting to see that occur until some time late next year,” Reed Davis, BPA forecast manager, said.

By mid-2013, BPA expects the economy to have recovered enough to show sustainable load growth, though it predicts it will occur at a much slower rate than the average growth rate of 3.7% from FY03 through FY09, according to Davis.

As part of the assessment process, the agency identified some specific changes in demand for transmission service that will occur over the next biennium.

Precious metals production and data warehouse additions are expected to increase load demand within the BPA service area. Federal stimulus funding is currently resulting in increases, but those are expected to slow during the next biennium. Anticipated mill closures will reduce demand for transmission capacity. Combined with other factors, a small net increase will result.

While BPA does not closely track the habits of end-use customers, it does note that air conditioning use in its service area is increasing.

“About two years ago, we added the capabilities in our modeling tools to capture the summer trend different from the winter trend,” Davis said. “Before, we had just one trend and realized that was no longer working.”

Transmission demand will increase slowly

The agency provided estimates for three different categories of transmission service.

Formula power transmission (FPT) and integration of resources (IR) are expected to decline during the rate period, while point-to-point (PTP) long term sales and network integration (NI) will increase based on load forecasts.

Network segment long term sales are expected to average 32,764 MWh per month during FY14 and 33,441 MWh per month during FY15.

Intertie segment long term sales for the southern and Montana interties are forecast to average 5,964 MWh per month during FY14 and 5,995 MWh per month during FY15.

PTP sales are forecast to average 1,006 MWh for FY14 and 1,102 MWh in FY15. PTP sales on the southern intertie are forecast to average 193 MWh for FY14 and 201 MWh in FY15.

BPA officials also discussed $284m of transmission credits for large-generator interconnection agreements (LGIA) as of June 30, and noted they expect an additional $130m in network upgrade costs during the FY13 to FY15 period. LGIAs are an indication of the additional transmission capacity that will be needed.

In addition, BPA provided preliminary income statements that show a projected total revenue requirement of $1.064bn for FY14 and $1.076bn for FY15. After accounting for income and expenses, the agency is projecting a need for $123.3m in net revenue in FY14 and $92.3m in FY15 to meet its cash requirements.

Those figures do not include the estimated $12m to $50m BPA has estimated it may be required to reimburse wind producers the agency decommitted due to oversupply of generation on BPA’s system. That issue is the subject of a separate rate case. Any liability decided in that case will be included in future budget projections, BPA financial analyst Ron Homenick told TransmissionHub at the workshop.

Issues for future discussion

Discussion of revenue forecasts will continue at the next pre-rate case workshop, to be held Aug. 8. The topic of a formula rate will also be addressed, Rebecca Fredrickson, BPA transmission rate case manager, told TransmissionHub.

BPA will also discuss three alternatives for recovering redispatch costs, which totaled over $480,000 in FY11. There are three types of redispatch: discretionary, network transmission (NT) and emergency. The three alternatives include recovering all redispatch costs in the network revenue requirement, recovering redispatch costs through a formula rate, or recovering NT costs through a formula rate and discretionary and emergency costs in the network revenue requirement.

Under all three alternatives, the cost of NT redispatch would be allocated only to NT customers.

Participants will also discuss formula incremental rates and redispatch at the Aug. 8 meeting.

The agency began stakeholder workshops in May to discuss the general areas to be considered in determining what adjustments need to be made to its transmission rates. Concurrently, the agency is holding pre-rate case workshops for power rates and generation input rates, and intends to file all three rate cases at the same time.

The last pre-rate case workshop is scheduled for Sept. 19. The tentative schedule calls for BPA’s initial proposal to be issued during the second week in November, in step with initial proposals for power and generation input rate cases.