PUD 2015 rates to be set Oct. 28

EPHRATA - Grant County PUD staff tentatively projected that revenue from residential customers will have to go up by 2.4 percent in 2015. The projection was part of a presentation on rates at the regular commissioners meeting Tuesday.

That's only a revenue forecast, not actual rate recommendation for 2015, said Bonnie Overfield of the PUD's financial department. A final rate recommendation is scheduled for the Oct. 28 meeting.

The preliminary report said irrigation customers would have to generate 3.5 percent more revenue, 3 percent for general service customers and one-half of 1 percent for large industrial customers.

Jeremy Noakes, of the PUD's financial department, said the rate projections reflect the results of a study to determine the actual cost of service, and PUD policy that establishes the goal of moderate rate increases. The policy sets a maximum 2.5 percent rate increase, based on total revenue requirement.

The cost of service study determined that irrigators and residential customers are paying less than what it actually costs to provide electricity to them, and large industrial customers are paying more than the actual cost. The PUD's rate policies stipulate that each class of customers has to pay at least 80 percent of the cost of providing their electricity by 2023. It further stipulates each rate class pays a maximum of 15 percent over the cost of its service by the 2023 deadline.

Noakes said the proposed 2015 rates are a step in that direction.

Board member Larry Schaapman asked about the cost of service study. The PUD has conducted three cost studies recently, he said, and the results have been different, sometimes dramatically different. He asked if PUD staff members were confident the results of this study were accurate.

Noakes said he's "much more comfortable" with this assessment process. Over time the PUD has changed the way it collects some of the data, so some of the results aren't as detailed, he said. But over time that will change and the big swings in study results should diminish, Noakes said.

The results will reflect underlying circumstances, as power consumption changes for different rate classes, Overfield said. But it should be more consistent, she said.

Utility district employees will be working on an analysis of the current rate structure to determine if it will meet the goals set in the policy, Noakes said. It'll take a long time to get to the goal at two percent per year, he said, but that's a more stable rate schedule.

The analysis also will include a look at adjusting rate classes. The rate structure has to be balanced between rate classes, Noakes said. If most customers are at the low end of the rate schedule, the PUD won't be able to pay for its services, he said.

The analysis will look at ways to balance fixed and variable costs and revenues, Noakes said. Currently most of the expense of running the PUD comes from maintaining the dams, power lines and substations, costs that will always be there, called fixed costs. Most of the revenue comes from customers using the system, which goes up and down with the season and the circumstances, called variable revenue.

Right now about 84 percent of expenses are fixed costs, while about 77 percent of revenue is variable, Noakes said. The analysis will look for ways to change that.