cowlitz restoration and recovery program · 4/24/2019 · credit risk management program. tacoma...

Keith UnderwoodNatural Resources / Generation Public Utility Board – Study SessionApril 24, 2019

1

Cowlitz Restoration and Recovery Program

(CRR Program)

Today’s Discussion

In Lieu of Fish Passage Decision

Cowlitz Restoration and Recovery Program (CRR)

Proposed CRR implementation Strategy

Principles of the PUB Resolution to enable the CRR

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Upstream Fish Passage – Hotly Contested Cowlitz Tribe and Friends of the Cowlitz

• Wanted “gravel to gravel” fish passage

• Fish Ladders or Elevators• Many Failed Fish Ladders

in Northwest (e.g. Deschutes River)

• Industry was moving towards Trap and Haul

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Bonneville Ladder Pelton Ladder

Resulting FERC License Article Upstream Fish Passage March 2002, FERC License Issuance

• Requires trap and haul and/or volitional passage

In Lieu of Fish Passage• Place $15 million into an Interest

bearing account by 2003• Conduct Fish Survival Studies

for 14 years

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CRR Program Development Timeline

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2002

FERC License Incorporates Settlement Agreement

2017 2018

FERC Approves

CRR

2036

FERC License Expires

2016

US Fish & Wildlife +

NOAA Approve CRR

2015

Agencies Recommend abandoning

volitional passage

2019

Tacoma & Fisheries Technical Committee (FTC)

Craft CRR Program

Modify FERC license to allow

abandonment ofvolitional release

earlier than 14 years

CRR Requirements Fund Recovery of Endangered Species Act-listed salmon and steelhead in the upper basin:

• Habitat restoration and protection projects• Hatchery-associated production projects

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Habitat Restoration and Protection

Streamside tree

plantings

Purchase Land

In-stream restoration

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Hatchery-Associated Production Examples

Acclimation facilities

Supplemental fish plantings

Fish release site

improvements

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CRR Program Elements

• Grant based • Uses existing state processes to select projects• Promotes and maintains partnerships• Encourages sustainability• Considers value of hatchery programs along side

habitat programs

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Grant ProgramLeverage existing Fish Habitat Program

Salmon Recovery Funding Board Process (SRFB) Funds fish habitat projects for Washington State Annual open solicitation process Relies on Lead Entities to conduct technical reviews

Lower Columbia Fish Recovery Board Lead Entity for the Cowlitz River Created Salmon and Steelhead Recovery Plans Composed of local governments, tribes and natural

resource management agencies Proposed projects go through rigorous technical review

and ranking Agreed to incorporate Tacoma Habitat Projects

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Habitat Project SelectionCriteria include:

Fit to Salmon Recovery Strategy Alignment with recovery plan

Certainty of Success Scope and approach Coordination, sequence of events, uncertainties Qualifications, community support and stewardship

Benefit to Fish Target population & stream reach Protection, access and restoration

Cost & Benefit Reasonable cost Match greater than 15%

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Grant Program BenefitsTacoma’s CCR Fund has grown to $17.8 M

Expands SRFB Program in Cowlitz Basin Matching funds for SRFB projects – 15% minimum Encouraging larger more comprehensive projects

Projects have demonstrated regional support Fosters partnerships Program coordination

Considers hatchery-related projects Not in SRFB process

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Grant ProgramNovel Hatchery Production Program

Hatchery Associated Production Team (HAP) WDFW & Tacoma Power - soliciting NOAA and Tribes Use selection criteria and rank Make recommendation to FTC-CRR Subcommittee

Fisheries Technical Committee’s – CRR Subcommittee Assure LCFRB and HAP recommendation are in alignment

with our priorities

Fisheries Technical Committee Reviews and agree on final list Created Cowlitz Salmon and Steelhead Recovery Plans

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Sustainable Use of FundsAnticipate expenditure rate of $2-3 million per biennium

• Funds budgeted as part of biennial budget process• Allows for development of high-quality, large multi-year projects• Promotes ecosystem enhancement economy• Ensures sustainable funding for sponsor organizations

Ability to fund large projects exceeding $3 million• Example: land procurement project• Requires additional Board approval

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Program Administration

Board Approve Biennial Budget• Typically $3 million

Project Selection Process: • Cowlitz Fisheries Technical Committee and

the Lower Columbia Fish Recovery Board• Technical merit and FERC directives

TPU Director Executes Contracts• Fund projects selected by FTC

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TPU Director Delegation Rational

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Benefit FTC authorized by FERC to select projects

Limits project proponent motivation to escalate and create controversy for Tacoma

Avoids disruption to extensive selection process

Risk Tacoma lose control over Habitat vs. Hatchery

project selection process

Administrative and/or legal constraints

Board approves funds, not the work or contractor

Accountability

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Annual presentation to the Board• All new and currently funded CRR projects • Anticipated expenditure rate of funds for upcoming year• Program changes

ApplicantApply for Habitat Project

LCFRBRank &

Recommend Projects, Regional

FTC and CRR Sub.

Rank & Recommend Projects, CRR

TacomaPower

TPU Director

Approve Contracts

Apply for Hatchery Project

Establish Contracts

Brief TPU Board

January - May May - September September - December

Project Review and Approval Process

PUB Resolution Principles Enabling CRR

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• CRR Program is grant-based

• Funding rate constrained to $3 million per biennium unless special approval from the Board

• TPU Director is delegated signature authority for grantee contracts

• Board oversight occurs as part of an annual program report

Questions?

