Commission recap 09/10/2019, 2020 Budget to draw on better data, cost forecast
New processes that allow Grant PUD to more accurately track its costs, together with improvements to forecasting methods, are expected to produce more accurate budgets and ease the rate burden on customers, commissioners learned Tuesday.
Commissioners will get their first look at a detailed 2020 budget forecast at their Sept. 24 commission meeting, scheduled for 9 a.m. to 5 p.m. in Grant PUD's Hydro Office Building at Wanapum Dam.
Public hearings on the 2020 budget are:
Ephrata Headquarters, 2 p.m.
30 C Street SW, Ephrata
Moses Lake Local Office Auditorium, 6 p.m.
312 W 3rd Ave., Moses lake
Quincy – Port of Quincy Boardroom, 6 p.m.
101 F Street SW, Quincy
Customers are urged to attend one or more of the hearings to learn cost and revenue expectations for 2020, ask questions, express concerns and enjoy light refreshments.
Grant PUD launched a more detailed cost-tracking system in July with a more complex coding system for specific costs. The system also requires all employees, not just hourly personnel, to submit timesheets detailing their hours worked by project or cost category.
The new method for forecasting capital spending combines more detailed data collection with a more realistic way of projecting capital costs per project, based on each project's relative phase of development. Projects already contracted and underway, for example, would be expected to come closer to their spending expectations than projects in earlier phases of development.
Grant PUD expects this will produce more accurate budgets with less tendency to overstate costs.
"This is so we're not issuing debt early or collecting cash we can't spend," Chief Financial Officer Jeff Bishop told commissioners.
In 2020, the budget will assume a rate-revenue increase of one-tenth of 1 percent. Load growth — demand for electricity — is expected to remain well above industry average, driven mostly by industrial growth.
Capital spending will remain approximately equal to 2019, with $43 million budgeted for electric-system improvements, including continued build-out of the high-speed fiber network. At the dams, $63 million is budgeted for capital projects, including $20 million to begin building a secondary earthen embankment — a federal requirement — for better seismic resistance on the Yakima County side of Priest Rapids Dam.
Operations and maintenance costs for 2020 are forecast to be 10% to 15% higher than the 2019 budget, pushed by technology investments to improve customer service, human resources and other data systems, all part of Grant PUD's "technology roadmap." The 2020 budget includes $5.2 million for these projects.
"The Tech roadmap is expensive," John Mertlich, senior manager of Financial Planning and Analysis, told commissioners. "We're trying to use technology to increase our capabilities."
More detailed data will be available at the Sept. 24 commission meeting and public hearings. (Discussion begins 02:37:45 on the commission audio. View the presentation here.)
— Learned about Grant PUD's metrics related to the objectives for the 2019 strategic plan. All but one of the financial metrics for the 2019 goals are on pace to hit year-end targets.
Grant PUD Lead Financial Analyst Jeremy Nolan told commissioners that as far as the financial metrics are concerned Grant PUD is in a good place, especially considering that just several years ago the utility was below achieving many of its financial targets.
One aspect discussed during Tuesday's presentation was the projected cash levels the utility expects to see above the minimum liquidity target levels at the end of the year. The electric system liquidity is projected to end the year at $188.7 million. The year-end target for the metric is $105 million. A portion of the projected excess cash was driven largely by pricing increases in the wholesale power markets during the first quarter.
General Manager Kevin Nordt told commissioners in the upcoming weeks they will provide the group with different options of how they could reduce the utility's liquid cash position, whether that be investing in capital projects, paying down debt as well as other alternate options.
When looking at all the 2019 strategic target goals, Nolan told the commissioners that although there is room for improvement things are in a good place. He added the favorable position is thanks to a lot of good work from many people from the board, to the executive team, to everyone throughout the organization. These efforts have helped change everything from our safety culture to our financial metrics. (01:13:00 on the commission audio and pages 01–07 of the presentation materials)
— Heard about the successful rehabilitation efforts for one of the wells at the Priest Rapids Hatchery. The same repair strategy will now be used on two other wells at the facility. Last year, three of the hatchery's eight wells went dry when the Priest Rapids Reservoir was lowered to accommodate work on the dam's spillway. When the reservoir was raised, the wells worked for a short period of time before they quit providing water. Rehabilitation work on the remaining two wells is anticipated to occur this fall or winter when fish are off the station.
Within the project area Fish and Wildlife have also discovered the growth of a perennial orchid listed as threatened under the Endangered Species Act. Utes Ladies Tresses was discovered on PUD property near the Wanapum Switch Yard in 2017. Fish and Wildlife Manager Tom Dresser told commissioners that he suspects it appeared in Grant PUD's project area due to birds carrying seeds from other parts of the region where the plant is known to have existed. The population of the plant appears to be expanding. The Fish and Wildlife team is mapping out the plant's location within the area and adding it to its monitoring program of threatened and endangered plants. (The discussion begins at 01:45:00 on the commission audio and read more on pages 08–25 of the presentation materials)
— Heard from Manager of Cultural Resources Brett Lenz that June's 243 Fire near Wanapum Dam burned 769 archaeological sites that Grant PUD monitors as an obligation of its federal license to operate Priest Rapids and Wanapum dams. His team will begin visiting each site to record damage and then report to the Federal Energy Regulatory Commission. This work will happen under the emergency clause of Grant PUD's Historic Properties Management Plan. (02:11:10 on the commission audio. Pages 26-32 of the presentation materials.)
— Unanimously approved amending the Interlocal Agreement establishing the Central Washington Public Utilities administrative agency. Grant PUD entered the joint agreement with other regional PUD's in 2009. The amendment allows greater flexibility for the individual members among their respective collective bargaining groups and other labor relations. The commission also approved a separate motion to amend the same agreement modifying the organization's meeting schedules, terms of board positions and updating other provisions of the interlocal agreement.
(Hear the discussion beginning at 02:10:35 of the commission audio. For complete details, see pages 08 to 28 of the commission packet.)