2021 budget - snopud.com

2021 BUDGETBOARD OF COMMISSIONERS:SIDNEY “SID” LOGAN • TANYA “TONI” OLSON • REBECCA WOLFE

Snohomish County PUD | 2021 BUDGET

2021 BUDGET

TABLE OF CONTENTS

CEO/General Manager’s Message ................................................... 1

ELECTRIC SYSTEM ............................................................................ 5

Exhibit 1 ‑ Operating and Other Revenue................................................................11Exhibit 2 ‑ Purchased Power, Transmission and Ancillary Services ................... 12Exhibit 3 ‑ Operating and Maintenance Expenses – By Division ........................ 13Exhibit 4 ‑ Operating and Maintenance – By Cost Element .................................14Exhibit 5 ‑ Capital Expenditures............................................................................... 15

GENERATION SYSTEM ................................................................... 17

Exhibit 6 – Generation System ..................................................................................19

WATER SYSTEM .............................................................................. 21

Exhibit 7 ‑ Operating and Other Revenue............................................................... 23Exhibit 8 ‑ Operating Expenses ................................................................................ 24Exhibit 9 ‑ Capital Expenditures............................................................................... 25

Snohomish County PUD | 2021 BUDGET

RESOLUTION NO. 5990

A RESOLUTION Adopting the 2021 Budget for Public Utility District No. 1 of Snohomish County, Washington

WHEREAS, a proposed budget for Public Utility District No. 1 of Snohomish

County, Washington (the “District”), was filed by the Commission of the District in

accordance with the requirements of applicable law; and

WHEREAS, after having given prior notice to the public in accordance with the

requirements of applicable law, the Commission held public hearings to take testimony on

issues relating to spending levels under consideration for the year 2021; and

WHEREAS, Resolution 5853 Modifying the Electric System’s Financial Reserve

Policy provides that cash reserves and funds are presented in the annual budget and that the

staff discuss with the Board proposed modifications of funds; and

WHEREAS, after having considered staff’s estimates of income for 2021 and

estimates of expenditures, capital construction requirements, and projected use of reserve

funds, and having considered the public testimony of those customers submitting and

offering testimony, the Commission has concluded that the 2021 District budget summarized

in Exhibit “A” hereto is fairly structured to meet the needs of the District and its customers.

NOW, THEREFORE, BE IT RESOLVED by the Commission of Public Utility

District No. 1 of Snohomish County, Washington, as follows:

1. The 2021 budget and the Fund transfers for Public Utility District No. 1 of

Snohomish County, as summarized in the attached Exhibit “A,” is hereby adopted.

Vice-President

Resolution No. 5990 - 2 -

PASSED AND APPROVED this 15th day of December, 2020.

President

Secretary

Snohomish County PUD 2021 Budget

Resolution No. 5990 Exhibit A

Page 1 of 1

($000's)

Operating Revenues Energy/Water Retail Sales $ 594,391 $ 27,649 $ 12,539 Energy/Water Wholesale Sales 37,394 - 486 Other Operating Revenues 30,749 - 371

Total Operating Revenues $ 662,534 $ 27,649 $ 13,396

Operating Expenses Purchased Power/Water $ 321,335 $ - $ 3,083 Operations & Maintenance 247,034 10,137 6,645 Taxes 36,246 98 684 Depreciation (non-cash) 56,221 5,948 3,085

Total Operating Expenses $ 660,836 $ 16,183 $ 13,497

Net Operating Income $ 1,698 $ 11,466 $ (101)

Non-Operating Income (Expense) Interest Income & Other $ 9,934 $ 1,627 $ 291 Interest Charges (14,550) (4,947) (676) Contributions 26,747 50 5,269

Total Non-Operating Income (Expense) 22,131 (3,270) 4,884

Net Income 23,829 8,196 4,783

Other Sources and (Uses) of Funds Capital Expenditures (105,123) (6,015) (10,967) Debt Service Principal (11,323) (8,130) (1,809) Loan Repayments and Other 10,876 - 4,618 Reserve Use: Revenue Fund 5,520 - 290 Reserve Use: Bond Construction Fund 20,000 - -

Total Other Sources (Uses) (80,050) (14,145) (7,868)

Electric Generation Water

Snohomish County PUD | 2021 BUDGET 1.

The 2021 Budget for Snohomish County PUD reflects the efforts of leaders, project leads, plan‑ners, and staff from across the organization. It is

driven by our values and represents a prudent strategy of reliability, modernization, and infrastructure in‑vestment in the future, while balancing the challenges brought forward by the COVID‑19 Pandemic. With the 2021 Budget, the PUD continues to focus on in‑vesting in the quality of its people, its commitment to its customers, preparing for the needs of the future, and responsible cost and fiscal management.

2021 BUDGET KEY FEATURESThe 2021 Budget and expenditure plan provides funding to develop, maintain, and enhance the PUD’s Electric, Generation, and Water systems and continue to provide excellent service and enhance reliability to our customers while pursuing cost‑effective conservation.

The 2021 operating budget for the Electric System is $661 million, an increase of $2 million from 2020. The expenditure plan includes $105 million in capital expendi‑tures; the majority of those expenditures are for system reliability improvements and upgrades across the PUD’s territory.

The 2021 operating budget for the Generation System is $16.1 million, $500,000 higher than 2020. The expenditure plan includes $6 million in capital expenditures for construction and improvements, primarily at the Jackson Hydroelectric Project. The Water System’s 2021 operating budget is approximately $13.5 million, roughly $638,000 higher than the 2020 operating budget. The expenditure plan for the Wa‑ter System includes $11.0 million in capital improvements, the majority of which are for Warm Beach upgrades and main replacement projects.

2021 BUDGETThe following highlights some of the major components of the 2021 Electric System operating budget and capital expenditures:

4 Rate adjustments – There are no planned general rate increases in the 2021 Electric System budget. Depending on the final Record of Decision by Bonnev‑ille Power Administration, the PUD may consider a pass‑through rate adjust‑ment in October 2021.

