Commission meeting recap April 24, 2018

DURING TUESDAY’S MEETING COMMISSIONERS

-Heard about a proposed new customer class that would give all traditional commercial and industrial customers priority status for power hookups. (1:27:30 commission audio)

The proposed new “Evolving Industry” customer class would provide increased certainty to the large number of cryptocurrency firms interested in hookups, Dave Churchman, Grant PUD’s chief customer officer, told commissioners.

The proposed customer class would ensure these firms pay a rate — to be determined — that covers both the cost to provide their electricity and the elevated risk they pose to Grant PUD. It also ensures these emerging businesses pay more, so core residential, irrigation and commercial customers can continue to pay below-cost rates.

Commissioners are expected to vote during their next meeting on May 8 on the proposed policy that would move the PUD toward creating the new customer class.

A product of six months of research and analysis, the Evolving Industry would apply to businesses:

  • Whose primary revenue stream is evolving and unproven.
  • Whose ability to pay power rates long term is uncertain or at risk, compared to traditional customer classes.
  • Who are vulnerable to extreme value fluctuations of their primary output.
  • Who are at risk for detrimental changes in regulation.
  • Who could become part of a large concentration of power demand in Grant PUD’s service area.

Early on, cryptocurrency firms likely will be the only members of the Evolving Industry customer class, but the class will apply to all businesses that meet the same proposed risk criteria.

Evolving Industry customers would be placed in a secondary waiting queue for service hookups. Grant PUD would not process service requests in this new customer class until all traditional customer applications are addressed.

Evolving Industry customers, new and existing, would pay a rate that covers:

  • Grant PUD’s cost to serve them.
  • The extra risk they pose as an emerging industry.
  • An “extra cost” — as all industrial customers pay — to help Grant PUD sustain below-cost rates for its core irrigation, residential and commercial customers.

The new rate class would align with Resolution 8768 (May 12, 2015), which defines Grant PUD’s approach to rate setting and the goal that by 2024 no industrial customer will pay more than 15 percent above their cost of service.

Evolving Industry customers would pay an application fee and fees to cover engineering costs. They’d pay up-front the costs to cover infrastructure upgrades needed to serve them.

Since summer 2017, Grant PUD has received an unprecedented 125 new service requests that total more than 2,000 megawatts of electricity. This is approximately four times the electricity needed to power all Grant County homes, businesses, government institutions and industry. One average megawatt of electricity provides enough energy to serve approximately 450 homes in Grant County.

Approximately 75 percent of these requests are from cryptocurrency firms.

The deluge of requests exposed serious deficiencies in Grant PUD’s current “first in, first out” customer-connection policies.

Utility officials agreed to stop accepting applications for new industrial hookups until staff proposed solutions. Staff hopes to develop a rate, create separate waiting queues for traditional and evolving customer classes by July 1 and transition to the new Evolving Industry rate class by Aug. 1.

The audience at Tuesday’s commission meeting included cryptocurrency miners who were in the request queue for a power hookup and members of the public who seek more control of the miners to set up their mining computers in residential areas with distribution infrastructure unable to handle for the machine’s huge energy draw.

“Churchman is putting together a fine program,” said Moses Lake resident Dick Deane, who said he lives next door to a mining operation with noisy cooling fans the operate around the clock, blowing hot air into his bedroom window. (Grant PUD staffers said after the meeting that the amount of power used by this customer is not out of the ordinary and poses no safety risk to others or Grant PUD power infrastructure.)

Deane urged Grant PUD to work together with the City of Moses Lake to crack down on the clandestine operations. “What we’re facing here is a tsunami. We’re here to blow the whistle.”

Deane’s neighbor Douglas Sly agreed. “Cryptocurrency operations are threatening Grant County’s economy,” Sly said. “They’re sucking the value out of Grant County, because Grant County PUD has the low rates.”

Heard expansion plans for Grant PUD fiber-optic network expansion in 2018. Senior Managers of Wholesale Fiber, Russ Brethower and Tom Stredwick announced during staff reports that this year’s expansion will bring an additional 1,400 residents and businesses access in Moses Lake and George. (1:52:55 commission audio)

The expansion in Moses Lake will extend the fiber availability into northern portions of Moses Lake from East Wheeler Road to Road 10 NE. The new expansion in George will bring service to the remaining residents and businesses of the city without fiber access. Construction is expected to begin in May or June. The expansion comes after commissioners allocated an additional $7 million from financial reserves toward the wholesale fiber-optic program in late 2017.

Commissioners have committed to extending fiber-optic connectivity to all residents of Grant County. The timing of ongoing expansion will be based on the overall financial strength of the utility going forward.

According to the Federal Communications Commission’s 2016 Broadband Progress Report (FCC), over 23 million rural individuals lack access to a broadband internet connection. As state and federal legislators wrestle with how best to bridge the digital divide that exists in rural America, Grant PUD is closing the rural gap by expanding world-class fiber-optic connectivity to all residents and businesses of Grant County.

