PUD Works to be Efficient, Effective
Editor’s note: This is part one of a two-part series on the finances of Northern Wasco County PUD.
Current and future success demands investment
Northern Wasco County PUD has developed a long-term strategy designed to assure the utility is managed for high-quality, effective and efficient results that meet its service area’s needs now and in the future.
To do that, the utility has developed policies, procedures and strategies designed with that goal in mind. Not least of those is managing the cost and investment involved in running the utility.
“The PUD is heavily capital intensive,” says Harvey Hall, PUD Chief Financial Officer. “We’re very dependent on our physical structure that produces the power, transmits the power and delivers the power.”
Assets of the PUD are valued at about $96 million. That includes the lines, transformers, substations, office building and other physical components involved in bringing power to the doors of the residents and businesses of the People’s Utility District.
Harvey compares the system to a system of roads and highways. “In Portland, when the traffic is trying to get out of town, I liken that to where the power is getting into the system—you have a six-lane interstate.” That’s the high-power transmission line. As the power gets nearer its destination, it peels off at various “off-ramps” and the voltage begins to shrink and as the power heads down onto the main “streets” of town and begins to slow down step by step as the power heads onto different smaller streets and to the power transformer.
Eventually, it finally reaches your “driveway” where a canister on the power poll drops the voltage down to 400 volts, allowing it to travel through the electrical panel to the outlets in your house where you can plug in your toaster or any of the modern conveniences your house may hold.
Between the high-speed power “highway” to the “parking spot” in your home, is the infrastructure of power delivery.
“The cost to deliver power depends on how much infrastructure is between the customer and the [power source],” Harvey says. The most expensive customers to serve are residential customers because their power passes through a lot of infrastructure to make it ready for home use, compared to industrial customers needing less infrastructure to deliver a lot more power.
The costs involved in providing the physical structure that gets power to your door are divided into two categories: capital cost and operations and maintenance cost. Capital costs are building and expanding the physical assets. Operations and maintenance, as the name implies are the costs to keep it running.
“Capital is something that you need to maintain,” Harvey explains. Assets lose their value, or depreciate, over time. “The basic theorem is that you need to be investing in your capital at a rate equal to the rate of depreciation over time merely to maintain the capital system.”
When the PUD invests more than the cost of depreciation in their capital assets, they are expanding their capacity—less and they are decreasing their capacity, which can eventually affect the efficiency and reliability of the system.
“In year one or year two it doesn’t make a lot of difference, but when it goes beyond five years, the system starts to tell on you.” The PUD recently went through a seven-year period where it invested less than depreciation. “Over the last couple of years, we have made significant capital investments,” Harvey says. The PUD has also developed a 10-year capital plan. “Over the next 10 years we are looking at investing about $37 million in our capital investments.”
This expansion of the system will not only mean capacity to meet the needs of growing business and residential service, but will also extend the life of the PUD’s existing assets.
“Equipment wears out faster depending on how hard you use it,” Harvey says. “A substation running at 60 percent capacity has more room to absorb more load and will last longer.”
The PUD’s substations operate at varying levels of capacity. Until recently, the Second Street Substation was running at near full capacity, contributing to faster wear and tear. The addition this year of the RiverTrail Substation has helped extend the life for the Second Street Substation.
It also means there will be additional capacity to serve new industry in The Dalles.
“RiverTrail was not designed for Google,” Harvey says. “It was designed to be able to provide additional capacity for the additional industries that come in.”
A couple of days after the new substation was put into service, on time and under budget, a potential customer came in asking about the PUD’s capacity to serve another high-megawatt load.
“If they had asked literally days before, we would have said no, but we said yes,” Harvey says.
It costs about $100,000 a day to operate the district. About 70 percent of most utilities’ costs of operation and maintenance are to purchase power. Another 10 percent is for transmission to get the power to the service territory. These are costs the PUD must pay to deliver power.
About 14 percent of PUD costs is staff, which is under the PUD’s direct control. Investing in people is a key part of reinvesting and repositioning the utility.
“Safety training, training on new assets, training and education to have a more flexible workforce rather than having more staff,” Harvey says. And that means more capacity and better ability to meet the changing needs of the customer and the changing way people want their power to be served.
The increasing interest in solar power is one example.
“We need, as a utility, to be in a position to be able to support that.”
Considering how customers want to interact with the PUD is also important. Facebook and a new website with a customer portal have already been implemented and the PUD is looking at adding a phone app in the future for account management and bill pay.
The PUD is also looking at automated metering which will mean more efficiency, added capability and less need for meter readers to traipse through your backyard.
It will also provide the ability to better pinpoint system outages, saving line crew time and speeding power restoration. The line crew will have no more need to go up and down the line to find the outage.
The goal of all of these efforts and more, is to provide high-quality, effective and efficient management of the PUD (see related chart). This 12-point management process is used to assure power is delivered to customer in safely, reliably and affordably.
These processes are also evaluated under a Capability Maturity Model, a scale ranging from “Initial” to “Optimizing” to determine how well they are being managed. Processes in the initial phase are often chaotic and undefined. As they improve in maturity they become more defined and established to the point that they are nearly automatic, improving quality, productivity and long-term stability.
The over-arching question is, “How can we provide the most value at the most reasonable cost—not necessarily the cheapest—but will we be the most efficient and reliable utility, not just today but for the long-run.”
Harvey is looking at a PUD future that extends beyond his retirement.
“Fifteen years from now, I want to be able to look back and say it’s a well-run facility and I had my fingers on that.”