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Strategic planning helps PUD improve bottom-line financial performance in 2011

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Strategic planning helps PUD improve bottom-line financial performance in 2011

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February 6, 2012

(Wenatchee, WA) By remaining disciplined in its financial policies and capitalizing on a good water year, the Chelan County PUD was able to exceed expectations in 2011 by $14.4 million on its combined financial bottom line. Combined improvement in net assets for the PUD was $17.1 million, compared with a budgeted amount of $2.7 million.

The year-end look was presented Monday to PUD commissioners by Chief Financial/Risk Officer Kelly Boyd. She said long-term financial policies in the Strategic Plan have met most objectives. The only target not quite achieved at this point is combined debt coverage, but it is projected to be in line with targets by 2013 and beyond, bringing all financial measurements within desired ranges.

In line with its Strategic Plan, which carries out what the PUD has heard from customers regarding financial priorities, the PUD is on track to build up reserves for a rainy day, continue reducing debt and maintaining low rates and reliable service by keeping PUD assets in good shape. PUD debt stands at $967 million and is forecast to drop approximately $60 million more per year on average over the next five years.

Above-average runoff from last spring’s high snowpack helped the PUD’s wholesale power sales exceed budget forecasts in 2011 by $10.6 million. In addition, the PUD held the line on operating expenses and came in $7.1 million below budget.

“We still want to stay the course on our long-term financial strategies,” said Boyd, “remaining prudent and disciplined.”

Boyd explained that specific PUD services such as water, sewer and fiber optics continue to come up short in paying for themselves, along with the retail electric system. All services rely on money from the PUD’s surplus power sales to close the gaps. Thanks to a new hedging program that periodically auctions off a future slice of power production from PUD dams, the wholesale revenues are becoming more stable, minimizing the risk of large swings in electric rates. Boyd said the power hedging program helped offset low market price conditions and bring in $61.1 million for the PUD in 2011. Even with the high snowpack, she said, wholesale power sales would have been below budgeted amounts had the PUD been forced to rely on market sales without the hedging program.

As of Jan. 1, 2012, the PUD ended its 9-percent electric surcharge and replaced it with a 2.5-percent increase from where rates stood in 2008. The average residential rate now of 3.2 cents per kilowatt hour remains second lowest in the nation.

In other action Monday:

  • Commissioners reviewed the proposed change in industrial rates that will allow users who are bumping up against the cap of 5 average megawatts to use one additional megawatt at predetermined market price – as long as the customer does not exceed 5 average MW for the year. A final hearing on the rate change is scheduled at 1 p.m. March 19.
  • Board members scheduled a series of public meetings to present results of extensive customer research and other outside analysis that will be considered in developing an updated strategic plan for the fiber-optic network. The first meeting will be at 5:30 p.m. Tuesday, Feb. 28, at the Confluence Technology Center. The meeting, which is expected to last several hours, will also be videotaped for the PUD website and streamed live on the Internet that evening for those who may not be able to attend in person. Additional meetings in communities will be scheduled, and a fiber plan is expected to be finalized in April.
  • Commissioners approved boundary changes in PUD commissioner districts 1, 2 and 3 to match the Chelan County commissioner districts as revised following the latest federal census; there are no changes to at-large districts A and B.

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