Fundamental flaws found in Thurston PUD’s Electric Utility Business Assessment

Unrealistic financial and technical assumptions create risk of higher electric bills and poor reliability; costs exceed $1 billion to implement countywide

BELLEVUE, Wash. (Sept. 27, 2012) — An industry expert’s review of the Thurston Public Utility District’s (PUD) scheme to enter the electric utility business by building a duplicate electric system from scratch in Thurston County finds substantial financial and technical risks that could lead to higher power bills and undependable service.

The slightest change in the PUD’s assumptions in any of the key factors of revenue projections, construction costs or wholesale power supply will cause electric rates to skyrocket, according to UtiliPoint International, a consulting firm recognized for its accuracy in assessing electric system value. Reliability of PUD electric service is also potentially compromised because of a loss in redundancy of power transmission compared to service from PSE. One glaring example: the suggested use of a 1929 transmission line to be the sole source of power delivery to Yelm rather than the two transmission lines used by PSE today.

Thurston County residents will vote in November on Proposition 1, which would give the Thurston PUD authority to forcibly acquire PSE’s local electric system or build a duplicative electric system alongside the current electric infrastructure. The PUD hired D. Hittle & Associates to outline ways the 3,000-customer water district could become an electric utility. PSE commissioned UtiliPoint International to perform a review of the PUD’s business assessment, so that voters would have objective, credible information before making a decision.

“The schemes the PUD proposes have enormous financial risk to Thurston County residents,” said Ken Johnson, a Yelm resident and Director of State Government Affairs at PSE. “Residents are being asked to take on $12,000 or more of debt per household based on skimpy, one-paragraph notions of what the PUD would do. Voters need solid facts, not hazy assumptions.”

The PUD’s proposal to build duplicate power systems is strictly against Washington state public policy because it is uneconomical and creates unnecessary environmental impacts. “When you picture having two sets of power lines, two sets of poles and two sets of substations, it’s easy to see why our state policy is against duplicative electrical systems,” said Johnson.

At more than $41 million, the PUD’s concept for serving 3,538 customers in Yelm is the equivalent of a $1.4 billion dollar proposal for the county as a whole. Likewise, the PUD’s schemes for serving the Olympia area (which require from $50 million to $153 million of borrowing) also cost $1 billion or more if applied to all of Thurston County. By comparison, the entire outstanding debt for all Thurston County schools and other public agencies is $588 million.

The UtiliPoint review of the PUD’s scheme notes that the water utility unrealistically assumes that all electric customers in a given area will choose to take service from the PUD if it builds its own duplicate system alongside PSE’s, an assumption that creates enormous financial risk for customers. “If only one-half of the customers in the Capitol Campus area signed up for electric service from the PUD, each customer would be on the hook for $72,000 before the PUD ever delivered a kilowatt of power,” Johnson noted. “It simply does not make sense to gamble with that kind of money in today’s economy.”

Additionally, none of the scenarios in the study commissioned by the PUD include costs to provide low-income assistance, energy efficiency programs, green power programs, renewable energy programs, city taxes or any details about crews, storm response and other key customer service functions.

Electric reliability is also compromised under the PUD’s proposed “bare bones”-type power system design. In Yelm for example, the Hittle study proposed the city be served from a single substation that would be built and connected to a single 1929-vintage transmission line, with inadequate backup. In contrast, PSE serves the Yelm area through two transmission lines, two substations, and numerous distribution lines that provide a high degree of redundancy and ability to meet the future needs of a growing community.

About Puget Sound Energy

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