Commission recap, 10/11/2022 — Inflation to add estimated $26.6M to 2023 budget
Highest inflation in a generation adds to capital, other costs
"Generational inflation" is having an impact on Grant PUD's financial planning and is reflected in the 2023 budget, which was presented to the commissioners and members of the public during a budget hearing on Tuesday, Oct. 11.
John Mertlich, Senior Manager of Financial Planning & Analysis, said the budget assumes an 8.7% inflation rate. Inflation accounts for about $26.6 million in increased expenses to the utility. Grant PUD's budgeted expenditures after offsets is $316.8 million. That number for 2022 is expected to be $309 million.
"The inflation level is generational in magnitude," Mertlich said, adding that the rate of inflation in the U.S. economy is something that hasn't been experienced since the late 1970s and early 1980s.
To help deal with higher inflation, Mertlich said the budget assumes a 2% overall increase in power prices for Grant PUD's retail customers as a planning target year-over-year from 2023 to 2028. He also presented scenarios to the commissioners for a 3% increase each year for the same time. A third scenario of 3% in 2023, 2.5% in 2024 and 2% in 2025 to 2028 is recommended by Grant PUD staff.
"This inflation factor is something we hadn't planned on and is a new element we have to deal with," said Commissioner Tom Flint during the hearing. "The recommendation to me makes a lot of sense."
Commissioner Larry Schaapman said that type of a rate increase shouldn't be a surprise to customers. "Smaller increments, i.e. 3%, would be a whole lot better than when I first stepped on this commission - they were asking for 8%," said Schaapman, who began serving on the commission in 2012.
The commissioners are expected to continue to review the proposed 2023 budget and take action on it before the end of the year. They are expected to explore adjusting power prices in 2023. For more information, see presentation here. Hear the discussion at 3:49:40 on the commission audio.
Change to rate language for large industrial customers
Technology upgrade proposed for the Grant PUD High-Speed Network
Grant PUD is in the process of upgrading its wholesale fiber-optic network to improve service and reliability, commissioners heard Tuesday.
Grant PUD will evaluate potentially transitioning the Grant PUD High-Speed Network to XGS-PON — "Passive Optical Network (PON) — technology, which the majority of the industry has now adopted as a preferred access technology, Information Technology Manager David Parkhurst told commissioners.
A PON system reduces power costs and the amount of maintenance required for optimum service, Parkhurst said. It also provides for a greater variety and faster network speeds, reducing costs but expanding capacity.
Parkhurst said he'd be back at a future meeting with more details about the changing landscape for broadband in recent years and how technology development and industry shifts are making XGS-PON technology a good option that could potentially mean potential savings on the continued buildout and operation of the fiber network.
The PON discussion was part of a larger fiber business report for July through September that shows the fiber "take rate" — the percentage of Grant County residents with fiber available who actually subscribe to the service — is currently just over 69% and is expected to hit the year's goal of 70% by year end, as fiber becomes available to new areas of the county.
Private companies around the region sell internet, cable TV and telephone services to Grant County residents over the Grant PUD wholesale fiber network.
For more information, see pages 6-18 of the presentation materials. Hear the discussion at 56:13:09 on the commission audio.
Mature tree unlawfully cut on Grant PUD land
A still-unidentified person unlawfully cut down a mature, Siberian Elm tree on Grant PUD property near the community of Desert Aire, potentially because it was blocking someone's view, Shannon Lowry, manager of License Compliance and Lands, told commissioners.
The incident is one of 18 "encroachments" onto Grant PUD lands identified from April to August, Lowry said. Most of the violations involved vegetation dumped onto Grant PUD property. The refuse vegetation dries and becomes a fire hazard to Grant PUD lands and the surrounding properties. Other highlights of Lowry's report include:
- In response to concerns about wildfire danger on its lands elsewhere along the Columbia River, Grant PUD has begun applying the State Department of Natural Resources recommendations to thin brush, trim trees, and remove debris piles near the community of Sunland Estates and other areas. Residents are urged to implement fire safety measures on their own property, including removing debris piles, wood stacks, and other combustible materials immediately adjacent to their homes.
- Visits at many of Grant PUD's recreation areas appear to be slightly lower than 2021, although some events, including the Watershed country music festival at The Gorge Amphitheatre, drew record-large crowds to PUD parks and camping areas. Rec-area security measures were very effective this year, Lowry said. "People were largely safe, with very few issues. We seemed to find the right balance… ensuring we have the right security where we need it, when we need it," she said.
- Lowry's team is keeping busy supporting the Grant PUD Power Delivery Department, conducting environmental land surveys and supporting land-permitting and right-of-way acquisition for Grant PUD electric system expansion projects, including substations and two new transmission lines.
For more information, see pages 19-36 of the presentation materials. Hear the discussion at 1:31:09 on the commission audio.
— Recognized employees who had contributed to award-winning communications projects in the past year. Lindsay Thompson and Emily Wilson were recognized by the commission for their work on the 2022 Annual Report, which won first place in the Northwest Public Power Association's Excellence in Communications contest. The Grant PUD Public Affairs team was recognized for their efforts in maintaining the website www.grantpud.org, which also won first place in the contest. Grant PUD also won first place in the wildcard category for its 2021 year-in-review video, and third place for its monthly customer newsletter. Hear the presentation at 3:09:03 on the commission audio.
— Adopted a resolution to establish new Rate Schedule No. 18 – Estimated Unmet District Load Cost Recovery Adjustment Clause Rider which moves the EUDL CRAC language from Rate Schedule No. 15 into a separate rate schedule rider and clarifies existing language. This is an administrative change and does not alter the intent of the existing language in Rate Schedule 15. The language in the new rate schedule, which is largely unchanged, is intended to insulate core customers rate impacts from additional power supply costs related to growing load in non-core rate classes. For more information, see pages 8 to 25 of the commission packet. Hear the discussion at 3:16:41 on the commission audio.
— Heard from Senior Manager of Wholesale Marketing Rich Flanigan about the "Western Resource Adequacy Program (WRAP), a voluntary, regional initiative to ensure member utilities have the capacity they need to serve their customers, even under extreme temperatures. The initiative requires utilities to share their surplus power with one-another, if needed, to help assure all member utilities have enough power to serve their customers. Most western U.S. and Canadian utilities have joined the initiative, including Chelan and Douglas County PUDs, the Bonneville Power Administration and Puget Sound Energy. The initiative is expected to go live in summer 2025. Grant PUD likely wouldn't join as a full member until winter 2025/2026 due to existing power-sales contracts that are expiring in the next three years.
For more information, see pages 37-60 of the presentation materials. Hear the discussion at 2:10:51 on the commission audio.
— Heard a proposal from Senior Manager of Enterprise Technology Charles Meyer for a $1.5 million contract with Arch Staffing and Consulting for contracted, temporary workers whose skills and capacity are needed for "peak work" periods. The contract expires Nov. 15, 2025 and will be used to temporarily to ramp-up or ramp-down the Grant PUD specialized workforce, as needed. Arch provides specialized, contracted labor for other Grant PUD departments, but this contract would cover only projects related to Information Technology. The contract is already contemplated in the current IT budget. For more information, see pages 1-5 of the presentation materials. Hear the discussion at 19:13:08 on the commission audio