Grant PUD to cut budget

EPHRATA — Grant County PUD staff recommend commissioners reduce the district’s $517.8 million budget by more than $15 million.

Layoffs are not anticipated if the budget is reduced, said Grant PUD General Manager Tim Culbertson.

But rate increases beyond the planned 4 percent are another matter because of declining power sales revenues.

“If we see another bad water year, 4 percent will not be enough,” he says. “In my mind, there isn’t a doubt for a need for a rate increase.”

This year, a 4 percent rate increase began April 1 for customers.

One factor is that Columbia River stream flows this year are at 70 percent of what is considered normal. Last year’s ?conditions were similar. 2010 is the fifth worse water year on record in 70 years, Culbertson said.

Less water means less power is produced for sale at the utility’s dams.

“Fortunately, we planned on a less-than-average water year in our budget, but it still negatively impacted us with the $60 million in the last two years,” he says.

The largest portion of the budget is comprised of purchased power costs and capital expenditures at the PUD’s hydro division.

Improvements on turbines and generators won’t be delayed, but some discretionary spending would. One example includes halting the purchase of any new vehicles.

The district’s updated financial forecast is being presented during a commission workshop on June 4 from 8 a.m. until noon.

Commissioners meet on June 8  from 8 a.m. until noon to learn about possible budget reductions.

Both workshops are held at the PUD’s Ephrata headquarters, located at 30 C St. SW.

At that time, commissioners learn more from staff about how growth and borrowing are impacting the district, Culbertson said.

The commission should discuss growth policies and the effect on the financial forecast and rates.

Although load growth is down this year by between 20 to 25 megawatts because of the mild winter, future load growth is significant.

Over the next five years, 110 additional megawatts are needed because of the new SGL/BMW plant in Moses Lake, REC Silicon’s needs and Microsoft’s expansion in Quincy.

Guardian Industries is included in the load forecast because they’re building a fiberglass manufacturing plant in Moses Lake.

The proposed Washington Tire plant in Ephrata isn’t included, but if it’s built, it could significantly increase the need for additional power.

There’s also growth in the residential and irrigation rate classes.

Bonnie Overfield, of Grant PUD, told commissioners on Monday the district experienced a $19.5 million reduction in its cash to pay for operations.

“That’s why we’re having discussions to mitigate that, so we’re not using as much of our cash reserves,” she commented.

The biggest pressure on rates is the retail operating ratio. Debt service obligations to fund improvements at the district’s aging dams are increasing faster than the district can raise rates.

Grant PUD Commissioner Randy Allred said he was very concerned about the situation.

He said Moody’s reduced the PUD’s bond rating by a full level.

“That ought to give an idea as to the situation at hand,” Allred commented. “Granted, we still have a lot of money … a lot of federal subsidies. We’re still very highly rated. Those are the facts.”

Overall, Grant PUD received a strong financial rating from credit rating agencies Standard & Poor’s, Fitch and Moody.

The one notch downgrade from Moody was because of the district’s cash position and the district’s significant amount of future capital work.

Moody wants the PUD to have more cash on hand as a backup to its financial position.