Commission recap 07/09/2019 Commissioners to explore rate options not linked to cost of service

Grant PUD commissioners Tuesday asked staff to describe the pros and cons of a potential new policy for rate setting that isn't pinned directly to "cost of service" — what it costs Grant PUD to provide electricity to each category of customer, from residential and ag to big industry.

They should have their answer in the coming months.

"As long as there's a reasonable method to the madness, we're probably on solid ground," General Manager Kevin Nordt said in response to inquiries, mainly from commissioners Tom Flint, Nelson Cox and Judy Wilson. "We'll lay out all the detail for you."

The board seeks more information about a fair, alternative means of rate setting that doesn't discourage county-wide growth.

Nordt said now is a good time for a rate discussion because finances are strong and "water-risk" — uncertainty about how much electricity the dams will produce in a budget year — has been reduced by contracts that lock in stable, predictable prices for Grant PUD power.

New commissioners Wilson and Cox were elected to the Grant PUD board on a platform of seeking a different way of setting rates that offers more preference than already provided to "core" residential, irrigation and small and medium-sized businesses customers.

The current policy, in effect with some changes, since 2013 sets a gradual series of rate adjustments until no rate class pays less than 20 percent of its cost to serve nor more than 15 percent above its cost to serve. Existing rates to core customer groups were already lower than 20-percent below, while industrials were paying substantially more than 20 percent above cost.

The resulting annual rate-revenue adjustments saw bills growing at a faster rate for core customers than the industrials to reach the final cost of service percentage goals in a 10-year period.

Cox and Wilson have said the current policy puts too much burden on the core customers and not enough on the county's large industrial companies, which use the most power. (2:50:35 on commission audio)

Commissioners also:

Heard that the recreation season is off to a smooth start thanks in part to coordination efforts with law enforcement and other local agencies. In her quarterly update, Shannon Lowry, manager of Lands and Recreation, reported that the agencies helped staff develop plans for managing concert crowds and their side effects to area residents.

Lowry said that the coordination work is evidence by activities and incidents with the Fourth of July holiday where "everything went extremely well with very few issues."

The group also had three filings with the Federal Energy Regulation Commission (FERC) last quarter including the Shoreline Management Plan in April. They anticipate filing two more in the upcoming quarter.

Hear the full departmental quarterly report starting at 48:35 of the commission audio and pages 17-25 of presentation materials).

Learned that the preliminary steps have taken place for the Priest Rapids Right Embankment Improvement project and it is anticipated that a contract will be awarded by the end of the third quarter, according to Managing Director of Power Production Rich Wallen. Coordination efforts also continue with internal and external stakeholders as part of the preparatory work.

Wallen also told commissioners that after successfully hitting performance targets for the first quarter of the year, unit availability targets at the dams fell short during the second quarter. This is mainly due issues with three of the units at Priest Rapids dam, causing them to be taken off line for various amounts of time. Aging equipment was mostly to blame. The dam is undergoing major investment now to modernize the turbine/generator units.

Wallen anticipates that the lessons learned from the quarter will help improve the ability to achieve target availability goals moving forward. Hear the full departmental quarterly report starting at 18:20 of the commission audio and pages 1-16 of presentation materials).

Heard a report from Risk Manager Devon Williams regarding how significant expansion of windpower in the U.S., primarily in the Midwest, has created more competition on the wholesale power market resulting in lower prices for the excess power generated at Priest Rapids and Wanapum dams. Williams explained that the price of windpower is also low because of tax credits that reduce costs of production for wind turbine operators. Federal tax credits of 2.4 cents per kilowatt hour make a big difference in profitability for windpower generators as they compete in the same market with hydro operators, said Williams. Hear the full departmental quarterly report starting at 1:10:21 of the commission audio and pages 26-46 of presentation materials).

Learned that the utility has five potential non-compliances that are in various stages of review with regulators and the Western Electricity Coordinating Council, two were discovered during a 2017 on-site audit, one was self-reported in Oct. 2018 and two were identified in the first quarter of this year, stated Gene Austin, Compliance manager. Austin said that potential non-compliances are investigated and then a determination is made by the regulator if it was in fact a failure to comply with regulations governing power utilities. It's always best to self-report when potential non-compliances are discovered, he added. Hear the full departmental quarterly report starting at 2:24:45 of the commission audio and pages 47-55 of presentation materials).

— Unanimously authorized General Manager Kevin Nordt to sign a purchase and sale agreement with S. Martinez Livestock to buy 2.9 acres on the Yakima County side of Priest Rapids Dam for $1,200. The land is needed for an upcoming project to build a secondary right embankment to the dam for improved seismic strength. (2:15:00 on the commission audio. Pages 31-45 in the commission packet. No new discussion preceded the vote.)

— Unanimously authorized General Manager Kevin Nordt to approve a change order to a contract with consultant Alvarez & Marsal Corporate Performance Improvement LLC, increasing the contract by $195,000, for a new contract total of $1,195,000. The company helped Grant PUD set up the new "data-optimization" cost-tracking system. The contract increase will cover additional support from the company during the transition to the new cost-tracking system and will help ensure the project's success. (2:15:50 on the commission audio. Pages 45-49 in the commission packet.)

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