The Lewis County Public Utility District held its public budget hearing on the 2021-22 budget via Zoom on Tuesday morning, identifying a $4 million budget deficit.
The three-year operating plan presented by staff shows a budget deficit in each of the three years — a $4 million deficit in 2021, $5.9 million in 2022 and $9 million in 2023.
Strategies to balance the 2021-22 budget and budgets of future years include possible rate increases, restructuring debt and deferring planned projects. The PUD has a public hearing on rates and the second hearing on the budget at 10 a.m. on Tuesday, Sept. 15. The 2021-22 budget will be voted on by the commissioners after the second reading. The second hearing on rates is scheduled for 10 a.m. on Oct. 6.
The PUD has budgeted for about $72 million in electricity sales in 2020 and adopted a balanced budget for the current year after raising rates.
The public attended Tuesday’s budget hearing via Zoom or phone and from the PUD’s Chehalis and Morton offices. The public in attendance could ask questions after the hearing.
PUD General Manager Chris Roden presented the budget and identified some of the key budget drivers as facilities maintenance and investment, fiber/telecommunications, LED street lighting and fleet maintenance and investment.
“We have a few major factors driving retail sales assumptions. One, first and foremost, is COVID-19. There’s a lot of uncertainty about this. Unfortunately, seeing the number of business closures locally, it is having a dampening effect on retail sales estimates into the future,” said Roden.
Roden said that the PUD will be losing some customers that use large amounts of power. Since the PUD is seeing this decrease in the use of electricity they’re using a 5 percent planning reduction.
“The decline in retail sales over the next three years is expected to total just below $10 million in the impact on the overall bottom line,” said Roden.
Of the PUD’s electric usage, 56 percent comes from residential customers, 17 percent from industrial, 16 percent from commercial and then smaller amounts in other categories such as streetlights and irrigation make up the rest.
Roden showed a graph that charted the retail revenues at the PUD from 1985 to 2020 and beyond.
“We look back to the unfortunate economic downturn in 2007 and our community has not seen a defined recovery in retail consumption. So overall the trend since 2007 is down,” said Roden.
Although there has been a reduction in electrical use by larger customers, the PUD’s system work activity has increased by 30 percent from 2016 to 2019, and growth in 2020 thus far looks strong when it comes to new customers.
“Our crews, our engineering staff, our support staff continues to be very busy and performing work in a very safe and efficient manner,” said Roden.
The PUD is planning a $21 million debt issuance for substation rehabilitation and advanced metering infrastructure to be repaid over the life of the equipment. The substation infrastructure is aging and is, on average, about 54 years old when 30-40 years old is the industry standard.
In 2021 the PUD is planning $4 million for advanced metering and $4.6 million in substation rehabilitation.
Telecommunication and broadband infrastructure are on the list, as well as $150,000 for the next three years in matching funds if the PUD is approved for a grant from the Public Works Board.
The PUD currently has $18 million in outstanding debt which is scheduled to be satisfied by 2027. The debt is below the low-end of the target debt range which is between about $20 and $60 million, Roden said.
“In summary, our current debt levels are low. We have a great opportunity given this capital investment cycle we are entering to finance these measures appropriately and make sure we’re not placing near-term undo stress on rates,” said Roden.
The PUD’s hydroelectric Cowlitz Falls project was built in the late 80s and became operational in the late 90s. The PUD has a contract with the Bonneville Power Administration for joint operation.
“Today in 2020 with the project, we are transitioning over to, what I would call, a mature project, which requires additional capital investment,” said Roden.
About $1 million in capital investment in the Cowlitz Falls project is planned for 2021.
A “fleet plan” that catalogs the PUD vehicles, the usage, life expectancy and mileage was presented. Roden said the PUD expected to spend about $1 million on vehicle purchases and replacements each year.
More information on the budget hearing, upcoming budget hearing and upcoming rate hearing can be found on the PUD’s website — www.lcpud.org.