Chelan PUD: Future Malaga substation is for local growth, not data centers

WENATCHEE — Chelan County PUD is considering purchasing an 8.15-acre property in Malaga for $2.1 million as the utility plans for a future substation to accommodate residential, commercial and industrial growth in the area.

The property, near the intersection of Malaga-Alcoa Highway and Stemilt Creek Road, has several features PUD officials said make it particularly well suited for a substation, including four transmission lines crossing the site, existing distribution infrastructure nearby and relatively flat terrain.

The existing Malaga substation is currently at 71% capacity, according to Asset Management Director Chad Rissman. The PUD generally begins getting serious about designing and locating additional infrastructure when an existing substation reaches 80%.

“The question of if we're going to need it is not a question, it's the real question is sort of when,” Rissman said.

Rissman estimated the new substation could be needed within five to 10 years, potentially sooner depending on development.

“I think my best guess would be five years. I doubt it would be ten years,” Rissman said.

The commission discussed the proposed purchase Sept. 8 but took no action. Staff plans to return with the property purchase for commission consideration Sept. 21.

The PUD entered into a purchase and sale agreement for the property in June and has since completed due diligence, including cultural and geotechnical surveys that found no concerns. The seller is asking $2.1 million, while an appraisal valued the property at $1.765 million.

PUD officials said the difference is partly attributable to how the appraisal treated a 300-foot transmission easement corridor through the property. The land beneath the transmission lines was not assigned value in the appraisal, according to Rissman, because the easement would ordinarily diminish its usefulness to another buyer.

For the PUD, however, the existing transmission corridor is one of the property's most valuable features.

“What the appraisal did not do, it did not value the property that's underneath the transmission line, and that makes a lot of sense for anybody other than Chelan PUD that would be purchasing this property, because to us it has significant value for the reasons that I mentioned before,” Rissman said.

The site's proximity to both transmission and distribution infrastructure would reduce the amount of additional infrastructure necessary to construct the eventual substation, Rissman said. Its frontage on Malaga-Alcoa Highway and Stemilt Creek Road would also provide access for large equipment, including transformers and mobile substations.

Rissman repeatedly emphasized that the future substation is intended to serve what the utility calls “organic growth,” rather than large-load customers.

“There's a lot of vacant land in the Malaga area, and I want to stress that this is for organic growth,” Rissman said. “We call, you know, normal residential, light commercial, light industrial, those kinds of things are sort of organic growth that are under the five megawatts of load, so the substation would be serving those types of loads.”

He said Malaga has experienced growth in housing, irrigation and orchard activity, and the PUD is already planning projects to add distribution capacity in the area.

Commission President Kelly Allen said making that distinction clear would be particularly important because of public attention surrounding large electrical loads and data center development in Malaga.

“I am so grateful for your presentation, particularly when you've addressed the organic growth, because with everything going on in Malaga, my first concern is when people see the headlines that we're paying more for a piece of property, it might be internalized to perceive that we are supporting data centers or Microsoft and that's the intent of the substation out there,” Allen said.

Allen said she expected that to be one of the principal questions the PUD receives if the purchase proceeds.

“So the more we can be proactive in getting the messaging and having the message that this is for organic growth is just going to make this one commissioner very happy, because I see that as being the number one obstacle that we might, or the number one question that we'll be getting once this actually goes through,” Allen said.

PUD staff has looked for potential substation locations in the Malaga area for years. Rissman said other properties have not reached the point where staff had both a suitable site and an agreed purchase and sale agreement.

The utility also conducted outreach around the proposed purchase. Real Estate Services' Becky Jaspers said the primary questions received concerned whether the site would serve organic growth or large business loads. Staff also recently presented the proposal to the Malaga-Colockum Community Council, which officials said raised no concerns.

Allen said delaying a purchase carries risks beyond the possibility that land prices could increase.

“If we don't do this now, it's not only the cost of what that property might be down the road, it's would that property even be available down the road,” Allen said.

She also pointed to the long-term reliability implications if the PUD were unable to secure an appropriate site before additional capacity is needed.

The commission is expected to consider approving the purchase Sept. 21.

Andrew Simpson: 509-433-7626 or andrew@ward.media