4 Bond issue – The 2021 Budget includes a $60 million bond issue to help fund capital projects.

4 Retail power consumption – Since 2008, consumption of power in the PUD’s service territory has generally been declining. Loads are expected to continue to decline in 2021 as a result of the economic impact of the COVID‑19 Pandemic, approximately 1% lower than 2020 budgeted levels.

4 Full-Time Equivalent (FTE) employees – The 2021 Budget reflects an overall reduction of FTEs, a result of an analysis of vacant and unused positions.

4 New connections – The estimate for 2021 Budget new premise connections is 3,322, down from the assumptions used in the 2020 Budget.

4 Wholesale market power sales – Sales are expected to increase $6.1 million from 2020 levels, a reflection of higher expected market prices and more excess power available to sell.

4 System reliability investments – The 2021 capital plan includes several major projects aimed at increasing reliability for customers – these include the miscel‑laneous Line Improvement Projects, Twin City Substation, and Sky Valley 115 kV Switching Station as well as continuation of the wood pole and underground cable replacement programs.

4 Community Support Program – The 2021 Budget includes funding to con‑tinue this program to help customers who have been financially impacted by the COVID‑19 Pandemic.

2. Snohomish County PUD | 2021 BUDGET

4 Connect Up Program – Includes $8.9 million for the beginning of a multi‑year project to modernize the PUD’s meters and network infrastructure.

4 Arlington North County Community Office – Includes $7.7 million for the design of a new community office located in Arlington and related site work.

4 Energy-efficiency programs – The PUD continues investment in energy‑efficiency programs with $19.4 million in planned expenditures. These expen‑ditures are reported as part of Operating and Maintenance costs.

COST MANAGEMENT IN THE 2021 BUDGET Snohomish County and Camano Island continue to experience population growth, yet the PUD has experienced flat or declining electric loads since 2008 due to the impacts of energy‑efficiency measures, climate change, solar power installations, and other factors. Lower power sales volumes, aging power distribution infrastruc‑ture, industry demands and initiatives, and inflationary factors, have led to pressure on PUD budgets and rates. In order to address this pressure, the Responsible Cost and Fiscal Management portion of the PUD’s Strategic Priorities features cost management as an important component, and this is reflected in the 2021 Budget development process. The 2021 Budget was prepared using target‑based budgeting principles, and staff are continually challenged to review their expenditures and processes to ensure that the cost management opportunities are evaluated. Several cost‑savings categories are evaluated and tracked:

w Continuous improvement opportunities

w Actively bidding contracts and reviewing material pricing

w Utilizing internal talent rather than contractors

w Utilizing new or alternative technology/tools

w Reevaluating absences and capturing attrition

w Suspending or restructuring under-utilized contracts/services

w Actively pursuing grants or other financial opportunities

COMPLIANCE WITH COMMISSION POLICYPursuant to Commission Policy, specifically EL‑4 that defines the executive policies for financial planning and budgeting, the 2021 Budget:

w Includes a credible projection of revenues and expenditures;

w Maintains cash reserves at levels consistent with Commission policy established in Resolutions 5853, 5854 and 5855;

w Provides for 2021 Electric System debt service coverage greater than the Com‑mission’s 1.75x minimum target; and

w Planned use of bond proceeds does not exceed the Commission’s target of 40% of non‑generation electric system capital.

CASH RESERVES The PUD maintains reserve accounts categorized as follows:

w Operating Reserve, which represents approximately 120 days of non‑power budgeted expenses in order to provide adequate working capital during unfore‑seen events such as natural disasters, pandemics, economic downturns, cus‑tomer loss, and revenue interruption. The Operating Reserve currently exceeds minimum levels, and the 2021 Budget plans to use $6 million of this reserve in 2021.

w Contingency Reserve, which hedges against risks associated with wholesale market exposure resulting from power supply portfolio imbalances created by such elements as weather, contract purchase/product variability, fuel prices, load variances or resource failure. This reserve also provides for self‑insured retentions and insurance carrier deductibles. These reserve funds are expected to remain intact during 2021.

w Project Reserve, which represents funds expected to be used for capital and other projects. These funds are generally the proceeds of bond issues. The PUD has no bond construction funds available at the end of 2020 but the 2021 bud‑get includes new a new debt issue of $60 million to help fund capital projects.

w Benefit Reserves, which are being accrued over time to fund the actuarial cost of post‑employment benefit obligations. The 2021 Budget provides $2 million to be added to this reserve.

w Sinking Reserves, which are utilized to set aside funds on a monthly basis for annual debt service and privilege tax payments.

w Bond Debt Service Reserves, which are held pursuant to bond covenants for future debt payments.


STRATEGIC PRIORITIES REVAMP – STRATEGY 2040The PUD is currently underway on a project to revamp its Strategic Plan. In 2021, the PUD will be working with internal and external stakeholders to help develop a long‑term vision and strategy for the PUD, which will be tied closely with the Budget Develop‑ment process.


2021 BUDGET

The Electric System operates primarily to provide electrical service to ap‑proximately 361,000 customers in Snohomish County and Camano Island. The Electric System purchases the majority of the electrical energy it sells to

customers from the Bonneville Power Administration (BPA). The Electric System consists of the PUD’s transmission lines, substations, distribution lines, transform‑ers, meters, and general plant. It also includes customer service, engineering and design, energy‑efficiency services, and administrative functions that support the construction, operations and maintenance of the transmission and distribution system.

Schedule 1 shows the Electric System’s 2021 Budget, in comparison with the 2020 Budget. Below are highlights of the 2021 Budget assumptions.

