PUD Pays Off 1996 GO Bonds
June 1, 2009 – Columbia River People’s Utility District (PUD) has made the final payment on its 1996 General Obligation Advanced Refunding (GO) Bonds. These bonds were issued to refinance the debt incurred when the PUD purchased the electric system from Portland General Electric (PGE) and began providing electric service in 1984. By paying them off, the PUD has paid off its original $17 million debt.
“It’s a lot like paying off the mortgage on your home,” said PUD General Manager Kevin Owens.
Paying off the 1996 bonds will reduce the PUD’s expenses by $1.4 million annually. These savings come at a critical time to the utility. Wholesale power costs, which represent approximately 60% of the PUD’s operating expenses, are expected to increase by 5-10% this fall. The savings will be used to offset this added expense, thereby avoiding a rate increase for PUD customers.
Many regional utilities have raised rates recently or are planning rate increases in the coming months. Because the PUD planned ahead and built its cash reserves, no rate increase is planned for 2009.
The PUD’s electric rates last increased in October 2001; the last rate change was a decrease of 4.65% in October 2006.
Conservative use of long-term debt helps the PUD keep rates affordable and stable. The PUD has issued bonds or revenue obligations just twice since it began providing service. The first issuance was in 1984 to purchase the original electric system from PGE. The second was in 2000 when the PUD purchased additional service area from PGE to serve more customers in St. Helens, Scappoose and Columbia City. The PUD has refinanced its bonds several times over the past 25 years to take advantage of lower interest rates.
Although some utilities use long-term debt to fund system maintenance projects, vehicles and equipment purchases, Columbia River PUD’s Board of Directors has developed a policy that outlines just three scenarios for which long-term borrowing is acceptable:
- Expanding the PUD’s service area
- Funding large capital projects such as power generation
- Refunding existing obligations to reduce debt service
“All PUD operations and capital improvements are funded through rates,” said Owens. “By taking this approach, we save millions of dollars in interest payments each year.”
PUD customers enjoy substantial rate benefits as a result of the switch to community ownership. The PUD’s residential rates, currently 30% lower than PGE’s, yield nearly $7 million a year in savings to PUD customers.
“That money stays in our local economy,” said Owens. “It’s one reason why switching to the PUD was a wise investment for the residents of South Columbia County.”