Your PUD News Release

PUD commissioners hear fiber construction update

Chelan County PUD
News Release
9/25/2006

General Manager Rich Riazzi and John Smith, PUD Networks director, Monday outlined factors that are affecting construction costs and the payback period for the PUD’s wholesale fiber-optics communications network.

Riazzi said the analysis of the fiber system is part of the overall look at District finances he and the board have launched for the community strategic planning meetings.

PUD commissioners in December 2002 authorized construction of the system to reach 55 percent of the county by 2012. A 2004 decision was made to accelerate construction to reach 95 percent of the county by 2012.

Access to the Internet, telephone and television services over PUD fiber is now available to 17,500 homes and businesses. There are 4,250 end-users buying services from 14 private service providers.

Construction costs have been higher than forecast since 2004 in part because many high-demand neighborhoods are served by power lines buried directly in the ground and not in conduit, Smith said. That has required trenching and boring to install fiber lines, increasing costs.

The number of end-users signing up for service has also taken longer to reach projected “take” rates, he said.

The plan approved in 2004 estimated the system would be cash flow positive by 2013 and pay for itself by 2026. Updated information now puts the cash flow positive date in 2018 and payback in 2037. Total investment in the fiber system is forecast at $140 million.

“Current costs are higher than anticipated,” Riazzi said. “Revenue per customer is growing, but is still below estimates. As a result, incremental risk has increased.”

Riazzi said he and the Networks team will look at ways to increase revenue and cut costs to bring the plan closer to original estimates. Possibilities include using wireless technology to bring access to high-cost and rural areas and seeking other wholesale customers for video services provided by the PUD.

Dr. David Weber from Wenatchee Valley Medical Center thanked commissioners for the investment in community fiber, saying it had saved lives. 

2007 budget process outlined

Targets, timelines and some of the challenges involved in balancing the PUD’s 2007 spending plan were discussed with commissioners on Monday.

The budget is being developed with a goal of holding increases in operation and maintenance costs to 5 percent over 2006, said TJ Farrell, budget supervisor. Finding the balance between that goal and rising material and fuel costs, increasing health care benefit costs and offering competitive salaries is the challenge, she said.

Randy Stedman, Human Resources director, discussed proposed salary increases, noting that pay for bargaining unit and salaried employees is 33 percent of the total operation and maintenance budget. He noted that a drop in the unemployment rate and increases in the cost of living are factors that impact the wages the PUD must offer to attract qualified employees.

Other principles for next year’s budget include setting cash reserves at a minimum of $75 million, maintaining the District’s AA bond rating and keeping a strong debt coverage ratio.

PUD commissioners will see a draft of the 2007 budget on Oct. 30. The final budget will be presented on Dec. 4, and approval requested on Dec. 11.

In other business, PUD commissioners:

• Approved redirecting PUD money paid in state utility taxes into the pockets of local people who produce alternative energy from sources such as wind and solar. Under a new state program the move will make about $9,000 more available this year to be shared among the producers in the PUD’s SNAP program (Sustainable Natural Alternative Power). If the program grows, the maximum payout would be $92,500. Commissioners also approved offering SNAP producers an option to use net metering, which would allow them to use the power they generate for their own home and get a credit on their power bill.
• Agreed to delay discussion on whether the board should take a position on Initiative 937 until all commissioners are present. The initiative, if passed by voters, would mandate the use of more renewable energy.
• Approved the hiring of PricewaterhouseCoopers of Delaware as the District’s new external auditor through 2008, replacing Deloitte and Touche. The cost will not exceed $230,000 for 2006 and will be negotiated for the next two years.

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PUD commissioners have set a special meeting for noon-1:30 p.m. on Thursday, Sept. 28, at the Wenatchee Roaster, 201 N. Wenatchee Ave., to attend the fall meeting of the PUD’s Medical Customer Partnership Group. 
The next regular meeting of the PUD commission is at 1 p.m. on Monday Oct. 3.
Most PUD commission meetings are recorded, and a link to the audio is available on the PUD’s home page at www.chelanpud.org.

Kimberlee Craig
Public Information Officer
661-4320, direct line
679-6858, cell
kimc@chelanpud.org