Schedule 1ELECTRIC SYSTEM

COMPARATIVE FINANCIAL DATA($000’s)

2020 2021 Budget1 BudgetOperating Revenues

Energy Retail Sales $599,725 $594,391 Energy Wholesale Sales 31,243 37,394 Other Operating Revenues 29,325 30,749

Total Operating Revenues $660,293 $662,534

Operating Expense Purchased Power2 $318,716 $321,335 Operations & Maintenance3 244,764 247,034 Taxes 36,776 36,246Depreciation Expense 54,000 56,221

Total Operating Expenses $654,256 $660,836

Net Operating Income $6,037 $1,698

Other Income & Expense 15,502 9,934 Interest Charges (16,519) (14,550)Contributions 26,133 26,747

Net Income $31,153 $23,829

Cash Adjustments to Net Income Capital Expenditures $(111,674) $(105,123)Debt Service Principal (10,375) (11,323)Depreciation 54,000 56,221 Other/Cash Adjustments 2,866 10,876

Estimated Changes in Reserves $(34,031) $(25,684)

1The 2020 budget has been re‑classifed to match the new format in 2021, noted in footnotes 2 and 32In the 2021 Budget, the Purchased Power number includes Power Resource Management costs, previously included in Operations and Maintenance. In order to be more consistent with the financial statements, the 2021 Budget includes these costs.

3Operating & Maintenance expenditures in the 2021 Budget include Transmission and Ancillary Services, which have previously been budgeted separately. Additionally, Power Resource Management Costs have been moved to Purchased Power.


1

Operating RevenuesRetail energy sales included in the 2021 Budget are sales within the PUD’s service territory to residential, commercial and industrial customers and are projected to be $5.3 million lower in the 2021 Budget due to expectations of lower customer consumption.

Sales to retail customers represent 90% of the Electric System’s total energy sales revenue. Chart A highlights the major components of our energy sales.

Wholesale Energy Sales Revenues are $37.3 million in the 2021 Budget, $6.1 mil‑lion higher than the 2020 Budget. This increase reflects a higher volume of excess power and slightly lower market sales prices expected in 2021 Budget reflecting the current higher forward price forecast.

Other operating revenues are $30.7 million in the 2021 Budget, a $1.4 million increase from 2020 levels. Other operating revenues include sales of the PUD’s transmission capacity, BPA energy‑efficiency program reimbursements, customer fees and other revenues.

Operating ExpendituresThe 2021 Budget for Operating expenditures is $6 million higher than the 2020 Budget. Chart B highlights the major components of the 2021 operating expen‑ditures.

PURCHASED POWERThe 2021 purchased power budget reflects a strategy for the power supply that focuses on securing stable, reliable power at predictable prices while keeping risk within acceptable levels.

Purchased power costs of $321.3 million are $2.6 million higher than the 2020 Budget. This increase is primarily the result of potential rate increases from Bonn‑eville Power Administration (BPA) beginning in October 2021. The cost increase is largely offset by increased wholesale market sales revenues.

w Bonneville Power Administration (BPA) – The 2021 Budget reflects a long‑term power purchase agreement effective October 1, 2012, through September 30, 2028, for the purchase of up to 811 aMW through the Block and Slice products. The BPA power contract represents 83% of the PUD’s 2021 power purchases and 74% of the PUD’s total power and transmission costs.

1Beginning in 2021, Operations & Maintenance includes Transmission and Ancillary Costs, to be consistent with the PUD’s financial statements


w Block Product – 43% of the PUD’s energy contract with BPA comes from the Block product. The Block product provides the PUD with power in flat monthly amounts that total 3 million MWh over calendar year 2021. The amount of energy the PUD receives each month is based on the PUD’s historical monthly load shape. In 2021, the total annual cost of the Block product is forecasted at $104 million.

w Slice Product – 57% of the PUD’s energy contract with BPA comes from the Slice product. The Slice product is delivered in variable amounts that reflect the actual output of the Federal Base Power System, which can vary from year to year based on regional hydro conditions. The 2021 Budget estimates receiving 3.9 million MWh from BPA’s Slice product at a cost of $129 million.

w Jackson Hydroelectric Project – The Electric System is expected to purchase 372,989 MWh of power from the Jackson Hydroelectric Project, a component of the PUD’s Generation System, at a cost of $13.1 million in the 2021 Budget. This represents 4% of the Electric System’s anticipated 2021 power resources.

w Small Hydroelectric Projects – The Generation System owns four small hydroelectric projects: the Woods Creek Project and the Youngs Creek Project in Snohomish County and the Calligan Creek Project and the Hancock Creek Project in King County. The 2021 Generation System budget includes $6.5 million in purchased power expenditures related to these projects.

w Short-term Market Purchases – The 2021 Budget includes 431,074 MWh, estimated to cost $14.7 million, for short‑term market purchases anticipated to satisfy the PUD’s retail loads in excess of its firm resources to manage short‑term load and resource variations. These costs are offset by wholesale power market sales.

w Renewable Energy Credits (RECs) – In the 2021 Budget, the PUD an‑ticipates it may need to purchase small quantities of RECs to supplement the PUD’s existing renewables portfolio and most cost‑effectively meet the target increase of 15% renewables in 2021. The 2021 Budget includes $367,200 for forecasted REC purchases.

w Renewable Power Purchases – In addition to the PUD’s owned resources, the utility has acquired eligible renewable resources through long‑term power supply contracts. These include: the White Creek Wind Agreement, the Wheat Field Wind Agreement, the Hay Canyon Wind Agreements, the Packwood Agreement, the Qualco Energy Corporation Small Renewable Generation Agreement, and the Hampton Lumber Mill – Darrington, WA Agreement. The PUD has also recognized the contributions of solar generation from its new Community Solar project in Arlington and the RECs associated with the PUD’s long‑term Bonneville power contract. The 2021 Budget forecasts a total of 505,638 MWh from these contracts at a forecast total cost of $38.6 million.

Chart C illustrates the PUD’s purchased power included in the 2021 Budget in terms of MWh purchased, while Chart D indicates the relative cost of the different power resources. Market purchases made for load/resource balancing are included.


ENERGY-EFFICIENCY PROGRAMSPUD programs are designed so that all customers (residential, commer‑cial, and industrial) have an opportu‑nity to become more energy efficient and have access to the newest energy technologies. The 2021 Budget in‑cludes continued enhancements to the energy services program portfo‑lio designed to improve customer ex‑perience and meet the PUD’s grow‑ing capacity needs.

