Grant PUD is expected to end the year with a bottom line more than $18 million greater than originally budgeted, spurred by higher-than-forecast wholesale prices from the sale of surplus electricity and reduced capital costs, commissioners learned Tuesday.
The latest forecast through June (second quarter 2019) predicts a bottom line of $76.1 million, up from the original 2019 forecast of $57.96 million, John Mertlich, senior manager of Financial Planning and Analysis, told commissioners.
Market prices for electricity that Grant PUD generated surplus to its local need were projected to average $22.84 per megawatt hour in 2019. That price is now forecasted to average $35.67 per megawatt hour, an increase of 56%.
Capital costs — money spent on large improvement projects, such as turbine/generator upgrades at the dams and expansion of the Grant PUD electric system — totaled $144.55 million in the original budget. That spending is now forecast to end the year at $124.98 million. This $19.57 million reduction is due in part to project rescheduling that has pushed capital spending into future years.
Total expenditures in 2019 are forecast to decline from the original estimate of $292.39 million to $259.26 million.
Grant PUD is managing its finances based on five key goals through 2024: cash on hand greater than $105 million, consolidated debt-service coverage greater than 1.80, a debt-to-net-plant ratio less than 60%, a return on net assets greater than 4% and a retail operating ratio less than 100 percent.
The utility expects to meet or exceed most of its financial targets through 2024.Return on net assets is forecast to be below target through 2021, then exceed targets in 2022 and 2023 before again dipping below target. The retail operating ratio isn't expected to hit the target until 2022 and beyond.
Despite these two off-target metrics, Grant PUD's excess cash on hand is expected to continue growing through 2024, while debt as a percentage of net plant assets is expected to remain even smaller than the 60% target. Debt-service coverage — the amount of cash available to pay for debt service —is expected to remain firmly above 1.80 times debt service.
Total debt remains unchanged at $1.26 billion. Grant PUD Treasurer Bonnie Overfield told commissioners her team is studying whether to pay off or refinance some outstanding debt in 2020.
(View the full financial forecast presentation on Pages 38 to 59 of this week's presentation materials here. Listen to the discussion beginning at 01:32:30 on the commission audio here.)
— Unanimously approved filling of the proposed draft budget for 2020. Commissioners will review and provide input before approving the budget later this year. Public hearings regarding the proposed 2020 budget are also scheduled for Oct. 8 and 10. (Hear the discussion beginning at 02:10:35 of the commission audio. For complete details, see pages 09 to 12 of the commission packet.)
— Unanimously approved payment of a claim in the amount of $7,000. The claim stems from issues relating to damages sustained at the claimant's home during the Central Ephrata substation fire in 2017. An insurance claim was paid to the claimant in 2017 covering most of the damages. The new payment covers time and effort restoring their home and administering claims following the incident.(Hear the discussion beginning at 02:11:50 of the commission audio. For complete details, see pages 13 to 14 of the commission packet.)