July 2010

Lower-Than-Average Water Year Impacts Hydropower System

Dear Member:

Our power provider, the Bonneville Power Administration (BPA), reported this spring that it will likely finish the fiscal year with negative net revenues of approximately $230 million. This shortfall is a direct result of the Northwest’s low snowpack.

The recent Northwest rains and some improvements in reservoir conditions make it easy to assume the “dry year” is behind us, but it is not. While reservoirs for drinking water and watering lawns could approach comfortable levels with continued precipitation, experts say the Northwest’s hydropower system cannot recover to average levels.

“We had hoped a wet spring would help snowpack across the Columbia River Basin, but that didn’t happen. We are now looking at the fifth lowest runoff since the hydro system has been in existence,” said BPA Administrator Steve Wright.

BPA keeps wholesale power rates down by selling surplus power to California during the spring and summer, when demand for power tends to be lower in the Northwest. A lot of surplus power usually is generated then because of the spring snow melt and runoff down the rivers. However, with runoff and power generation falling far below normal this year, BPA will have much less surplus power to sell.

Barring unscheduled plant outages or unforeseen circumstances, the region’s utilities expect to have enough power to meet this year’s demand. However, if BPA has to supplement the Northwest’s supply by buying power on the spot market, the price is expected to be steep.

This lower-than-average water year will have an effect on the BPA wholesale power rate-making process for 2012-2013, which begins later this year. Midstate Electric and other Northwest public utilities will be directly involved to help BPA identify cost savings and controls to blunt the effect of the expected BPA revenue shortfall.

I will keep you informed on this issue as it unfolds.

Bill A. Kopacz
General Manager



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