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Board reviews business plans with an eye towards meeting financial challenges in the 2020s

by Kimberlee Craig | Oct 02, 2017

Chelan County PUD commissioners Monday reviewed detailed business plans for the next five years while also taking a look at projected financial results through 2027.  The result is a forecast showing the District meeting its financial targets through 2022. The plans, though, reflect a transition to facing financial challenges in in the mid-2020s as a result of declining wholesale revenue and increasing infrastructure investment demands.

Since 2010, the District has taken advantage of a favorable wholesale market to reduce debt, avoid rate increases, create long-term customer value and maintain reliable service to meet growing load. Unlike most other utilities, about 80 percent of the District’s revenues result from sales to other than customer-owners. The single biggest change since adoption of the strategic plan in 2015 is the drop in wholesale power prices.

“The sun is shining on us but there are clouds – not storm clouds - on the horizon that are getting closer,” said General Manager Steve Wright. “Chelan PUD continues to be in strong financial shape in the near term. We see financial challenges in the longer term that are common for other utilities.

“This vital planning helps us be prepared and provides long-term vision for our short-term actions.”  (00:20:00)

One measure of Chelan PUD’s fiscal strength is that Fitch Ratings just affirmed Chelan PUD’s “AA+ Stable” rating, Debbie Litchfield, treasurer, reported Monday. The District is one of a handful of public utilities in the country to achieve that high rating, Litchfield said. (00:05:00)

The District is forecasting 2017 to be another excellent financial year.

Wright and Kelly Boyd, chief financial/risk officer, reviewed the updated five-year look at PUD finances as part of the District’s business planning. Goals for 2018-2022 will guide staff in developing next year’s budget.

Key among what’s changed from the previous five-year forecast:

  • Information gleaned from asset management is bringing a better understanding of aging equipment and structures. 
  • That understanding points to more investments for maintaining reliable service, meeting load growth and creating the best long-term customer value
  • Changing power markets and lower wholesale prices translate to declining forecasted revenue
  • Less revenue and needed investments mean borrowing and managing revenue will be needed sooner than previously forecast in the 2015 strategic plan. The strategic plan assumed no borrowing or revenue actions through 2027
  • Even with these challenges, all financial targets are forecast to be met through the five-year period

The plans do not alter the strategic planning objectives. Reducing debt and investing in assets and people are appropriate strategies to prepare for lower wholesale revenues. The Public Power Benefit program is proposed to be maintained at current level supporting broadband network expansion, the parking pass for PUD parks operated by the state, the hydro research initiative and Rocky Reach Visitor Center improvements.

“We are continuing to crawl before we walk in our Public Power Benefit efforts,” Wright added. No new Public Power Benefit projects will be solicited in 2018.

Key initiatives in the next five years, proposed in the plans, include:

  • Substantially higher than normal refurbishment of hydro turbines at Rocky Reach and Rock Island dams
  • New systems to provide customers better information
  • Investments to meet load growth that has roughly doubled in the last 18 months

 

Senior managers also outlined the five-year look for each of the PUD’s eight business units, that roll up into the District plan.

Commissioners thanked staff for the thorough review, noting the strong foundation financial planning offers for basing decisions on the District’s Vision, Mission and values.  

(Business planning discussion at 00:14:00-02:05:00 on the board meeting recording)

In other business, commissioners:

  • Approved moving forward with a request for proposals to replace the District’s aging analog radio system with digital equipment including mobile handheld and vehicle-mounted units that are vital for safe and effective communications for crews in the field and at the dams. The action calls for proposals from firms for design, engineering, equipment and installation, estimated at $3.6 million. In preparation for moving to digital technology, the PUD also is replacing its microwave communication stations to carry the digital signals, approved earlier by the board. (Discussion at 02:03:00)
  • Invited customers and employees to celebrate Public Power Week through Oct. 7 with their hometown utility. Customers are invited to Get in the Game of energy savings to win prizes including smart thermostats and installation donated by local contractors. To thank customers, PUD staff will have pumpkin doughnuts and cider in office lobbies 11 a.m.-1 p.m. on Friday, Oct. 6. The Public Power Week finale and Energy Fair is 9 a.m. to 1 p.m. at Pybus Market when prize winners will be drawn and customers can talk with PUD energy experts and contractors about game-changing devices to increase comfort and save energy and money.

Upcoming events:

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The next regular Chelan PUD commission meeting starts at 10 a.m. on Monday, Oct. 16, 2017, in the boardroom at 327 N. Wenatchee Ave. 

Outages or Emergencies

Visit our Safety and Outage Center for information, or to report an outage, 24 hours a day, 7 days a week, call 1-877-PUD-8123.

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