What's the right level of risk for our public utility?

By Rich Riazzi, General Manager

10/23/2006

After sharing with you in August an overview of our utility services – and their related costs – it’s now time to take a more detailed look at the PUD’s financial situation. In our second strategic planning meeting scheduled for the evening of Nov. 20, we will talk about financial trends, what drives those trends and what we may want to do to manage them.

There will always be risk in running a public utility such as ours with such large physical assets and such complex infrastructure. The founders of this PUD were no strangers to risk, putting the utility into debt in order to acquire dams and distribution systems many years ago. But they had faith in themselves and in the region as a solid place to grow and develop.

We find similarities today.

• The PUD is investing hundreds of millions of dollars in rebuilding the turbines and generators at its hydroelectric projects so they will continue to produce low-cost energy for the long term.
• The PUD is investing in a fiber-optics network that delivers state-of-the-art communication services for local businesses and individuals.
• The PUD is supporting efforts to improve water service and add service territory as clean water continues to be a necessity for growth and development.
• The PUD continues to be faced with difficult decisions about protecting fish and maintaining our parks. Both of these resources make this an attractive area to live and visit.

All of these services require significant financial investment. As growth occurs, more of the energy the PUD now sells on the open market for better prices will have to be retained to meet electrical demand here at home. That inevitable drop in surplus power sales revenue will affect how much we can spend on the other services just mentioned.

As you join us for Session 2 in our strategic planning series, we will examine financial data covering where we’ve been and where we need to be in the next five to 10 years. We’ll look at what will influence our future financial picture. We’ll be figuring out how much risk we should accept, how much debt we should carry, what our cash reserve levels should be and how to set priorities for future spending.

As with all our public meetings, there will be time for public comment. After we go through the financial information for the Board of Commissioners, we will want to hear from our customer-owners. We look forward to hearing what you will have to say after you hear all the details. We are planning ahead, and now is the right time to be making decisions about our collective future.