PUD sets Nov. 10 for rate-hike hearing

Allison Arthur aarthur@ptleader
Posted 10/25/16

After four years without increasing electric rates, Jefferson County Public Utility District (PUD) is ready to take two steps in 2017 by proposing a $7.01 monthly base rate increase in January and a …

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PUD sets Nov. 10 for rate-hike hearing

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After four years without increasing electric rates, Jefferson County Public Utility District (PUD) is ready to take two steps in 2017 by proposing a $7.01 monthly base rate increase in January and a 1 percent consumption hike next June.

The base rate is the rate every customer pays per month regardless of the amount of energy consumed.

First, the PUD board hosts a public hearing at 6 p.m., Thursday, Nov. 10 at the East Jefferson Fire Rescue's fire hall in Chimacum, 9193 Rhody Drive.

The PUD has not raised rates since it purchased the power system from Puget Sound Energy for $115 million in April 2013.

“We know we have to raise rates because we have certain obligations,” said Jim Parker, PUD manager.

Even with a rate increase next year, the PUD needs to dip into reserves to the tune of $1.5 million to make ends meet on its $34 million electric budget, Parker said.

The PUD has been meeting and exceeding the debt coverage requirements for its loan to buy the system from Puget Sound Energy (PSE), Parker said, and now has about $10 million in cash reserves. A rate hike ensures that the PUD will continue to have adequate reserves, operating margins and the ability to fund system improvements, Parker said.

RISE IN POWER COST

The rate increase also is necessary because the cost of power that the PUD buys from the Bonneville Power Administration (BPA) has gone up twice since the PUD took over, and it is expected to go up again in October 2017.

“It's gone up 4 to 5 percent those other times, and it sounds like another 4 percent next year,” Parker said.

Operating costs have increased because the PUD has added more customer service, finance and engineering staff.

When the PUD took over the East Jefferson County power grid (excluding the Brinnon area) from PSE in April 2013, the PUD managed 12 water systems and had nine employees. Today, it manages 10 water systems – because several systems have been consolidated – and the electric power grid, which has 19,000 customers. The PUD now has 42 employees.

If approved by commissioners, the rate hikes likely would make the PUD's rates higher than PSE's current rates.

“If we do these rates, we probably would be a little higher,” Parker said. “We're trying to get away from comparing ourselves with PSE. They are under the Utilities and Transportation Commission (UTC) and they're a private company. We're closer to Clallam and Mason PUD and other public utilities."

Parker said he would look at PSE's rates and have comparison information by the Nov. 10 public hearing.

The rate increase is only for 2017. There had been talk of hikes three years in a row.

“The agreement that we got as a consensus of the board is that we would raise the rates in 2017 and look at the results and the consequences before making any determination for what to do in 2018,” said Ken Collins, PUD board chair.

THE PROPOSAL

The PUD's proposal to increase the monthly base rate from $7.49 to $14.50 – an increase of $7.01 a month – would go into effect in January 2017. Every PUD customer pays the base rate. When combined with consumption charges, it's estimated the cost would raise the average monthly bill by about 5.7 percent, according to the PUD.

Of that $14.50 monthly fee, the board has talked about setting aside $2 a month – roughly $500,000 a year – to help low-income customers pay their power bills. That currently is a line item in the budget, Parker said, noting that the PUD probably needs to hire a full-time person to manage the program.

Before it sold to the PUD, PSE had been giving low-income users about $450,000 a year in subsidies. That all disappeared when the PUD took over and a voluntary program called Power Boost was started, with customers who can afford to pay a little each month doing so. As a private company, PSE could make offer customer discounts that a public utility cannot.

Power Boost raised $15,700 in 2013; $73,100 in 2014 and $36,600 in 2015, far less than the $450,000 PSE was offering in assistance.

Currently, people who ask the PUD for financial help because they have low incomes can qualify for $20 off their monthly power bill and $7 off their water bill.

“Yet another reason [for the rate increase] is that we want to have the ability to ensure the most vulnerable people in the community don't have their power shut off in the winter,” Collins said of wanting a fund to help low-income people.

Collins said that $500,000 also would be part of the general fund and used for other purposes, such as responses to storm events.

As for the second increase, in June 2017, a month when electric consumption is typically low, the PUD is proposing to raise the consumption rate by 1 percent. Parker said that could cost the average customer about $1 a month more for those who use 1,000 kilowatts a month.

RECOMMENDATIONS

Commissioners heard from EES Consulting in August on a cost of service and rate design study that looked at various rates charged to customers. Commissioners also heard from members of the public, some of whom suggested the board get on with a rate increase sooner rather than later and get the PUD's financial house in order.

EES concluded that Jefferson PUD's base rate of $7.49 a month was one of the lowest in the state for public utilities. It currently is below the $12 a month that the Clark County PUD charges and well below Mason PUD 1, which charges $31.66 a month and Grays Harbor PUD, which charges $39 a month as a base rate, EES discovered.

SCHOOLS ISSUE

To ensure fairness among ratepayers, EES also recommended that schools pay more for some power services. EES found that schools should be paying 35 percent more than they were for “interruptible” power – power that the PUD could turn off at night when not in use. It was an early proposal that sparked controversy last summer, with Chimacum School District Superintendent Rick Thompson urging commissioners to be gentle with schools.

There were early predictions that a raise of 35 percent could cost the schools the equivalent of a schoolteacher.

Commissioner Barney Burke, running for a second term on the board, noted that not all schools have buildings that are on the interruptible rate. About half of the schools in Port Townsend are, for example.

Jeff Randall, who is opposing Burke for the District 1 seat, argued in a hearing against a 35 percent increase.

The board has since changed its 35 percent idea, instead suggesting a 5.5 percent hike for schools with the uninterruptible rate and phasing in an increase starting next June.

The board had also talked about increasing rates for schools for 2018, 2019 and 2020, but has opted to wait until 2017 to address further increases.

DECISION

After the hearing on Nov. 10, commissioners could act on the proposed rate increase at its regular meeting on Nov. 15.

“The goal would be to have rates in place at the first of the year,” said Parker. “It will take a little work to change the billing system,” he added.

For more information on rates, see

jeffpud.org.

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