Grand River Dam Authority Revenue and Competitors

However, GRDA has not always been the low-cost provider. Two decades ago, at a time when many municipal customers were signing new electric supply contracts, the utility's rates were closer to the competition, including investor-owned utilities like Oklahoma Gas & Electric (OG&E) and American Electric Power-Public Service Company of Oklahoma (AEP-PSO). Still, decision-makers in those communities, armed with the knowledge of GRDA's cost-of-service rates and beneficial mixture of coal and hydroelectric generation resources, signed with GRDA. Today, 20 years later, the choice has proven to be the right one for those Oklahoma communities. "Over the last 20 years, our competitors' rates have risen much faster than ours," said GRDA Chief Financial Officer Carolyn Dougherty. "While our customers' total bills including both base rates and fuel have gone up by about 66 percent since the mid-1980s, other utilities have gone up as much as 240 percent." GRDA's increase is just a reflection of the rising costs of doing business, said Dougherty, adding that, unlike investor-owned utilities, "no portion of GRDA rates have to be earmarked for profit. Still, with GRDA's newest generation facility — Unit 2 at the GRDA Coal Fired Complex (Chouteau, Oklahoma) — already in service for 20 years, maintenance and operating costs are just higher than they used to be. So the new rate increase is designed to help GRDA continue to operate efficiently and reinvest in its resources. One large expenditure on the slate for GRDA includes the mitigation costs associated with relicensing efforts for the Robert S. Kerr Dam (Locust Grove, Oklahoma). That project is already well underway. "We are in extensive negotiations with federal and state resource agencies to acquire our new license to operate Kerr Dam," said Anthony Due, GRDA's assistant general manager of operations and hydroelectric generation, "and mitigation efforts there could be millions of dollars." Part of GRDA's mixture of coal and hydroelectric generation resources, Kerr Dam will also be the site of a major rehabilitation project in the near future. GRDA will upgrade the four, 40-year old hydroelectric units with new components that are not only more "fish friendly" but also more efficient, with greater generating capacity. "The Kerr upgrade project will likely cost $50 million," said Due, "but we will see an increase in production and efficiency." In a typical year, GRDA's hydroelectric resources help the utility set the standard for low-cost generation in Oklahoma. However, anyone who can read a rain gauge understands 2005 has been anything but typical. According to the National Weather Service Forecast Office, 2005 was the third driest year in Oklahoma since 1921. According to Due, that kept things pretty quiet around the Kerr and Pensacola Dam powerhouses most of the year. "The drought conditions we've had definitely affected our ability to utilize our hydroelectric resources," said Due. "However, when we do have water available, our production costs are very beneficial to our customers. The upgrade work at Kerr will only expand on that production cost advantage." Historically, customers have chosen GRDA because they understood its focus was not on profits but on power, supplied at the lowest possible cost, said Dougherty. "And that's where our focus remains today. This rate increase is a tool to help us strengthen our resources so that, 20 years from now, our customers will once again look back and say GRDA was the best choice." Certainly, there are many plans in place for those resources, said Easley, and while some will be expensive, all are necessary. "There are environmental upgrades to our coal-fired complex that have to be made. We've also received requests for new transmission from customers, and there are other equipment upgrades that have to be made," he said. "The costs associated with these projects will stretch well into the millions and we simply do not have the cash reserves on hand now. But this increase will give us the financial flexibility to move forward on these needed projects."