The PUD has allocated an overall conservation budget of $19.4 million, which includes $11.5 million in energy‑effi‑ciency program incentives and rebates. Revenue sources related to energy‑efficiency through BPA Energy Efficiency Incentives (EEI) and conservation loan repayments will recover approximately $7 million for a net cost to the PUD of $4.47 million for energy‑efficiency incentives and rebates.

The PUD continues to acquire all cost‑effective and achievable energy‑efficiency resources in adherence with state legislation. The energy conservation targets es‑tablished for the 2021‑22 biennium are consistent with Washington State Energy Independence Act requirements and satisfy the PUD’s compliance obligations. Beyond compliance alone, the PUD uses data driven insights to refine and offer a suite of programs to meet the variety of needs of customers in our service territory.

Energy‑efficiency programs for the 2021 Budget include:

w Retail discounts on specialty LEDs, LEDs for hard‑to‑reach markets, fixtures, heat pump water heaters, smart thermostats and other high‑efficiency appli‑ances and electronics;

w Weatherization for income‑qualified residential customers, provided in partner‑ship with local agencies, as well as an energy savings kits for all Income Quali‑fied Assistance program participants;

w Incentives for residential insulation, high‑efficiency windows, efficient heat pumps (air source, ground source, and ductless);

OPERATING AND MAINTENANCE (O&M) EXPENDITURESOperating and maintenance expenses in the 2021 Budget are $247 million, $2,270 higher than the 2020 Budget. Operating and Maintenance expenditures include energy‑efficiency programs and Transmission and Ancillary Services (Transmis‑sion and Ancillary Services previously was budgeted as a separate line item but has been combined with O&M in the 2021 budget). O&M expenditures account for 37% of total PUD operating expenditures. Exhibit 3 (page 13) provides detail for O&M expenditures by division, and Exhibit 4 (page 14) provides detail for O&M expenditures by cost element.

O&M expenditures include those costs incurred in:w operating and maintaining the Electric System to provide reliable service to our

customers. This effort includes the regular maintenance of lines and stations, response to customer outages, and tree trimming efforts;

w providing effective customer service through the call center, local offices, account control and front‑line operations, as well as executive account attention and ef‑fective communications;

w maintaining an effective program that ensures the safety of employees in the performance of their duties;

w providing the internal support needed to serve our customers effectively in areas such as employee resources and safety, finance and accounting, material procurement and management, and information technology;

w providing maintenance and upkeep of our facilities, vehicles, and equipment;w ensuring compliance with environmental and other government regulations; w supporting the policy‑making, regulatory and management oversight functions;

and maintaining an effective energy‑efficiency program.

Operating and Maintenance Costs also include Transmission and Ancillary Service costs forecasted at $59.8 million, which is $1.2 million higher than 2020 Budget levels due to anticipated BPA rate changes.


w Rebates for energy‑efficient commercial lighting, networked or advanced light‑ing controls, kitchen equipment, HVAC, and other end‑uses;

w Builder incentives for efficiency upgrades that exceed the levels set by building code in residential new construction, single family, multifamily, and manufac‑tured homes;

w Custom incentives to businesses for installing a wide variety of energy‑efficient technologies at commercial and industrial customer sites; and

w Strategic energy management and coaching relationships with large commercial and industrial customers to identify process, behavioral, and capital energy sav‑ings projects; and

w Incentives for commercial building new construction projects.

The 2021 Budget also includes resources for:

w Advancing innovative program development and design;

w Leveraging data to inform more sophisticated strategic planning and target market segments for energy‑efficiency resource acquisition;

w Supporting a shift toward capacity benefits as a program outcome;

w Delivering an expanded Electric Vehicle program that provides for research, rebates, and incentives to customers in all segments;

w Working across departments to deliver several Distributed Energy Resources pilots to learn more about capacity and rate benefits;

w Partnering with outside agencies to co‑fund projects by applying for, and manag‑ing strategic grants for new technology;

w Enhancing outreach and education to more closely couple energy efficiency with the PUD’s income‑qualified customer assistance programs;

w Trade ally network training and development, supporting new jobs in the com‑munity;

w Measurement, evaluation, and continual improvement of program performance;

w Providing information and promotion of programs via traditional channels, at events and home shows, and directly in customers’ homes;

w Market research at the local level as well as leveraging regional research efforts; and

w Technology demonstration and evaluation projects conducted in Snohomish County with support from EPRI, BPA, NEEA, and local community partners.

TAXES AND DEPRECIATIONBudgeted taxes of $36.2 million are $532,000 lower than 2020 reflecting lower retail sales. Taxes include a 3.873% state excise tax and a 2.14% percent county privilege tax.

Estimated deprecation expenditures of $56.2 million are $2.2 million higher than 2020. Depreciation is an estimate of the reduced value of the PUD’s fixed assets and are part of operating expenditures in the 2021 Budget.

CASH ADJUSTMENTS TO NET INCOMEThe 2021 Budget ref lects a $6.4 million decrease in capital expenditures from 2020 and is based on the current project schedules. Budgeted capital expenditures for 2021 includes expansion, upgrades and maintenance of the electric distribu‑tion system infrastructure, including funding for line extension and plat work, distribution system line improvements and state‑requested relocation work. It also provides for facilities and information technology capital and vehicle and equip‑ment replacements.

Debt service principal expenditures in the 2021 Budget are $11.3 million, reflective of scheduled debt payments on existing revenue bonds. The 2021 Budget assumes a $60 million Bond issue to help fund Capital programs.

CAPITAL EXPENDITURESThe 2021 Budget includes costs related to expansion, upgrades and maintenance of the Electric System infrastructure, including funding for depreciated cable replacement, distribution system line improvements, and state‑requested reloca‑tion work. In addition, capital expenditures include the costs for the Connect Up Program, telecommunications infrastructure, information systems applications and hardware, work on existing facilities, development of new facilities, and purchases of vehicles and equipment.

