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Posted on Mar 13, 2015

Rate debate continues between ag and industrial users

Local farmers and technology companies were back before the Grant PUD on Tuesday, with the two sides again on opposite sides of the rate-setting debate.

Up before the commissioners was a resolution defining the method the utility uses for rate increases. While the commission already has such a resolution in place, this new replacement resolution had some changed language in it to better define the cost-of-service method the utility uses to set rate increases through 2023.

Among those at the commissioners meeting, which was held at the Hydro Office Building at Wanapum Dam, were local farmers, technology business people and supporters of both sides.

Following the urging of some local farmers to table the resolution until a workshop on the cost-of-service model can be held in the coming months, commissioners voted 4-1 to table the topic until at least the March 24 meeting.
Commissioner Tom Flint, who made the motion, said he would have liked to have seen the resolution discussed at a regular meeting at the PUD’s Ephrata office.

“As many of you know, I have not been supportive of the direction we are going,” Flint said.

Only Commissioner Larry Schaapman of Quincy voted against tabling the resolution. After the meeting, Schaapman said he voted against tabling the updated resolution because the commission was making progress on this issue and staff has put in much work drafting a retail rate schedule that brings the utility in line with its cost-of-service model.

“I believe it is fair and equitable,” he said.

By tabling the resolution, the commission has left an “open piece of paper” on the table again, with no direction for staff, Schaapman said. Having a policy in place would take much anxiety out of the process for everyone, he said.

Commissioners are attempting to bring the district more in line with a cost-of-service model that ties rates more closely to the actual cost of providing services to its various customers, which range from residential and commercial customers to data centers and food processors.

Commissioners passed a policy in 2013 that sets a target date of 2023 to achieve more equality between the rate classes. The policy stipulates customer classes must pay at least 80 percent of the cost of providing their electricity and can’t pay more than 15 percent over the cost of service. The policy also calls for “small and predictable” rate increases to avoid “rate shock.”

The new resolution that was tabled does not stray from these principles.

The two user groups currently most out of line with their cost of service are irrigators and large industrial users. Irrigators pay more than 40 percent below the cost of providing their electricity while large industrial users (includes Quincy data centers) pay about 35 percent above their actual cost.

Last November, Grant PUD commissioners set off a debate between the two user groups when they approved rate increases of 3.5 percent for irrigators and 0.5 percent for large industrial customers.

Then, in February, staff presented a proposed path to get all user groups to those cost-of-service targets by 2024. It was decided that only residential and irrigation users would be allowed to pay 80 percent of their costs. All other users groups will pay at least the full cost of providing service to them or from 13 percent to 16 percent over that cost. Under the proposed retail rate schedule, large industrial customers would pay 16 percent over their cost of service.

To get to these numbers and generate the money the utility needs, with a projected 2 percent annual retail revenue increase, residential rates would have to be raised an average of 1.6 percent a year until 2024, resulting in a deficit of about $114 million below the cost toserve the residential rate class from 2015 to 2024.

Irrigation would be raised 3.3 percent a year, resulting in an $82 million deficit in those nine years.
Industrial users would see a rate increase of 0.5 percent annually through 2023, generating an additional $182 million above their cost of service.

Ag processors would see an annual rate increase of 4.3 percent, generating an additional $15 million above their cost of service.

Dan Miller, president of Ag. Power Users of Grant County, was among those urging commissioners to table the resolution. He suggested commissioners wait to make a decision after the future workshop. The group has some questions about how the costs were derived, Miller said.

“What’s the harm in waiting?” he asked.

Kim Rogers of REC Silicon in Moses Lake said there has been pressure from “certain groups” to focus on one rate user and to give preferential treatment to others.

“I urge you to stay true to your original plan and level the playing field,” Rogers said.

A prosperous community has a diversified economy, she added.

“Being fair isn’t always popular,” Rogers said. “Being fair is always right.”

However, Evan Landin of Quincy countered that you don’t always have to be fair in life.

“Sometimes we need to take a risk and make our decision on things that aren’t nearly so clean cut,” he said.

While he appreciates the data centers, Grant County is an ag community, and rates should encourage farming, Landon said.

“Rates don’t always have to be fair or driven by cost of service,” he said.

 

— By Jill FitzSimmons, editor@qvpr.com

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