On November 22, 2022, Mason PUD 3 Commissioners adopted a $101.2 million budget which is a $12.8 million increase over 2022. The budget includes a five percent (5%) effective energy rate increase for the various rate schedules as well as a monthly “Low-Income Energy Assistance Surcharge” to comply with state legislation for low-income programs. To smooth the impact to customer rates, Commissioners voted to supplement the budget with approximately $5 million from the PUD’s reserves. Major budget drivers include continued economic impacts from the COVID-19 pandemic, increased wholesale power costs, customer growth, and legislative mandates. PUD Commissioners conducted two public hearings on the budget and rates on Tuesday, November 8, where public testimony was heard and considered.
The 2023 budget considers the priorities set in the PUD’s five-year strategic plan, as well as increasing regulatory requirements and other impacts outside of the utility’s control.
Residential Rate Increase
The residential increase (which will take effect April of 2023) raises the energy rate from $0.07710 per kWh to $0.08160 per kWh with no increase to the system charge. Based on 2,000-kilowatt-hour use, the residential rate increase averages approximately $9.55 per month per household. This does not include the surcharge.
NEW Low-Income Energy Assistance Surcharge
The Low-Income Energy Assistance Surcharge is a result of the PUD’s need to comply with the Washington State Clean Energy Transformation Act (CETA) legislation RCW 19.405, section 120 which requires utilities to provide energy assistance to “low-income households with a priority given to those with a higher energy burden.” The PUD’s existing low-income programs does not provide this priority, however existing participants in those programs will be grandfathered in. To ensure compliance, a new low-income energy assistance program was created, and the cost will be recovered through a surcharge to customers which is estimated to be below $5.00 per month. The law requires assurance of equitable distribution of benefits and a reduction of burdens to vulnerable populations and highly impacted communities, therefore these customers must be exempt from sharing in the cost of the programs (surcharge).
Increases by Rate Class
All rate class increases result in an overall five percent (5%) effective rate increase and applies to the various rate classes as follows:
- For residential, it includes an increase to the energy rate of 5.84% and no increase to the system charge.
- For small commercial, it includes an increase to the energy rate of 4.47% and increase to the system charge of $0.10.
- For large commercial, it includes an increase to the energy rate of 5.25% and increase to the system charge of $0.10.
- For cannabis, it includes an increase to the energy rate of 4.96% and increase to the system charge of $0.20.
- For industrial, it includes an increase to the energy rate of 7.87% and increase to the system charge of $0.62.
All current rate schedules are available on the PUD’s website and new schedules will be posted with the effective dates.
Drivers of the 2023 Budget & Rate Increase Include:
- Wholesale Power Costs – One of the major drivers of the 2023 budget and rate increase is an increase to wholesale power costs of 12.8%. Power costs are responsible for approximately forty-one percent (41%) of the PUD’s rate-funded budget. The updated power contract with Bonneville Power Administration (BPA) included a five percent (5%) rate increase for wholesale power to Mason PUD 3 – one of the highest in the region. The PUD has also recognized an increase in residential consumption which has caused higher than normal wholesale demand and load shaping costs from the BPA. Additionally, the PUD lost its low-density discount from the BPA due to organic customer growth. This discount is intended for rural utilities with low-customer counts per line mile of distribution. The PUD has benefitted from the discount for decades and the loss of this discount adds approximately $1.3 million to the annual budget.
- Compliance with Energy Legislation – Another major impact to the PUD’s budget is the cost to comply with the Clean Energy Transformation Act to provide a new qualifying low-income program as well as keep the commitment to customers currently enrolled in the PUD’s existing low-income programs at a cost of $1.6 million. Additionally, costs to comply with the Energy Independence Act which mandates renewable energy purchases estimated at a cost of approximately $3.8 million for 2023.
- Economic Impacts from COVID-19 Pandemic – Inflation of the costs of goods and services have skyrocketed following the pandemic across all sectors and the utility industry is no exception. Supply constraints, due to extensive delays, further compounds the rising costs. The 2023 budget reflects the difficulty in sourcing necessary equipment and supplies to maintain a safe and reliable system.
