Your PUD News Release

Small rate increases suggested as part of long-term financial outlook

Chelan County PUD
News Release
4/13/2005

To get Chelan County PUD securely through 2011, when new long-term power contracts will be in place, Chief Financial Officer Joe Jarvis told the Board of Commissioners Wednesday that small rate increases should be considered between now and then.

He suggested they consider 2.5 percent annually or an amount that would cover inflation. He said they could also consider a temporary surcharge in low-water years, to cover the loss of anticipated revenue from surplus power sales.

While the PUD is in solid financial shape for the next few years, Jarvis said this low-water year is an alarm bell that is alerting PUD managers to the need for additional revenue to maintain District financial reserves, reduce debt and sustain a healthy debt-coverage ratio that can affect bond ratings. Projections show the PUD’s financial picture declining in 2008-2011.

Jarvis acknowledged that PUD commissioners are reluctant to consider raising electric rates. But he said a series of small increases would secure the PUD’s financial position and avoid the potential of sudden, larger rate increases that would come as  more of a shock to customers. He recalled the turbulence of the mid-1990s when double-digit rate increases in 1993-95 had angry customers asking why the PUD had not planned ahead and leveled out the spikes?

Chelan County PUD has not raised electric rates since 2000 when a 2.5-percent increase was added for customers using higher quantities of power. Today’s residential rate of approximately 3 cents per kilowatt hour is about a third of the national average and is among the lowest rates in the country. Even with the suggested inflationary rate increases, Jarvis projected that residential electric rates in Chelan County after 2011 would still be only about 3.5 cents a kilowatt hour.

General Manager Charlie Hosken said many other utilities are allowed to add surcharges to rates when the cost of fuel such as natural gas or coal rises more than expected. He said hydropower utilities are looking at similar surcharges to cover the problems associated with low-water years when there is less “fuel” in the rivers to generate electricity.

Chelan County PUD has budgeted income of $39 million this year from the sale of surplus electricity on the open market. With the drought, that figure may be trimmed to $29 million, depending on what happens with the market price of power.

The PUD has stopped generating power at the Lake Chelan Project in order to save water in the lake and guarantee that lake levels this summer meet the federal requirements in the PUD’s operating license. Usually in April, May and June, the PUD is generating heavily at Lake Chelan during spring runoff from the mountains.

Jarvis explained that the PUD has been paying close attention to its spending (this year’s budget reflected a 0.3-percent increase in operation and maintenance spending). He said it would still be prudent to begin raising revenue gradually to cover the financial needs of the years 2008-2011.

PUD commissioners took no action Wednesday. They were meeting in the second day of a two-day strategic planning retreat. They are expected to consider the financial picture in upcoming meetings and will be explaining the finance picture at upcoming community meetings proposed in May. No dates have been set.

Commissioner Werner Janssen said he thought it was a perfect time for the PUD to promote maximum energy conservation in order to preserve as much surplus energy as possible for sale on the surplus market – thereby benefiting PUD finances and minimizing needed rate increases.

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PUD commissioners will meet next at 1 p.m. Monday, April 18, in the PUD board room, 327 N. Wenatchee Ave., for their regular weekly meeting.

Steve Lachowicz
Communications Director
661-4639, direct line
679-0148, cell
stevel@chelanpud.org