Commission Recap 5/28/2019, Microsoft pays forward its energy conservation rebate

Microsoft pays forward its energy conservation rebate

Grant PUD commissioners heard a proposal on Tuesday outlining Microsoft's plan to defer its $480,000 power conservation rebate from Grant PUD and instead use the money as a way to broadly benefit Grant County residents through Grant PUD's Pay it Forward Program. The rebate is a result of energy-efficient upgrades Microsoft made to its Quincy data center.

As part of Washington's Energy Independence Act (I-937), every two years qualifying utilities must report their energy conservation achievements to the State of Washington. Grant PUD has established a conservation goal for the 2018-2019 biennium of 32,149 megawatt-hours.

In an effort to meet this goal, Grant PUD partnered with Microsoft to document energy efficient changes it made to its Quincy facilities. The upgrades, verified by a third-party auditor, helped Grant PUD fulfill its requirement of the state law and also helped Grant PUD save millions in expenses over previous years to reach the same I-937 conservation goals.

Microsoft and Grant PUD staff are proposing four projects for the funding, to achieve aligned goals, stated Chuck Allen, Grant PUD Public Affairs supervisor. The Big Bend Community College Foundation would receive $400,000 to help further advance the development of an industrial, mechanical and technical programs in the college's new Workforce Education Building. The funding would be delivered via the Columbia Basin Foundation. The Columbia Basin Foundation would also receive $50,000 to develop a program that would direct locally-grown Grant County produce to needy school-aged children throughout the county. Finally the Columbia Basin Foundation would use an additional $20,000 of the donation to provide grant funding for school districts in the county. The school districts would use these grant dollars to cover transportation costs for getting sixth-grade students to a hydro-powered outreach and educational event at Wanapum Dam.

The remaining $10,000 of the donation would be directed to Grant PUD's community-sponsored Share the Warmth program. Share the Warmth funding helps the neediest families throughout the county pay their electric bills when they have no other options.

Following Tuesday's review of the proposal, commissioners are scheduled to take action as a motion during their next scheduled meeting.

(See the presentation on pages 85-96 of presentation materials and hear the discussion which begins on 2:41:00 of the commission audio)

Net income outlook good amid high wholesale power prices

Higher than expected energy prices on the regional wholesale market have increased Grant PUD's net power revenue by nearly $9 million over 2019 budget estimates, commissioners heard Tuesday.

Prices on the wholesale energy market have increased 83 percent over the past year, from $19.95 per megawatt during Q1 2018 to $36.57 per megawatt during Q1 2019. The better-than-expected 2019 prices reflect a market scarcity of natural gas following a natural gas pipeline explosion in Canada in October 2018. The line is expected to be fully repaired later this year.

Natural gas pricing is a strong driver of power prices on the wholesale market. Grant PUD depends on the market to sell its surplus hydropower generation to buyers outside Grant County or buy power when the utility's own power resources aren't enough to cover county demand.

Jeremy Nolan, lead financial analyst for the utility, said retail energy sales to Grant PUD's customers within the county are expected to top the 2019 budget by nearly $1.8 million, based on load forecasts.

Total budgeted expenditures are expected to end the year nearly $17.9 million below budget. The two main drivers are lower capital spending, as revised project timelines move spending into future years, and the increase in net power revenue, which Grant PUD records as an expense offset.

It all combines for a bottom line – change in net position — of $70.9 million, up from the budgeted $58 million.

Grant PUD is meeting or exceeding its key industry financial targets of liquid cash, debt service coverage and consolidated debt to net plant ratio.

"Overall, it's a pretty rosy picture. It's kind of nice," Nolan said.

General Manager Kevin Nordt told commissioners the strong shorter-term outlook gives the commission flexibility in the 2020 budget-planning cycle to discuss a variety of issues that could include lowering future planned rate increases or continuing fiber-optic build-out.

"Just keep bringing us this kind of good news," Commissioner Tom Flint said.

(View the full financial presentation here, pages 14 to 23. Listen to the discussion beginning at 1:22:55 on the commission audio.)

