Commission Recap 07/23/2019, Other states' data-center enticements narrow Grant County's edge
Grant County still has a very attractive combination of low-cost land and electricity, temperate climate and seismic stability that data center developers are looking for, commissioners heard Tuesday.
But the state's lack of tax-break incentives make it hard for Washington to compete with tax incentives other states are offering to lure in these big customers.
Energy costs amount to 40 percent to 80 percent of a data center's operating costs, Project Specialist Baxter Gillette told commissioners. Grant PUD's power rate remains lower than its competitors across the country, even with construction costs for new transmission lines are taken into account.
But the state's property tax contributes to a combined "effective rate" that pushes the county's per-kilowatt hour rate above that of competitors across the country. Washington's current sales tax break to data centers that locate in rural counties, like Grant, expires in 2025, Gillette said, and some of Grant PUD's data center customers are expressing concern.
Nationwide no companies announced new data center construction for Washington between 2016 and 2017, but two have announced for cities in Oregon, and others in the U.S. Midwest, Southwest and east coast.
"We're in a good spot," General Manager Kevin Nordt said, pointing to expected strong load growth protected into the future in Grant County, as other utilities struggle with low or flat growth.
"One thing that has changed for us," he said "In 2006-2007, we had lines out the door and we could dictate terms. That's no longer the case. We want to make sure people know where we're at in the competitive landscape." (View the presentation here. Listen to the discussion beginning at 03:43:45 on the commission audio.)
Fiber network sees solid subscriber growth in 2019
Construction efforts to expand Grant PUD's fiber-optic network continues for the areas slated to receive access this year. Work is all but complete for customers located on the off-island portion of Crescent Bar and Trinidad. The first of nine pre-determined areas that will receive service in 2019. This according to Senior Manager of Wholesale Fiber Russ Brethower during the update he shared to commissioners Tuesday.
Brethower said he anticipates three additional areas coming online in August, with the remaining five areas included in the 2019 expansion having construction completed by year's end.
As the network expands, so do the number of customers utilizing the network. Through the end of June, 1,319 new customers have subscribed for service via one of the independent service providers. Grant PUD's growth target for 2019 is 2,575 new fiber customers.
Commissioners approved $12.6 million to expand Grant PUD's fiber network in 2019. The funding helped accelerate the build-out and reach the approximately 30 percent of customers who did not have access to the network at the beginning of the year. The budget provides access for service expansion to nine geographic areas in the county or approximately 2,882 potential new users. As part of this year's expansion efforts, commissioners have also committed to provide access for fiber service for all customers in the next five years.
Beyond the nine areas scheduled to receive fiber service this year, there is no time frame for expanding to other areas. Any further expansion will be based on the overall financial conditions of the utility and the network.
For a full list of the anticipated expansion sequence, visit www.grantpud.org/getfiber
(Hear the presentation beginning at 02:12:30 the commission audio and pages 46-57 of the presentation packet)
— Heard that Grant PUD's rate revenue and energy sales were both below budget for the April through June quarter, amid moderate to cooler temperatures that required less heating, air conditioning and irrigation.
Grant PUD Data Analyst Shaun Harrington said energy sales in megawatt hours totaled nearly 1.2 million for the quarter — 10.3 percent below the budgeted 1.28 million megawatt hours. Total rate revenue for the quarter totaled $48.5 million, down 6.1 percent from the budgeted $3.1 million.
Harrington said moderate temperatures in May and June required less heating and air conditioner use. Electric meters on irrigation pumps also recorded less energy use.
A reduction in sales to large commercial customers classified as Rate 7 was influenced by most cryptocurrency operations shifting from that rate class to the new Rate 17 with higher energy costs, Harrington said.
On the industrial side, most of the budget-to-actual difference was driven by a single customer that decreased production due to lower domestic demand. One ag food processor shut down for 10 days, reducing energy consumption.
The shutdown of REC Silicon in Moses Lake doesn't factor into the budget-to-actual deviation, because budgeting already reflected the company's expected reduction in energy use.
Overall, Grant PUD is expecting the county's demand for electricity to continue to grow, said Clark Kaml, senior manager of Rates and Pricing, told commissioners, as utilities elsewhere in the region and the country are seeing flat or declining customer demand.
Statewide, Kaml said, energy demand per person has declined, even as the state's population has grown. (View the presentation here. Listen to the discussion beginning at 2:01:15 on the commission audio.)
— Heard that as Grant PUD's electrical system ages, the Power Delivery group will begin performing an end-of-life risk assessment for transformers located throughout the 57 substations in the county. The assessment will provide a risk-based decision making model for determining the health of each transformer, as well as the consequences the electrical system would face if one of the transformers were to fail. This criteria will provide better insight when considering which units Grant PUD may need to replace.
Managing Director of Power Delivery Jeff Grizzel said power system availability fell below the goal of 99.985 percent. Extended outages in April and June were the main drivers of these results. Causes of the outages ranged from car accidents impacting the system to lighting storms throughout the region.
These same issues also resulted in the average time an outage impacted customers for the quarter to be above the goal of 110 minutes per interruption.
(Hear the presentation beginning at 02:33:30 the commission audio and pages 30-45 of the presentation packet)
— Learned that staff hopes the commission adopts the 2020 budget be adopted by November, following their review and input as well as other feedback throughout the budget development process. Commissioners will evaluate and comment on the proposed budget during their August commission meetings.
Customers will have the opportunity to attend any of the scheduled commission meetings as well as participate in any of the three anticipated public budget hearings in October. These public meetings are traditionally held in various parts of the county allowing customers to provide input and learn more about the proposed budget.
(The discussion with the commission begins at 05:12:45 on the commission audio)
— Unanimously approved a change order to increase by $72,000 a contract with Andritz Hydro Corp for a new contract total of $1,081,391 for additional needed grinding and weld repairs for wicket gate servomotor rehabilitation at Priest Rapids Dam. Wicket gate servomotors operate the wicket gates, which control water flow to the turbine. This work is required to extend the unit's life by 50 years. (For details, see pages 10 to 15 of the commission packet.)