BPA projects $280M loss: Drought, extreme weather hit Bonneville Power Administration revenues

Bonneville Power Administration, which supplies about half of Clark County’s electricity through Clark Public Utilities, is projecting a $280 million net loss this year due to drought and extreme weather.

“Those factors weighed pretty heavily on our finances this year,” BPA senior spokesman Doug Johnson said.

It’s still too early to tell how or if BPA’s latest financial report will impact the local utility’s ratepayers, Clark Public Utilities spokesman Dameon Pesanti said.

BPA’s projection is about $375 million below its target for revenue, according to a recent public statement.

Such a significant loss when the administration was anticipating a $95 million net revenue is a concern, Johnson acknowledged.

“We’re dealing with a fair amount of uncertainty every time we calculate our rates,” Johnson said.

By the end of the year, BPA expects to have $720 million in reserves, as well as 97 days’ cash on hand.

BPA has an Aa1 rating from credit rating agency Moody’s, the second best achievable. In a recent rating action, however, Moody’s described BPA’s outlook as negative. That’s in part tied to Moody’s negative outlook on the U.S. government, given that BPA operates under the U.S. Department of Energy. But other factors are also at play.

“Hydrology and wholesale market prices remain the greatest volatility drivers to BPA’s financial performance,” according to Moody’s.

BPA calculates its rates every two years. Two years ago, BPA’s revenue was $900 million more than projected. Because the federal agency doesn’t accrue profit, it gave that money back to customers through lower rates.

But not this year. In January, particularly, demand for power skyrocketed. When BPA isn’t able to meet its contractual obligations to Clark Public Utilities and other customers with its own power generation, it has to buy power on the open market, where prices skyrocketed during January’s week of freezing temperatures.

Plus, weather has been dry, which affects dams’ power generation. Washington officials have declared a drought emergency for the state.

“It’s important to remember that every water year is different,” said Tom Conning, public affairs specialist for the Northwest Division of the U.S. Army Corps of Engineers, which operates the dams that generate energy for BPA.

The Army Corps of Engineers’ water regulation team has seen lower-than-average precipitation throughout the Columbia River basin, he said. This means less water may be available for hydropower generation, fish and wildlife this year.

Precipitation for the current water year, measured above The Dalles Dam, is 86 percent of average currently. Meanwhile, air temperatures are almost 1 degree above normal. The hotter temperatures could increase the speed of melting snow in the mountains, which could leave the region with less water for dams in the summer.

Although hydropower is reliable, Conning said, it’s constrained by the region’s water supply. Plus, the Army Corps of Engineers must balance the dams’ power generation with spilling water for juvenile salmon migration.

Climate change may be impacting weather and snowpack, but Johnson said its impacts aren’t measured over one budget year.

“Our analysis is more long term,” Johnson said.