PUD to Hold December 15 Public Hearing on Proposed $33.8 Million Budget for 2016

Controllable expenses, including capital equipment, are budgeted at $10.24 million. This is the lowest level since 2009.

Wholesale power costs, which make up 57.3% of the total budget, are projected to be $19.38 million. This is an increase of $1.10 million over the 2015 budget. The change is primarily the result of a wholesale power and transmission rate increase enacted by Bonneville Power Administration (BPA) in October 2015. BPA raised wholesale power rates for the PUD by 7.2% and raised transmission rates by 3.4%.

Rates expected to remain stable

The PUD does not plan to make any rate changes in 2016.

The PUD completed a Cost of Service Analysis this summer and enacted a 6.4% overall rate increase on October 1, 2015. The increase was lower than the amount recommended by the analysis, which was based on projected future revenues and expenses.

“We have found ways to reduce expenses without sacrificing customer service or reliability, to help minimize the impact to customers of increasing wholesale power costs,” said Nguyen. “This allowed our Board of Directors to keep rates affordable by adopting a smaller rate increase than the Cost of Service Analysis recommended.”

On average, the PUD’s residential electric rates are about 34% lower than those charged by Portland General Electric, which previously served customers in the area. The PUD’s lower prices saved residential customers an average of $570 each in 2014, and similar savings are occurring in 2015.

Operating revenues projected to rise to $31.5 million

Overall operating revenues are projected to rise to $31.54 million, which is $2.58 million or 8.9% higher than 2015 levels. A warm winter in 2015 that produced lower-than-projected revenues, lower industrial loads in 2015, and the rate changes implemented in October 2015 are the largest factors in the increase.

Capital projects include substation, distribution system work

The 2016 capital construction expense of $2.49 million is well within the PUD’s historical capital budget spending levels of $2 – $3 million annually.

The largest capital project in 2016 will be the replacement of a 54-year old transformer at Rosehill Substation in St. Helens. This project is part of the PUD’s long-range capital improvement plan that was developed in 2010 to ensure that the PUD is able to accommodate growth in the area and provide reliable service to all customers, now and in the future.

The capital budget also includes a distribution line to tie two substations together, several projects to upgrade overhead power lines and move lines underground, and a project to replace transformers and underground cables at a local marina.

No additional debt planned

The PUD will fund all 2016 operations through electric rates and cash reserves. The Board does not plan to issue any long-term debt during 2016. The PUD recently refinanced its remaining long-term debt, resulting in a savings of $353,000 in interest expenses, and is on track to pay off all long-term debt by 2020.

Year-end cash reserves to remain above target

The PUD uses cash reserves to provide contingency funds for long-term capital construction projects, customer deposits, short-term operating expenses, storm response, and strategic capital investments. The proposed 2016 Budget adds $7,602 to the year-end cash reserve balance, compared with a 2015 budgeted cash drawdown of $1.98 million. Cash reserves for 2016 are projected to remain above the $8.2 million target previously set by the board.

“The staff has worked very hard to provide the Board with a sound, balanced, and fiscally responsible budget for 2016,” said Nguyen. “This will allow us to continue to carry out our mission to provide quality services at the lowest practical cost.”