Commission meeting recap for July 24, 2018

Warmer, wetter spring causes dip in revenue expectations through June

A warmer, wetter early spring contributed to Grant PUD’s year-to-date revenue from electric rates to come in 2.3 percent below budget. See detailed summary here, pages 8-12. Listen to the commission recording beginning at 1:32:05.

Financial Analyst Jeremy Nolan told commissioners that five of the utility’s nine major rate classes produced below-budget revenues through June. These rate classes are residential, which came in 3.6 percent below budget; commercial, 1.3 percent below budget; irrigation, 38.2 percent below budget; industrial, 11.3 percent below budget and ag food processing, 13.8 percent below budget.

Low temps in April and May ranged from 6 percent to 18 percent above average, Nolan said, meaning customers needed less electricity to heat their homes. Heating and cooling are big drivers of energy costs.

The Irrigation season in the Columbia Basin begins in March, but April rainfall was nearly 3 times its average and May rainfall nearly twice its average. That reduced irrigators’ need for electricity to pump water to their crops.

In the Industrial rate class, several data centers used less energy than forecast. The forecast variances for the other industrials, as well as the variances in the Large Industrial and Ag Processor rate classes were within the normal budgeting variance of plus or minus one megawatt, Nolan said.

Rate 7 for large general business was the only one to show substantial growth of 73 percent through June, driven by the arrival of cryptocurrency mining firms, Nolan said. These firms currently use about 22 of a potential 30 megawatts in Grant County. Many more have inquired about power.

Commissioners, staff, and the community are discussing a proposed new rate class, Rate 17, for the cryptos and other higher-risk “evolving industry” customers. The proposed rate class charges evolving industry customers more to cover both the cost to provide their electricity and the higher risk these highly mobile, big energy users pose Grant PUD and its customers.

A change in retail revenue, year to date through June was $2.23 million below budget. This was offset a bit by corresponding increase of $1.2 million in revenue from wholesale power sales. The budgeted energy and revenue forecasts were developed from 2016 figures. Nolan said efforts are underway to improve forecast calculations.

Fiber-optic network expansion parameters and sequence reviewed

Approximately 12,000 customers within the county still await access to Grant PUD’s high-speed fiber optic network. The parameters and timing for reaching the remaining 30 percent was a discussion point of the Wholesale Fiber quarterly report on Tuesday.

This year commissioners allocated an additional $7 million from financial reserves toward the wholesale fiber-optic program in late 2017. With this funding crews continue working to extend fiber availability to a large area north of Moses Lake and within the city of George.

It is anticipated that first group of customers within the Moses Lake expansion area will see service as early as September. The plan is to have the entire expansion to this area and to George completed by the end of the year.

Pre-sold subscriptions by internet service providers to new expansion area north of Moses Lake are currently at more than 50 percent.

Overall, those subscribing to the network have steadily been growing during the past few years. The current “take rate,” or the percentage of those subscribed to the network who have access, is 52.04 percent. This includes 998 new customers who have signed up so far in 2018.

Following the completion of these projects continued expansion of the network will depend on the financial health of the district and the financial health of the fiber-optic network.

During the presentation Senior Manager of Wholesale Fiber Russ Brethower discussed the buildout sequence to the remaining areas of the county without access. Expansion to new parts of the county have been prioritized based upon various factors including general return on investment, take-rate assurance and socio-economic considerations.

Forty geographic areas for future expansion have been identified, each with estimates of build-out costs and potential customers served. No associated timeframes have been established for future expansion.

When future funding is available, the first proposed area to receive fiber-optic service would be the Trinidad region and off island at Crescent Bar.

“There is no one person that deserves access to fiber sooner than anyone else,” said Brethower.

Brethower went on to stress that the intent is to use a data driven approach to make it equitable and provide certainty to the people of Grant County regarding the future of the network. See the entire proposed expansion sequence in the fiber group’s presentation here (pages 27-41) and hear the discussion beginning at 2:32:30 and continuing again at 4:15:35 of the commission audio.

In other business commissioners heard that:

-Grant PUD is poised for system growth

Crypto currency projects aren’t the only new growth facing Grant PUD, this according to the quarterly update from Power Delivery during Tuesday’s commission meeting. Beyond the influx of requests from those targeted for the evolving industries rate class, commissioners learned that Grant PUD has the potential for more than 200 MW in traditional load.

Last year Grant PUD’s average load was 590 aMW. These new expressions of interest from large general service and industrial customers could grow the system by more than a third.

