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Non-Treaty Storage Agreement non-Binding Terms for Storage Accounts

Non-Treaty Storage Agreement non-Binding Terms for Storage Accounts. Account Types and Sizes.

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Non-Treaty Storage Agreement non-Binding Terms for Storage Accounts

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  1. Non-Treaty Storage Agreementnon-Binding Terms for Storage Accounts

  2. Account Types and Sizes • A new non-Treaty storage agreement would allow coordinated use of additional reservoir storage in Canada (non-Treaty storage). This coordination is accomplished through the use of non-Treaty storage accounts established under the proposed agreement terms. • There are three types of accounts established totaling five million acre-feet (Maf) • Active Storage accounts total 3 Maf equally shared by BPA and BC Hydro. These accounts remain open and available through the term of agreement. • Recallable Storage is 0.5 Maf and is currently empty (has no water in it). BC Hydro may make this space available on a temporary basis. This type of account would generally be used in high water years when extra system storage is needed. Recallable storage is equally shared by BPA and BC Hydro • Recallable Release is 1.5 Maf and is currently full of water. BC Hydro may make this account available on a temporary basis. This type of account would typically be used in a dry water condition when additional water and flows are needed to meet power and non-power needs. Recallable release is equally shared by BPA and BC Hydro.

  3. Limitations on Storage and Release Activity • Overall, non-Treaty storage activity must not reduce the power and flood control benefits of the Treaty operating plans – a Treaty requirement. • When one party desires to increase or decrease flows from non-Treaty storage, a request is made of the other party. If the other party cannot accept the flow change, the transaction is denied. Otherwise, the transaction goes forward. • All flow changes are scheduled on a flat weekly basis and are made at Arrow. • Storage is a reduction in flow and release is an increase in flow.

  4. The Active Storage AccountsBPA’s Share • BPA’s storage and release transactions result in a change in flow out of Arrow. • The change in Arrow flow will then change flows into Grand Coulee and generally result in generation changes through all the projects downstream. • There are no energy schedules between BPA and BC Hydro associated with the change in Arrow outflows from BPA’s transactions. • BPA compensates BC Hydro for the energy reduction that is calculated to occur at Mica as a result of its lower reservoir level from BPA’s non-Treaty storage use (headlosses).

  5. The Active Storage AccountsBC Hydro’s Share • BC Hydro’s storage and release transactions result in a change in flow at Arrow • The change in Arrow flow will then change flows into Grand Coulee and it is assumed the flow change will result in generation changes at Grand Coulee and through all the projects downstream. • The change in energy generated by the downstream federal hydroprojects is calculated each day based on the water-to-energy conversion factor, or h/k for each of the affected federal projects. • The economic value of the change in energy generated is also calculated by using a preschedule mid-C market index price. • There are no energy deliveries concurrent with the BC Hydro water transactions, but the cumulative economic value of the change in federal generation is calculated over time.

  6. Sample Calculation for BC Hydro Release Transactions Energy Calculation • Assume BC Hydro releases 10 kcfs from their non-Treaty storage account for one week. • Assume that the water would pass through all federal projects downstream. • A typical water-to-energy conversion factor or h/k for the federal projects from Grand Coulee through Bonneville is about 60 MW per kcfs, if projects are not spilling. • So the generation change is 10 kcfs x 60 MW/kcfs = 600 MW flat for the week. • 600 MW x 24 hours = 14,400 MWh/day. • 14,400 MWh/day x 7 days = 100,800 MWh of additional federal generation for the week.

  7. Sample Calculation for BC Hydro Release Transactions Energy Value Calculation • To determine the value of the additional generation on the federal system, a daily preschedule index for mid-C energy prices is used. • It is assumed both the water and energy are flat so a flat index price is used. • Assume for this example that the flat index price for each day of the week is $40/MWh. • Using 100,800 MWh of additional federal generation for the week from the previous slide and the price of $40/MWh the economic value of the increased generation is $4.03 million.

  8. Sample Calculation for BC Hydro Storage Transactions Energy Value Calculation • Assume that sometime later in the year, BC Hydro stores back 10 kcfs for a week into their non-Treaty storage account. • There would now be less water to pass through federal projects downstream. • Using the same typical h/k for the federal projects of 60 MW/kcfs, the generation change would be -100,800 MWh for the week. • BC Hydro would typically choose a relatively low-priced period to store into their account, so assume the flat mid-C index price is now $30/MWh. • The value of the generation change would be -$3.02 million. • The amount of water in the BC Hydro non-Treaty storage account is now the same as at the outset, but the net value of the energy changes from federal hydro projects downstream is $1.0 million.

  9. BC Hydro’s Transaction Benefits Account • The value of BC Hydro’s transactions are netted throughout the year. • It is expected that BC Hydro will act in an economic fashion with respect to non-Treaty storage transactions. • Results of the energy calculations and energy value calculations are kept in a continuous fashion in a “Transaction Benefits” account maintained by BPA and confirmed by BC Hydro. • The Mica headlosses that BPA owes BC Hydro are also kept as economic value and included in the Transaction Benefits account. • It is to be expected that most often the Transaction Benefits account would have a positive value, meaning that BPA would owe BC Hydro at the end of the year. • However, it is possible that BC Hydro would owe BPA at the end of the year, if there had been a lot of storage activity and few releases.

