Commission recap 11-24-2020: Grant PUD 2021 budget approved with no rate increase
Budget reflects growth and financial strength, despite COVID challenges
EPHRATA — Grant PUD commissioners unanimously approved a $380.6 million budget for 2021 that invests in employees and critical assets, continues roll-out of key technology initiatives and controls costs — without raising power rates for the third, consecutive year.
The budget aligns with Grant PUD's Strategic Plan and top priorities of Grant PUD customers — reliable electric service, good customer service, clear and timely communication and keeping rates as low as possible.
"I would like to express my appreciation for all the hard work staff has gone through to make this a truly working budget, one that's justified and able to do all the good work and not have a rate increase at the same time," Commission President Tom Flint said before the unanimous vote.
The budget includes $143.6 million in operations-and-maintenance (O&M) expenses, a $17 million increase over the 2020 budget. Power production – expenses that go toward the generation of electricity – account for 39% of the total O&M. Administrative and general expenses account for 39% and power delivery — the electric grid and infrastructure – accounts for 22%. See page 15-18 of the budget presentation for a further breakdown of budgeted O&M expenditures.
The proposed 2021 capital budget of $143.4 million is a $2.6 million increase over the 2020 budget. The electric system accounts for $73.7 million of the total, driven by a second phase of investment in substations and transmission and $11 million of additional fiber-optic-network expansion. Power production accounts for $69.7 million, with major drivers that include $16 million for right-bank (Yakima County-side) improvements at Priest Rapids Dam and continued turbine/generating-unit rehabilitation.
Technology upgrades account for $3.1 million in 2021, up slightly from an aggressive expansion in the 2020 budget that included moving business systems to the cloud and improving cost tracking. Top capital projects include expanding Grant PUD's geographic-mapping capability using ESRI technology and modernizing ordering and inventory management.
Total expenditures of $380.6 million are offset by $102.1 million in revenues that include money paid by customers to build infrastructure and wholesale power sales, both by contract and on the regional wholesale market. The budget total of $278.4 million reflects these offsets.
Load growth — demand for electricity within Grant County — is forecast to increase at an average of 4.1% annually through 2030. That's down from the pre-COVID forecast of 6.2% but still well above the historic average of 3.6%. The majority of forecasted growth is associated with new large customers.
Retail energy revenues – sales to Grant County customers – is budgeted at $211.8 million in 2021, down from the original 2020 budget forecast of $222.9 million. The approximately $11 million dip is linked to slower than expected large customer growth, an updated forecasting methodology, the economic impact from the COVID pandemic and a decline in demand from cryptocurrency firms.
Grant PUD sells excess power not needed to serve Grant County customers on the regional wholesale market, resulting in net wholesale revenues. Net wholesale revenues are forecast at $77.8 million in the 2021 budget, up from $55.7million in the 2020 budget.
"I really appreciate the fact that staff helped us through this budget and explained things so well. It's just a whole lot to take in, and I truly appreciate their efforts," Commissioner Nelson Cox said.
Staff and commissioners recognize outstanding efforts of employee groups
Water rescue The first recognition was for a group of controllers, hydro mechanics and other Wanapum Dam and Wanapum Maintenance Center personnel to aided in the rescue of two Grant PUD contractors whose boat capsized in the Wanapum Dam tailrace Nov. 13. The dam's Emergency Response Team launched a Grant PUD boat equipped for emergency response to rescue the two contractors from the frigid Columbia River and rush them back to shore where a shore crew awaited, their pickups running and heaters on to warm the two boatmen.
General Manager Kevin Nordt credited all involved for displaying courage, discipline and the benefit of training and called the rescue response and "very extraordinary act that shows the best of what the district is about." Commissioners and other managers also expressed their admiration and gratitude.
"My hat's off to you and the time and energy you put forth to make sure we have safe conditions and a safe utility," Commission President Tom Flint said. "You made my day in more ways than one."
