Guiding principles give us direction

By Rich Riazzi, General Manager

6/20/2007

Thanks to action by our Board of Commissioners on June 11, the PUD now has direction from the board on how to manage the District’s financial health. Commissioners adopted a set of guiding principles that tell us where we ought to be headed in terms of a financial, operating and risk perspective. For example, the board decided that the PUD should be a utility that provides multiple services (not just electricity). They decided that cash reserves could be available to fund the capital needs of any District service. And they decided that the PUD should still be able to turn to a surcharge as a reasonable way to cover a financial shortfall when operating conditions deviate from a normal year.
 
The principles adopted by the board now can guide us as we begin building budgets for next year, as we contemplate capital spending over the next four or five years and as we determine how best to serve the growing needs of our customer-owners. The board’s adopted principles will also serve as a guide for  developing our annual operating plans.
 
The board also said that internal PUD cost control and efficiencies should be part of annual financial plans. That’s why we are focusing on continuing realignment, process improvement and on next steps that might be logical now that we have had experience with our new organizational structure.
 
By setting rate increases at 5 percent for electric, 9 percent for water and 9 percent for sewer, the board shaped the District’s tolerance for risk. We now have established risk boundaries and we can manage accordingly. Based upon the one-year rate increase agreed to by the board -- and should it be followed over the course of the next four to five years --staff’s analysis shows us 90 percent of the time an electric surcharge will be at or below 16 percent, and 10 percent of the time the charge could be higher. 
 
The action taken June 11 was an important step in achieving our goal as stated from the beginning – to move the District toward more stable financial footing. We have a solid start.