The major capital projects included in the 2021 expenditure plan are presented in the table below and Exhibit 5 on page 15 highlights the capital projects by major category in the 2021 Budget.


gMajor Capital Upgrade ProjectsA reliable, cost‑effective and safe electric system network requires that facilities be upgraded to provide anticipated levels of service. The upgrades to the existing facilities are prompted by localized load growth, land‑use changes and infrastruc‑ture expansions. This category consists of large specific system upgrades, such as substation upgrades or line reconductoring. The expenditure plan for this program in the 2021 Budget is $2.1 million.

gOther Capital Outlay This program funds anticipated but as yet unidentified work, such as emergency line expansions and replacements and substation improvements. This category consists of small system improvements that experience indicates are necessary each year. This program’s expenditure plan for the 2021 Budget is $1.6 million.

gInformation Technology UpgradesThe Information Technology Services capital expenditure plan supports the technology infrastructure (such as servers, network, applications, and telecom‑munications) that provides the basic framework for the PUD’s computer and com‑munications systems. The 2021 expenditure plan includes $1.2 million in funding for new software and business capabilities, replacement of aging infrastructure and equipment, system software application improvements and telecommunications.

gOther Capital ExpendituresOther categories of capital expenditures include funding to modernize our telecom‑munications system, the completion of the Arlington Microgrid Project, Emer‑gency Work and Construction, along with other smaller projects.

gCapital Asset ProgramsThe existing electric system facilities must be routinely refurbished and/or replaced to provide a reliable, cost‑effective and safe system. This program provides for facil‑ity relocations, replacement of malfunctioning or deteriorated plant and improving operational efficiency. Each of the programs included in this category consists of specific improvement projects that are continuous and ongoing over a number of years. The 2021 expenditure plan is $35.9 million for this program.

gCustomer and Reimbursable WorkThe Customer and Reimbursable work portion of the capital expenditure plan funds the PUD’s response to customer requests for new electrical service, upgrades to existing services and other services including street and area lighting, as well as new equipment such as transformers and meters.

gNew Facilities and UpgradesThe Facilities Department expenditure plan for capital expenditures is related to design, construction, upgrade and replacement of PUD facilities. The 2021 expen‑diture plan includes $9.5 million related to construction work for the new North County local office, Arlington Microgrid site work, and major roofing projects.

gMajor Capital Expansion ProjectsThe steady growth and changing load patterns of residential, industrial and com‑mercial customers continue to require new facilities and property as well as increase peak load demands. The purpose of this program is to provide increased electric system capacity by constructing new facilities and large specific system expan‑sions, such as new substations and new lines. These projects generally extend over a number of years. The 2021 expenditure plan for this program is $10.0 million.

gVehicles and EquipmentThe replacement of aged vehicles and equipment reaching the end of their useful lives is necessary to ensure safe operation, reliable service and optimal efficiency. Vehicle and equipment replacements are planned by Transportation Services with the intent to remove them from service before extensive maintenance costs and downtime are realized. New technology is continually being investigated to reduce environmental impact and improve workforce efficiency. The 2021 expenditure plan includes $4.0 million for new and replacement vehicles and equipment.

Significant 2021 Electric SystemCapital Projects/Programs

($000’s)Miscellaneous Line Improvements $11,896 North County Community Office 7,679 Twin City Substation Design and Build 5,860 Wood Pole Program 5,226 Cable Replacement Program 5,016 Hat Island Cable 4,753 Sky Valley 115 kV Switching Station 4,327


2021 Budget Electric System Operating Revenues

Exhibit 1

2019Operating Revenues Results Amount MWh Amount

Residential 366,804,003$ 351,776,017$ 3,474,466 354,773,228$

Commercial 209,058,420 208,488,924 2,305,771 204,990,867

Industrial 36,610,813 35,562,883 438,510 30,690,562

Street Lights 4,042,601 3,896,693 27,000 3,936,419Total Retail Energy Sales 616,515,837 599,724,516 6,245,747 594,391,076

Total Wholesale Energy Sales 29,317,167$ 31,242,700$ 1,787,636 37,393,757$

Total Energy Sales 645,833,004$ 630,967,216$ 8,033,383 631,784,833$

Other Operating Revenues

Transmission Sales 11,169,607$ 7,269,000$ 9,274,000$

Miscellaneous Operating Expense Reimbursements 2,224,003 1,617,099 1,649,441

Surplus REC and Emission Sales ‐ 200,000 1,600,000

BPA ECA Reimbursement 2,294,847 8,000,000 5,800,000

Residential Exchange Credit 3,094,612 2,405,793 2,402,496

Miscellaneous Service Charge Revenue 5,939,041 6,316,267 6,442,592

Rents from Electric Property 3,728,749 3,516,667 3,580,095Total Other Operating Revenues 28,450,859$ 29,324,826$ 30,748,625$

Total Operating Revenues 674,283,863$ 660,292,042$ 662,533,458$

2021 Budget2020 Budget


2021 Budget Electric SystemPurchased Power and Transmisison Services

Exhibit 2

Total Total Total2019 2019 2020 2020 2021 2021

MWh's Results MWh's Budget MWh's Budget

BPA Block 3,083,066 110,664,635$ 2,989,906 104,568,342$ 2,984,960 104,070,500$

BPA Slice/Slice True-up 3,644,134 135,444,810 4,101,440 129,204,227 3,919,101 129,028,570

BPA Financial Reserves and Policy Funding - - - 1,869,351 - 2,488,335

BPA Lookback Credit/REP Customer Refund - (6,632,415) - - - -

Total BPA Power Costs 6,727,200 239,477,030$ 7,091,346 235,641,920$ 6,904,061 235,587,405$

