Commission recap 10/08/2019: Financial outlook includes reduced need for rate increases
Grant PUD forecasters see reduced need for electric-rate increases, as a strong financial outlook for Grant PUD is expected to continue, commissioners heard Tuesday during the first two of three scheduled public hearings on the proposed $291 million 2020 budget.
"We're in the best financial position we've been in for many, many years at the District," Chief Financial Officer Jeff Bishop told commissioners.
The proposed 2020 budget assumes enough funding to continue upgrades and improvements at Priest Rapids and Wanapum Dams and Grant PUD's electric system, continue investing technology to increase efficiency and continue fiber-optic network expansion. Read a complete summary of the proposed 2020 budget here.
Grant PUD staff has proposed using excess "liquid" cash savings to pay for a higher portion of capital costs — reducing need for new debt — and potentially paying off some existing debt, as well as refinance other debt to lower interest rates. That proposal is expected to provide Grant PUD a net savings of $44.7 million by 2024, if market conditions continue as forecast.
That proposal follows an extensive risk analysis and ample consultation with credit-rating agencies.
Grant PUD is coming off a strong revenue year, with the price for surplus electricity sold on the wholesale market higher than expected in the 2019 Budget. The 2020 Budget wholesale market prices, based upon current price indices, are about 17% higher on average from 2020-2024 than was in the 2019 Budget. Markets can be volatile, however, and strong prices aren't a sure thing moving forward.
Load growth is expected to remain strong in Grant County, driven mostly by data center expansion.
The current scenario points to a reduced need for an annual electric-rate revenue increase. The proposed 2020 budget assumes a one-tenth of 1 percent rate-revenue increase, down from the 2-percent annual increases of recent years.
Four members of the public attended the budget hearing in at Grant PUD's Ephrata Headquarters building. Another seven attended an evening meeting in Moses Lake. A final budget hearing is scheduled for 6 p.m., Oct. 10 at the Port of Quincy boardroom, 101 F Street SW, Quincy.
Commissioners are expected to vote on the proposed 2020 budget in early November.
In response to questions from the public:
- Grant PUD is seeking state and federal grant funding for continued fiber-optic buildout, but the proposed 2020 budget already includes as much capital funding as Grant PUD contract crews will likely be able to complete during the year, given limits on time and materials.
- The proposed 2020 budget contains adequate funding for electric-system upgrades, including more transmission for industrial customers.
- The value of Grant PUD hydropower on the market depends on the time of day it's sold and the buyer's intended use of the power. For example, hydropower purchased for its environmental, carbon-free attributes to fill in for solar and wind power, can fetch a higher price.
- One member of the cryptocurrency community commented at the Moses Lake budget hearing Tuesday that once Grant PUD's new Rate 17 fully phased in, it will force Grant County cryptocurrency miners out of business. Rate 17 for "evolving industries" is a higher rate that takes into account the higher risk inherent for Grant PUD from this customer class.
— Heard that the 2020 recreation season provided "optimal conditions" for recreators visiting any of Grant PUD's recreation sites.This according to Shannon Lowry, manager of Lands and Recreation as she provided her quarterly update to the commission.
After several years of construction at Crescent Bar, Grant PUD's most popular recreation site, a record number of visitors enjoyed the revamped sites first fully operational recreation season. Lowry reported that this season Grant PUD sold nearly 6,000 greens fees for Crescent Bar's golf course and to-date taken around 4,500 campground reservations.
"Overall we felt like it was a very successful season," said Lowry.
Once all the data from this year's recreation season has been compiled, Lands and Recreation will provide a comprehensive view of this year's recreation stats to the commission.
Looking toward 2020 the group is preparing to address several capital projects. The proposed projects include rebuilding of the Buckshot recreation site which was damaged by fire in 2018. This work will bring the destination, popular with bird hunters, back into compliance.
Lands and Recreation also plans to look at replacing the office building at Crescent Bar, which they have outgrown. The new building will allow more room for security personnel, needed space for staff to handle campground and golf course reservations, and provide room for other administrative work at Crescent Bar.
Another proposed project involves dredging work and erosion control at the Priest Rapids Recreation Area's boat launch. This process will involve mainly removing silt and other debris that has built up near the boat launch and can impact those trying to launch a watercraft at varying times of the year.
Hear the full departmental quarterly report starting at 02:20:25 of the commission audio and pages 19-26 of presentation materials).
— Learned that the preparatory work and permitting efforts continue for the Priest Rapids Right Embankment Improvement project. Managing Director of Power Production Ty Ehrman, told commissioners during his quarterly report that bids for the project are anticipated to go out later this year with key elements of the project to begin early in 2020.
Vibration issues and subsequent repairs to one of the units at Priest Rapids dam caused the group to miss the project availability and forced outage targets from April to July. Repairs were completed on the unit and the project successfully achieved its August performance goals.
(Hear the full departmental quarterly report starting at 01:56:05 of the commission audio and pages 1-18 of presentation materials).
— Heard from Manager of Enterprise Risk Management, Devon Williams that their group is busy preparing for the utility's property and liability insurance renewal. The group is working closely with Grant PUD's insurance broker as a combination of factors have led to increased rate proposals for the utility's insurance premium.
Williams says they are seeing increased premium proposals driven in part by major losses within the industry related to wildfires in California. As a result, initial quotes for the utility's proposed property and liability insurance renewal are coming in approximately 21% higher than previous premiums. That's an increase of approximately $200,000.
The Enterprise Risk Management group continues to explore alternative options to help reduce insurance premiums. Property and liability insurance coverage renews Nov. 1.
(Hear the full departmental quarterly report starting at 02:54:45 of the commission audio and pages 27-41 of presentation materials).
— Unanimously accepted a $1.7 million bid from Potelco, Inc. for expansion work on the Randolph substation located on Randolph Road in Moses Lake. The construction will add one fully built 41MVA power transformer to provide additional capacity in order to meet customer needs.(Read more on Pages 8 to 11 of the commission packet).
— Unanimously approved a resolution supporting the carbon-free and environmental stewardship benefits of hydro. See the full resolution on Pages 12 to 13 of the commission packet.
— Heard from Gene Austin, Compliance Program manager, that Grant PUD's preparations are on track for a comprehensive system-reliability audit coming in August. Austin used a detailed timeline of milestones yet-to-achieve, but on track. The region's top reliability auditors will review Grant PUD's reliability-related documentation and records and conduct an on-site inspection and interviews with staff. This audit happens every three years. It helps ensure Grant PUD is meeting all requirements for reliable service.
(Hear the full departmental quarterly report starting at 03:12:40 of the commission audio and pages 42-53 of presentation materials).