Grant PUD uses reserves, saves money on debt service
EPHRATA — Financial moves earlier this year will save Grant PUD a lot of money — $158.2 million, the public utility says.
About two-thirds of the $158.2 million is from having paid off some debt in January. Utility district officials calculated that paying off that debt will save the PUD about $105.4 million in debt service payments.
The PUD refinanced some bonds in January and March, a move that will save about $52.8 million in debt service payments over the life of the bonds. The refinanced bonds will be paid off in 2044.
Utility district officials originally announced the transactions, when taken together, would result $243.4 million in savings over the life of the bonds, but the PUD later revised that figure to $158.2 million.
Commissioner Dale Walker estimated on Tuesday that the PUD will save about $7 million to $8 million per year in interest payments during the next 24 years, counting both the interest payments that won’t be required on the bonds that were paid off and the savings from lower interest rates on the refinanced bonds.
Commissioner Judy Wilson said June 22 that it was a matter of PUD leadership being able to act when conditions were right and a commission that supported the staff in pursuing the savings.
Walker said reducing the debt will have a positive impact on possible future retail electricity rate increases.
To pay a portion of the costs of projects — such as upgrading turbines and generators, a massive project currently underway — the PUD issues bonds, which are paid back over time and with interest. The idea of paying off or refinancing some of the bonds had been discussed during the 2020 budgeting process, which started in August 2019 and was completed in November when the 2020 budget was approved by commissioners. Whether or not PUD officials would attempt to pay off any bonds and refinance others depended on market conditions. In January, market conditions were favorable.
Bonnie Overfield, senior manager of the PUD’s treasury division, said Tuesday that in January the PUD spent $76.4 million of its reserves to pay off loan principal and interest.
The bond refinancing was done by paying off some bonds with money raised by issuing bonds at a lower interest rate. The interest rate on that portion of the PUD’s debt dropped from 5 percent to 2.3 percent to 3 percent.
When the two January transactions were completed, “We thought we were pretty close to done” with refinancing, Walker said. But another opportunity arose in March, he said, and PUD officials did some more refinancing.
Cheryl Schweizer can be reached via email at education@columbiabasinherald.com.