152 



REVENUES. EXPENDITURES. ANn rONSERVATlON 



Question 1 : The Northwest Power Planning Council has produced a graph (attached) 



showing a drop in BPA Preference rates in real dollars from 1983 to 1992. If 

 BPA had adjusted rates since 1983 to keep pace with inflation what would 

 BPA's current cash reserve be? Further, what rate increase would it take to 

 return BPA's rates to 1983 rates in real dollars? 



Answer: It is not possible to determine what BPA's cash reserves would be if rates had 



kept pace with inflation since 1983 This hypothetical assumes BPA would 

 abandon cost based rates and carry cash reserves far in excess of those needed 

 for prudent risk mitigation Also, an implied assumption is that this very 

 different financial situation for BPA would have no effect on financial policy 

 decisions, such as the expense/capital ratio for new resources and programs. 

 Additionally, this scenario presupposes no reductions in customer loads due to 

 the higher rates 



We have, however, estimated the revenue impacts had BPA's rates kept pace 

 with inflation, assuming no changes in load. The total revenue accumulation 

 for BPA since late 1 983, when rates set in 1983 would be in force, would be 

 $2,035 million more than the actual revenues earned, based on BPA rates in 

 force during that time period 



The rate increase necessary for BPA to return to the real level of rates set in 

 1983 is 30 percent That is, the FY 1994 Priority Firm (PF) rate would have to 

 be 30 percent higher than the current FY 1993 PF rate in order to return to the 

 real level of rates set in 1983. Since the actual increase for FY 1994 will be far 

 lower than a 30 percent increase, FY 1994 rates will be well below the real 

 level of rates set in 1983 



