Fact Sheet on Thurston County Proposition No. 1
Prepared by:
Public Utility District No. 1 of Thurston County
921 Lakeridge Way SW, Suite 301
Olympia, Washington 98502
What is Proposition No. 1?
What has the PUD done to study these options?
Proposition 1 asks voters:
The PUD contracted with an electric engineering firm for a preliminary
business assessment study, looking at three alternatives for providing
electric service. That assessment is available on the PUD website at
www.thurstonpud.com . Each of the alternatives examined involves
initially providing electric service to only a relatively small portion of
Thurston County.
“Shall Public Utility District No. 1 of Thurston County
construct or acquire electric facilities for the generation,
transmission or distribution of electric power?”
Proposition No. 1 is an initiative placed on the ballot by petition by
the citizens of Thurston County. 11,011 valid signatures of registered
voters were examined by the County Auditor and the Thurston
County Commissioners placed the measure on the November ballot.
If passed, this will authorize Public Utility District No. 1 of Thurston
County to provide electric service. The PUD has not been involved in
this petition drive to authorize the PUD to provide electrical service.
What does the Initiative do?
The initiative, if passed would authorize the PUD to acquire, construct,
own and operate electric generation, transmission, and distribution.
In essence it would provide authority and be enabling in nature. It
would not require that the PUD do so, and any decision to proceed
would be made by the elected PUD Commissioners in an open public
meeting process.
What is the Thurston County Public Utility (PUD) District?
The Thurston PUD is a county-wide municipal corporation of the state,
governed by a board of three Commissioners elected by the voters.
The PUD was formed in 1938 by a public vote. Each Commissioner
serves a six-year term, and one is elected every even-numbered year.
The PUD Commissioner districts are the same geographically as the
County Commissioner and Port Commissioner districts.
What does the Thurston PUD do now?
Thurston PUD provides water service to over 3,200 homes and
businesses, and manages and maintains water systems serving
another 950 homes, schools and businesses; a population of over
10,000. The PUD also participates in county-wide planning as a
member of the Thurston Regional Planning Council, and in water
resource planning through participation in various local, regional,
and statewide organizations. The PUD has a staff of twelve people,
including a general manager, an office staff, and a field maintenance
staff. To begin providing electric service, additional staff would be
needed. A chart of the PUD’s current organization follows.
PUD’S CURRENT ORGANIZATION
A detailed process would be required if the PUD were to be granted
authority by the initiative before acquisition or construction of electric
facilities would take place.
Would property taxes change if Proposition No. 1 passes?
No. The PUD is very limited in its ability to levy property taxes.
Currently, the PUD levies a tax of just under $.01 per thousand dollars
of property value, or about $2.40 per year on a $250,000 home. Under
state law, the PUD can only increase total property tax revenues from
existing property by 1% per year, which is less than the rate of inflation
over the past ten years. Anything above that requires a separate vote
of the public for what is called a “levy lid lift.” The PUD currently has
a written policy to not use property taxes for acquisitions.
What control do voters have over the PUD?
Voters have control over the PUD in three ways. First, the PUD
Commissioners are elected on a county-wide basis, and the voters
decide who the governing body of the PUD is in the same way
that County Commissioners and Port Commissioners are selected.
Second, if the PUD wanted to increase property taxes by more than
the 1% annual limit, a separate public vote would be required to raise
property taxes. Finally, all decisions of the PUD are made in open
public meetings that are advertised in advance of the meeting, anyone
is welcome to attend, there is an opportunity for public comment, and
the public can talk with the Commissioners outside of these meetings
as well.
How is the PUD funded currently?
The PUD derives nearly all of its budget from water rates. A small
portion comes from the county-wide property tax used to pay for
election costs and support county-wide activities. In addition, the PUD
funds capital improvements to its water systems with a combination
of bonds, grants, and loans. The bonds and loans are repaid, with
interest, from water rates. The 2012 budgeted expenditures from the
water operations budget are shown below:
THURSTON COUNTY VOTERS
PUD Commissioners
General Manager
Operations Manager
Chief Financial Officer
Field Supervisor
Accountant
Field Technician II
Customer Service Representative III
Field Technician II
Customer Service Representative II
Field Technician I
Customer Service Representative I
Field Technician I
What could the PUD do if Proposition No. 1 passes?
The PUD could acquire or build electric generation, transmission, and
distribution facilities to supply electricity. Currently, most people in
Thurston County receive electric service from Puget Sound Energy. A
few homes and businesses in the County are served by other nearby
electric utilities. The PUD could negotiate to acquire electric facilities
from existing utilities, it could acquire them by a court-supervised
acquisition process, or it could build its own electric facilities.
When would Proposition No. 1 take effect?
If approved by the voters, Proposition No. 1 would take effect on
certification of the election, scheduled for November 27, 2012.
How would the PUD raise capital to pay for electric facilities?
If the voters approve Proposition No. 1, and the PUD Commissioners
decide to invest in electric generation, transmission, or distribution
facilities, the PUD would issue municipal revenue bonds to pay for
electric facilities. The PUD recently issued revenue bonds for water
system improvements, and was able to borrow the funds it needed at
interest rates typical of municipal revenue bonds and borrowed at a
3.37% interest rate. It is likely it would be able to issue electric revenue
bonds for new or acquired facilities. If revenue bonds were issued,
they would be repaid out of future electric revenues.
Continued next page
How long would it take for the PUD to begin electric service?
If the voters approve Proposition No. 1, and the PUD Commissioners
decide to initiate electric service, the PUD would need to obtain a
franchise from the city or county where facilities would be located,
secure funding, acquire or build electric facilities, establish a
management and maintenance framework, and secure a power
supply. These steps take some time. New public utilities typically
require two to four years to begin operations. During this time the
PUD would gather input from government elected officials and their
representatives, in the area(s) to be served, from potential customers,
from voters, from stakeholders, environmental groups and from
business groups.
