Grant PUD shelves fee idea

EPHRATA — Grant County PUD is setting aside the idea of a customer surcharge and revisiting the issue later this fall during more budget talks.

EPHRATA - Grant County PUD is setting aside the idea of a customer surcharge and revisiting the issue later this fall during more budget talks.

The purpose of a surcharge would be to temporarily raise rates if the district's reserves fall below $100 million. The year-end projection for the reserve fund is $95.4 million.

Staff previously discussed possible rate increases of between 7 percent for two to three years, or 20 percent for one year, through a temporary surcharge.

Commissioners heard more information about the surcharge proposal from Mike Frantz, a PUD senior resource analyst, on Monday.

In an unexplained change of direction, he said staff is talking about a policy and not suggesting a surcharge.

"This is just a structure," he said. "This is too early in the process to be talking about a surcharge."

Frantz called a surcharge a tool of last resort to bring reserves back to the adopted target of $120 million.

The district has talked about the surcharge for four or five years, he said.

Some questions to consider include whether retail revenues are keeping up with operating costs.

The reserve balance is intended to weather volatility.

The district is going through the process of adopting a budget and a financial forecast for the next five years.

They must look at what the current reserve fund balance and projected reserve fund balance are.

The reserve fund is designed to insulate the district for a two- to three-year period. Reserves are there to absorb year-to-year variations

Commissioner Bob Bernd asked if the surcharge would be implemented if a financial forecast showed the district reaching $120 million in three years.

Frantz said according to the proposal, no, but the decision would be up to the board's discretion.

If the current budget is adopted, the PUD will need to have a surcharge next year.

They are having a below-average water year, but the net wholesale is above what they forecasted, Frantz said.

Bonnie Overfield, a PUD senior analyst, said there will be more discussions on what the budget looks like.

General manager Tim Culbertson spoke about a request made that morning to consider the transfer of a sequestered $8 million for new resource funding.

It was also asked if the district could borrow from the electric system for the Columbia-Rocky Ford Substation line.

He didn't say if the requests came from staff or commissioners.

Frantz said he didn't know what the 2011, 2012 and 2013 budgets would look like.

Commissioner Terry Brewer said it was too early for him to be looking at a surcharge policy.

"It's a serious policy matter," Brewer commented.

He claimed he never saw anything in writing about the policy.

"My point is this is a serious policy shift of direction," he said. "It deserves attention in strategic planning."

He is opposed to a surcharge proposal, without a lot of serious discussions and public meetings.

Culbertson said staff has had the concept on the table before and commissioners asked for a power cost adjustment.

"What I've had in mind is very different than what I'm seeing here," Brewer said.

He added the commission doesn't need a surcharge policy to adopt a surcharge.

Culbertson said that was correct.

Brewer spoke about the issue causing a lot of unrest in the public.

"I've been faced with it every day," Brewer said.

Brewer said he wouldn't advocate a power cost adjustment based on forecast. Three months a year, a quarterly adjustment is done and based on real numbers.

That's how a power cost adjustment works: you look at your costs and you make an adjustment in rates in the following quarter, he said.

"That's how a surcharge works too, if you want to look at it that way," commissioner Randy Allred said.

Brewer agreed.

Overfield, a district analyst, said she wants to make sure they're committed to adopting a budget where revenues met the expenditures.

"We have financial peramiters that are adopted and on the books. I want to make sure we have a plan to meet those," she said.

Brewer said he didn't disagree, but that commissioners needed to also talk about strategic planning.

Commissioner Bob Bernd said there's been a lot of misinformation that they are considering a 7- to 20-percent increase.

"That's a policy issue," Bernd said. "We can implement a surcharge when we need to. I don't think there's been a reluctance on this board's part to make hard decisions."

He thinks they've reduced the risk since he came on commission because they've increased reserves from $50 million to $100 million, while using less than average water.

They've also been more conservative in forecasts.

In response, Allred said money hadn't been transferred around.

Commissioner Greg Hansen said it comes back to rates and certain classes.

Commissioner Tom Flint said he was one of the ones who precipitated the issue.

In 2001, there was a sub-critical water year, but no tools in place to deal with that.

"I always thought we should have a temporary tool to keep the financial viability of the district whole," Flint said. "It's a tool I think is important."

Flint said he always considered the tool more of a power cost adjustment and added the surcharge leaves him kind of cold.

He admitted the end result is the same and that maybe it's just semantics.

The discussion is nothing new and he's been asking for a tool for five years.

The recent discussion was taken out of context to some extent, he said.

Culbertson said they are not asking commissioners to take action, but to respond to their request about a power cost adjustment.

He asked commissioners if they wanted a consultant working on a cost of service analysis, to also look at the power cost adjustment/surcharge.

Some residents responded Monday about the proposal after the commissioners spoke.

Rich Callahan of Royal City said he looked at the state auditor's report because he was interested in running for commissioner.

He said the district went from roughly 456 employees to 725 employees, including consultants, and the PUD is not really producing any more power.

Callahan said the district should be looking at downsizing in some areas and the auditor says they're bloated in mid-management.

"That 20 percent is really going to hurt a lot of folks," he said.

The PUD pays $120,800 per full time equivalent and the fiber's losing about $5 million a year, he said.

"We've definitely got a lot of room for improvement there," he said. "If we need to find some new people to go in and clean house ... I guess that's what we need to do," Callahan said.

Culbertson said the state audit didn't say mid management was bloated. Rather, the state was complimentary to Grant PUD in comparison to other neighboring utilities and in that it met the industry standards.

There's never been a recommendation to do a 20-percent surcharge. The talks were a concept and a tool to use to address revenue shortfalls, he explained.

Culbertson said the $120,800 employee cost figure includes benefits.

Tom Bennett of Moses Lake asked about district's long-range planning in light of recession.

Culbertson and assistant general manager Chuck Berrie provided a summary of the PUD's projects.

Jeff Powell of Moses Lake said he is retired and lives on a fixed income.

He likes the power rates and quality of life in Grant County.

"There's big business, taking a lot of money off us," he said. "I would like a fair shake as a homeowner."

Powell pointed out he's retired and doesn't get cost-of-living increases.

Bernd said there's been mis-characterization on what surcharges could or would be, if they would be at all.

The preliminary budget doesn't anticipate a surcharge at all, he said. Until we're beyond that process, it's premature to talk about that, he added.