Commission recap: 5/26/2020: Budget looking strong through March amid changing forecast
Grant PUD's budget through March remains strong, with better-than-forecast power sales to the region more than compensating for a slowing demand for energy among the county's industrial and commercial customers.
Compared to Grant PUD's 2020 budget, energy use among Grant PUD retail customers is expected to decline by approximately 50 average megawatts this year, due to some industrial customers changing their expansion plans and reduction in demand from the governor's COVID-19 prevention orders.
The quarterly load updates are based on the most recent information available on recent and expected energy usage by big commercial and industrial customers, John Mertlich, senior manager of Financial Planning and Analysis told commissioners Tuesday.
Grant PUD locked in some good prices last year with our contracted power purchasers and again through short-term sales contracts for our surplus energy this year. Those transactions will help push the forecast for net wholesale power sales to $84.1 million this year — $28.5 million above budget and well above the $16.6 million in reduced energy sales at home from retail customers.
The forecast was part of the January-March, first-quarter financial report. Mertlich presented a retail energy sales graph that reflected a continued growth rate in retail sales through 2025, however the overall level of retails sales through 2025 has been adjusted down for the first-quarter load update.
Debt reduction: Grant PUD secured long-term savings in January and March when the utility's Treasury team moved quickly to reduce and refinance debt by taking advantage of historically low interest rates.
The combined transactions will save the utility $243.4 million in debt service over time, including a $3.1 million improvement in net debt interest payments over the 2020 budget, Bonnie Overfield, senior manager of Treasury, told commissioners. The outstanding debt balance after transactions totals $1.2 billion.
Commissioners thanked Overfield for her team's work. "Just echoing what everyone has said. Appreciate all your passion and hard work saving our customer-owners money on the long term," Commission President Tom Flint said.
The latest projections show Grant PUD will end the year better than forecast with a "change-in-net-position" bottom line of nearly $68 million, compared to the original budget of $65.6 million.
COVID impact. Total short-term financial impact from the state's travel and other restrictions to combat the COVID-19 pandemic has so far been mild, but significant uncertainty remains over intermediate and long-term impacts
Targets. Financial metrics for liquid cash, consolidated debt-service coverage and debt-to-net-plant ratio are meeting targets, Mertlich said.
Return on net assets continues to come in below the 4% target through 2025. Retail operating ratio only hits targets beyond 2023.
View the full budget and treasury reports in the presentation materials, pages 13-39. Hear the discussion at 58:00 on the first commission audio.
Short-term rate reduction proposed to help 'core' customers through COVID
Commissioner Dale Walker proposed reducing by 4% for the basic charge on "core customers'" electric bills for six months ending Dec. 31.
The reduction would apply to residential, irrigation and small and medium-sized businesses (Rate Schedules 1,2, 3 and 7) to help these "core customer" groups hard-hit by the COVID-19 pandemic.
Commissioners will gauge the proposal's overall impact to Grant PUD finances based on figures submitted by staff Tuesday. They'll discuss the proposal further at their next meeting June 9.
Commissioner Larry Schaapman expressed concern that the proposal wouldn't return much money to customers and pointed to other ways Grant PUD has helped during the COVID-19 pandemic.
The utility has waived late fees for core customers, urges customers with overdue bills to apply to Grant PUD's Share the Warmth program and state programs for help paying utility bills. Customer Service staff also work toward affordable repayment options.
Hear the discussion at 1:42:40 in the first commission audio. The report for this discussion will be part of the presentation materials for the June 9 commission meeting.
Grant PUD receives clean financial audit
Grant PUD's 2019 financials received a clean report from independent auditor Moss Adams. Moss Adams reviewed Grant PUD's financial statements and internal controls and reported no findings or deficiencies of the utility's internal controls.
Laurie Tish, partner in the Moss Adams firm told commissioners that the tone from top managers was one that consistently focused on the importance of "ethics" and "openness" in the utility's response to audit requests and various discussion points throughout the process.
Commissioner Tom Flint thanked Moss Adams for their work, noting that the commission values their "unbiased look" at district operations and procedures.
Grant PUD Chief Financial Officer, Jeff Bishop added that timely feedback on Grant PUD's financial statements are key to ensuring the utility is getting the best financial compliance outcomes for its customers. He thanked all of those on the financial team and others at Grant PUD for their efforts throughout the audit.
Parts of the audit were completed on-site prior to the closure of Grant PUD's offices due to COVID-19. Following the office closures, Moss Adams and Grant PUD's finance staff had to adjust and complete the remainder of the audit while working remotely.
(View the audit presentation to the commission here on pages 64 to 76. Listen to the discussion beginning at 23:30:00 on the second commission audio.)
— Heard a report from Grant PUD's Project Management Office. One of Grant PUD's newest groups that is bringing a standardized approach to managing projects across the utility.
Senior Manager of the Project Management Office, Julie Pyper discussed the department's first quarter initiatives and the forecasted project work they will be focusing on during the second quarter.
Of the group's $55.4 million capital budget for 2020, 10.3% was utilized in the first quarter. With most of the quarter's capital budget going towards work on the expansion of the Wholesale Fiber Network and the continued implementation of Priest Rapids turbine and generator upgrade.
Pyper told commissioners the effects of COVID-19 have led to short-term delays in the Priest Rapids project. Certain turbine parts are manufactured in both Italy and China. The impacts of the coronavirus slowed production of the components and impaired the ability for the utility to perform its international inspections of the parts. In addition, on-site contracted labor has been working through impacts related to COVID-19 policy and personal protection equipment requirements.
Pyper estimates these delays will result in this unit coming online approximately three weeks later than planned pre-COVID 19.
Pyper also shared that the impacts of COVID-19 may result in potential lags in the supply chain for materials used in the Design Build 2 project. To prevent possible delays to the project, as a part of a planned charge order, the group will be including funds to initiate the purchasing of equipment earlier than planned pre-COVID-19.
(View the audit presentation to the commission here on pages 45 to 63. Listen to the discussion beginning at 50:20 on the second commission audio.)
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