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Tacoma Public Utilifish

Questions?

SurvivetheSound.org: May 6-10

1

Tacoma PowerEnergy Risk Management/Operations & Trading Update

Ying HallEnergy Risk Manager

Todd LloydAssistant Power Manager, Resource Operations & Trading

Section 1Resource Operations &

Trading

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Commercial Operations Update

Graph 1: Tacoma System Flows Have Been Below Adverse(Tacoma System Hydro Flows, Water Year 1929 – 2019)

0

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cfs) 5th-95th

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Adverse

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2019

2019Projection

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Graph 2: Federal System Flows Have Been Below Average(Federal System Hydro Flows, Water Year 1961 – 2019)

02,0004,0006,0008,000

10,00012,00014,00016,00018,00020,00022,00024,00026,00028,00030,00032,00034,00036,00038,00040,00042,00044,00046,000

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

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ws(

KAF)

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Average

2019

2019Projection

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Graph 3: Last 10 Years of Flows Have Been Good(Tacoma System Flows Annual Avg., Water Year 1929 – 2019)

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Graph 4: Current Snowpack is Below Average(Current Snowpack Conditions, % of Normal)

Federal System

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Graph 5: Current Cowlitz Elevation Is Well Below Normal(Cowlitz Elevation, Current vs. Historic)

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Forward Market Prices

Budget Prices

Graph 6: Market Prices Have Been Above Budget Since Q3’18(Market vs. Budget Prices, 2018 – 2022)

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Graph 7: We’ve Been Selling Less than Budgeted, Purchasing More(Actual vs. Budget Wholesale Volumes, 2019 – 2020)

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Section 2Wholesale Net Revenues

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$65.0

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Wholesale Net Revenues

Graph 8: Q1’19 Actuals Below Budget, But Still Have Time to Recover(Cumulative Actual vs. Budget Wholesale Net Revenues, 2019 – 2020)

Expected Water (as of Jan. 1)

Expected Water (Current)

Adverse Water (Budget)

Adverse Water (Current)

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70% probability of exceeding the biennium budget

of $79.3M


Graph 9: Estimated 70% Probability of Making Budget(Risk Model Simulation of Biennial Net Revenues, 2019 – 2020)

Wholesale Net Revenue (Million Dollars)

Den

sity

010

2030

40

40 60 80 100 120 140 160 180

Biennium Budget$79.3M

5%$53.3M

Mean$94.1M

95%$137.4M

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Graph 10: $6M Below Budget Due to Poor Hydro, Purchases (Cumulative Wholesale Net Revenue Variance, Jan – Mar 2019)

-$5.41

$5.00

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-$5.54

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Hedging, Balancing, Ancillaries

Market Prices vs. Budget

Customer Demand vs. Budget

Generation vs. Budget (Adverse Water)

Biennium-to-Date Total

Section 3Hedging Program & Credit Risk

Management

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Overview

Hedging Program Objective

A hedging program is part of Tacoma Power’s energy risk management policy.

The objective of the hedging program is to:

Stabilize net revenues from wholesale operations

Protect against very low wholesale revenue outcomes

Hedging Program Design

The hedging policy enforces dollar cost averaging of surplus sales and prohibits holding deficit positions.

The program has a two year horizon, and utilizes physical forward contracts.

Allowable hedge ratio governed by “hedging bands” that:

Limit the maximum amount hedged far into the future

Require progressively more surplus be hedged as time to delivery gets closer

Hedging Program

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Hedging Program

$(16.0) $(15.0) $(14.0) $(13.0) $(12.0) $(11.0) $(10.0) $(9.0) $(8.0) $(7.0) $(6.0) $(5.0) $(4.0) $(3.0) $(2.0) $(1.0) $- $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 $8.0

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Settled Hedges Hedges vs. Market (MTM) Cumulative

Graph 11: Current Hedging Program Performance Is Not Typical(Hedging Program, 2017 – 2020)

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Background

Tacoma Power frequently sells electricity to wholesale trading partners or “counterparties”

Tacoma Power incurs credit exposure –money that the utility could lose in the event of a counterparty default

Credit Risk Management Program

Tacoma Power manages credit risk by:

Extending credit to investment grade counterparties only

Setting exposure limits based on creditworthiness

Daily monitoring of credit quality

Daily monitoring of exposure

Actions include stopping trading with a specific counterparty, requesting collateralization

Credit Risk Management

Overview

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Rank Counterparty Internal Model Rating

Letter of Credit Collateral Loss in Event of Default

1 Brookfield Energy Marketing LP BBB- $2,500,000 $02 Sacramento Municipal Utility District AA- $679,0713 Avangrid Renewables, LLC A- $454,7284 Puget Sound Energy, Inc. BBB $405,1585 Portland General Electric Co. BBB $385,5656 Calpine Corporation B+ $2,750,000 $07 Exelon Generation Company, LLC BBB+ $237,4448 Morgan Stanley Capital Group, Inc. A+ $225,6269 EDF Trading Limited BBB+ $171,121

10 Powerex Corp. A+ $34,79311 BP Energy Company A- $19,04012 DTE Energy Company BBB $10,00013 Eugene Water & Electric Board AA- $4,76914 CP Energy Marketing Inc. BBB+ $3,60015 Black Hills Power, Inc. A- $1,025

Graph 12: Current Credit Exposures Are Low(Top 15 Counterparty Credit Exposures)

Wholesale Credit Exposures

cowlitz restoration and recovery program · 4/24/2019 · credit risk management program. tacoma...

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