Initially 28 potential projects have been identified. These projects would vary within their size and scope. Projects may involve expansion of the distribution system, refurbishing existing substations, building new substations or adding transmission reinforcement to the system.

Grant PUD staff have been working with the customers to gauge their power needs, but developing the final plan of service and exact approach for each project is yet to be defined. Customers still need to work through the application process.

Timing to complete any finalized plan of service can also vary depending on the type of work that needs to be accomplished. More standard projects like distribution expansion may take 6 to 18 months, whereas projects involving transmission reinforcement may take up to 5 years or more.

These customers have been in the queue while Grant PUD looked to accommodate the large number of requests for service received during this past year. Now that the evolving industry rate class and new application process has been defined, staff will work to move these projects through the process. See pages 13-26 of the presentation materials for more details and 1:58:30 of the commission audio.

Grant PUD has energy resources to meet annual growth projections through 2028

Months of work by Grant PUD energy and financial analysts show that the utility has enough of its own energy resources — generation from its dams and its portion of contracted power and some wind energy — to meet its annual energy demands through 2028. See presentation here, pages 42-75. Listen to the commission recording beginning at 3:36:45.

Beyond that year, the utility will need additional energy via market purchases and power purchase agreements with other utilities to meet forecasted demand.

Those are the conclusions of Grant PUD’s draft “Integrated Resource Plan,” a complex report the state requires PUDs to develop every two years.

At Grant PUD, this plan is a road map for meeting the objective of providing reliable and least-cost electric service to all customers, while addressing the substantial risks and uncertainties inherent in the electric-utility business.

Types of risk contemplated in the plan include:

  • Load risk: Grant PUD has seen an above-industry-average annual growth rate in energy demand of 4 percent over the past decade. That rate is expected to diminish only slightly, to 3.4 percent annually in the coming decade. Most of that growth has come from few, existing large customers. That increases risk of quick load loss if any of them leave the county, Rich Flanigan, senior manager of Wholesale Marketing Supply, told commissioners.
  • Environmental risk: Proposed new laws to reduce carbon emissions statewide continue to work their way onto ballots. All have failed so far. A new one, Initiative 1631, will be on the November ballot. It would create a $15 fee per ton of carbon that increase through 2035. This and existing clean-energy standards have the potential to increase costs to Grant PUD and its customers.
  • Changing power-market risk: Industry efforts to become more efficient at integrating intermittent wind and solar power onto the regional energy grid could bring about changes in the way Grant PUD sells its surplus energy.

Workshop: Grant PUD staff will host a workshop on the proposed 2018 Integrated Resource Plan to into more detail about load-growth and risk scenarios. The workshop is Aug. 8, from 1 p.m. to 4 p.m. in the Commission Room at Ephrata Headquarters, 30 C Street SW. The workshop is open to the public.

-Crescent Bar homeowners request more time to pay for sewer system

Gary Wirta and Tom Plampin of the Crescent Bar Island homeowners associations presented commissioners with a proposal to expand from 10 years to 25 years the payback period the homeowners agreed to reimburse Grant PUD for their portion of the island’s new sewer system. 3:04:25 of commission recording

The system’s $12.9 million cost is higher than the early predictions. Some homeowners would struggle to make the $2,000 annual payments, which increase over time, Plampin said. These homeowners, whose homes and condos are on PUD-owned land, could be forced to leave the island for inability to pay.

“The HOAs are not seeking preferential treatment or cost avoidance,” Plampin said, adding that a longer payback would also benefit the PUD in higher interest received on the debt.

The 10-year pay-back dates to 2015 agreement the island homeowners signed with Grant PUD that ended years of litigation. The homeowners got new long-term leases that allow them to remain on the island through at least 2047.

Commissioners agreed to review the proposal with staff and meet with the group in the future.

In other business commissioners

-Approved a new substation for Royal Slope

Commissioners unanimously authorized staff to move forward with construction of a new substation for Royal Slope and the associated transmission line. Commission President Terry Brewer was absent for the vote, away on PUD business. 3:29:25 of commission recording

The Red Rock Substation and transmission will add electric-system capacity and reliability in the vicinity of Royal City and the Port of Royal Slope industrial area.

The action responds to a commitment dating to 2004 to the Port of Royal Slope, which has sought the new substation to attract new companies and jobs to the area. Commissioners emphasized at their July 10 meeting that their decision is based on that longtime commitment and is not to be construed as precedent for future electric-system improvements.

Grant PUD staff will now develop a plan, timeline and cost projection for the substation and begin acquiring right-of-way for the transmission line.

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