1. Oregon Rural Electric Coop Directors Education Seminar The Future for BPA Jim Litchfield June 2, 2015 1

2. Discussion Topics – The BPA Challenge End Game in 2028 – Current Power Sales Contracts Expire BPA’s Statutory Mandates Loads are no longer rapidly growing Governmental Mandates Aging Power & Transmission Assets Fish and Wildlife Mitigation Risk Competition in Western Power Markets California Independent System Operator – CAISO 2

3. The Current Power Sales Contracts BPA’s Power Sales Contracts Expire in 2028 Current Customers are Diverse: Full Requirements Customers Block Power Customers Slice and Slice/Block Customers Rates are Now Tiered High Water Mark Limits Tier 1 – Existing System Cost-based Rates Tier 2 – Power Purchased in Markets or from New Resources Tier 1 - $31.50/MWhr and Tier 2 could now be lower than Tier 1 3

4. BPA’s Statutory Mandates Bonneville Project Act – 1937 Market the output of federal dams – just Bonneville at the time Construct Transmission necessary to market the power Gave preference to public bodies and cooperatives Sell power at the cost of federal generation Regional Preference Act – 1964 – Priority to NW Customers Transmission System Act – 1974 – Self Financing Agency NW Power Act – 1980 The Council and the Power Plan & the Fish and Wildlife Program 4

5. PNUCC Load Growth Projections 5 MWa

6. Council’s Load Forecast from 1983 Power Plan 6 Current Loads

7. 2015 PNUCC’s Regional Forecast 7

8. BPA’s Load Forecast from 2013 8

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10. Governmental Mandates Electric Power Planning is a Complex Business Driven by Reliability at the LOWEST Practical Cost Mandates are caused by POLITICAL Drivers Renewable Portfolio Standards in MT, OR, WA and CA Regulatory PURPA Policies in all States Incentives Provided by Government to Subsidize Renewables Large and Rapid Development of Wind and now Solar resources 10

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13. Wind Integration is a Challenge 13

14. CAISO Actual Renewable Generation May 20th 14

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18. Federal System is OLD Aging Infrastructure Cannot be Ignored The Hydropower system was built between 1938 and 1974 when Libby Dam was completed The Youngest Dam is over 40 years old and the Oldest is almost 80 years old! Transmission System is also Old because it was built to market the power produced by dams and other generators Changes in Loads and Resources (coal plant shutdowns) will require New Transmission to be built to maintain reliability 18

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21. Power Markets Provide Competition BPA’s Statutory Mandate is to Sell Federal Power at Cost Competitive Power Markets are now Providing Realistic Alternatives Natural Gas Prices Have Dropped Due to Fracking Large Amounts of New Renewable Generation is now being Sold into Power Markets with ZERO or even Negative Operating Costs Market Prices are Low Even in this Poor Water Year BPA Is Forced to Sell its Excess Power at Lower Market Prices which will increase Preference Rates 21

22. 22 BPA PF Rate

23. Fish and Wildlife Mitigation Continues Fish and Wildlife Expenditures Continue to Increase Direct Expenditures are Greater than $260 million/year The Current “Fish Accords” are Expending about $100 million of that Annual Expenditure – WILL THEY CONTINUE? In Addition there are Significant Costs from Lost Power Generation due to Fish Requirements for Flow and Spill The Current Biological Opinion for the FCRPS Expires in 2018 – There will be a New Biop with New Requirements Total Fish and Wildlife Expenditures since the NW Power Act are more than $14 BILLION! 23

24. Fish & Wildlife Total Expenditures - 2013 24

25. 25 Fish & Wildlife Expenditures Over 31 Years More Than $14 Billion Today

26. BUT THERE IS HOPE! 26

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