State of the PUD

Connell Community CenterJune 16, 2008

Working in Partnership with Our CommunityPresented by:Ed Brost, Interim Manager

The District

Board of Commissioners

Elected Board of 3 CommissionersServe 6-year staggered terms from three

districts

Stuart NelsonVice President

since 2003

Bill GordonPresident since 2003

Chuck HallSecretarysince 2005

District’s Mission Statement

Franklin PUD provides quality services and achieves efficiencies that benefit our

community

District’s Key Focus Areas

RatesReliabilityRelationships

Blanton Road Substation under construction

Franklin PUD

Serves 2/3 of Franklin County population 1,067 miles of transmission and distribution lines 20 substations

93 full-time employees and 1 part-time employee Bonneville preference customer (Slice/Block) 2007 revenues: $81.8 million Continued growing local economy in 2007

25,328 meters 21,299 customers

Service Area

Local Economy Continued unprecedented growth in 2007

$106 million in new private investment for 518 single family homes

$81 million in new commercial and industrial projects permitted in Pasco

25 new distribution miles added in 2007

County’s population growth fastest in State Franklin County population over 67,000, an increase

of 37% since 2000 City of Pasco has 50,210 residents as of end of 2007

2007/2008 Highlights

2007 Highlights

Jan 1, 2007 5% rate decreaseStrategic decisions

Purchased power from two wind projectsNine Canyon, Phase IIIWhite Creek

Reserves at an all time high

2007 HighlightsReliability exceeds industry standardMoody’s bond rating upgrade from A to 2aSystem improvement projects completed in

2007:Overhead to underground conversion at:

East Lewis Street, Burden BoulevardTerra VitaSunrise Estates

2007 Highlights

Broke ground for Blanton Road SubstationCompleted design for 115kV line in ConnellCommercial projects completed in 2007

(Lowe’s Home Improvement Warehouse, Miscellaneous commercial growth in Road 68 area (retail & office), Multiplex theatre, Twin City Foods and ConAgra expansions, Bybee Foods Freezer building expansion,and Freeze Pak)

2007 Highlights

Strong 2007 retail sales $61.6 million Exceeded revenue forecast by $3.6 million

Continued strong load growth (4.9% in 2007) Revenue levels sustained even with a 5% rate

decrease for all classes in 2007 3.8% average growth over last three years 620 new accounts in 2007

New connection charges billed to customers$2.4 million in 2007

2008 Highlights – to date Completed Blanton Road Substation Standard and Poor's bond rating upgraded

to an “A” Rate decrease May 1, 2008 – 4% overall Residential Exchange rate credit

3% effective for one year (May 1, 2008)

District’s Growth

Projects planned or announced for 2008(Syngenta Seeds, Inc.(food processing plant), Coyote Ridge Corrections Center, new high school in Pasco, additional retail and commercial buildings, medical and professional office buildings)

2008 District Projects

15 subdivisions being developed in Pasco and Connell

Connell/Kahlotus transmission lineHeadquarters remodelAMR systemAccounting/Work Management

System

Customers and Rates

2007 Load by Customer Class

34%

17%

14%

34%

1%

Residential

Commercial

Industrial

Irrigation

Lighting

2007 Energy Sales Revenue

31%

27%

11%

10%

1%

20% ResidentialCommercialIndustrialIrrigationLightingWholesale

2007 Operating Expenses

Electric Rates

Date Change

January 1, 2003 +11.5%

January 1, 2005 +10.5%

January 1, 2007 -5.0%

May 1, 2008May 1, 2008*

-4.0 %-3.0 %

Changes in Franklin PUDs Electric Rates

* 3% credit for approximately 1 year.