Would the PUD provide electric service
throughout the county?
That is a decision that the Commissioners would need to make in
an open public process after gaining input from the voters, potential
customers and stakeholders. The business assessment study contracted
by the PUD looked at initial service territories that comprise only a
small part of the county for initial service.
If the PUD purchased PSE Electric properties,
how would it do so?
The PUD could acquire PSE properties by either negotiation or by a
court-supervised process set up under the state constitution and state
law. A negotiated price could be above or below the current property
tax valuation of PSE properties. If the court-supervised process
were used, state law requires that the PUD pay fair market value, as
determined by a jury. The preliminary business assessment study
prepared for the PUD assumed that if the PUD acquired PSE facilities,
it would pay a premium over PSE’s current tax value.
If the pud purchased PSE Electric properties,
how would it pay for them?
The PUD would likely pay for any acquisitions with revenue bonds,
which would be paid off over time out of utility rates. The PUD has a
policy that it does not use property tax revenues for acquisitions.
What is the PUD’s bond rating and financial audit status?
PUD No. 1 of Thurston County has a Standard and Poors rating agency
long term bond rating of AA- for its water revenue bonds. In August
2012, the Washington State Audit was completed for the year 2011. The
State Auditor found no significant deficiencies or material weaknesses
in the PUD’s internal controls or management of the federal awards
received. There were no findings or management letter items and an
unqualified opinion was issued on the financial statements.
How does state law provide for determining the value of
property the PUD might acquire from PSE?
The law allows acquisition by either a negotiation or by the court
supervised process. A negotiated price would be one that PSE and
the PUD agreed to voluntarily. Under the court supervised process,
RCW 54.16.020 provides: “the court shall submit to the jury the values
placed upon the property by the taxing authority for taxation purposes,
and in respect to property, plants, and facilities of persons using public
highways for furnishing public service without franchises, shall consider in
determining the value thereof the fact that the property, plants, and facilities
are subject to be removed from the highways by reason of being so operated
without a franchise.”
What is the current property tax value of PSE Electric
property in Thurston County?
Washington law requires that utility property be assessed at “true
and fair value” (RCW 84.12.270). The Department of Revenue prepares
the assessment of PSE properties, not the County Assessor. In 2011,
the value established for PSE property in Thurston County was $131
million. That includes transmission facilities that are primarily used
to move power to other parts of the PSE service territory in Pierce,
King, and other counties, and which may not be needed to provide
service in Thurston County.
How many PUDs provide electric service?
There are a total of twenty-eight Public Utility Districts in Washington.
Twenty-two of them provide electric service. Thurston PUD is the
only PUD that provides only water service. Jefferson County PUD is
scheduled to begin providing electric service in April, 2013.
Do other PUDs provide electric service to only
a portion of their county?
Yes. For examples nearby, Grays Harbor PUD, Mason PUD #1, Mason
PUD #3, and Lewis PUD each serve only a portion of the county in
which they are located.
Where would Thurston PUD get electricity from?
The PUD could obtain power from the Bonneville Power Administration
(BPA), which is obligated by federal law to provide power to local
utilities whenever they request it. Under current BPA policies, the PUD
would be able to initially get up to 50 average megawatts of power at
the BPA “Priority Firm Tier 1” rate that other PUDs pay. If the PUD
wanted more than that amount of power, it would have to pay BPA a
different “Tier 2” rate that could be higher or lower than the Priority
Firm rate. Over time, the amount of “Tier 1” power available to new
public utilities is expected to increase.
The PUD would also be free to purchase power from other wholesale
sources, or it could acquire generating facilities to produce power.
The preliminary business assessment study identified three potential
initial service territories; all of these are expected to be of a size that
the PUD could acquire all or most of its needed power from BPA at the
Tier 1 price either initially or shortly after starting service.
How do electric rates compare between electric utilities?
Table 1 (please refer to next page) taken from the U.S. Energy
Information Administration data for the year 2010, compares average
electric rates by dollars per kilowatt hour ($/kWh) for all of the electric
utilities in Washington State.
What does the preliminary business assessment
study indicate?
The study prepared for the PUD examined three alternatives as
examples of where the PUD might initially provide electric service.
Two involved building new underground distribution facilities
to serve Yelm and Downtown Olympia, while the third involved
acquiring existing facilities in Tumwater and Olympia from PSE at
a premium to the value on which PSE pays property taxes. All of the
initial service areas examined were only a portion of the County; the
system could be expanded county-wide over time. The chart below
shows the summary results of the consultant’s analysis for the PUD.
SUMMARY OF DISTRICT ELECTRIC SYSTEM OPTIONS
Approximate Approximate
Estimated Estimated 10-Yr.
Customers in Load MWa In
Initial
Cumultive
Alternative 2016
2016 TypeDescriptionFinancing Savings
1
3,538
9
Build
Yelm System
Capitol
Campus North
2
1,457
15
Build
to Port of
Olympia System
3
20,140
78
Acquire
I-5 to Highway
101 Tumwater
core to Port of
Olympia System
$41,939,000
$10,025,000
$50,528,000
$18,720,000
$153,691,000
$215,710,000
Where can I get more information?
The County Auditor has published a voter’s pamphlet, available at
http://www.co.thurston.wa.us/auditor/elections/electns.htm
The Washington Public Utility Districts Association has a publication,
What Is A PUD? It is available at:
http://www.wpuda.org/pdf/WPUDA_broch_5%20(2).pdf
Table 1