Grant PUD Warns of Rising Power Costs Amid Demand, State Mandates

GRANT COUNTY — Grant PUD commissioners were briefed Aug. 12 on the main reasons power supply costs are expected to rise in the coming years, with analysts pointing to state mandates, growing demand, and changing market conditions.

Grant PUD’s rate-setting policy guarantees that “core customers” — residential, agricultural, and small to medium-sized businesses — will continue to receive the lowest rates possible, benefiting first from the low production costs of the utility’s Columbia River dams, Priest Rapids and Wanapum, collectively known as the Priest Rapids Project (PRP). Large industrial customers driving the need for more electricity will shoulder the costs of more expensive energy sources, such as solar and natural gas. Still, all customers will face rate increases due to higher production, material, and inflation-related costs.

Energy Supply Management analysts Lisa Stites and Michael Frantz told commissioners that several factors will drive higher energy prices, including the addition of new power resources to supplement hydrogeneration, compliance with the state’s clean energy laws, and participation in the Western Resource Adequacy Program (WRAP). Grant PUD’s longstanding strategy of selling “slices” of its PRP generating capacity, which has helped fund wholesale energy purchases for retail customers, will become less profitable as state requirements force the utility to keep its carbon-free hydropower for local use rather than selling it at a premium.

Under its federal license, Grant PUD also provides 30% of the combined output of the Priest Rapids and Wanapum dams to regional utilities, with the option to reclaim a portion to meet local growth. The utility auctions part of this capacity to fund purchases of additional market power, but projections show future demand may exceed the auction’s ability to cover the cost of needed supply.

Stites said joining WRAP would give Grant PUD access to a wider pool of power resources across the West, but would also require the utility to add as much as 231 megawatts of capacity by winter 2031 — at more than double the cost per megawatt hour compared to PRP hydropower.

Frantz noted that reduced wholesale sales, higher costs, and increased operational risks are all on the horizon. Commissioner Larry Schaapman said higher costs are an industry-wide reality.

“They’re not going to find anywhere else where costs are not going up,” Schaapman said.

He added that Grant PUD has been upfront with large electricity users about bearing extra costs when dam resources can no longer consistently meet countywide demand.

“These folks have been well aware that this day was coming,” Schaapman said.