Rate Strategy

Rate Advisory Committee recommends long term rate stability

Goal is to sustain these decreases while meeting challenges due to state/federal mandates

Continue to seek reductions

Board commitment to financial integrity and to District financial policies

Power Supply

Power Supply Overview Diversified power supply Block and Slice customer of Bonneville

Under critical water Bonneville contracts meet 93% of District load (100 of 107 aMW)

Thermal resources meet incremental load requirements and serve as a hedge against low stream flows

Wind power purchases Packwood hydro Developing an Integrated Resource Plan (IRP)

Other District Resources

Owned Resource:Pasco CT 22 MW

Contracted Resources:Frederickson (Aug 2022) 30 MW

Packwood Hydro (firm) 3 aMW

Nine Canyon Wind Project (2030) 3 aMW

White Creek Wind Project (2027) 3 aMW

26

Estimated Monthly EnergyLoads & Resources 2012

0

2040

6080

100

120140

160180

200Ja

n

Feb

Mar

Apr

May Ju

n

Jul

Aug Se

p

Oct

Nov

Dec

aMW

Average Slice

WhiteCreek

Nine Canyon

Frederickson

Critical Slice

Block

Load (Pessimistic)

Load (Budget)

Load (Expected)

27

Estimated Monthly EnergyLoads & Resources 2022

0

2040

6080

100

120140

160180

200

Jan

Mar

May Ju

l

Sep

Nov

aMW

FredericksonAverage Slice9 Canyon (+3.4aMW)Critical SlicePackwoodBlockLoad (Expected)

Regional Issues

Key Regional Issues

Post 2011 BPA contracts Residential ExchangeFish costs – Biological Opinion Increasing legislative mandates impacting

costsClimate Change, Initiative 937Transmission reporting requirements

Post 2011 contracts with BPA

Regional Dialogue process – secure benefits of Federal System for the Northwest

20-year contractsRates uncertaintyCost control and dispute resolution are

important issues yet to be decidedContracts to be offered by August and signed

by December 2008

Residential Exchange Program

1980 NW Power Act established the Residential Exchange Program (REP)

Increase parity between the private and preference customers’ wholesale power costs

Share benefits of federal power system with private residential and small farm customers

Private benefits passed on to their customers in form of a credit on their bills

The Act specifically stated public power customers would not have to pay for this benefit received by private customers

The Court Ruling in 2007

May 3rd, 2007 Ninth Circuit Court ruled BPA violated law

BPA suspended payments to private utilitiesPublic Power has had significant rate

increases due to unlawful agreements over last 6 years

Important to reach regional agreement regarding level of benefits – while honoring NW Power Act provisions

BPA Proposed Settlement

February 8, 2008 BPA issued settlement provisions and initiated formal rate proceeding Cash payments to public’s and private’s for 2007 and

2008 Provides $620 million in future rate relief to publics

over 20 years (2009 – 2028) for unlawful payments Re-establishes REP payments and program at

approximately $210 million a year. Expected decision by September 2008

Fish Costs & River Operations - the $800 million question

PUD member of NW RiverPartners

Regional organization advocating rational, scientific approach to fish

recovery that preserves & enhances values of our river system

RiverPartners builds awareness

Provides a unified voice for values of the Columbia and Snake rivers.

Effective means to promote good stewardship and cost efficient salmon restoration programs.

Active in number of forums: litigation, technical, political, press/media and member communications.

Green Dams/Blue Skies pro-active campaign in support of the Snake River dams.

Renewable/Conservation Standards

Meeting I-937 renewable requirements Triggers at 25,000 customers (expected 2012) First threshold met

6% of resources acquired from renewable resources

I-937 conservation requirement: “all cost-effective” will be a challenge 2007 accomplishments 5.9aMW at $54.97

Climate Change

Continues to evolve regionally and in DC, and will impact our power costs

Our costs will go up – question is, how much

Summary

Summary

2008 continues the strong trends of 2007 Thriving service territory Positive trends in key financial indicators Key issues facing the PUD affecting our future Well postured to meet significant challenges

(BPA contracts, climate change, growth, I-937) Engaged and responsive Board Customer service is our number one focus

Questions?

Blanton Road Substation