PUD Board Approves 2013 Budget

December 19, 2012 – At its December 18 meeting, the Columbia River People’s Utility District (PUD) Board of Directors approved a $33.2 million Operating and Capital Budget for 2013.

The 2013 Budget is 0.8% higher than the approved 2012 Budget, but controllable expenses, which exclude power costs, depreciation, taxes and equipment, are 7.2% below 2012 Budget levels.

The PUD sets its annual operating budget through a process that involves the PUD Board, PUD staff, and a customer Budget Advisory Committee. The Committee, which met twice in November to provide input on the proposed budget and activities for the upcoming year, includes representatives from the PUD’s residential, commercial and industrial customer classes, along with low-income and senior advocates.

“I look at our Budget Committee as the eyes and ears of our customer base,” said PUD Board President Loren Tarbell. “I appreciate their willingness to help us stay focused on the right things.”

4% rate increase planned for October

The PUD will draw from cash reserves that were set aside for rate stabilization and implement an overall 4% rate increase next October to accommodate a wholesale power cost increase that will be implemented by Bonneville Power Administration (BPA) on October 1, 2013. The PUD’s only other rate increase in the last 11 years was also a 4% increase, which was implemented in October 2011. That increase was also a result of rising wholesale power costs. When BPA implements its new wholesale rates in October 2013, the PUD will be paying nearly 24% more for wholesale power than it was in 2009. Power costs make up 50% of the PUD’s 2013 Budget.

When the PUD completed a 5-Year Cost of Service Analysis in 2011, PUD staff projected that BPA would raise wholesale power costs by 6.5% in October 2013. BPA recently published its preliminary rate case, which includes a 7.1% power cost increase for the PUD.

“BPA’s preliminary announcement was very close to what we projected,” said PUD General Manager Kevin Owens. “If their final increase is similar to what they announced, we expect to enact a 4% rate increase on October 1 and then hold rates steady through September 2015.”

The PUD’s residential rates are currently 38% lower than those charged by Portland General Electric, which previously served customers in the area. The PUD’s lower rate saves residential customers an average of $573 each per year, and has saved residential customers nearly $59 million since the PUD began operations in 1984.

No additional debt planned

The PUD will fund all 2013 operations, including capital improvements, system maintenance, tree trimming, energy efficiency programs, and customer service functions, through electric rates and cash reserves. The Board does not plan to issue any long-term debt during 2013, and expects to pay off its existing $8.3 million in long-term debt in 2020.

“We operate in a fiscally conservative manner,” said Tarbell. “We don’t borrow money for daily operations or system improvements. We save up and plan our projects when we can afford to pay for them without borrowing. This keeps costs lower for all PUD customers.

Staffing levels to remain steady

The PUD plans to hold staffing levels steady in 2013. The PUD has 54.5 budgeted positions, with four positions currently unfilled. The PUD plans to fill three of these positions in 2013.

“Our staff operates at a very high level of competency and efficiency,” said Owens. “That, coupled with our use of technology, allows us to meet customer needs with fewer employees, which keeps costs lower for our customers.”

The PUD has invested heavily in technology to help streamline operations and improve customer service. During 2012, the PUD outsourced its bill printing and began upgrading its digital mapping system to facilitate system improvement work.

Capital improvements planned

The PUD plans to spend $2.8 million on system improvements, equipment and construction in 2013. The purchase of two bucket trucks and continued construction of the new Fairgrounds Substation in St. Helens are the largest capital expenditures planned for the year. The Staff and Board will also evaluate the PUD’s headquarters facility during the first quarter of 2013 to determine the best way to accommodate the need for additional office space, meeting facilities, and training facilities.

The construction of the new Fairgrounds Substation is part of an 8-year capital investment plan to add capacity and replace aging infrastructure within the PUD’s service area. In 2011, the PUD replaced a 54-year-old transformer at Scappoose Substation with a new, larger transformer that will accommodate growth in the area and provide an alternate source of power for customers served by neighboring substations. The PUD plans similar upgrades for transformers at Rose Hill Substation in 2015 and St. Helens Substation in 2017. These projects will be paid for through electric revenues and cash reserves, without additional borrowing.

The PUD also plans to spend $855,000 on tree trimming in 2013. The PUD trims trees and removes trees growing near the power lines on a three-year cycle. In 2013, the PUD’s contract tree trimming crews will be working primarily in the Rainier area.

“We’ve had a lot of success in reducing outages through our tree trimming efforts,” said Owens. “It’s particularly valuable in the heavily forested parts of our service area.”

Operating revenues expected to rise slightly from 2012 levels

Overall operating revenues are projected at $28.4 million. The PUD’s operating revenues peaked in 2008 and then declined during 2009 and 2010 as a result of the economic recession and the closure of several local businesses. After recovering somewhat in 2011, in 2012 the PUD’s largest single customer experienced an extended, scheduled outage that curtailed their energy use by nearly 10 million kilowatt-hours. Revenues in 2013 are projected to be 2.3% below 2008 levels, and 2.4% above 2011 levels.

Cash reserves projected at $9.25 million

The 2013 Budget includes a projected decrease of $1.47 million to cash reserves. However, the projected 2013 year-end cash balance of $9.25 million is adequate to provide contingency funds for rate stability, long-term capital construction projects, storm response, and strategic capital investments and opportunities.