Eyeing Increased Revenue Potential, NID Agrees to Continue Selling Power to PG&E Important Public Hearing on Newtown Canal Project Nov. 18 Published on Nov 17, 2009 - 9:27:34 AM
GRASS VALLEY, Calif. Nov. 17, 2009 - With its current power purchase agreement on the Combie South Powerhouse due to expire in December, Nevada Irrigation District's board recently approved a new contract to renew selling commercial power to Pacific Gas & Electric (PG&E). Incorporated in California in 1905, PG&E is one of the largest combination natural gas and electric utilities in the United States.
Based on a recommendation by the district's Water & Hydroelectric Operations (WHO) Committee, NID's board unanimously agreed to a new 10-year contract with PG&E. "We currently receive 6-7 cents per kilowatt hour," advised Operations Manager Don Wight. "But if we look at the feed in the schedule under the new contract, it starts at 10 cents and ends up increasing to 13 cents. This is a pre-approved contract with the PUC and it's available for small generators. Combie South just makes it under the small generator contract," Wight added.
District counsel Jeff Meith supported the contract, stating that since the market price for selling power fluctuates almost daily, entering into a contract with PG&E minimizes the risk of working with private power marketers. "When we have a guaranteed contract, we take less risk," Meith said.
Wight added that the new commitment allows the district to review current pricing in 10 years, rather than extending the contract out 15-20 years.
District Edges Closer to Perfecting Water Rights
For the past 4-5 years, NID staff have been actively pursuing the licensing of ten remaining water right permits. As the district moved into the petition process, the state filed notice of the official thirty-day public protest period beginning on October 21. Among those on the state's mailing list are various water rights holders like the Department of Fish and Game.
According to NID legal counsel Meith, the district hopes that the final licensing process won't be fraught with protests over issues like prior rights, public trust, or environmental concerns. "CEQA is a necessary step," he added. "This petition phase to move to licensing is a discretionary act that requires CEQA. We hope it will be a smooth process."
While Meith assured the board that the cost of consultants to help shepherd NID through the CEQA process would likely be less than $25,000, district Finance Manager Marie Owens noted that $100,000 was budgeted for the process in 2009. "And we have budgeted $160,000 for 2010," she added.
According to Operations Manger Wight, all NID's petitions are based on historic and current operations within the district and do not allow for additional use.
The formal protest period ends November 20.
Budget Review: Red Ink Continues to Flow in Recreation and Hydroelectric Divisions
The bottom line: NID anticipates the need to to borrow $203,500 to balance its Recreation Division budget in 2010. And what source will they dip into for these dollars? The district's Operating, Repair/Replacement and Rate Stabilization Reserve (ORR), formerly known as the Rate Augmentation Fund, which is funded by property tax revenues.
Citing lagging concession sales and higher expenses, Finance Manager Owens noted while revenues appear to be strong, final accounting of expenses has not been tabulated. "For Scotts Flat, revenues level off at this time of the year but expenditures keep coming in," Owens said, stating that the district might break even or even see a little profit here. But in the upper division campgrounds, NID rarely realizes a profit when reconciling revenues to maintenance fees.
Nevertheless, the district hopes to see making recreation areas like Combie Reservoir self-sufficient over the next three years. "It's amazing we are getting close to breaking even on several of these facilities," Director Nancy Weber lauded staff. She also emphasized the need for additional help to support Recreation Manager Peggy Davidson and encouraged filling budgeted staff vacancies in this division. "Peggy needs a stable crew to help her," Weber advised. " I'm lobbying for these positions to be filled and have done so all year."
On the hydroelectric side of NID's operations, while the district is now looking at $600,000 more in budgeted revenues, Owens is still projecting a hydro division deficit or over $900,000. In the absence of sufficient reserves in this division, NID was forced to borrow again from its ORR reserve to fund the Combie Powerhouse North project. And while there was recent discussion of raising the dam at Rollins Reservoir to create more water for power generation, climate change and the cost of paying for dam construction are impediments to this strategy.