Jackson Hydro 306,344 20,418,020 374,240 11,720,182 372,989 13,171,221

Generation System - Other Debt Service - 9,265,444 - 6,736,332 - 5,950,559

Youngs Creek Hydro 12,292 1,915,276 17,169 1,941,153 17,114 2,014,280

Woods Creek Hydro 2,901 131,938 1,278 159,636 1,273 607,044

Hancock Creek Hyrdo 9,993 2,417,776 27,382 1,982,408 27,308 2,048,404

Calligan Creek Hydro 10,998 2,105,425 24,658 1,792,648 24,598 1,800,017

Renewable Research - 195,709 - 1,025,400 - 2,057,784 Total Generation System 342,529 36,449,587$ 444,727 25,357,759$ 443,282 27,649,307$

Packwood 11,460 557,184 17,094 576,741 17,045 704,704

Qualco 2,814 12,909 2,662 177,461 5,433 211,343

Hampton Lumber Mills 16,787 831,288 17,587 975,320 17,587 1,128,674

Wind Power Contracts 414,625 32,703,640 466,643 35,895,053 465,574 36,559,251Total Other Renewable Power Sources 445,686 34,105,020$ 503,986 37,624,575$ 505,638 38,603,973$

Market/Short Term Purchases 627,233 35,126,652 416,377 15,333,005 431,074 14,727,229

Small Power Producer 209 10,335 239 11,831 238 11,789

Other Non-Power Services - 173,637 - 450,895 - 443,492

Renewable Energy Credits (REC) Purchases - 0 - 265,540 - 367,203

Power Resource Management - 4,566,623 - 4,030,344 - 3,944,856Total Purchased Power 8,142,857 349,908,884$ 8,456,675 318,715,868$ 8,284,292 321,335,253$


2021 Budget Electric SystemOperating Maintenance Expenses - By Division

Exhibit 3

2019 2020 2021Operating & Maintenance - by Division Results Budget Budget

70,464,593$ 65,713,577$ 69,711,927$

Transmission and Ancillary Services 56,064,558 58,665,861 59,824,351

Customer and Energy Services 29,188,410 33,804,352 34,901,845

29,501,337 31,771,748 32,274,978

21,281,123 20,211,124 20,743,952

8,658,066 11,814,840 11,692,539

8,709,321 9,208,320 10,403,035

3,952,188 4,407,654 7,721,183

5,451,179 6,140,271 5,707,171

4,380,592 5,013,511 5,390,974

2,780,633 2,063,831 1,623,780

Other Costs/Credits (20,920,213) (4,051,028) (12,962,011)

Total Operating & Maintenance Expenses by Division 211,572,498$ 244,764,061$ 247,033,723$

Information Technology Services

Power, Rates & Transmission Management

Facilities and Security

Distribution & Engineering Services

Administration and Safety

Corporate Communications

Legal Services

Finance

Human Resources


2021 Budget Electric System Operating Maintenance - By Cost Element

Exhibit 4

2019 2020 2021Results Budget Budget

Labor 71,559,983$ 73,977,692$ 74,568,848$

Transmission and Ancillary Services 56,064,558 58,665,861 59,824,351

Contracts and Services 41,650,790 52,030,028 51,762,831

Overheads 31,966,441 34,671,756 31,102,722

Materials, Equip and Supplies 8,915,259 9,908,947 9,876,216

Employee and Retiree Benefits (9,169,235) 4,200,000 5,746,686

Bad Debt Expense 2,277,864 1,799,174 4,971,454

Insurance and Claims 3,518,698 2,061,081 2,661,640

Other Miscellaneous Expense 1,518,373 3,804,688 2,382,580

Rents and Utilities 1,790,244 1,931,446 2,291,551

Travel and Training 1,275,262 1,522,888 1,666,344

Land, Property and Easements 204,260 190,500 178,500

Total Operating & Maintenance by Cost Element 211,572,498$ 244,764,061$ 247,033,723$

Operating & Maintenance by Cost Element


2021 Budget Electric SystemCapital Expenditures

Exhibit 5

2019 2020 2021Capital Projects by Major Category Results Budget Budget

Asset Programs 25,980,696$ 35,811,425$ 35,939,931$

Customer & Reimbursable Work 33,356,583 28,388,711 28,137,258

New Facilites and Upgrades 5,829,024 15,712,021 12,557,985

Expansion Projects 14,843,505 11,652,032 10,016,023

Vehicles and Equipmment 5,776,063 6,500,000 4,044,041

Connect Up Programs ‐ ‐ 3,009,456

Other Distribution Capital 2,165,475 2,916,891 3,279,730

Emergency Work and Construction 4,619,430 503,362 2,835,000

Upgrade Projects 8,405,205 2,103,894 2,050,678

Outlay Programs 6,073,860 833,851 1,546,494

Information Technlogy Upgrades 1,543,936 1,190,401 1,195,783

Arlington Microgrid 3,501,475 6,061,650 510,695

Total Capital Programs 112,095,252$ 111,674,239$ 105,123,073$

target $100,567,361

$86,651,198


2021 BUDGET

The Generation System is financed and accounted for as a system separate from the Elec‑

tric System.

The Generation System consists of the Jackson Hydroelectric Project (an operating generating facility with a nameplate capacity of 111.8 MW lo‑cated on the Sultan River), the Youngs Creek Hydroelectric Project (a 7.5 MW project located near Sultan) the Woods Creek Hydroelectric Project (a 650 KW project also located near Sultan), and the Hancock Creek and Calligan Creek Projects (both 6 MW projects located in King County).

The Electric System has covenanted to purchase all power and energy available from the Generation System, and the net cash expenditures of the Genera‑tion System are treated as a component of the Electric System’s purchased pow‑er. The Generation System is charged for administrative functions provided by the Electric System that support its operations.


Schedule 2 is a summary comparing the 2021 Budget for the Generation System with the 2020 Budget.

Operating RevenuesThe majority of the Generation System’s costs, and the MWh generated, are passed on to the Electric System via energy sales (recorded as a purchased power by the Electric System). Energy sales are almost identical to the 2020 Budget.

Operating ExpendituresOperating and maintenance expenditures in the 2021 Budget are $488,000 higher than 2020.

Estimated deprecation expenditures of $5.9 million reflect the current depreciation schedules on assets for 2021. Depreciation is an estimate of the reduced value of the Generation System’s fixed assets.

