Cost of service part of setting PUD rates

EPHRATA — Rates are a subject that comes up a lot in conversations about the Grant County PUD. How rates are established and how they’re calculated have been debated for a long time.

Rates came up again during public hearings on the PUD’s 2019 budget. “A lot of them (customers) feel that we are subsidizing certain rate classes. And it’s not the rate classes, ag or anybody else. You know what I’m talking about,” said Marvin Price, testifying at the Oct. 9 hearing in Ephrata.

Current PUD rate policy takes into account the cost of providing electricity to its customers, divided into various rate classes. Under the current policy all customers and rate classes should pay at least 80 percent of the cost of providing their electricity by 2024. That’s the floor, and there’s a ceiling. The current policy says customers should pay up to 15 percent more than it costs to provide their electricity, but not more than that.

Current estimates are that residential and irrigation customers, and small general service (things like small businesses and some agriculture) pay less than the cost of providing electricity. Large industrial customers are paying more than the cost of providing service. In both cases, it’s outside the ceiling and floor set by the PUD policy.

Okay, fine, but how much does it cost? Which all leads to another question. “How is it that one rate class has a lower rate, and a lower cost, than another rate class?” said Jeremy Nolan of the PUD.

Utility district officials periodically review how much it costs, the last time in 2017. The next review is scheduled for next year, Nolan said.

Everybody pays for certain parts of the system, Nolan said – everybody is chipping in for maintenance and operation at Wanapum and Priest Rapids dams, and everybody is paying for high-voltage transmission lines. Everybody also pays for substations and some transformers, because everybody uses those, Nolan said.

After that is when it starts to get complicated. “Off of those substations, you get distribution lines.” But not everybody uses those, Nolan said.

Getting electricity to a house, an irrigation system or a small business requires one kind of transmission system, and getting electricity to a large customer requires another. As customers build – installing an irrigation system in a new field or building a data center – they pay most of the cost of getting electricity from where it stops to where it needs to go.

That’s partly dependent on geography, said Clark Keml, senior manager for rates and pricing. The electrical line to an irrigation setup is likely to be longer than the line to a large industrial customer.

Where customers paid to help build the infrastructure, their rates are going to be lower than those of customers who paid to hook into the existing system. In addition, some large industrial customers paid more than their infrastructure cost, so their rates are set to pay them back, Nolan said.“If they (a customer) are paying up front, then their ongoing rate is going to be lower because of that,” Nolan said.

There’s only a couple ways for the PUD to recover their costs, Keml said. “If it’s not collected up front, it needs to be collected incrementally, so either on a monthly basis or volumetric, as in per kilowatt-hours.” Large industrial users use more power, and can spread the cost over more kilowatt-hours.

The idea is to have customers pay for the parts of the system they’re using. Nolan used irrigation customers as an example. “Thirty-five percent of their whole cost is tied up in portions of the system that industrials never use. For residential, it’s 31 percent. It’s not an inconsequential amount.”

The cost analysis is only part of the process of setting rates, Nolan said. The actual decisions on rates are made by the commissioners.

Nolan said PUD employees are willing to answer questions from customers about the cost analysis process and how it works, in as much detail questioners want. People who have questions can contact the PUD’s public affairs office.

Cheryl Schweizer can be reached via email at education@columbiabasinherald.com.