Consultant asks PUD to adjust reserves

EPHRATA - Consultant Gary Saleba, of Kirkland, Wash., recommends Grant County PUD use a line of credit to count as some of its reserves.

Saleba's idea was in response to the district's planned rate increases of between 8 and 12 percent next year.

He represented member companies of the Grant County Industrial Alliance during a rate hearing in Ephrata earlier this week.

But he stressed his information could benefit all customers.

The PUD's reserve fund of $120 million in cash appears too high and costly for customer shareholders, he said.

He recommended the district obtain a line of credit for $40 million in reserves and cap the reserve fund at $80 million.

If reserves needed to be increased, members would agree to pay extra at that time, he explained. If there were an excess in reserves, customer refunds could be discussed.

At his firm, they've issued engineering opinions on billions of dollars of PUD revenue bonds, he said.

"I've probably given 100 pitches to rating agencies," he said. "Rating agencies don't care. You still have your $120 million there. They look at a line of credit and cash as a moral equivalent."

He also recommended lower, four-percent increases in 2012 through 2015.

Alliance members represent about 40 percent of the district's revenue sales.

Lon Topaz of REC Silicon said the company is getting close to paying the final tiered rate if the next plant expansion goes forward.

"I suspect REC will be the only people paying it," Topaz said. The current rate schedule 15 (for industrial customers) already has customers paying marginal cost of new resources when you run out of hydropower."

Enacting a rate in place before it gets paid seems to be problematic, he said.

Marvin Price of Lamb Weston/BSW in Warden said the company supports the alliance and its proposal.

After reviewing the district's budget, it doesn't seem like the PUD is in a recessionary environment, he said.

"Only the PUD could have this type of capital plan," he said. "The rest of us would not be in business."

As increases are considered, he said the district must reevaluate capital expenses going forward.

He said they don't like to be singled out for extraordinarily high increases.

Lee Willis, of Titan Data Center in Moses Lake, said the company began a project in 2008, which it is still in the middle of.

The company is building a multi-tenant data center for customers on Randolph Road.

They completed the first construction phase of the project this month.

Based on 2008 rates, they were looking at a projected bill of $221,000 per month.

Between 2008 and what they're paying now, the rate increased by 14.12 percent. From 2008 to 2015, they are looking at an increase of 90.14 percent, he estimated.

The economy is "screaming" 3 to 4 percent numbers, he said.

Willis asked commissioners to consider re-crunching the numbers, as a significant portion of the rates could have gone toward new jobs.

"Whether it's a deal breaker or not for the project, I don't know, I don't make that decision," Willis said. "You're impacting a project by an additional $2.5 million."

John Ford, of Sabey Data Center Properties, said the company is building the first of three buildings in Quincy and prefers to stay in Washington state.

If some of the proposed rates go into effect, the company might not be able to build the other buildings, he said.

In western Washington, the state Route 520 floating bridge/tunnel project came in under budget, he said.

He asked if the district has the opportunity to reexamine its project costs.

Commission President Randy Allred said debt service is increasing by more than $50 million this fall.

Commissioner Tom Flint said the commission is taking the issue seriously and was looking at the budget that morning to see if they could reprioritize spending.

The district is dealing with different license requirements than it had in the past, he said.