Commission Meeting Recap 2-23-2021: Changes coming for irrigation deposit procedures

Commissioners heard about an internal procedural change impacting irrigation customers. From year-to-year an irrigation customer may rotate fields or parcels of land they lease. As a result, before each growing season many irrigation customers need to request service from Grant PUD, for any new locations they will be operating during the upcoming year.

A procedural change will now allow irrigation customers with accounts in their personal name and that meet Grant PUD's creditworthiness criteria, to forego the need to pay a deposit or prepay for service on leased property. The customers will also need to have an existing account that has an Irrigation Power Agreement with Grant PUD.

An Irrigation Power Agreement is a lien placed upon property which used as security in the event of a failure to pay.

If the irrigation customer's leased account is not in their personal name, but instead part of a corporate account, the customer would be required to provide security in the form a surety bond, or by providing a letter of credit or using Grant PUD's personal guarantee form.

Terry McKenzie, Senior Manager of Customer Solutions said although the change is procedural and does not require a resolution of the commission to implement, the group felt the change was significant enough to share with the Commissioners.

Historically, in order to begin service on a new account for leased land even long-standing irrigation customers, with good acceptable payment history, would be required to either prepay their account for the upcoming growing season or pay a deposit.

In lieu of prepaying or making a deposit on a new account an irrigation customer could have also implemented an Irrigation Power Agreement while also meeting the necessary credit worthiness requirements. However, some irrigation customers lease property that does not allow for an Irrigation

Power Agreement to be established, such as leased land from the Bureau of Reclamation which is not eligible for such an agreement since it is federal property.

Commissioner Larry Schaapman said he had long been an advocate of adjusting these requirements. He talked about some long-time irrigation customers who had shown their creditworthiness by faithfully paying their bill, being frustrated by the former process.

The change will go into effect for the 2021 irrigation season. If a customer is leasing irrigation land and would like to know if this change may apply to their situation, they can call Customer Service at 509-766-2505 to learn more.

Read the memo with additional details on pages 73-82 of the commission presentation materials and hear the discussion beginning at 3:03:10 of the commission audio.

Good year for wholesale sales helps Grant PUD weather COVID

Grant PUD ended 2020 with $333.4 million in operating revenues, a 3.8% increase over 2019, pushed by a $13.9 million increase in wholesale power sales that offset some COVID-related dips in retail energy sales and sales at cost to contracted power purchasers.

"We weathered this storm better than most. We should count our blessings," Chief Financial Officer Jeff Bishop told commissioners of the gains that came despite the financial pressures of the COVID pandemic.

Sales to long-term contracted power purchasers – a requirement of Grant PUD's federal license to operate Wanapum and Priest Rapids dams — decreased by $2 million. Retail revenues to Grant PUD customers were down $2.6 million – 4.7% below budget — mostly due to reduced demand from commercial, industrial, large industrial and evolving industry customers. Milder weather conditions and some impacts from COVID-related unemployment reduced local demand.

Milder, but drier weather — 15% less precipitation with 11% higher wind speed — increased revenues from irrigation rates by $2.5 million — 10%.

Reduced demand for electricity around the county gave Grant PUD more electricity to sell on the wholesale market, driving the increase in overall wholesale market sales.

Total operating expenses of $231 million were 5% higher than the same period in 2019, largely due to an increase in labor costs associated with new collective bargaining agreement with IBEW Local 77 and less labor being charged to capital projects due to the pandemic.

Other factors influencing the 2020 budget results include $3.1 million in insurance proceeds related to the Central Ephrata Substation claim, a $5.4 million increase in contributions in aid of construction – monetary contributions to infrastructure provided by developers – and bond transactions that reduced interest payments on debt by $15 million from the prior year.

Change in net position — the bottom-line — came in at $94.7 million, 9.8% higher than in 2019.

Grant PUD is evaluating financing plans and may not need to issue any new debt in 2021 beyond a required refunding in June. Total debt stands at $1.2 billion. The utility's debt to net plant ratio – total debt to total value of plant assets – ended the year at just under 55% exceeding targets and is expected to decline to just over 47% by 2025.

Debt-service coverage – the ability of Grant PUD's cash flow to meet debt obligations — is expected to remain well above the 1.80 target through 2025.

Return on net assets, a measure of profitability, meets the 2020 interim target but is not expected to hit targets 2021 through 2025 under most conditions.

Grant PUD ended 2020 with $470.4 million in cash and investments, of which $210.2 million was in liquid /unrestricted funds.

Commissioner Dale Walker expressed concern at Grant PUD's $94.7 million bottom line at a time when many customers are suffering from the effects of the pandemic.

That money will be used to pay for capital projects to avoid borrowing in the future, Bishop explained.

See the full presentation on pages 16-42 of the presentation materials. Hear the discussion at 1:18:45 on the commission audio.

Commissioner also:

— Unanimously approved a staff review and finding that no customers currently qualify to be billed under Rate Schedule No. 17 for "evolving industries." Rate 17 charges nascent, high-energy-use businesses more for their electricity because of the increased risk they present to Grant PUD and its other customers. All those customers currently taking service under Rate 17 will, effective March 1, 2021, start taking service under the applicable Grant PUD rate schedule – likely Rate Schedule 7 – based on their energy use. If demand from the both existing evolving-industry customers and those awaiting service again increases to 5% or more of Grant PUD total load, all will again be moved to the higher Rate 17.

Existing cryptocurrency firms are collectively using approximately 1.4 average megawatts of electricity, well below the 5% — approximately 50 average megawatts — needed to meet the concentration threshold for Rate 17. Since Rate Schedule 17 was approved by commissioners Aug. 28, 2018, only cryptocurrency firms have been eligible.

"We've had a lot of time to work through this and come up with a rate schedule that protects the public and allows evolving industry to move forward," Commissioner Tom Flint said. "I know we've all wrestled with this a bit, but we really have a good product here. I'm fully supportive."

Hear the discussion at 2:45:10 on the commission audio.

— Heard from Julie Pyper, Senior Manager of the Enterprise Project Management Office and Organizational Change Management, as she reviewed the group's accomplishments in 2020 and summarized goals for the upcoming year.

Pyper said in March, the department is scheduled to finalize its "Project Management Framework" document. The framework will provide standard operating procedures the department will use for managing projects. The principles of the document will allow for increased predictability and consistency for delivering successful projects for the utility.

The end-of-year budgetary projection for 2020 shows the department spent $60.1 million of its $76.3 million approved capital budget. Pyper attributed delays due to the impacts of COVID-19 as a main driver that resulted in capital projects coming in under budget.

See the full report on pages 43-72 of the commission presentation materials and hear the discussion beginning at 2:12:55 of the commission audio.

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