Seattle City Light and other Northwest utilities slammed by the economic slowdown from the coronavirus will collectively get a $3 million-per-month price break from Bonneville Power Administration, a major regional provider of electricity.
The action, which still requires approval from the Federal Energy Regulatory Commission, will suspend a charge levied on more than 140 Northwest utilities to help build up BPA financial reserves.
Founded in 1937 by the federal government to deliver and sell power from the Bonneville Dam, the BPA now markets power from a network of 31 Northwest hydroelectric dams and a nuclear power plant. The agency has faced financial challenges in recent years as it foots the bill for maintaining the power production and transmission network as well as bankrolling a regional effort to recover Columbia Basin threatened and endangered salmon runs.
The BPA financial reserve charge that is being dropped had been scheduled to remain in effect until Oct. 1. 2021, and was viewed favorably by agencies that determine the credit rating of the BPA.
"Maintaining reserves is a staple of financial strength," said Michelle Manary, BPA chief financial officer. "But given the significant challenges customers are facing, we agree this is not the time to be building up cash reserves."
Most utilities have found that demand for their power has declined as the novel coronavirus prompted a big economic downturn with restaurants closing, and companies shutting offices and telling employees to work at home.
This reduced utilities' revenues and triggered belt-tightening measures that have included employee furloughs and hiring freezes, while they tap into their financial reserves and cut spending. Utilities also have had to extend more financial assistance to struggling customers with measures such as suspending disconnections.
At Seattle City Light, in May, the power demand was 7.5% below the forecast, and in June was still down by 5.5%, according to Debra Smith, the utility's chief executive officer.
To help out customers, Smith said that Seattle City Light does not expect to go forward with a planned 2021 rate increase, and will have some "really serious budget" decisions to make.
Seattle City Light buys about 40% of its power from the BPA, and Smith serves as chair of the Public Power Council, which represents consumer utilities in the Pacific Northwest that have a priority right to federally generated hydroelectric power.
She co-signed a Public Power Council letter sent May 15 to BPA administrator Elliot Mainzer that requested the suspension of the federal charge. That letter called the move "a targeted and temporary suspension...in light of extraordinary and unforeseeable circumstances that go far beyond normal business risk."
Scott Simms, the council's executive director, said Northwest utilities have experienced a range of impacts from the economic downturn. Some have seen only a very small decline in power demand, while others who had industrial customers curtail operations have lost up to 10% of their load.
"Right now, it's really critical to get every penny you can save," Simms said.
A June record of decision, signed by Mainzer, said dropping the financial reserve charge will not jeopardize BPA's long-term financial health, and will provide "immediate and substantive" relief to the utilities.
Smith said the BPA removal of the reserve charge will save Seattle City Light $2.9 million annually. But City Light also is expecting a change in the way BPA charges transmission costs that will add about the same amount in annual charges.