Load growth discussion continues

Commissioners continued learning about requests for service and the impact the possible load growth could have in the Quincy area due to limits of the existing transmission capacity to that part of the county. (Previous details available in recap of discussion from May 14 workshop).

There are five requests for service specifically in the Quincy area that currently sit in the application pipeline phase of Grant PUD's new customer connection process. In this phase, customers have already paid the full application fee. Although these requests could be met with existing transmission capacity, providing the requested service would limit the ability to supply future requests utilizing existing infrastructure.

General Manager/CEO Kevin Nordt said that after reviewing Grant PUD's electrical system that it appears to be a localized limit rather than a system-wide limit on transmission capacity.

Commissioners asked staff to continue exploring the long-term risks and opportunities of expanding transmission to Quincy. No plans have been finalized for any expansion and commissioners will continue their discussion to determine how to best address the potential growth which may involve review of existing policies and pricing models.

"I think we need to be proactive and moving forward in making the infrastructure available," said Commissioner Tom Flint.

(See the presentation on pages 97-119 of the presentation materials and hear the discussion which begins on 3:35:30 of the commission audio)

Treasury reports to better return on investments

Grant PUD expects a total return of 1.96 percent by year end on its $511.4 million diversified investment portfolio, Treasurer Bonnie Overfield told commissioners. The 2019 year-end projection is up from the 1.45-percent return earned in 2018.

Outstanding debt is $1.3 billion. Grant PUD last issued debt in the fourth quarter of 2017. No new debt issuances are expected until late 2020 or early 2021.

Total debt as a percentage of the value of net plant assets is expected to end the year at 60 percent and decline to the target of 55 percent beyond 2024. Grant PUD uses debt to supplement cash financing for capital improvements to spread the high cost of upgrading long-lived assets like turbines, generators and electric system improvements over the generations of Grant PUD customers who benefit from them.

Bond-rating agencies Moody's, Fitch and Standard & Poor have rated Grant PUD's credit worthiness at a very good AA. High ratings mean low interest rates on future borrowing. Treasury is always looking for opportunities to refinance current debt to reduce finance charges longer term.

(View the full, first-quarter 2019 Treasury presentation here, pages 25 to 39. Hear the discussion at 2:09:25 on the commission audio.)

Commissioners also:

— Unanimously approved a contract with Oracle that will provide improvements to the existing customer service and billing system. The upgrade to Oracle's cloud-based system combines customer billing and care with Grant PUD's new advanced-meter system.

With the new system customers will have access to useful tools that will allow them to analyze energy use and help provide insight for how to better control energy bills.

The not-to-exceed contract is for $6.2 million dollars. However, it is estimated that over 10 years the switch to the cloud-based system will save Grant PUD approximately $11.5 million since Oracle will be responsible for handling the upgrades and employing the staff to keep the system secure, updated and available.

(Previous details available in recap of discussion from May 14 commission meeting See details on pages 28 to 68 of the commission packet. Discussion begins at 02:59:00 of the commission audio.)

-- Unanimously approved a not-to-exceed $1.05 million change order to a contract with the Washington Department of Fish and Wildlife for a new contract total of $8.5 million through June 30, 2020 for operational and maintenance activities performed by WDFW at Grant PUD's Priest Rapids Hatchery and broodstock collection associated with the utility's Upper Columbia River fall Chinook hatchery mitigation program. Grant PUD believes this change order is the lowest-cost solution to meeting its federal requirements for fall Chinook. Read more in the Commission Packet, pages 69-75.

— Unanimously approved modifications to the Sunland Public Recreation Development Plan. The plan, originally approved by the commission in 2015, defines how adequate public access and public recreation opportunities are achieved on Grant PUD's property in the Sunland area. The plan is updated periodically to include any new land use authorizations and other relevant changes. (See pages 77 of the commission packet)

— Unanimously approved a resolution amending the governance policy and superseding prior resolutions relating to governance of Grant PUD. (See pages 8-28 of the commission packet)

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