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Doug Bechtel
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You may have heard that I asked the Board of Directors for approval to begin the paperwork to obtain a $5,000,000 loan for major upgrades to our transmission system on Lopez, Shaw and Orcas. Our transmission system consists of the high voltage wires and submarine cables that connect our islands together. Improvements to our transmission system do no come often but are usually expensive because they involve submarine cables. While the Board authorized me to begin the necessary studies, they made it clear to me that borrowing (along with a 5% rate increase to pay off the loan) was a last alternative to be undertaken only if absolutely necessary. I took this to mean - "Try to find a way to accomplish the work without borrowing".
The projects to be paid for with the loan were identified in a long range plan we completed in 1995. I always assumed that we would borrow for transmission improvements. In fact, there are some very good reasons why we should borrow. For example, if we borrow for a project, the money is paid back from future members' bills - members who will benefit from the improvement. On the other hand, if we take money from savings or our current budget, the improvement will have been paid for by those who bought electricity before the project was built.
Another example is the effect of such a large amount of money on the rest of our budget. $5,000,000 is probably equal to what we have spent on our construction programs for four years. What would happen to our other programs to improve the reliability of our system (storm abatement, pole replacement, right of way clearing, other undergrounding, etc.)? They would virtually cease to exist for several years if we have to come up with $5,000,000 from our budget.
Is there a third alternative? That is what I am looking for now. Let's look at a simple example of what I hope to find. We have two submarine cables between Lopez and Shaw. One cable was installed a few years ago and will meet our electrical loads for decades. The other cable is a smaller cable with a lot of life left but is at its maximum capacity if the larger cable fails. Should we spend nearly $2,000,000 to replace the cable? What if the new cable failed and the old cable could meet our loads for all but ten hours a year? What about 100 hours? 1000 hours? We need to look at the probability of the new cable failing (pretty low, I think) and then look at the quality of service we could provide with the old cable.
This is obviously a judgment call and is far more difficult than a technical decision. In real life, the example above does not come near to the complexity of the actual situation. The decision is also compounded by other factors such as the ability of our load management system to reduce the load in an emergency and our need to move the old cable to another crossing to provide reliable service in that crossing.
If we are able to delay the time when we need to buy new submarine cables, we can delay the need to borrow the money and keep rates our rates lower longer.
Altogether a difficult analysis and decision - stay tuned.
Doug Bechtel
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