Chelan PUD commissioners reviewed a preliminary budget for 2023 on Monday that delivers on a bold capital project plan with higher-than-forecasted revenue from a strong energy market (available on the board audio recording around 02:95:00).
While revenues are expected to increase, so are operating expenses as the utility carries out the priorities set in its 5-year business plan, and the 2020-2024 strategic plan. Those priorities include:
The next budget hearing will be Nov. 21, followed by a board vote Dec. 5.
Chelan PUD, partners find a path forward after Service Center delay
Construction is in full swing at the 19-acre Service Center campus after challenges with supply-chain issues, a labor shortage, and the discovery of cultural artifacts. (Audio available at about 01:24:00 of the board audio.)
“It’s been a challenging environment for construction nationwide,” said Shared Services Director Dan Frazier. “Industry data indicates that across the construction sector, project costs have increased by over 14 percent this year due to supply chain disruption and labor shortages.”
After discovery of several cultural artifacts in 2021, Chelan PUD paused groundwork last November for nine months while staff consulted Confederated Tribes of the Colville Reservation, Yakama Nation, the Wanapum, and the Washington State Department of Archaeology and Historic Preservation (DAHP).
“Working together with our tribal partners was an enormous benefit,” Frazier said. “It’s given us the opportunity to strengthen relationships, and reinforce the PUD’s commitment to our core values of stewardship and trustworthiness. We look forward to continuing that collaboration into the future.”
The additional investigations and monitoring resulted in a new cultural excavation permit that allowed the PUD to move forward with groundwork in July 2022. The new permit includes ongoing monitoring, weekly communication with our tribal partners, and a process if more artifacts are unearthed during construction.
Combined with inflation, supply-chain issues, and labor shortages, the setbacks are expected to increase the $139 million cost by about $25 million. Because of the PUD’s strong financial position, there will be no anticipated rate impacts to customer-owners as a result of the increased costs.
“Most construction projects are experiencing costs and schedule impacts due to labor, supply-chain, and inflation challenges and we are committed to completing this project with a high degree of quality to better serve our customers,” said General Manager Kirk Hudson. “Looking at all the alternatives, this project still aligns with our Vision of the best, for the most, for the longest period of time.”
Chelan PUD expects to wrap up 2022 with a $150.5 million bottom line, about $89 million more than budgeted due to surplus energy sales, and the increasing value of hydropower as a carbon-free, renewable energy source. Part of that revenue will be used to cover the $25 million increase through the Board-designated Strategic Facilities Fund.
“The Service Center campus will fundamentally change how we operate as an organization to better serve our customer-owners and fulfill our mission,” said Project Manager David Lodge. “Despite many project challenges, the long-term benefits will echo for generations to come.”
Looking back at the options the board considered during the planning process, Commissioner Randy Smith said he believes that the benefits of a consolidated campus can’t be measured in dollars alone.
“One of things I recall at that moment, there were intangibles that I believe to this day will ultimately play out as a positive for the District, over and above the numbers we’re looking at,” Smith said. “Bringing all of our facilities to one campus where people can interact in different fashion than they are today will increase efficiency well beyond what we anticipated then.”
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Watch construction of the Service Center in action with this short video.