Benton PUD is putting its customers on notice to expect a rate increase next year.
PUD officials gave a public presentation Tuesday in Kennewick to explain the issues that are expected to drive up costs for the utility in the future.
A new contract with the Bonneville Power Administration next year means Benton PUD will pay a higher wholesale price to buy power, and it also would not be able to buy additional power to sell to other utilities, said Jim Sanders, Benton PUD general manager.
The sale of power to other utilities for years helped Benton PUD lower costs for its retail customers, he said.
Requirements to gradually increase the share of renewable power in its mix and to promote power conservation will add to the financial burden, he said. Those costs need to be balanced, he told about 20 Tri-Citians who had come for the presentation.
Benton PUD commissioners will determine on Nov. 23 the rate increase for different customer-classes, but officials have recommended to cap the increase at 9 percent.
Benton PUD's retail rates compare favorably with most Northwest utilities, said Chad Bartram, assistant general manager and director of finance and business services. Benton PUD has to plan ahead to continue providing services to customers and repay its debt, which currently is more than $61 million, he said.
Benton PUD will continue to maximize efficiencies and reduce internal costs, but customers, both residential and big, and small businesses should brace for possible rate increases in the next four years, said Dan Bickford, director of power management at the PUD.
To cushion the impact of a possible rate increase in 2011 on customers, Benton PUD will use its cash reserve of $4.3 million, Bickford said.
The BPA may increase the power rate by 7 percent to 20 percent next year, he said. Transmission and conservation costs also will increase for the utility, which continues to pay rebates to low-income customers and those who make energy-efficiency improvements.
Meeting some of the requirements of the Energy Independence Act also will be a burden, he said. Benton PUD will need to purchase higher-cost renewable energy to meet a portion of its retail load -- 3 percent by 2012, 9 percent by 2016 and 15 percent by 2020. Failure to meet the targets would result in costly penalties, Bickford said.
He also explained why 2010 has been a tough year for the utility: less water in the Columbia River, lower rates for the sale of power to other utilities and reduced retail power sales because of a mild spring.
Benton PUD offered its customers five consecutive rate decreases from 2004-08, Sanders said. The net power cost was $17 million from 2003-09, and it is projected to increase to $34 million from 2009-14.
A public hearing on the proposed 2011 budget is scheduled Monday.
"We'll continue to refine our budgetary assumptions," Sanders said.
-- Pratik Joshi: 582-1541; email@example.com; Business Beat blog at www.tricityherald.com.