New power-sale contracts strengthen PUD’s proposed $547 million budget

WENATCHEE — New power-sale contracts are strengthening Chelan PUD’s financial outlook as the utility considers a $547 million spending plan for 2027, including increased investment in dams, substations and transmission infrastructure.

The preliminary budget presented to commissioners Nov. 2 projects $567 million in revenue, approximately $89 million above the adopted 2026 budget. Proposed expenditures, including debt principal payments, would increase about 10%, from $498 million to $547 million.

No action was taken. Commissioners are scheduled to hold a second public hearing Nov. 16 and consider adopting the budget Dec. 7.

Mark Mullins, director of financial enterprise planning, risk and analytics, said changes in the utility’s wholesale power portfolio account for much of the improved financial outlook.

The PUD’s Alcoa power contract ends Jan. 1, 2027. In preparation, the utility has executed three market-based contracts lasting five, seven and 10 years. Each covers a 5% share, totaling 15%, compared with the Alcoa contract’s 26%.

“And those market-based contracts provide us with revenue certainty,” Mullins said.

He said the agreements also capture the value of the utility’s generating capacity and carbon-free electricity. Some power remains uncommitted, with the PUD evaluating additional sales opportunities while retaining enough resources to meet reliability requirements.

The proposed budget projects a $169 million bottom line, $45 million above the adopted 2026 budget. That financial measure is separate from the utility’s spending plan, which includes capital investment and debt payments.

Capital investment would total $190 million, up $27 million from the adopted 2026 budget. Rock Island Dam and the electric distribution system are the largest drivers, each accounting for more than $60 million.

Planned work includes continued generating-unit rehabilitation and other improvements at Rock Island, a spare transformer replacement at Rocky Reach, substation development, water-main replacements and fiber-system investment.

Ed McDaniel, director of project delivery, said staff is budgeting for near-term work while reserving larger funding requests for when designs, schedules and costs are better established.

For the Upper Valley transmission wildfire resilience project, staff expects to seek approximately $10 million in contracts to complete design and begin equipment procurement. A larger construction commitment would return to commissioners in 2027.

Other projects, including the next generating-unit rehabilitation at Rock Island’s Powerhouse 2 and spillway modernization, also would return for further funding consideration as planning advances.

Operating expenses, including depreciation and taxes, are projected at $413 million, approximately $39 million above the 2026 budget.

One significant change is about $14 million for the Canadian Entitlement Allocation. Mullins said the arrangement replaces the physical return of electricity with a financial settlement, allowing the utility and its power purchasers to retain the electricity’s value. Some of the expense can be recovered through existing power agreements.

The budget also includes a $6 million Public Power Benefit allocation. Revenue from state carbon allowances, however, is expected to be about $4 million below the amount budgeted for 2026.

Despite the increased spending, staff projects strong financial reserves and low debt. Expected liquidity is $424 million, with 336 days of cash on hand and a debt ratio of 7.2%.

The preliminary budget incorporates proposed annual rate increases of 5% for electricity, 2.5% for water and 4% for wastewater beginning in 2027. Those rates remain subject to separate board approval, with consideration scheduled for Nov. 16.

Staff said the increases are intended to reduce long-term dependence on wholesale power revenue for day-to-day service costs, while surplus power sales continue supporting infrastructure investment. Any changes commissioners make to the rate proposal would be reflected in the budget before adoption.

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