Fiber service is currently available to about 70 percent of county residents and businesses. To connect to Grant PUD’s High Speed Network.

Chief Financial Officer, Jeff Bishop, followed up with a presentation discussing the goal of finishing the expansion project and how the determination will be made each year on whether the expansion of the fiber network will continue.  The annual Go/No-Go assessment will be based on the fiber program’s ability to meet its programs financial metrics and overall health of the District.  (Begins 2:30:50 on commission Audio)

In other action, commissioners:

Approved a resolution amending the 2018 strategic plan for Grant PUD.  The strategic plan is reviewed by the commission every six months to assess the progress made towards company goals and identify future steps. Slight variations may occur during the review process and when formal action for approval is needed to revise the plan the changes are done via a resolution.  (Commission Audio 3:30:35)

Unanimously approved salary and benefit increases for Grant PUD General Manager Kevin Nordt and General Counsel Mitch Delabarre. Effective May 4, Nordt will receive a one-time addition of 15 days of personal leave and a 5-percent salary increase to $292,032 annually, up from his former salary of $278,110. Delabarre will receive a one-time addition of three days of personal leave and a 3-percent salary increase to $259,740 per year, up from his former salary of $252,116 annually.

“A rigorous set of goals and objectives were laid out for these gentlemen this year. We all concurred that the performance of both the general manager and general counsel were above expectations,” Commission President Terry Brewer said.

Commissioner Bob Bernd said the increase moves Nordt into the “lower quartile” of what general managers at like-sized utilities are earning, according to a recent industry survey.  (Commission Audio 3:31:35)

Unanimously approved a 15-year contract with the Yakama Nation to hatch, raise and release coho salmon to achieve “No Net Impact” designation for coho migrating through Priest Rapids and Wanapum Dams. The change increases the contract amount by $14 million for a new contract total of $21.3 million for expanded services. The Yakamas’ contract work has helped Grant PUD save approximately $9 million by getting federal approval to do fish-survival “check-in” studies every 10 years instead of every five years.  The Bonneville Power Administration and Chelan PUD also contract with the Yakamas’ for their coho salmon work.  Historically Grant PUD has contributed to approximately 15% of the total cost of the contract that all three organizations have with the Yakamas. (Commission Audio 3:40:30)

Unanimously agreed to authorize the general manager to execute a 6-month contract with Avangrid Renewables (formerly Iberdrola) for a 10-percent slice of Grant PUD’s share of output at Wanapum and Priest Rapids dams. The new deal takes effect July 1, 2018 and continues a very similar deal that’s set to expire. (Commission Audio 3:45:40)

Other Meeting Highlights, commissioners:

Learned some good news about the Priest Rapids spillway from Chief Operating Officer Kevin Marshall. Contract crews have drilled 80 holes to pin down the points where water is leaking into the spillway structure. They plan to drill 220 more holes over the next couple of months to analyze all 22 spillway monoliths. So far, only some of the holes drilled in monoliths 17-20 are showing signs of leakage. All others are dry. The holes will remain there to aid drainage, Marshall said. No repair plan has yet been developed.

Learned that Grant PUD received a virtually clean 2017 annual audit by independent firm PWC (PricewaterhouseCoopers). The firm will release its final summary later this week. Auditors uncovered two errors. The first was cash mistake in 2016 that wrongly recorded a $3.2 million cash inflow as an operational activity instead of a financing activity. The firm did not require a fix. The second involved a miscalculation of interest expense totaling $1.4 million. The error has already been corrected. (Commission Audio 3:02:30)

Heard that Grant PUD’s Power Delivery team contains three new engineers, is looking for a fourth and three more linemen. The team is working well to clear a backlog of needed system maintenance that has resulted from the utility’s rapid growth since 2008. “That’s kind of our Achilles heel right now,” Mike Tongue, senior manager of Power Delivery Construction and Maintenance, told commissioners. Commission President Terry Brewer said industrial customers count on a reliable system when they agree to locate in the county and expect good maintenance. “I don’t want to argue,” Brewer said of the maintenance backlog, “I just want it to change going forward.” (Commission Audio 4:03:30)

Review items for next business meeting, May 8.

-Reviewed a proposed change Order No. 7 to increase by $324,580 the contract price of $2.34 million with the Washington Department of Fish and Wildlife for Priest Rapids Hatchery fish monitoring and evaluation from July 2018 through June 2019. The change order is necessary to meet Federal Energy Regulatory Commission (FERC) license requirements for fall Chinook salmon artificial propagation, monitoring and evaluation.

-Reviewed a motion that would increase a contract with North Sky Communications of Kent, Washington by $4 million for a new contract total of $5.9 million. The increase will fund expansion into George and Moses Lake of Grant PUD’s fiber-optic network this year.

Important dates:

May 7 – Commission Workshop to discuss proposed “Emerging Industry” rate class for cryptocurrency and other businesses with inherent higher business risk for Grant PUD and its customers. Ephrata Headquarters Commission Room, 12:30 p.m.

Next commission meeting: May 8, Ephrata Headquarters

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