Grays Harbor PUD commissioners are prepared on Monday to adopt a 2013 spending plan that appears to favor the lowest of three capital spending options but likely will include a rate increase of 5-7 percent.
The commissioners since Oct. 16 have been considering an operations and maintenance budget for 2013 of about $110.5 million, with a capital budget of about $7.5 million. The three commissioners also have studied a $10 million capital option as well as a $15 million option, which included all projects requested by staff.
“We continue to do those things to maintain reliability and to make the system safe,” General Manager Rick Lovely said of the capital budget items at a workshop on Tuesday. “We have problems that need to be fixed.”
Commission President Tom Casey said he didn’t want to consider anything less than the $7.5 million for capital projects and also wanted to avoid dipping into reserves with the budget.
“We can manage to that,” said Doug Streeter, the PUD’s chief financial officer.
Former PUD lineman and senior engineer Ralph Koal questioned the capital recommendations at the commissioner’s last workshop on Tuesday.
“If you are living in your house, you want to fix the toilet and the hot water heater before you add another bedroom on,” Koal said. “This place has not maintained itself.”
Casey said he was concerned, too, that the capital budget could impact service.
“What’s the stuff that falls below the cutline and what’s the risk we’re taking with that?” Casey asked.
One of the biggest single expenses, $1.5 million for a new PeopleSoft Software system for customer service and billing, is something that must be done, Streeter noted.
Streeter said even with the lowest option for capital spending, the PUD would fix anything that needed to be fixed.
“If there is a $500,000 issue, then we’ll be $500,000 over budget,” Streeter said. “But you know what, it’s going to get fixed.”
Casey responded that “something that’s going to get fixed is something that’s broken.”
But knowing what the whole budget package contains, Casey said he “probably could live with that. But I don’t like it.”
To fund the entire budget without cutting into reserves or other funding, would take about a 7 percent across the board rate increase, Streeter suggested.
The PUD did not increase rates for 2012 in the $107.5 million operations and maintenance budget and a capital budget of $8.48 million adopted last year. The only other PUD in the state to avoid a rate increase last year was Franklin County PUD.
The last rate increase of 7 percent was passed in December 2010 and went into effect in 2011.
The increase now being considered is in anticipation of a Bonneville Power Administration pending rate hike. The BPA supplies most of the PUD’s power. The budget also takes into account the impact of a declining power market with a projected decrease in $2 million in revenue for the coming year from the sale of surplus power. In the past, when market conditions were more favorable, the PUD sold surplus power to reduce or prevent rate increases. “I don’t think there is much potential in trying to beat BPA’s rate increase back,” Casey said.
Commissioner Russ Skolrood noted that the capital budget actually was about $6 million when the cost of the new software system is taken off the top.
“I don’t see anything in the $6 million that is a waste of ratepayers money,” he said, noting that fewer breakdowns in the system are a benefit to ratepayers in the long run.
Commissioner Dave Timmons said he has gone over the $7.5 million capital proposal and couldn’t identify any other significant cuts that could be made.
“There aren’t any ‘wants’ in there, those are all ‘need to get done,’” Streeter said.
The commissioners have said they would like to vote on the final budget during the regular commission meeting that begins at 4:30 Monday afternoon in the PUD’s Nichols Building.