Cash Adjustments to Net Income Capital expenditures in the 2021 Budget are $6.0 million, $1.8 million higher than the 2020 Budget. Capital expenditures include $3.6 million related to capital main‑tenance for the Jackson Hydroelectric Project.

Debt service principal is lower in the 2021 Budget compared to 2020, reflecting the reduction of payments on the Jackson Hydroelectric Project construction bonds. There are no planned reserve transfers in the 2021 Budget.

Chart F illustrates the relative percentages of Generation System costs transferred to the Electric System as a component of purchased power.

Schedule 2 GENERATION SYSTEM

COMPARATIVE FINANCIAL DATA ($000’s)

2020 2021 Budget Budget

Operating RevenuesEnergy Sales $26,510 $27,649


Operating ExpensesOperating & Maintenance Expenses $10,076 $10,137 Taxes 95 98 Depreciation 5,524 5,948


Net Operating Income $10,815 $11,466

Other Income & Expense $1,660 $1,627 Interest Charges (5,415) (4,947)Contributions 50 50

Net Income $7,110 $8,196

Cash Adjustments to Net IncomeCapital Expenditures $(4,182) $(6,015)Debt Service Principal (8,455) (8,130)Depreciation 5,524 5,948

Estimated Changes in Reserves $0 $0


2021 Budget Generation System Exhibit 6

2019 2020 2021Generation System Net Energy Sales Results Budget Budget

Jackson Hydro 20,418,020$ 11,720,182$ 13,171,221$

Generation System ‐ Other 9,265,444 6,736,332 5,950,559

Youngs Creek Hydro 1,915,276 1,941,153 2,014,280

Woods Creek Hydro 131,938 159,636 607,044

Hancock Creek Hyrdo 2,417,776 1,982,408 2,048,404

Calligan Creek Hydro 2,105,425 1,792,648 1,800,017

Renewable Research 195,709 1,025,400 2,057,784

Total Generation System Net Energy Sales 36,449,587$ 25,357,759$ 27,649,307$

2019 2020 2021Generation System O&M by Cost Element Results Budget Budget

Labor 2,685,501$ 3,436,326$ 3,546,834$


Overheads 1,680,759 2,190,558 2,181,229

Materials, Equip and Supplies 408,119 2,152,764 1,684,810

Insurance and Claims 558,639 268,056 509,975

Other Miscellaneous Expense 62,907 65,412 49,915

Rents and Utilities 241,721 231,107 288,928

Travel and Training 54,685 98,424 52,316


Total Generation System O&M by Cost Element 7,105,102$ 10,141,924$ 10,137,327$


2021 Budget Generation System Exhibit 6

2019 2020 2021Generation System Capital Expenditures Results Budget Budget

Jackson Hydro 3,066,485$ 2,500,734$ 3,502,820$

Youngs Creek Hydro 32,201 131,000 190,700

Woods Creek Hydro ‐ 68,000 513,542

Hancock Creek Hyrdo 55,585 ‐

Calligan Creek Hydro 55,311 ‐ ‐

Renewable Research 58,861 1,482,366 1,807,784

Total Generation System Capital Expenditures 3,268,443$ 4,182,100$ 6,014,846$


2021 BUDGET

The Water System is financed and accounted for separate from the Electric and Generation Systems. It operates primarily to provide water service to approximately 22,216 customers in central Snohomish County. The Water

System purchases the majority of the water it sells to customers from the City of Everett. The assets of the system include transmission mains, pump stations, dis‑tribution mains and services, supply wells, reservoirs, treatment facilities, meters, maintenance facilities, and equipment. The Water System is charged for adminis‑trative functions provided by the Electric System.

ASSUMPTIONSThe 2021 Budget is based on the following assumptions:

Water PurchasesThe majority of the water sold by the PUD is purchased from the City of Everett. The City of Everett wholesale water rates are expected to increase 3.7% in 2021, which is reflected in the budget for purchased water costs.

Full-time Equivalent Employees (FTE)The 2021 Budget includes no additional FTE’s. (Note: Employee figures do not include services provided by the Electric System including accounting and finance, real estate, employee resources, vehicle and equipment maintenance, information technology services, telecommunications, legal, contracts, facilities and customer service functions.)

Asset AcquisitionIn 2018, the Water System completed the acquisition of the assets of the Warm Beach Water System, which serves about 600 customers. The 2021 Budget includes continued funding for capital and other improvements of the Warm Beach Water System. The 2021 Budget also includes funding from loans and grants from the Drinking Water State Revolving Fund (DWSRF) to help offset some of the ac‑quisition and costs.


Schedule 3 is a summary comparing the 2021 Budget for the Water System with the 2020 Budget.

Operating RevenuesWater retail sales are estimated at $12.5 million. Other operating revenues include $371,000 in property rental and other miscellaneous fees. No rate increases are planned for 2021.

Operating Expenditures

Purchased water costs are budgeted at $3.0 million, a decrease of 157,000 from 2020 levels. Water purchases needed from the City of Everett include the impact of a projected 3.7% wholesale water rate increase, and planned shutdown of the Lake Stevens well. Water purchases are offset partially by production from the PUD’s Lake Stevens well water treatment facility. Chart G reflects the relative amount of the expenditure categories in the Water System.

Operating and maintenance expenditures for the 2021 Budget are higher than 2020 budgeted levels primarily due to increased costs of shared services, approxi‑mately $722,000.

Estimated depreciation of $4.6 million is roughly equivalent to 2020. Depreciation is an estimate of the reduced value of the PUD’s fixed assets.

Contributions are expected to increase in 2021 as a result of a higher level of de‑veloper activity.

Cash Adjustments to Net IncomeThe 2021 Budget provides approximately $10.9 million for capital expenditures and construction projects and features several significant main replacements as well as capital expenditures to bring the Warm Beach system to alignment with PUD service standards. The table below lists the significant capital expenditures included in the 2021 Budget.

