Grant PUD approves annual 4 percent rate increases

EPHRATA — In a 4-1 vote, Grant County PUD commissioners agreed upon a 4 percent electrical rate increase to start April 1.

The increase was approved Tuesday with the PUD’s 2010 budget, which is $517.8 million.

For some residential customers, the hike likely means their electric bills will be $2 more per month, to bring an extra $4 million to the district, according to the PUD.

But just how the increase will be allocated between all other rate classes has yet to be determined.

Commissioners meet in January to determine the allocations.

According to the PUD, rates were increased because of capital projects, upgrades at Priest Rapids and Wanapum dams and the costs of implementing the new federal license.

PUD customers last experienced an increase in 2003. During the past six years, the PUD’s energy load jumped by 31 percent.

Commission President Terry Brewer cast the sole opposing vote against the motion. He said commissioners heard from too many customers, asking them not to increase rates in 2010.

Commissioner Greg Hansen moved to approve the budget, with a 4 percent increase, and with the allocation to be determined at a later date.

Commissioner Tom Flint seconded the motion.

According to the resolution, an annual 4 percent rate increase was approved to take place each year from 2010 through 2013.

Commissioner Randy Allred said the commission would review the district’s financial situation next year to determine if an increase was still needed in 2011.

It’s because the district works from financial forecasts, which can change depending on power sales and if it’s a good or bad water year.

During the past 15 years, residential customers have taken the most hits during rate increases, Hansen said.

During some years, there was as much as a 4 percent differential in rates increases between other rate classes.

“I think it’s time we adjust these rates,” he said. “The people that own this PUD, the residentials, the farmers. It’s time for them to have a few more benefits from this project.”

Flint said he was willing to compromise to get the commission to a consensus about rates.

He added they needed to perform due diligence to study the rate tiers.

Flint said he was “very concerned” as the economy is fragile in places and wants to take time to work on the allocation.

Commissioner Bob Bernd said he accepted the increase, although 4 percent was more than he was willing to do.

Assuming the commission can work something out, he will vote for the motion, Bernd said.

PUD General Manager Tim Culbertson said staff originally recommended a 5 percent increase for the next three years.

He said he thought the goal was to bring the reserve and contingency fund to a healthy balance.

The district expects to borrow $800 million in the next five years for capital projects.

He added he would hate the district to use its reserves.

 He later stated a bond issue covering the borrowing debt “will place extra emphasis on protecting Grant PUD’s AA credit rating.”

“A higher bond rating means lower interest rates for borrowed money to fund our priority projects,” he stated. “Any reduction in the utility’s credit rating  would result in added rate pressure due to higher interest rates and cost Grant PUD as much as $50 million to $80 million … These dollars would need to be recovered through increases in power sales beyond what it currently forecasted.”

Brewer invited audience members to speak before they voted.

David Bailey, representing the Grant County Industrial Alliance, spoke. The alliance includes food processors, industries and data centers.

He said the alliance is looking for predictability of rates and wants a reliable system.

“We don’t object to what your planning on system, as long as we have a reliable system,” he said.

If the PUD really needs a rate increase, it’s going to have to make a decision.

“We believe the improvements you do to the system benefits everyone,” he said.

He recommended rate increases be done is small, consistent increments.

Mick Hansen, representing the Citizens for Public Power, spoke.

He said most of the PUD’s major expense is going to pay for big substations for industrial customers.

It’s costing the PUD a lot more for industrial customers.

He asked the PUD to consider what its doing to the residents here and what its done for the past 15 years.

Marvin Price, of Lamb Weston BSW, said he was concerned about what happens in the future, not regarding a rate increase next year.

He described Lamb Weston BSW as a small, standalone company separate from Lamb Weston.

Small businesses are the ones that hire people and the same ones having difficulty keeping people employed and staying in business.

Greg Hansen said he didn’t think the resolution was set in stone, especially if the district had an exceptional year.

Price said it appeared to him the resolution would be difficult to rescind.

Allred said he didn’t think so.

Price responded by saying let the commission’s action be a forecast rather than a decision.

Allred said he would support the resolution for the good of the district and to help the outcome of a positive bond rating for the utility.

Flint said it’s critical to understand the district has a plan to build up its reserve and contingency fund. When the PUD goes to the rating agencies, it must have a plan.

Dan Miller, president of the Ag Power Users of Grant County, thanked everyone for their time and the chance to participate in the rate meetings.

Brewer said he wasn’t supporting the resolution because it approved an increase in 2010.

When he spoke last week during a meeting, he did talk about adopting a multi-year rate increase, but not to occur in the next few years, he said.

He said he was concerned about the financial outlook of the district.

He later stated, “Raising rates is never easy but the risks and uncertainly of the alternative is unacceptable. Grant PUD is a growing utility operating aging dams. We must continue to provide reliable service at the lowest possible cost. By adopting this relatively small increase, we are working to avoid double digit rate increases moving forward. It’s our responsibility and commitment to ensure a financially healthy and reliable utility not only for the future, but for our future generations.”

Allred said if the district doesn’t need a rate increase in the future, it won’t enact one despite what they voted on today.

Bernd said he agreed with Allred. He added he would have preferred 3 percent increases for two years.

Budget documents can be found online, at www.gcpud.org.