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Tier 1/HWM

What is a High Water Mark (HWM)?

The amount of power a utility purchases from Bonneville Power Administration (BPA) during a specified time period will be used to help set the High Water Mark (HWM) for that utility. This HWM will set the amount of power a utility can purchase from BPA at BPA's low-cost rate (Tier 1).

Up until now, BPA has been able to provide enough generation to serve the needs of utilities in the Northwest with the Federal based hydro system (FBS). Starting October 1, 2010, this low-cost source of power was no longer adequate to serve all of our needs. Rather than dilute the value of this low-cost resource, the BPA has decided to cap the amount of power utilities can buy from this system. This low-cost hydro is referred to in future rate cases as "Tier 1." The HWM we'll define as a utility's ability to buy power at the Tier 1 rate.

When is the HWM determined?

The HWM will be based on each utility's actual retail load for the period of October 1, 2014 through September 30, 2015.

How is OTEC's HWM determined?

Once each utility's load is determined, the HWM will be the ratio of OTEC's load divided by the total load of all utility's load multiplied by the total power available from the FBS.

What happens when we need more power than the HWM can provide?

If utilities need additional power, they must go into the marketplace and acquire it. BPA, as well as many other power providers will have Tier 2 products.

Can the OTEC's HWM change?

Yes. The HWM can change, most notably for changes in the FBS. For instance, if a court requires a dam to be removed or if BPA has to spill more water for fish migration or to accommodate wind power, then less water is available to produce power. Both of these events would reduce OTEC's HWM and cause us to have to purchase more expensive power out on the open market.

Why did BPA choose the HWM for future rate cases?

BPA believes this is the best way to ensure the Pacific Northwest has adequate electric infrastructure to meet future economic and population growth. The needed infrastructure is critical if the region is to avoid the extreme market volatility that occurred during the power crisis of 2000-2001.

By defining what amount of power will be available at Tier 1 rates, BPA is providing the clarity utilities and other resource developers need to make decisions about developing and or acquiring new power resources. OTEC will make decisions about how to purchase Tier 2 power in Fall of 2011