Chelan County PUD

2016 Budget Timeline & Key Assumptions

October 5, 2015

What we will cover today…

Purpose Timeline Guidelines & Assumptions

Next Steps

No Board Action Required 2

Purpose Today

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Transition from our five-year

business planning efforts to the

2016 Budget process

Cascading Planning Cycle District vision & mission

District Strategic Plan (3 Goals – 7 Objectives)

District balanced scorecard strategy map

District BSc indicators

Business Unit business plans

Annual budget

District-wide performance plan

Department work plans

Annual employee performance plans

Levels of Organization

2016 Budget Timeline

September

Business Plans Finalized Budget

Initiated

Business Plan Board

Presentation (9/21)

October Preliminary

Budget Review & Development

Budget Overview

Presentations (10/5)

November

Budgets Compiled & Presented to

Board

Formal Board / Public Hearings

(11/2) (11/16)

December Finalize Budget Prepare Budget

Journals

Request Budget

Approval (12/7)

Indicates Board Meetings

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Strategic Focus

The 2016 Budget is built around strategic initiatives and business plans presented September 21st

Public Power Benefit for 2016 has been included for the initial allocation of funding and a placeholder is included for the remainder pending studies

The foundation of our strategic initiatives and budget is at the top of our balanced scorecard – Customer-Owner Satisfaction

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2016 District Priorities

Pay down debt

Net debt reduction of $24 million from scheduled principal maturities (no accelerated payments in 2016)

Year end debt ratio of 42% and debt balance of $590M

On path to achieve 2019 debt ratio target of below 35%

Public Power Benefit Program

Initiate Fiber system expansion

Complete pilot program for park passes

Complete feasibility studies

Integrate economic development and education focus

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2016 District Priorities

Reinvest in core assets and people

Rocky Reach large unit repairs Rock Island Modernization

Lake Wenatchee /Dryden wastewater improvements Upgrade Customer Information System

Investigate two-way metering capabilities Harden assets to protect against weather and fire

Expand energy efficiency programs Further implement safety strategic plan

Enhance employee skill development Prepare for the future through workforce succession

planning

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Early External Indicators

Wholesale Electric Market

lower than recent budgets

Accelerating investments in projects with highest long-

term value for customer-owners

Regulatory Requirements

continue to increase

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2016 Targeted Financial Policies

Rate of Return

Target > 4.0%

Combined Cover

Target > 2.0

Liquidity

Target > $175 M

Debt Ratio

Target < 50%

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Key Budget Assumptions • Average flows and current market price

• Hedge program fully implemented

• Unit outages impacts included

• Hydro fish spill consistent

Wholesale Revenue

• ~1% Electric

• ~2% Water

• ~1.5% Wastewater

• ~1,040 new connections-Networks

System Load Growth

• New rate for High Density Usage rate class

• 2% change in Water rates

• No change in Fiber rates

• 5% change in Wastewater rates

Business Line Service Revenues

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Key Budget Assumptions • Collective Bargaining Agreement includes

increases of 0.25% effective 1/1 and 3.0% effective 4/1.

• Budget includes estimated benefits forecasts.

Labor Bargaining Unit

• Estimate based on market forecast data of 3.0% for merit and market increases and 0.5% for promotions (all planned for 4/1) and 0.25% for the General Manager reserve (planned for 1/1).

• Budget includes estimated benefits forecasts.

Labor Non-Bargaining Unit

• Debt Reduction Charge (DRC) – 3.0%

• Capital Recovery Charge (CRC) - 50%

• Credit Premium Charge (Alcoa) – 1.0%

• Debt Admin Charge (Puget) – 1.0%

Long-term power contract terms &

conditions

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Key Budget Assumptions • Driven by 2016-20 business plans

• Expenditures increase as we accelerate investments in assets, catch up on deferred maintenance & implement turbine/generator repairs/refurbishments

Capital & Operating

Expenditures

• Net debt reduction of $24 million • Interest earnings estimated just over 1%

Debt and Interest Income

• Includes 2016 initial allocation and placeholder for remainder pending studies

• Budget revisions will be added for any newly designated projects

Public Power Benefit

Investments

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Budget Next Steps

Develop • Preliminary budgeting in process

Review

• Review and revise in October & November

• 1st Budget Hearing November 2nd

• 2nd Budget Hearing November 16th

Approve • Requesting Board Approval on December 7th

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