PUD 3 Commissioners Considering Substation Construction Fund

Mason PUD 3 commissioners are considering a plan to fund future substation construction, while minimizing rate impacts on customers.

Commissioners have been talking about the matter since September 2016. An independent study on substation construction, and allocation of cost options was commissioned in January. The board discussed the issue at its March 11, March 28, and Tuesday (April 11) business meetings.

Staff told commissioners Tuesday that there has been a steady increase in applications for new services over the past few years. That, along with several large commercial projects means that over the next decade four, possibly five, new substations will be needed throughout the PUD’s service territory to meet growing energy needs.

Eleven substations serve customers throughout the PUD service territory. Substations convert high voltage transmission electricity to lower distribution voltages. The power is then sent throughout the local power grid to homes and businesses.

PUD staff worked in-house to produce an animated short to explain why a substation funding plan is important now.

Commissioners have been contemplating a new fee to help pay for a special substation reserve fund. The proposed fee is based on a customer’s share of constructing substations to meet their power needs. In this case, its customers who add new load or expand existing load. It also accounts for the benefit of increased reliability for all customers when a new substation is built.

The cost-sharing structure calculates that 40% of a substation will be used for system reliability and the other 60% will be collected through a fair and equitable fee to those who are adding load to the system. That means the PUD would be responsible for 40% of the cost of a new substation while the other 60% of the cost will be recovered through system capacity fees directly related to a customer’s impact on the system.

Members of the public commented on the plan, asking that commissioners delay action. Commissioners agreed, and plan to take up the matter at a future business meeting.

How Would It Work?

  • System Capacity Fees go into a separate account specifically for constructing substations. This allows for an enhanced planning and financing process for substations to meet growing loads various areas of PUD 3’s service area.
  • Each new customer connection pays a fair and equitable fee, based on that customer’s intensity of the power needs. The fee represents their proportionate share of the cost of a new substation.
  • The System Capacity Fee ensures that existing customers are protected from paying an undue amount for construction of new substations. There is a benefit to all customers when a safe, reliable and redundant system is working well.

What Are the Options?

Unlike other rural utilities, PUD 3 is experiencing growth in applications for residential and commercial services. The PUD is also expecting increased demands from large commercial and industrial customers. Without a substation financing program (System Capacity Fee), there are few options:

  • Tell customers in areas where substations are at capacity that they cannot build. This would drive away existing businesses that make up cornerstones of our community.
  • Charge new customers the full cost of a new $3 to $5 million substation, which would hinder economic development.
  • Raise all customer rates to pay for substation projects. All PUD 3 customers would be asked to subsidize projects for new customers for whom substation upgrades are necessary.

Mason PUD 3 includes about 600 square miles of service territory, with nearly 33,000 electricity customers. PUD 3 also operates a wholesale fiber optic telecommunications network, which supports the operation of its electric distribution services.