Commission recap, 11/13/2018

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Proposed Budget to include $12.6 million more for faster fiber build-out

A majority of Grant PUD commissioners Tuesday said they would like to add $12.6 million more to the proposed 2019 budget to speed fiber-optic build-out to the 30 percent of Grant County residents who still don't have access.

An investment of $12.6 million annually for five years would be enough to complete the build-out, Chief Financial Officer Jeff Bishop told commissioners. The five-year build-out would reduce projected reserve funds by an estimated $40 million by 2023 and slightly reduce debt-service coverage — the amount of revenue Grant PUD as to cover its debt — from the projected 1.99 to 1.96. Bond-rating agencies favor debt coverage in the 2.0 range.

Commissioners Dale Walker, Tom Flint and Terry Brewer said it may be better to spend the money now to finish the build-out and then work on getting reserves and debt coverage back to preferred levels. This may have to come through increased debt or higher electric rates.

Under the current proposal, the 2019 budget would include a 2-percent rate-revenue increase to be allocated through the different rate classes, but the increase would drop to 1 percent in 2020 and lower the following years.

The $12.6 million added to the 2019 budget would be on top of the $3.1 million originally budgeted for fiber in 2019 and the $2.7 million left over from build-out this year.

Commissioners are scheduled to vote on the 2019 budget at their Nov. 27 meeting.

The 2019 budget reflects an extra $50 million that can be released from reserves, following an updated, in-house risk analysis already reviewed with several bond-rating agencies. About $25 million of this excess liquidity is factored into fiber under the five-year buildout projection.

Commissioner Flint said these are separate funds he would prefer be used for rate stabilization, rather than fiber build-out.

Commissioners will meet with staff Nov. 30 for an in-depth workshop on debt and reserve liquidity. More discussion about what to do with the $50 million from reserves is expected in the coming weeks.

Total expenditures in 2018 are forecast to come in $10.7 million under budget, based mostly on some reduced capital spending and total employment that is lower-than-forecast. See the fiber-spending options and the budget presentation here, page 31 and full discussion begins 3:26:20 of the commission audio.

New slice contract would preserve generation, sell clean, storable, on-demand attributes of Grant PUD hydropower

Commissioners reviewed highlights of a proposed three-year contract to sell Avangrid Renewables — a wind power company — use of a 10-percent slice of the combined output of Priest Rapids and Wanapum dams, starting Jan. 1, 2019.

The deal would lock in a price of $4.19 per megawatt hour above market price, Rich Flanigan, senior manager of Wholesale Market Supply, told commissioners. Benefits to Avangrid include carbon-free energy and the ability to serve its customers when the wind isn't blowing and its own windmills aren't generating.

"When you look at what it does for our risk, it's a win-win for us," Commissioner Tom Flint said.

"And we get the power back," added Commissioner Larry Schaapman. "We're really starting to monetize these attributes. They're becoming a financial asset for us."

The ability to store hydropower in the reservoir until it's needed — storage and generation on demand — are "ancillary attributes" that Grant PUD continues to sell, as demand increases for carbon-free energy.

Avangrid (formerly Iberdrola) must return to Grant PUD most of the power it uses. The company would replace the contracted hydropower with power it buys on the regional wholesale market, which is a mix of carbon-free and carbon-emitting generation. If the state approves a tax or fee on carbon, the power returned to Grant PUD from Avangrid must be carbon-free, Flanigan said.

The deal is consistent with the objectives of Grant PUD's Strategic Plan to maintain a strong financial position. The contract helps achieves this by providing "revenue certainty" – a locked-in price that eliminates water risk. Bond rating agencies favor lower risk.

Fourteen companies either bid or expressed interest in the slice. Avangrid's bid was the highest.

Conditions of the deal are similar to a six-month slice contract commissioners approved last summer with Avangrid for a 10 percent slice of the dams' output. This contract expires Dec. 31, 2018. See the staff presentation here, Page 15 and full discussion 1:42:55 of the commission audio.

Commissioners also:

— Adopted design guidelines to improve reliability of the distribution and transmission system. The process to develop the guidelines began in 2017. The process was necessary as Grant PUD's electric system grows and becomes more complex. Guidelines will be reviewed at least biannually and updated as needed. See the guidelines for the both the distribution and transmissions system plans on pages 12 to 80 of the commission packet. Discussion 3:03:20 of the commission audio.

— Approved renewal of Grant PUD's property and liability insurance policy. The annual premium for the policy total $1,901,688. See pages 8-9 of the commission packet. 3:02:20 of the commission audio.

— Agreed to approve the 2019 internal audit plan. The plan identifies the priorities that the District will focus on throughout next year. The plan helps to provide reasonable assurance that needed controls are in place. See pages 1 to 14 of the staff presentations for a list of key focus areas of the 2019 audit activities. 1:10:15 on the recording.)

— Learned that a new transmission line funded jointly by Grant, Douglas and Chelan County PUDs and Bonneville Power Administration to improve power supply and reliability appears set to move forward. The project will help alleviate congestion of transmission services utilized by each utility in the North and Mid-Columbia regions. The joint effort has been discussed and studied since 2004. The new transmission line would run from Douglas PUD's Rapids Switchyard in Rock Island, across the Columbia and south to the Colockum Creek area, where it crosses the river again to Bonneville's Columbia Substation, just west of Highway 28 near the entrance to Palisades. The estimated cost of the project would be nearly $24 million, of which Grant PUD's portion would be 16.7 percent or approximately $4 million.

Each utility identified problems facing their respective systems due to the constraints in this region and how by cooperatively working together they could solve the issues at the lowest cost with the new transmission line.

Each party is within a 45-day opt-out window that started Oct. 9. Staff recommended that Grant PUD continue with the project as long as no other parties opt-out. If any party chooses not to move forward with the project then Grant PUD will meet with the remaining parties to determine next steps. (2:02:55 on the audio recording. See staff presentation page 25 to 30)

— Discussed changes to the days of operation for the Grand Coulee local office. Starting the week of Dec. 10, Grant PUD's office in Grand Coulee will be cutting back the number of days it's open. Beginning that week the office will be open to drive through-traffic on Wednesdays and Fridays. On those days, the office will maintain its normal hours of 8 a.m. to 4:30 p.m.

Since last year, the Grand Coulee local office has been a drive-through only office. At that time, Grant PUD entered into an agreement with the City of Grand Coulee that allows the city to accept Grant PUD payments.

Customers will still have the opportunity to pay their Grant PUD bill at city hall. Payments will be accepted at city hall Monday through Friday during the city's normal business hours. Listen to the discussion 4:14:15 of the commission audio.

— Heard the quarterly federal and state legislative updates. The results of the recent elections were shared although some of the state and federal races are still too close to call. On the state level, rural broadband funding and state carbon policy will be monitored during the upcoming session. On the federal level, a variety of issues will be watched including negotiations around the Columbia River Treaty and other pro-hydro legislation. See pages 46 to 60 of the staff presentations to see the full presentation. The presentation begins at 2:31:05 of the audio recording.)

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