In order to keep its financial house in order, Klickitat County PUD must raise the retail rates it charges customers for electricity usage.
That’s the sober message that KPUD General Manager Jim Smith delivered at a public rate hearing in White Salmon on Nov. 23. Only one customer attended and provided testimony during the hearing, which began with Smith’s detailed presentation of two rate scenarios and KPUD’s financial situation.
Smith explained that revenues from the generation facilities KPUD either owns outright or in partnership with other utilities have declined to the point that they no longer provide a financial buffer against electric rate increases. Those revenues used to subsidize electric rates; now, KPUD needs to raise electric rates to subsidize its under performing generation facilities, which include the H.W. Hill Landfill Gas Plant at the Roosevelt Landfill, and the White Creek Wind Project in south-central Klickitat County.
Projections presented by Smith indicated KPUD expects about a $1.1 million drop in energy sales next year because of declining prices in a volatile renewable energy market. They also indicate a further decline in revenues as existing contracts for purchase of energy output expire in the next few years.
Absent this revenue, KPUD’s Board of Commissioners is being forced to consider sources to fill a projected $1.1 million gap in its 2016 budget that includes interest payments on about $138 million in bonded indebtedness related to KPUD’s under performing generation projects, and higher payments to Bonneville Power Administration for the wholesale hydropower KPUD buys, then sells to its customers. The current residential rate is 8.94 cents per kilowatt hour.
KPUD depends on hydropower to supply its customers with electricity; 85% comes from BPA, the other 15% from KPUD’s McNary Dam Fishway Hydro Project. (KPUD and Northern Wasco PUD each own 50% of the McNary project, which is experiencing a mechanical issue the partners are trying to resolve.)
The 2016 electric rate hike Smith is recommending to the KPUD Board is two-phased: A 3% increase on Jan. 1, 2016, and a 3% increase on July 1, 2016.
KPUD commissioners will hold a public hearing on KPUD’s proposed 2016 budget on Tues-day, Dec. 8, at 3 p.m., at KPUD headquarters in Goldendale.
Commissioners are expected to take two actions: a motion to adopt a resolution calling for the rate hike, and a motion to approve the 2016 budget, which includes a total operating budget of $10.9 million and total expense budget of $50.5 million.
John Janney, KPUD’s chief financial officer, said the rate hike will feel more like a 4.5% increase because of the phasing.
Janney noted that the 5.5% increase BPA passed on to public customers like KPUD on Oct. 1, 2015, won’t be felt fully until next year. BPA, like KPUD, has financial obligations related to its operations and long-term debt. This last rate increase will be in effect until the end of September 2017.
Smith said during the Nov. 23 hearing, “This rate increase keeps us relative to where we are with Bonneville today.”
KPUD’s proposed rate in-crease will provide $700,000 to cover the cost of buying BPA hydropower, and another $400,-000 for general operating expenses. Janney noted that the latter amount represents less than 1% of KPUD’s total 2016 expense budget.
The customer who attended to hearing here was White Salmon resident Bob Havig, a retired KPUD engineer/branch manager and one-time candidate for the KPUD Board.
Havig presented two charts to the board that graphed how much higher an average KPUD residential bill is today compared to those of four neighboring utilities (based on 1,000 kilowatt hours used per month). The rate comparison was for three time periods: Sept. 1, 2001; Sept. 15, 2006; and Nov. 20, 2015.
In 2001, KPUD was smack in the middle, but had moved to the top by 2006, according to Havig’s rate comparison that included Skamania, Benton, and Northern Wasco PUDs, and the Hood River Electric Cooperative.
“I’m concerned about the trajectory of these rates, [where KPUD is] going from the middle of the graph to the top,” Havig said.
He also criticized KPUD Com-missioners for the amount of debt they have exposed KPUD ratepayers to as a result of board-initiated investments in power-generating facilities, and encouraged the commissioners to not get involved in any more projects, such as the proposed John Day Pumped Storage Project, that would expand on that exposure.
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