PUD 3 Approves Collecting Fees for Substation Construction

The Mason County PUD 3 Commission Tuesday adopted a fee schedule that will require new development to pay for a portion of the construction costs for new substations and upgrades to existing substations. The system capacity fee, which is based on a customer’s share of constructing substations to meet their power needs, goes into a special substation reserve fund. The fee applies to customers who add new load or expand existing load.

A new substation is estimated to cost between $3 Million and $5 Million. PUD 3 staff calculates the utility is responsible for 40% of that cost while the other 60% will be recovered by the system capacity fees directly related to a customer’s impact on the system.

Most new residential services would require a system capacity fee of $1700.

Some are opposed to the fees saying it will discourage development and price more people out of owning new homes. Among those to testify against the fees Tuesday were Joel Baxter from Olympia Master Builders and Heidi McCutcheon, Executive Director of the Shelton Mason County Chamber of Commerce.

The PUD Commissioners unanimously approved Resolution No. 1682 saying the fees are a fair and equitable way for growth to pay for growth.

Here is video of PUD 3 staff’s presentation to the Commission, the Commissioners’ comments and their action:

Here is a news release from Mason County PUD 3:

Mason PUD 3 Commissioners Adopt Plan for Future Substation Funding

Plan will Provide Reliable, Safe Power for Growing Energy Needs

Mason PUD 3 commissioners today (April 25) approved a funding plan to ensure the PUD’s ability to build new substations to handle growing local demands for electricity. The program avoids the potential of a general rate increase of between two and three percent for PUD 3’s nearly 34,000 customers.

“Planning for the long term is a good move,” said Linda Gott, PUD 3 commissioner. “We need to prepare for the future needs of our customers and the community.”

PUD 3 will set aside $2.5 million from its reserves to establish a special account specifically for substations and the fees paid by new connections. The plan includes a system capacity fee that represents a new customer connection’s proportionate share of building a new substation. In this case, customers who add new electricity needs or expand their existing requirements. It also accounts for the benefit of increased reliability for all customers when a new substation is built.

The commission this morning adopted a resolution establishing the program. The resolution did not include a one-half of one percent increase in customer rates as recommended by a cost of service study of the fees. The fee goes into effect May 1.

Essentially, the fee paid by new connections helps pay for the capacity of a new substation, up to 60 percent. The PUD’s substation reserve funds 40 percent of the reserve capacity built into a new substation. The reserve capacity means substations can take over for other facilities should one go offline. This could be for maintenance. On the other hand, if one substation loses power, the PUD can reroute electricity from other substations to quickly bring customers back on line.

What Is the Charge?

The system capacity fee is based on the ampacity rating at the point where service is provided to a customer. For a typical new home (with a service between 101 and 200 amps) the one-time fee is $1,700. New customers (such as large commercial and industrial businesses) who use a lot of electricity would see a fee proportionate to their energy needs. This is due to the large amount of power they need, which impacts the capacity of an existing substation, or create the need for a new substation.

How Does It Work?

  • System capacity fees go into a separate account specifically for substations. This allows for an enhanced planning and funding process for substations to meet growing loads in various areas of PUD 3’s service area.
  • Each new customer connecting to the system pays a fee, based on the type of service, and the intensity of the power needs. The fee represents their proportionate share of the cost of new substations, when needed.
  • 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.

Why Are New Substations Needed?

Eleven substations serve customers throughout the PUD’s service territory. Substations convert high voltage transmission electricity to lower voltages. The power is sent throughout the county on the PUD’s local distribution system.

Some of PUD 3’s substations are at or near their maximum capacity. The PUD forecasts that the local demand for electricity will continue to grow. That means the need to build four, possibly five new substations over the next ten years.

PUD built its last new substation at Johns Prairie. It was energized in January of 2007.

The growth in energy needs, and projected growth into the future is evidenced by:

  • A substation in the Kamilche area is at capacity.
  • The Shelton Hills development.
  • The Potlatch substation at Lake Cushman needs to be replaced.
  • Growth in north Mason County is taking up substation capacity.
  • The Belfair bypass is within the ten year planning window, which will open up developable land.
  • If new swaths of large industrial lands are annexed into the Shelton Urban Growth area, a fifth substation may be needed to meet that region’s electricity requirements.

From 2000 through 2017, PUD 3 has connected about 7,200 new services to its system. Not all the connections are equal in the load they demand from the electricity distribution system. They range from residential to large commercial. Even with a slowdown during the 2008 recession, new connections had a continued upward trend.

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