- Capital Costs Due to Customer Growth – Infrastructure costs budgeted at $2.3 million to meet continued customer growth are another component of the 2023 budget. The PUD continues to see increases of new service applications. Approximately sixty percent (60%) of these costs are offset from the collection of system capacity fees charged to customers as they apply for new service or expand existing electrical services.
- Substation Capacity Projects – The rapid nature of this growth requires upfront costs to plan, design, and prepare for infrastructure such as substations and transmission needs to meet ongoing community and system growth.
The PUD has been working to secure grants for these large substation projects and has seen some success. However, many grants have a matching component and won’t be officially funded until costs have been expended or the next budget approval period. The North Mason Electrical Capacity Project’s first phase, budgeted at $3.2 million, includes the construction of a new ring bus at the current Belfair Yard as well as upgrading the existing Belfair substation with a new transformer, and preparing for the Olympic Ridge Transmission line to a future substation in the Belfair Area. This project is funded, in part, by an American Rescue Plan Act grant for $1.5 million the PUD secured as a sub-recipient through Mason County. The PUD was also able to work with US Representative Derek Kilmer to secure an additional $3 million for the multi-year North Mason Electrical Capacity Project through the House Energy and Water appropriations bill.
A second capacity project, Sanderson Electrical Capacity Project, is budgeted at $658 thousand for the site preparation and design of the Goldsborough Switching Station. For this project, the PUD has secured funding in the amount of $100 thousand through the State’s 2022 Supplemental Capital Budget with the help of State Representative Drew MacEwen.
- Demand for Broadband Infrastructure – The COVID-19 pandemic has intensified the need for faster deployment of high-speed broadband to our community. Twelve specific Fiberhood communities throughout Mason County are benefiting from two ongoing Community Economic Revitalization Board grants/loans with a budget of $1.6 million in 2023. These communities are part of a four-year extension project of the PUD’s fiber-optic network to unserved homes and businesses. Both grants are anticipated to be completed by the fourth quarter of 2023. Additionally, the PUD received the United States Department of Agriculture ReConnect grant in the Grapeview area with budgeted expenditures of $600 thousand for the construction and expansion of PUD 3’s fiber network connections within the Three Fingers project zone. This is a 5-year grant with total grant funds awarded of $2.8 million and $825 thousand in matching funds, for a total project cost of $3.3 million.
- Increasing costs for PUD’s pole inspection, test, and treatment program. Through the inspection process, the PUD has found a higher than expected number of poles requiring priority replacement for safety and reliability purposes. A portion of these costs are shared with carriers attached to the poles.
The commission also voted to raise the annual pole attachment rates from $27.00 per attachment to $33.00 to assist in recovering increased costs for the maintenance of its poles. These rates are charged annually to entities who attach various telephone, cable, and fiber lines to PUD poles. An outside consultant conducted a rate study to determine the rate the PUD should charge to adequately recover costs. Like the public for the energy rate hearing, the Licensees were also notified in advance of the hearing and the PUD will be honoring the guidelines of its contracts with the various entities attached to PUD poles.
To partially offset some of the increases in costs, the PUD is supplementing the budget with $5 million from the PUD’s reserves. President of the board, Linda Gott, said “this is the most complicated budget I’ve seen in my 24 years as a commissioner.”
PUD’s general manager, Annette Creekpaum, also commented on these economic times and the financial complexities the utility faces. She said, “In addition to trying to reduce the rate impacts to customers by adding the $5 million out of the PUD’s reserves, we are also looking at our budget in comparison to the inflation rate. Even with these massive impacts to costs, the PUD’s budget increase is still under the inflation rate by over two percent (2%).”
The PUD conducts financial analyses throughout the year as part of an ongoing process to ensure its rates support the most reliable, economical, and safest service possible for its customers.