But even when the district's hydroelectric operations begin generating a profit, Owens warned the board that the district must begin to establish a reserve account for this division. In particular, she voiced concerns about maintenance liabilities as NID assumes the cost of operating its hydroelectric facilities in 2013 when FERC relicensing comes to a close.
"I don't think these are representative," Owens warned the board, referring to current PG&E costs. "I believe they will be twice as high."
"My bigger concern is we don't have any reserves. We have a primary source of supply and if we have to replace or repair it, we don't have the money," Owens added. "We don't have the reserves here to take care of catastrophic events that we have reserves for on the water side."
Director Nick Wilcox added his concerns about relying on eventual hydroelectric revenues to subsidize water operations. "We are going to have significant deficits on the water side. In the short term we cannot count on excess hydro revenues to subsidize our water operations part."
Owens agreed, noting that there won't be any revenues in the hydro division until 2013 because it will be paying back a loan to the Rate Stabilization Reserve.
At this point, Director Scott Miller observed it was a good time to segue into a discussion of rates.
2010 Rate Increases Still a Consideration
If NID's Administrative Practices Committee (APC) finally advances a recommendation to the board on the district's 2010 proposed rate increases, customers should be able to hear discussion on the topic at this week's (Nov. 18) board meeting.
Minutes from the October 21 Water Rates Committee indicate that three water rate revenue scenarios are to be considered. Along with a "no increase" option, committee members also considered adhering to the current 2010 Proposition 218 Notice rates. The third scenario looks at an average between existing rates and the proposed 2010 increases. Earlier this month the APC failed to advance a recommendation to the board based on these three scenarios.
At the November 4 board meeting, several directors asked for a review of costs relating to personnel, long-term maintenance, and future projects. "We have major developments like Lake Wildwood and Lake of the Pines where there infrastructure is aging," Director Drew advised.
Agreeing with Drew, Director Weber added her concerns about future maintenance demands throughout the district. "John Kirk recommended during strategic planning the need for assessing long-term maintenance needs but it didn't get much traction. I also want to see us considering private waterlines and what we need to spend to replace these--and not just as a needs-be basis."
Currently, NID treated water rates fall over 40 percent short of covering the cost to provide water to this segment of the district's customer base. And while 85 percent of the water NID delivers is raw water, these customers pay rates that cover less than 45 percent of NID's cost to provide water to this customer base.
NID Director Honored
Each year, during National Businesswomen's Week, the Business and Professional Women of Nevada County (BPWNC) selects an outstanding local woman as their Woman of the Year. In recognition of her contributions to her community, Nancy Weber was unanimously chosen for this honor.
"Not only has Ms. Weber served on the NID board for many years, she has served Nevada County in several other capacities," BPWNC officer Judy McCarrick told NID's board. "As a registered nurse and teacher, Nancy developed a model program to assist parents of infants born with physical and mental challenges. She was also one of the founders and developers of her neighborhood association and has been involved with other key projects with local groups and fire councils," McCarrick added.
"It is her commitment and the range of significant contributions to her community that have made Nancy Weber BPWNC's proud choice as our 2009 Woman of the Year."
Weber was presented with the award at a recent BPWNC dinner held in Grass Valley.
Important Public Hearing on Newtown Canal Project
As the mandatory CEQA process continues on NID's Newtown Canal Partial Encasement Project, a public hearing is scheduled for Wednesday, November 18 during the district's regularly scheduled 9 a.m. board meeting. The public hearing is part of a required process to address potential environmental impacts by the project. Anyone concerned with possible impacts to nearby wells or other aspects of the natural landscape adjacent to the Newtown Canal should attend this meeting.
The next NID board meeting will be held on Wednesday, November 18 at 9 a.m. at the NID Business Center in grass Valley. The public is encouraged to attend.
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