Recap of Grant PUD commission meeting, 01/23/2018

Commissioners study 2-percent increase in annual rate revenue

(1:30:00) and (3:37:15) Grant PUD commissioners got a look Tuesday at a proposed slate of rate increases across most Grant PUD customer types that would generate an estimated 2 percent more in revenue from retail electricity rates starting April 1.

The proposed increase would be the fourth in a series of consecutive annual rate increases under a rate-design policy approved by commissioners in 2013 to help keep Grant PUD on a path of financial stability by more closely aligning the rate paid by each customer class to the actual cost to provide it with electricity.

The latest increase will add an estimated average of:

• $1.49 to the monthly residential bill
• $6.43 to the monthly general service (large commercial) bill
• $24.65 to the monthly bill for irrigators
• $73.85 to the monthly bill for "large general" (commercial)
• Billing increases for large industrial customers are based on too many varying factors to be characterized by a single average figure.

The latest increase is expected to generate $3.8 million in new retail rate revenue over 12 months. The proposed rate-revenue increase has already been included in the 2018 budget approved by commissioners Dec. 12.

Commissioners agreed in 2013 to align rates based on a Grant PUD cost-of-service analysis with targets to ensure no customer class pays more than 15 percent above its cost of service nor 20 percent below.

Under this model, rates paid by large industrial customers, who pay more than their costs of service, help keep rates lower for the "core" residential, irrigation and general-service (commercial) customers.

Here's a list of proposed increases per rate class and rate targets:

*Achieved through a combination of adjustment to the fixed monthly "basic" charge, the rate per kilowatt hour, demand charge and horsepower capacity charge.

** Resolution 8768 (commissioner approved in May 12, 2015): Goal is to adjust rates in small increments over time until no customer class pays more than 20 percent below its cost of service, nor more than 15 percent above its cost of service. Residential and irrigation classes receive most cost preference, followed by general service (small and large commercial). The target rates above cost will be only be as high as necessary. The below-cost limit for general and large-general (commercial) service will vary.

Many cryptocurrency (bitcoin) mining operations that have requested Grant PUD power. An analysis of the cost to serve those energy-intense customers is currently underway to determine a fair rate that also protects all Grant PUD customers.

Commissioner Dale Walker said he was concerned how a "new large load" rate class could end up affecting the rates of other customers. General Manager Kevin Nordt said the analysis that will happen during the upcoming year will examine the structure of that rate and its effects.

"There are ways to address that on our radar screen for sure," Nordt said.

Commissioner Bob Bernd said Tuesday after a morning rate briefing that he hoped to be able to say "no increase" in rates in 2024.

Some of the approximately 20 members of the public who attended the afternoon rate meeting expressed concerns about the proposed increase.

"You're going to sell all this electricity to the richest people at the expense of the farmers," said Judy Wilson of Moses Lake, concerned about the large number of energy inquires from cryptocurrency miners (bitcoin) and potential growth of financial firms and other lucrative businesses that could adopt a variation of the "blockchain" technology currently used in bitcoin mining. (4:20:00)

Spud Brown of Royal City suggested a single rate for all classes of customer and proposed the PUD pay down its approximately $1.3 billion in debt to reduce the approximately $94 million in annual debt service, rather than rely on cost-of-service estimates to set rates.

"You're looking at this in the wrong direction," Brown said. "You've got to drop some of that debt… Sooner or later, you guys are going to have to pay the fiddler." (4:28:00)

General Manager Kevin Nordt explained that total debt load is "pretty healthy," considering that upgrades to modernize Priest Rapids and Wanapum dams cost in excess of $1 billion — more than the $750 million it cost to build both dams — and funding those costs with debt helps fairly spread the debt burden over the multiple generations of customers who will benefit from the upgraded equipment.

An update to Grant PUD's cost-of-service analysis is expected this year.

Commissioners are scheduled to hear a second round of public comment at their Feb. 13 commission meeting and vote on the proposed increase at their March 13 meeting. Both meetings are at Grant PUD's Ephrata headquarters. New rates would take effect April 1.

For more detailed information about the proposed 2018 rate increase view PUD Analyst Jeremy Nolan's presentation here. Scroll down to page 31.

