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Power board weighs power-cost adjustment and staged rate changes while targeting a $28M cash reserve
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Summary
The board reviewed updated five- and seven-year financial models and the mechanics of a power-cost adjustment (PCA). Members favored a cautious, staged approach and asked staff to prepare two simplified packages (PCA and standard-rate) and to use a five-year planning window for near-term decisions.
The Hurricane Power Board spent its meeting reviewing updated financial scenarios and the mechanics of a power-cost adjustment (PCA), with staff and the consultant urging a cautious, staged approach to rate changes.
Jill, a consultant with Utility Financial Solutions, presented updated models that extended the prior five-year plan to seven years and incorporated a new impact-fee study. She said the no-change scenario would drive operating losses over seven years and reduce projected cash balances from about $15.7 million to $9.8 million. "If we don't do anything and we end up having to fund the capital improvement program, ... this would be the worst-case scenario here if we did nothing with rates," Jill said.
The consultant laid out alternatives including a bonding scenario paired with modest annual rate increases (0.75%) and a PCA. On the PCA, Jill described the mechanism and options: "When we set up the PCA model, we typically set it up on either a 6-month rolling average or a 12-month rolling average," she said, explaining the PCA compares a rolling average of purchase power cost to a base and bills the difference as an adder or subtractor to customer bills. She added the rolling average smooths volatility so customers do not face monthly spikes.
Board members pressed for assumptions grounded in historical data, especially on growth and purchase-power projections, and urged separating accumulated depreciation from the operating-cash reserve so that the board knows how much operating liquidity is actually available. Several members said the PCA would shift market volatility to customers but could protect the city's cash if the wholesale market becomes unusually volatile under new market arrangements (EDAM/UAMs). Other members raised concerns about customer perception: a PCA would appear as a monthly line item and would require a public education effort.
Rather than adopt a permanent change immediately, the board asked staff to prepare two simplified packages for a city council work session: (A) a standard rate plan and (B) a PCA plan, each analyzed on a five-year window (the board favored five years for nearer-term accuracy). The board did not make a formal decision to implement a PCA; members agreed the PCA remains an option to mitigate market risk and that any initial rate action should be staged (one to three years) and revisited as financials and capital decisions (bonding and impact-fee outcomes) evolve.
The board directed staff to provide additional clarifying details, including annual depreciation history and a clearer separation of operating cash, impact-fee cash and depreciation funds, and to return with the two-option package for council education and feedback.