Schedule 3WATER SYSTEM

COMPARATIVE FINANCIAL DATA ($000’s)

2020 2021 Budget BudgetOperating Revenues

Water Retail Sales $12,326 $12,539 Water Wholesale Sales 477 486 Other Operating Revenues 363 371


Operating Expenses ($000’s)Purchased Water $3,240 $3,083 Operating & Maintenance 5,923 6,645 Taxes 672 684 Depreciation 3,024 3,085


Net Operating Income $307 $(101)

Other Income & Expense 3,386 291 Interest Charges (519) (676)Contributions 3,945 5,269

Net Income $7,119 $4,783

Cash Adjustments to Net IncomeCapital Expenditures $(9,664) $(10,967)Debt Service Principal (1,825) (1,809)Depreciation 3,024 3,085 Loans and Other 3,180 4,618

Estimated Changes in Reserves $1,834 $(290)

Significant 2021 Water System Construction Projects/Programs

($000’s)Warm Beach ‑ Clarence Ave Main Replacement $ 1,542

Walker Hill Reservoir 1 Improvements and Re‑coat 1,483

Water Meter Box Replacement Project 959

Warm Beach ‑ Soundview Dr Main Replacement 903

Warm Beach – Water Treatment Plan Improvements 747


2021 Budget Water SystemOperating and Other Revenue

Exhibit 7

2019 2020 2021Operating Revenues Results Budget Budget

Sale of Water ‐ Retail SF & MF (includes Surcharge) 11,943,718$ 11,709,490$ 11,912,850$

Low Income / Senior Discounts ‐ (116,699) (120,200)

Sale of Water ‐ Commercial 798,080 733,592 746,348 Total Water Retail Sales 12,741,798 12,326,383 12,538,999

Sale of Water ‐ City of Granite Falls Wholesale 359,577 264,679 269,974

Sale of Water ‐ City of Arlington Wholesale 128,799 95,974 97,892

Sale of Water ‐ Other (Snohomish & Goldbar) 145,662 116,000 118,320

Total Wholesale Water Sales 634,039 476,653 486,186

Total Water Sales 13,375,837$ 12,803,036$ 13,025,185$

Other Operating Revenues

Lake Roesiger Septic Tank Pumping Revenue 11,882 14,141 14,353

Property Rental 237,095 235,413 240,827

Miscellaneous Receipts & Engineering Fees/Other 154,117 113,579 115,851 Other Revenue

Total Other Revenues 403,094$ 363,133$ 371,031$

Total Operating Revenues 13,778,930 13,166,169 13,396,216

Other Revenue

Misc. Non Operating Income 3,179,576 4,784,300$

Investment Income 579,188 162,846 246,639

Assessments for LUDS Interest 30,426 44,000 44,000

Subtotal ‐ Interest Income and Other 609,614$ 3,386,422$ 5,074,940$

Contributions

General Facilities Charges 3,461,123$ 2,121,527$ 2,229,519$

New Service Connections 394,981 352,763 359,818

Distribution Service Charges 414,489 470,433 479,842

Contributions Non‐Tax DC 15,611 ‐ ‐

Non‐Cash Contributions/Donated Plant 4,158,392 1,500,000 2,200,000

Subtotal ‐ Contributions 8,444,595$ 4,444,723$ 5,269,179$


2021 Budget Water SystemOperating Expenses

Exhibit 8

2019 2020 2021Operating & Maintenance by Cost Element Results Budget Budget

Labor 2,312,422 2,640,422 2,925,743


Overheads 968,806 663,521 838,771

Materials, Equipment & Supplies 669,201 403,875 275,040

Rents and Utilities 324,837 357,000 366,000

Insurance and Claims 118,829 170,602 185,891

Bad Debt Expense 32,961 62,576 63,296


Other Miscellaneous Expense 37,859 35,100 37,500

Travel and Education 14,794 22,400 22,400

Employee and Benefits (338,174) ‐ ‐

Total Operating & Maintenance by Cost Element 5,362,534$ 5,923,984$ 6,645,135$

Purchased Water 2,596,534 3,240,372 3,082,811

Taxes 726,431 671,761 684,297

Depreciation 3,027,528 3,024,443 3,084,932

Total Operating Expense 11,713,026$ 12,860,561$ 13,497,174$


2021 Budget Water System Capital Expenditures Exhibit 9

Project Description 2021 Budget

Design & Crew Inspection for/including Donated Plant 2,500,000

CIP #54 ‐ Warm Beach ‐ Clarence Ave Main Replacement 1,542,000

CIP #203 ‐ Walker Hill Reservoir 1 Improvements and Re‐coat 1,483,000

CIP #314 ‐ Water Meter Box Replacement Project 959,000

CIP #55A ‐ Warm Beach ‐ 172nd St NW Main Extension 917,000

CIP #52 ‐ Warm Beach ‐ Soundview Dr Main Replacement 903,000

CIP #310 ‐ Warm Beach Water Treatment Plant Improvements 747,000

CIP #312 ‐ Lake Stevens Treatment Corrosion Control Optimization 463,000

CIP #107 ‐ Small System Well Spare Parts (Pump, motor, wire) 284,000

CIP #55B ‐ Warm Beach ‐ Kayak Intertie 213,000

CIP #305 ‐ New Services 206,000

CIP #53 ‐ Warm Beach ‐ Marine Dr Main Replacement 195,000

CIP #56 ‐ Downtown LS Festival St Main Extension 104,000

CIP #98 ‐ Forced Right of Way Relocations / Replacements 100,000

CIP #57 ‐ Warm Beach Misc Improvements (10 Hydrants) 94,000

CIP #43 ‐ 32nd St SE / SR9 Crossing 85,000

CIP #301 ‐ Vehicles and Equipment 84,000

CIP #300 ‐ Misc. Meter Replacement Program 45,000

CIP #202 ‐ Kayak Reservoir 2 42,000

Total Water System ‐ Regular Capital Expenditures 10,966,000$

2/11/2021

SNOHOMISH COUNTY PUD • 2021 BUDGET • SNOPUD.COM

2021 budget - snopud.com

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