PUDpost2Okanogan County PUD commissioners are hammering out a budget to cover shortfalls. File photo by Sue Misao

 

BY MARCY STAMPER

Plummeting prices for power on the wholesale market, overly optimistic projections about growth, numerous capital projects and a coming increase in what it pays for electricity have the PUD relying on borrowed funds and planning another rate hike this fall.

The Okanogan County Public Utility District commissioners and staff got an earful from ratepayers who are disgruntled by the proposed increases and by the utility’s spending and borrowing for capital projects at their board meeting on May 28.

The PUD has been working with consultants and a ratepayer advisory group over the past six months to find ways to cover an annual shortfall of $4.5 to $5 million, according to PUD Director of Finance and Auditor Don Coppock.

In December, the consultants proposed a 16-percent increase in each of the next two years and smaller increases in subsequent years, and floated another alternative – three 9.5-percent increases – at the end of May. Both plans were assailed by ratepayers.

Staff and consultants are still drafting various scenarios, which include spreading out the increases over a longer period and modifying how people are charged for electricity. They are also considering postponing some capital projects and maintenance and weighing the impact of different levels of borrowing on their budget.

One goal is to simplify bills so that ratepayers readily understand the charges, said PUD commissioner Steve Houston in an interview last week. Residential customers currently pay a $10 base charge and a $25 minimum energy charge, which includes the first 500 kilowatt hours (kWh) used. Usage above 500 kWh is billed on top of that.

PUD staff will meet with a ratepayer advisory group later this month to evaluate two new scenarios – phasing out the 500 free kWh over two years or all at once and instead charging for every kWh used, said Coppock. Both plans would carry a $35 base charge.

Some of the shifts grow out of an analysis of the PUD’s cost of providing power to customers – about $78 each – and a comparison of the portion of that cost paid by each ratepayer class. Residential customers pay less than half the PUD’s cost of providing service, while commercial and industrial customers pay more than it costs, according to the study. Houston said it is typical for commercial and industrial customers to subsidize residential accounts but that the PUD wants to even out the gap.

 

Recession hits hard

The main contributor to the district’s financial woes is a major drop in what the PUD earns from selling surplus power, which brought in $12 million at its height in 2008 but has fallen 75 percent, to just $3 million annually, according to Coppock.

“For years, we’ve relied on that to balance the budget,” said Houston at the May meeting, acknowledging that the PUD had not saved any of its revenue from surplus power sales and now relies more on debt.

The utility is also making up for overestimating growth in its 2010 equity management plan, said Coppock. Since growth had been running at 3 to 4 percent a year, they planned for an expansion of 2.6 percent. In fact, growth has not even reached 1 percent a year, he said. They also based their calculations on one or both of the area’s sawmills starting up again, but both remain idle, said Coppock.

“On a debt-to-asset basis, we’re very strong, but in terms of operations, we’re barely treading water,” he said.

Still another factor pushing a rate hike is a 9.6-percent increase (spread over the next two years) coming in October from the Bonneville Power Administration for the power it sells the PUD.

 

Debt, Enloe, no solar

Several members of the public at the May 28 meeting questioned the PUD about its debt, which is close to $39 million this year. Total assets – headquarters, the power grid and equipment, and cash and receivables – are $130 million, said Coppock. Retail sales bring in $36 million a year.

The PUD, like all utilities, tries to strike a balance between using ratepayer revenue to cover its expenses with borrowing to pay for ongoing maintenance and future projects, said Houston. By borrowing, they spread the cost of the system over its life span, he said.

The PUD Action Group, an informal alliance of ratepayers, has been hounding the PUD for the past three years to make the utility more accountable.

“Our fundamental concerns are they don’t seem to pay any attention to the public ratepayer,” said Action Group leader Dan Isaac of Tonasket in an interview last week. Isaac attended the May meeting, but said a major gripe is that meetings are held during the day when working people cannot attend. Isaac questioned the PUD’s “unbridled spending” on projects such as smart meters, Enloe Dam and the Methow transmission line. “They’re a public utility and are supposed to respond to the will of the people – the majority in the Methow don’t want it [the powerline] there,” he said.

Oroville resident Joseph Enzensperger said Enloe Dam has been a cash cow for lawyers, lobbyists, engineers and consultants but a source of red ink for the PUD. He urged the PUD to re-install the pilot solar project that had been at its previous headquarters. “Why does this utility in the sunny Okanogan have zero solar in its portfolio?” he said.

Enzensperger said he was impressed by the reception at the meeting. “There was extensive give and take. They asked some good questions,” he said.

 

Rate hike in fall

The PUD had planned to raise rates starting in July, but because it is taking longer to arrive at a new rate structure, commissioners predict it will come in September or October.

They will most likely take up the issue again at their June 25 meeting. Houston said they plan evening meetings at sites around the county to discuss rates.

Agendas, audio from past meetings and detailed documents about the consultants’ rate study are posted on the PUD’s website at www.okanoganpud.org.