As a slight introduction, I have been your Grant PUD Commissioner for the past twelve years and have chosen not to seek re-election. As I ride off into the sunset Iíd like to set the record straight on some common misconceptions about your PUD. There is a giant misconception regarding our current rate setting that I feel needs clarification as we enter into this election. When I began as a commissioner, rates were set rather haphazardly with no consideration given to the cost involved in serving the various rate categories. The commission decided to hire an outside consultant to look at our rates and do a ďcost-of-service analysisĒ (COSA). It showed that several adjustments were needed to better allocate rate increases. We received that report but did not take action based on its findings. A couple years later we commissioned another analysis by a nationally recognized energy services group. This time the commission was much more involved in the process to help us better understand it and its conclusions. This report came to the same conclusions as the first.
Subsequently this consultant helped our staff put our own model in place so that we could do future analyses on our own. The commission then passed a resolution saying that it would consider this COSA as part of its rate-making procedure. (By the way, a COSA is used by most state regulatory agencies when they consider proposed utility rate increases. However, PUDs are not subject to state rate-making oversight.) Our commission decided that no rate category should get its electricity for less than 20 percent below the cost to serve them, and none should have to pay more than 15 percent above the cost to serve them. Certain categories are guaranteed rates at 20 percent below cost. Those are irrigation, residential and small business. Rates have been being set to get all rates within this band by 2023. Subsequently, large industries like SGL, REC, Moses Lake Industries, Yahoo and Microsoft are seeing very small increases as they are paying 25 to 35 percent above the cost to serve them and irrigators have seen 3 1/3 percent increases as they have been paying about 40 to 45 percent less than what it costs to serve them. Again, the goal is to have irrigators at cost less 20 percent and large industry around 15 percent above their cost of service by the end of 2023. The excess that large industry pays helps subsidize those getting electricity below cost.
Another misconception is that we are running out of power from our two electric generating dams. We are still years away from running out of this inexpensive electricity and with the current rate of growth, which has been aggressive, we should be fixed for several years. But more importantly, this commission has passed resolutions assuring that irrigators, residences, small and medium-sized business will always have first priority to our hydropower resource. In the event that at some future date we exhaust our resources and have to rely on the open market, large industries will have to relinquish project power and the PUD will purchase their power in the market. Given that caveat, I am comfortable in saying that our core customers will never have to rely on more expensive market power. We would have to grow to a population larger than Spokane for that to happen.
Much has been made of our $1.3 billion debt. Thatís a lot of money. We had to relicense our dams at a tremendous cost. Without paying those costs we jeopardize our ability to generate power from our own dams. The dams are 60 years old. Big expensive things like turbines and generators were starting to show excessive wear. The decision was made that when a new license was procured we should make the investment to prolong the life of our dams for another fifty years. Turbines and generators are all being replaced. The people who bought our bonds gave us excellent rates and we enjoy among the highest credit rating of any public utility because of our exceptionable management of debt.
In conclusion, your PUD is a huge asset for our county. There are many complexities and not approaching the job of commissioner with an open mind, a willingness to learn and a willingness to serve all the people of Grant County could result in unforeseen hardship for our county.