PUD commissioners debate smaller rate increase ahead of Nov. 16 vote

WENATCHEE — Chelan PUD commissioners debated on Nov. 2 whether to begin a five-year rate plan with a smaller electric increase, with some favoring a more gradual approach and others warning that smaller increases would leave customer payments falling further behind operating costs.

The proposed plan would raise electric rates 5% annually from 2027 through 2031, with annual increases of 2.5% for water and 4% for wastewater. Wholesale telecommunications rates would remain unchanged in 2027, then increase 2.5% annually beginning in 2028.

No action was taken. Staff plans to return with the proposal for consideration Nov. 16. If approved, increases would take effect each June 1, beginning in 2027, with annual board reviews that could result in adjustments.

Staff estimates the first-year increases would add approximately $3.50 to an average monthly residential electric bill, $1.75 to a water bill and $4 to a wastewater bill.

The proposal accompanies a broader shift toward managing electric, water, wastewater and fiber services as one integrated utility, using surplus power revenue to support infrastructure investment across the systems. Customer rates would cover a portion of ongoing operating costs, with wholesale revenue helping cover the balance.

Commissioner Steve McKenna suggested starting with a smaller electric increase and evaluating the results before proceeding further. He cited both the PUD’s strong financial position and pressures on household budgets.

“Not saying wait a year before we implement this, but let’s take a step, but do it in a slower, smaller fashion,” McKenna said.

Later in the discussion, he suggested considering 4% for the first year, followed by another review.

Commissioner Carnan Bergren also questioned beginning at 5%. He argued that the utility’s financial strength provided room to start lower and adjust upward if conditions changed. He also questioned how the proposed approach accounted for the different histories of financial support for each service.

Commissioner Randy Smith supported the staff recommendation, saying previous increases had not kept pace with costs.

“One of the things that triggered me to be really supportive of this 5% is that we’ve been losing ground for the last five years,” Smith said.

He questioned whether starting with a smaller increase would worsen the problem the plan is intended to address.

Financial staff said the rate analysis focuses on direct operating costs, excluding capital investment, debt service and depreciation. Under the proposed approach, surplus power revenue would support capital needs separately.

For 2027, staff projects electric rate revenue would cover about 62% of direct operating costs, compared with 69% for wastewater. Water and fiber revenues are projected to exceed their direct operating costs.

Mark Mullins, director of financial enterprise planning, risk and analytics, said smaller increases could leave the electric system relying more heavily on wholesale revenue. Because electric rates cover only part of operating costs, raising rates by the same percentage as inflation would not necessarily keep the dollar gap from widening.

Staff said surplus power sales have historically allowed local customers to pay below-cost electric rates. About 20% of the PUD’s generation has historically served local demand, excluding data centers, with the remainder available for other sales.

Those revenues face uncertainty from water conditions, wholesale prices, technology and changing energy markets, staff said. The proposed increases are intended to reduce that reliance gradually and lower the risk of sharper increases later.

Commissioner Garry Arseneault requested clearer explanations of the actual bill impacts of different percentage increases. He also urged greater attention to customer assistance and energy-efficiency programs.

During public comment, Wenatchee resident Denali White urged commissioners to reject the increase and place more costs on data centers. She argued that growing data-center demand affects power markets and equipment costs beyond the facilities themselves.

“Residents and small businesses should have priority over the profits of big tech companies,” White said.

In their presentation, staff described a large-load framework intended to prevent data-center costs from shifting to existing customers. Mullins said the Malaga data center is served through power procured by the customer, purchased and resold by the PUD, with delivery costs recovered through its large-load rate schedule.

General Manager Kirk Hudson said staff’s recommendation attempts to balance affordability, financial sustainability and the integrated utility approach. He said staff could provide dollar comparisons among different increases before the next meeting.

The proposed rates are already reflected in the preliminary 2027 budget, which is scheduled for another hearing Nov. 16 and consideration for adoption Dec. 7. Hudson said changes to the rate proposal could be incorporated into that budget.

Staff also clarified that customers would receive direct notice within 30 days after adoption of a rate plan, leaving several months before any increases take effect.

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