Other commission highlights Tuesday

Fiber network build-out could begin 'fairly quickly'

(2:18:55) Continued build-out of Grant PUD's High Speed Network could begin "fairly quickly" General Manager Kevin Nordt told commissioners in what he said would be the first of quarterly updates on commissioners' Dec. 12 decision, amid much customer support, to transfer $7 million from a Grant PUD savings fund to the 2018 budget for the fiber system.

The build-out will not be on a fixed schedule, but based on Grant PUD's financial capabilities from year to year, Nordt said.

To make it happen, Grant PUD will keep the public aware of the process, get personnel in the right positions, pursue state and federal grant funding, if any, to expand rural broadband; continue to actively promote the network to increase the current "take rate" of 49.55 percent to 75 percent or 80 percent, in line with the country's best-performing networks, and create a build-out schedule.

The build-out will likely not require a contract-bidding process, he said.

"Network revenue growth is reasonably healthy," Nordt said. "We'll get a handle on the build-out schedule with stakeholder engagement… so folks can see there's a method to our progress. We'll be able to start building pretty quickly, it's looking like."

A fix is in the works for pole fires

(3:30:00) Brent Bischoff, senior manager of Power Delivery Engineering, and Jesus Lopez, manager of Dispatch, told commissioners of plans to replace old-style horizontal insulators that make wood poles susceptible to catching fire.

Last fall, crews responded to a string of pole fires that happened after the first light rains following the dry days of summer. All the affected poles contained insulators installed in a horizontal, rather than the more common vertical position, Lopez explained after the meeting.

The horizontal insulators have more room for dust to accumulate on their surfaces. After a light rain the dust or dirt becomes moist and can become a pathway for electricity to travel from the power line to the wood pole, which is also very dry.

Chris Heimbigner, Grant PUD Line Office supervisor, said after the meeting that the Grant PUD system has thousands of these horizontal insulators in use across the county. But that doesn't mean they're all going to catch fire. The setting — near a big, dusty field, for example — would make a pole more vulnerable that one in a rocky or more urban setting.

"We're going to go after this pretty aggressively starting this year" Heimbigner said.

Crews will replace the horizontal insulators with vertical ones.

Total on-the-job accidents declining

Grant PUD Safety Coordinator Tyler O'Brion shared with commissioners that total on-the-job accidents were at a four-year low in 2017 with a total of 70. Incidents that resulted in days away from work are also at a four-year low, at 4 total.

Safety results show that this year's total 26 "recordable accidents" — ones that require more than first aide — continue to hover around the same level, meaning Grant PUD still has work to do to improve safety district-wide.

Commissioners also:

– Unanimously approved four professional contracts that will provide Grant PUD archaeological staff with expert help for carrying out the District's Historic Properties Management Plan, which includes the ongoing effort to track and record the historically sensitive sites around the reservoirs of Priest Rapids and Wanapum Dams. The work is mandated by Grant PUD's federal license to operate the dams and by Section 106 of the National Historic Preservation Act. Each contract is for $800,000 and for a term of 730 days. Twelve bidders responded. The contracts were awarded to these top-scoring bidders: Eastern Washington University, Rain Shadow Research of Pullman, Applied Archaeological Research of Portland, Ore. and Environmental Science Associates of Seattle. (Page 9+ of Commission packet).

– Unanimously authorized the general manager to execute Amendment No. 2 of an existing contract with the U.S. Department of Agriculture, Animal and Plant Health Inspection Services for avian predator control at Priest Rapids and Wanapum dams. The authorization increases the contract by $256,552, for a new, not-to-exceed total of $799,345. Ongoing control is necessary to reduce the number of predator birds who eat young salmon on their way past Grant PUD dams. (Page 78 if commission packet)

– Unanimously authorized the general manager to approve a change order, adding $391,238 to an existing contract with HDR Constructors. The change brings the total contract to $28.9 million and extends it by 91 days to Jan. 31, 2018. The change results from a negation between Grant PUD and HDR, the lead contractor on a project to build or rebuild seven substations around the county. The negotiation corrected differing or inaccurate cost estimates. This change is not related to repairs to the fire-damaged Central Ephrata Substation. (Page 105 of commission packet)