Grays Harbor PUD customers will pay 8 percent more per month for electrical service under a 2013 budget approved unanimously by the three commissioners at their regular meeting Monday.
The PUD said the increase means an additional $7.51 a month for an average customer using 1,100 kilowatt-hours a month.
The 2013 budget, the last for retiring PUD Commission President Tom Casey, includes a $110.5 million operations and maintenance spending plan and $7.5 million capital budget.
Although he voted for the plan, Casey called the capital budget “inadequate” and noted that “we have shrunk the number of employees we have.”
The outgoing commissioner, first elected in 1982, pointed out there was no rate increase last year and said he had presided over far greater increases.
“I know $7.50 in one month is meaningful to a lot of people, but given the pressures, it’s manageable,” Casey said. “… This budget is far from disaster. I can remember raising rates 50 percent.”
But Aberdeen resident Tony Myer disagreed: “That’s unacceptable. You started out at 4 or 5 percent, then it went to 7 and now it’s up to 8… . That’s not a good figure.”
PUD Chief Financial Officer Doug Streeter replied that there was no other way “to maintain the financial integrity of the district.” Reserves already are lower than they should be, Streeter said.
“We can’t squeeze this turnip any tighter than what we are right now,” Streeter said.
PUD staff and commissioners said the rate increase is needed to fund capital improvements without borrowing or using reserves, and it reflects increasing power supply costs from the PUD’s largest supplier, the Bonneville Power Administration. Streeter noted the budget includes payments of $6.3 million in interest, with about $3.5 million to pay off principal for past borrowing.
Casey said rates would have been even higher had the PUD not been able to keep rates lower in past years by borrowing to pay for needed capital projects. “Those are the things that are putting on this pressure” for a rate increase, he said.
“Rising BPA rates and the requirement to invest in renewable resources adds millions of dollars in additional costs,” PUD General Manager Rick Lovely said in a budget statement.
Under Initiative-937, passed by state voters in 2006, Grays Harbor PUD is required to provide a certain percentage of the energy needed to serve customers from renewable resources. The PUD estimates the cost for compliance is $4.04 million for 2013, an increase of $280,000 over last year. “In a rational market, we never would have made these decision, we never would have made those purchases,” Lovely said of the higher costs of purchasing eligible resources under the act.
PUD administration has said staff continue to cut internal costs, with departments trimming almost $1 million dollars in operations and maintenance budget. The staff has been reduced in the past several years, going from 184 to 154 employee positions, Streeter said.
Commissioner Russ Skolrood thanked the staff for going through a thorough budget review process.
“I don’t think anybody is going to do cartwheels over this one,” he said.
Skolrood called the spending plan a “bite-the-bullet budget. I think it stops the borrowing for a year.”
The rate increase equates to a $7 million source of revenue to pay for the capital budget, and Skolrood said he hoped the PUD could start to save up money in the future with the one-year rate increase.
Commissioner Dave Timmons, voting for his first rate increase, said he had thoughts when he was elected that he could “come in here and have a status quo budget. Not true.”
Lovely called the capital budget “bare bones,” and said much of it is for “preventative measures and upgrades to update aging and outdated equipment.”
With the rate increase, which was higher than previously projected, Lovely said the “plan is to fund these investments from revenue rather than assume additional debt at this time.”
The budget is based on a revenue forecast that projects continued declines in revenues (a projected $2 million decrease) from the sale of surplus power into power markets and little change in retail revenues.
Casey blamed a lot of the PUD’s financial plight on the surplus power market, which has seen prices plummet because of an abundance of natural gas produced by a method known as hydraulic fracturing, or “fracking.”
“This fracking isn’t going away,” he said.
The PUD notes the decline in the power markets is now a four-year trend.
“Now, instead of having that, we have to find revenue right here at home and charge our own ratepayers to pay the bills,” Casey said.
The last rate increase of 7 percent was passed in December 2010 and went into effect in 2011. Streeter said the current budget with the 8 percent increase was the “worst thing I have ever had to put together, but it’s what we were tasked to do. We are trying to maintain the PUD.”
Casey will be honored Thursday as the 2012 recipient of the Lifetime Achievement Award for the Washington Public Utility Districts Association (WPUDA).
The award recognizes Casey for “exceptional leadership and dedication to the ideals and principles of the association and the philosophy and purpose of public power.” The award will be presented at the association’s annual conference banquet at the Heathman Lodge in Vancouver, Wash.