Customer Care System The second group of employees work in the many departments around Grant PUD who worked together to implement a big and complex new Customer Care System software package that integrates Grant PUD's new advanced meters into the Grant PUD customer service and billing system. The project required years of preparation and long hours and efforts by many employees from Customer Service, Power Delivery, Finance, the Enterprise Project Management Office, Treasury and Information Technology, as well as close collaboration with contractors Oracle and TMG Consulting. The new cloud-based system launched on schedule, making Grant PUD the first in the nation to deploy it. Benefits include more accurate billing and, eventually, more information for customers about power use, outage times and other benefits.
"This is new in the industry, this move to the cloud," General Manager and CEO Kevin Nordt said. "If you look at our vision statement of excellence in service and leadership, this is an excellent example of that. It is a very, very big accomplishment."
Other senior managers and commissioners also credited the extended team for their long hours, hard work and collaboration.
"I know that its been a heavy lift to integrate everything and work together," Commission President Tom Flint said. "You make us proud to be the first to put it together. I want to thank everybody who was on the team."
Hear the full recognition of both employee groups and their supervisors beginning at 34:45 on the commission audio.
— Heard from Julie Pyper, Senior Manager of the Grant PUD Enterprise Project Management Office, who urged commissioners to approve an increase of $3.75 million to a contract with Arch Staffing and Consulting. Arch provides personnel with specialized experience needed on a temporary basis by Grant PUD across a wide range of current and planned projects. The change, if approved, would increase the total contract amount with Arch to $6 million. Grant PUD has contracted with Arch Staffing since November 2019. The company has proven reliable, Pyper said, adding that the goal is to find a balance of capacity and capability of on-staff and contracted personnel.
Payment to Arch would be on an "as-needed" basis, Pyper said. The use of temporary, as-needed specialists reduces administrative work to onboard and retain full-time personnel. Grant PUD has contracts in place with other "staff-augmentation" contractors that it can turn to for competitive purposes. Commissioners are scheduled to vote on the Arch Staffing contract at their Dec. 8 meeting.
— Heard a review of Grant PUD's Health Screening Policy and safety review. Hear the discussion at 1:55:30 on the commission audio. View more information in the meeting's presentation materials, pages 24-30.
—Heard from Senior Wholesale Manager Rich Flanigan that Shell Energy submitted the best bid for 3-year contract for a 20% slice of Grant PUD's 63.31% share of generation from Priest Rapids and Wanapum dams. A contract with Shell for 53.31% for Grant PUD's share of the dams' generation expired in September 2020. That contract is now held by Morgan Stanley. The 20% slice contract is a new one with Shell. If commissioners approve, the contract will begin Jan. 1, 2021. Slice contract holders benefit Grant by reducing water risk from year to year, sharing some operational risk, paying a premium for ancillary services and non-carbon attributes, and providing predictable revenue. These slice contracts are viewed favorably by Fitch, Moody's and other agencies that provide ratings for Grant PUD credit. Commissioners are scheduled to vote on the proposed Shell contract at their Dec. 8 meeting.
— Heard that through the third quarter, total operating revenues for the utility were $5.2 million higher than the same period over the prior year. The increased revenues are being driving by wholesale revenues which were $9 million more than the previous year. The increase in wholesale revenues has helped to offset a reduction in retail sales in Grant County primarily related to commercial and industrial slow-downs primarily related to COVID-19 impacts. Operating expenses are about $7.1 million higher than in the same period as last year. This is primarily because of less labor being billed to capital projects, which were slowed down because of COVID-19 impacts and permitting delays.
— Julie Pyper, Project Management Office senior manager, told commissioners that her department has remained busy working on a number of initiatives this year. The top five initiatives as far as hours worked by her staff include:
- 1.Design Build 2 substation expansion project
- 2.COVID-19 Response
- 3.Human Capital Management System
- 4.Oracle Customer Care System
- 5.GIS Upgrade
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