Yahoo Weather

You are here

Editorial: Sometimes the PUD can’t prevent rate hikes, sometimes it can

There are some financial issues completely beyond the control of our Grays Harbor PUD, its commissioners and administration where they have no real choice but to raise rates.

And then there are the times when it makes you wonder why raising rates is even on the table. In this case, the health insurance costs at the public utility district are going up. And this is a cost that the PUD never budgeted to happen.

As a worst-case scenario, PUD officials have said that it could mean a 0.4 percent rate hike. This is what the PUD staff told its commissioners recently and is on top of a 3.75 percent rate hike that went into effect in January and a potential 1.75 percent rate hike that might be needed, depending on how energy prices go.

We’re lucky to have new General Manager Dave Ward and Chief Financial Officer Doug Streeter, who say they will do everything in their power to make sure the health care costs are absorbed by the PUD’s operating budget.

“Since we are only two months into our budget year and our budgets are conservative in nature, there should be enough time to manage and absorb the cost increase,” Streeter wrote in a recent email. “… We do not anticipate needing to do anything additional with rates as a result of this increase.”

I get why sometimes a rate increase is on the table. If you’re unaware, the PUD buys its power from the Bonneville Power Administration, an arm of the federal government. When the feds raise their rates, then the trickle-down effect is more money out of your pocket. There’s only so much the PUD can do to control its costs. They really aren’t lying to you about all of that. Even little power utilities like the city of McCleary are impacted by Bonneville’s choices.

Another big impact of rate increases comes from voter-approved Initiative 937, which set into effect a number of renewable energy standards. The results are more wind turbines and other alternative energy facets around the state that the PUD was mandated by the people to do, even though the PUD had more than enough hydro power capacity courtesy of the Bonneville Power Administration to power all the homes on the Harbor. The initiative specifically decided that hydro power from our rivers could not be considered renewable energy. That likely spurred some jobs in eastern Washington and other places where the turbines spin, but it also meant an increase in costs. If you were one of the 51.73 percent of voters that approved this initiative back in 2006, the PUD warned you that your rates would likely go up because it takes money to invest in all this infrastructure that really wasn’t needed. For the record, voters in Grays Harbor shot the measure down by nearly 60 percent, but there was too much support for the initiative elsewhere in the state. And, lo and behold, the rates have gone up consistently ever since.

One note of positive impact the renewable initiative has had on the Harbor is in the creation of the wind turbines at Grayland, installed by the Coastal Community Action Program, with the proceeds benefiting many valuable programs. It’s questionable if the towers would have been put up without the requirement, if only because the state might not have provided the financial resources to help it move forward. I’m pretty sure the PUD would have been on board no matter what.

Nonetheless, a big chunk of the rate increases you’ve seen between 2006 and today are the result of the initiative. The PUD has consistently told its ratepayers this fact everytime they go and raise rates.

Those binding costs make sense to me.

But even considering raising rates to cover health insurance plans makes no sense to me.

The PUD has a self-funded insurance plan covered by Premera Blue Cross. Starting April 1, Premera recommended a 14.4 percent increase, Streeter says, but the PUD’s health and welfare committee decided not to automatically increase costs by that amount.

“We asked our benefits consultant to work with Premera on some plan design modification options in order to reduce the potential increase,” Streeter wrote in an email.

Some of the health care costs are firm, Streeter says. Roughly 5 percent of the cost increase is associated with additional benefits the PUD is required to provide under the federal Affordable Care Act, Streeter says.

In addition, the PUD is “being hit with a reinsurance assessment to help fund a reinsurance program to help stabilize the state’s individual market,” Streeter writes. “This assessment is against Premera as the insurance company, but they pass the cost on to each business they cover. There is also a tax under the Affordable Care Act on insured businesses. When the Affordable Care Act was passed I think everyone had questions as to how this would be funded, and now we are beginning to see a cost shift where businesses that have historically provided health insurance are now paying more to help fund newly insureds under other programs.”

Like Streeter says, since the PUD is only two months into the year, they have time to absorb the extra costs, which work out to about $400,000. If, for whatever reason, the PUD is unable to absorb the costs, instead of the first blush, “let’s raise rates,” the next avenue to take should be to go to its union and ask for concessions.

I’ve heard this complaint for years — ever since the double digit recession began in 2008, to be precise. And the complaint is usually made by folks who are already in a union. Where their union brothers and sisters at the cities and Grays Harbor County have gone without benefit increases for some years and without raises for other years, the PUD’s unions have continued to get raises each year, never taking concessions. Those increased costs from those higher wages and increased medical costs get passed on as another cost to the ratepayers. Even PUD management has gone for years without raises, but the unions have received raises every year — even in tougher economic climates than this year.

“Our union contract runs through March 31, 2015 so it would be difficult to open negotiations for this item,” Streeter says. “If it was a more desperate situation, I am sure the district would not rule out trying anything to decrease expenses.”

The PUD currently splits its monthly premiums with the ratepayers paying 90 percent and the employees 10 percent of the costs. Streeter points out that employees are responsible for co-pays and deductibles.

I know when my company’s premium costs go up, I have to pay more. I’m not sure why it has to be so different for public employees and why the ratepayers are always expected to absorb more costs to their own pocket books.

Steven Friederich is editor of The Vidette. Contact him at editor@thevidette.com