  10. Settling BC Hydro’s Transaction Benefits Account • The Transaction Benefits account may be settled by one of two means. • Energy Deliveries (mutually agreed) - if it is expected that the account balance would afford a benefit to either BPA or BC Hydro at the end of September, the party with the expected benefit may request delivery of energy to the Canada/U.S. border up to the expected benefit amount. Deliveries would be by mutual agreement. • If this option is exercised, the Transaction Benefits account would be adjusted by the value of the energy delivered to the border. • Financial Settlement – Unless otherwise agreed, the balance in the Transaction Benefits account at the end of September will be financially settled.

  11. Sample Transaction Benefits Accounting Typical Spring Storage/Summer Release – benefits both fish and power Net value $2.87 million

  12. How Power Benefits are Created • The BC Hydro Transaction Benefits Account readily demonstrates the value of shaping water for federal generation. • Although not explicitly accounted for, the same benefits accrue to the federal system through BPA’s transactions and resulting flow/generation changes at federal projects. • Power benefits are created by: • storing water when it has less economic value and releasing it when it has more economic value ($ gain) • Shaping water so that more energy is produced from a unit of water, for example producing energy from water that would otherwise be spilled (beyond that needed for fish) (MW gain and $ gain).

  13. Examples of Seasonal Variation in Federal h/k (based on 70-year study average) and Energy Prices(from October 2009 – September 2010)

  14. Example of Unit Value of Water

  15. The Recallable Accounts • There are two types of recallable accounts that may be made available by BC Hydro for shared use on a recallable or temporary basis. Recallable accounts would typically be used in unusual conditions such as very low or very high water years. As with the Active Accounts, all transactions are by mutual agreement. • Recallable Storage – this space is currently empty, so could be used to store water in a high water year. • Recallable Release – this space contains water, so it could be used in a dry water year to supplement low flows. • Accounting for transactions in recallable accounts is the same as that for Active Accounts. • There are no energy schedules between BPA and BC Hydro associated with the change in Arrow outflows from BPA’s transactions. • BC Hydro transactions are included in the Transaction Benefits Account.

  16. Firm Release Provisions for BPA • The proposed terms include two “firm” release provisions, one for BPA and one for BC Hydro. • BPA’s has a firm release right for 0.5 Maf of water in the spring (May/June) of the lowest 20% of water years (a BiOp objective for ESA-listed fish). This release right is limited by the volume of storage in BPA’s Active Account and it may not have been exercised in the previous year. • As with other BPA accounts, there are no energy schedules between BPA and BC Hydro associated with the change in Arrow outflows from BPA’s firm release provisions.

  17. Firm Release Provisions for BC Hydro – the Intent • BC Hydro firm release provisions are intended to provide a firm planning benefit based on their current practice of critical water planning and the requirement to be load/resource balance by 2015, excluding imports and thermals. • To the extent that non-Treaty storage can be used as a firm resource in BC Hydro planning, a resource that would otherwise be needed to balance loads can be deferred. • This benefit is intended to be for planning purposes only and will likely not be used in actual operations. Rather, in critical water conditions, BC Hydro is expected to use the market to meet load. • The intent of the provisions is for this provision to be usable, to be less attractive than using the market, and to be no cost to BPA or downstream U.S. parties.

  18. Firm Release Provisions for BC Hydro – the Details • There are some specifics of these provisions yet to be defined in the contract. • In critical water conditions on BC Hydro’s system as defined by streamflow conditions reported in a public venue, from October through April BC Hydro may release 2 kcfs from their Active Account and Recallable Release Account. • If BC Hydro makes such a release, BPA may also request a release of 2 kcfs from their Active and Recallable Release Accounts • BPA would deliver the energy produced by all downstream U.S. projects from the increased flow, including the generation from mid-C projects, to the Canada/U.S. border. Deliveries may be restricted on certain hours due to capacity constraints on BPA’s system. The value of energy delivered would be calculated. • BC Hydro would pay all transmission costs and losses • Flows would be reduced and the water stored back into Active and Recallable accounts by mutual agreement. • BC Hydro would deliver to BPA energy of equivalent value to that received. • BC Hydro would pay all transmission costs and losses for delivery of the energy returned to BPA

  19. Benefits of the Proposed Agreement for Fisheries • Absent a new long-term non-Treaty storage agreement, BPA would likely continue to negotiate annually for seasonal non-Treaty agreements to shape water from spring to summer. • A new long-term agreement would provide more certainty for obtaining these spring/summer flow shaping benefits. • The proposed agreement also provides for 0.5 Maf of additional water in the spring in the lowest water conditions to provide benefits for ESA-listed fish. • In some high water conditions, a new non-Treaty storage agreement may be useful in reducing flows/spill and dissolved gas levels in excess of state standards.

  20. Power Benefits of the Proposed Agreement • Absent a new long-term agreement, BPA would likely continue to negotiate annually for non-Treaty agreements to shape water from spring to summer. These agreements provide a power as well as a fisheries benefit. Based on studies of historic water conditions, the estimated power value of these short-term agreements is about $3 million/year to the federal system and its customers. There would be additional benefits to the mid-C project participants and to BC Hydro. • Under a long-term agreement there would be additional flexibility to to utilize non-Treaty storage outside the spring/summer period, including shaping flows from year to year. • The benefits of any any non-Treaty agreement will vary significantly from year to year, however the estimated value to the federal system of a new long-term agreement is estimated to be $8 million/year, more than double the power benefits of seasonal short-term agreements. There would be additional benefits to the mid-C project participants and to BC Hydro. • Slice customers would receive their proportionate share of the federal benefits.

  21. Further Information For further information and documents: www.bpa.gov/go/ntsa

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