PUD 3 customers to see possible rate increase in October
Rate Increase Proposed
At the Public Hearing today (Tuesday, September 10) PUD Commissioners heard a proposed budget for 2020 and a proposed rate increase for some rate classes which would be effective with October 1, 2019 bills. Some key points proposed about the rate and budget include:
Daily System Charge = $0.10/day increase (effective October 1, 2019)
Customers in most rate classes would see an increase in their daily system charge of $0.10 per day which amounts to about $3.00 additional for most months.
The rate would go into effect October 1, 2019.
Qualifying low-income seniors and low-income disabled customers would be exempt from this increase.
2020 Budget = $77.6 million (2.7% higher than 2019)
The proposed $77.6 million budget includes an increase in the general daily system charge increase of $0.10 per day, or approximately $3.00 per month. The District used a zero-based budget approach for 2020. Every function was analyzed for its costs and needs. The proposed budget is 2.7 percent higher than 2019. We expect a 1.0 percent growth in kWh sales and a leveling of electric revenues from previous estimates.
Energy Independence Act (I-937)
The District will spend at least $3.7 million in 2020 to meet requirements of Washington State's Energy Independence Act (previously I-937). This includes power purchases and conservation programs. It is a cost increase of $1 million over 2019.
Under the law, the District was required to purchase renewable energy at 3% in 2012, 9% in 2016 and will now be 15% in 2020. This is a major driver in the increase to renewable spending.
On the positive side, due to the requirements of the EIA, the District is 107% carbon free by including (Renewable Energy Credits) “REC” purchases the District made to meet these renewable targets. In 2020, we will be 113% carbon-free.
Wholesale Rate Impacts from the Bonneville Power Administration (BPA)
The 2020 budget reflects wholesale rate impacts of the BPA’s Record of Decision for rate period 2020-2021.
BPA implemented a zero average base power rate increase. However, the specific impact to the District is a 0.53% increase in power rates.
The budget includes a 11% increase in the cost of energy transmission from the BPA. While Bonneville announced a weighted average transmission rate increase of 3.6% over the two-year rate period, the District’s rate is disproportionate to the average because we had already realized the savings from operating reserves which others will just be realizing in the new Fiscal Year.
The BPA wholesale rate changes go into effect October 2019.
BPA Financial Reserve Surcharge - Pass Through on Customer Bills
Because of the high likelihood that a BPA Financial Reserve surcharge will occur in 2020, $468 thousand is included in 2020’s budget for the District’s expected share of the full capped amount of $30M. The surcharge will be paid to BPA over ten months. The amounts range from $36k to $62k per month. This in turn will be added as a separate line item to customer billings, similar to the spill charge, at an average charge of $1.50 per month. This surcharge is a BPA reserves requirement which keeps BPA’s reserves above $0 at 60 days cash on hand. This surcharge could occur over multiple years and is foregone revenue from the surplus sale of energy due to extra water spilled for fish programs.
Loss of “Lookback” Payment from the BPA - (approx. $1m/year)
Another major driver is expiration of a nearly $1 million per year settlement with the Bonneville Power Administration over the way the agency calculated its Small Farm and Residential Exchange program during the 2002-2007 fiscal years. The program was designed to share benefits of the publicly owned federal power system with customers of private utilities in the region. In 2007, the Ninth Circuit Court of Appeals ruled that BPA overcharged public power utilities $767 million for the program. The court ordered that the money be repaid in what is called a “Lookback Payment.” The District’s portion of the Lookback Payment was $5.5 million. Repayment began in 2008, and expires this month, September 2019. The average annual reimbursement was $990,000, with 2019’s compensation at $825,000.
Capital Projects
Totten Substation - The capital budget includes the cost to complete the new Totten Substation. The substation is expected to reach significant completion by the end of 2019. We expect to see some costs in 2020.
Grid Modernization - The customer-facing part of grid modernization was finished in 2018. It continued into 2019 with connectivity of District infrastructure. The current phase is the implementation of the SCADA network to implement efficiency upgrades such as phase balancing, and possible reconductoring to reduce system losses. These upgrades will ultimately allow the District to use voltage optimization strategies to reduce wholesale power costs and overhead utility expenses. The current fund balance is $1.4 million and is funded by savings from the 2010 bond sale.
Pole Test & Treat Program - Pole inspection and treatment costs are included in the 2020 budgeted at $200,000. This is a formal program to annually inspect and evaluate poles to ensure they meet safety and reliability standards, plus structural integrity.
Increased Labor Costs - In the 2020 budget, there is an increase in labor costs with the addition of a line crew. The number of line crews has not changed since the 80s. Our customer base and infrastructure has grown significantly since then. We have also added a boring crew and a dirt crew. These additional crews partially offset a reduction in contracting but are also a result of added regulations on the District such as NESC compliance and pole maintenance.
Telecommunications - Telecommunications’ main focus in 2020 is to meet deadlines to comply with requirements of a grant awarded by the Community Economic Revitalization Board (CERB) Round 1 project. This includes utility pole make-ready; the first round of hut installations; and contract stringing and splicing for zones in SW Mason County and on the Tahuya Peninsula. Fiberhood projects are also on-going as customers meet designated commitment levels. We will also be extending fiber on State Route 108 to Grays Harbor as outlined in the adopted interlocal agreement to improve the District’s redundant access to internet and meet customer requests for high capacity transport circuits originating out of Grays Harbor. Finally, Telecom is working closely with Engineering and Operations to ensure the fiber optic network is expanded and ready for service at the selected SCADA Fiber Interface Cabinets and line devices to meet the goals of the District’s Grid Modernization strategic initiative.
Debt Service Refinancing
Debt Service Refinancing of the 2010B bonds is expected to occur before the June 1st call date. We anticipate a savings of approximately $360 thousand in 2020.
Other
Other items throughout the budget are natural fluctuations in the cost of goods and services.
Questions?
For any questions regarding the proposed rate increase or budget, contact Sherry Speaks at extension 5304.