Because of unexpected cost increases and expenditures on utilities, Portland State faces over $500,000 in a projected budget shortfall regarding energy consumption for the remainder of the 2006-07 fiscal year.
The budget shortfalls bring to an end a year of energy rate increases from both Portland General Electric and Northwest Natural Gas. NW Natural increased gas costs at PSU by 53 percent, according to Robyn Pierce, interim director of Facilities, while PGE increased electrical costs by 5.2 percent over the 2006 calendar year.
PSU budgeted $3.4 million in utilities for the 2006-07 fiscal year, but that number had been surpassed by late winter, according to Vice President of Finance and Administration Lindsay Desrochers. This year’s expenses are now estimated at over $4 million, bringing the university to its current budget shortfall.
“By February or March it was clear we were going to have a deficit,” Desrochers said. “It wasn’t clear how big.”
The most recent $520,000 estimate in utility budget shortfalls has decreased from early estimates, which initially totaled close to $730,000. This is the third year of utility budget shortages at PSU, with nearly $1 million in the 2004-05 fiscal year and $500,000 in the 2003-04 fiscal year, as reported in a March 10 Vanguard article.
Tom Riddle, Portland State’s PGE representative, said the projected increase in electrical costs for the 2007 calendar year at PSU is between 8 and 10 percent. Pierce said the increase in electricity costs this year totaled 19.5 percent, but Riddle explained that that number was the overall utility cost increase rather than electricity only. Riddle said the electricity increase has been 5.2 percent this year.
The increases in gas cost to PSU facilities caused a breach of contract between PSU and NW Natural. Pierce said the two institutions had a contract preventing NW Natural from raising gas prices at PSU for the entirety of the 2006-07 fiscal year, but despite the contract, NW Natural increased gas prices.
NW Natural Chief Financial Officer David Anderson said to financial analysts on February 16 that hurricanes Katrina and Rita caused a spike in gas prices, subsequently forcing NW Natural to raise prices to customers. Nearly 20 companies including PSU filed suit against NW Natural, but Anderson told the analysts that every company but one, timber company Georgia-Pacific, reached a settlement.
Portland State received $30,000 in the settlement from the company. Pierce said the unexpected increase in both electricity and gas played a significant role in causing the budget shortfall.
Pierce said the university also encountered difficulty with PGE this year concerning engineering laboratories and the classification of their electrical billing rate. She said professors used laboratories less frequently during the spring in an annex underneath the Ondine housing building and Fifth Avenue Cinema, causing PGE to reclassify the meter that calculates the kilowatts of energy the laboratories use.
The meter was billed under a PGE business electricity service called Schedule 83, but because the amount of electricity used dipped below a certain level, it was switched to Schedule 32. Riddle said the classification of a Schedule 83 and Schedule 32 is dependent on the demand of electricity each requires. Schedule 83 requires a demand of business using more than 30 kilowatts, while Schedule 32 is for businesses using less than 30 kilowatts.
The laboratory previously used more than 30 kilowatts, but because professors used it less, it dropped below 30 kilowatts. This caused PGE to increase the billing rate of this section’s meter at PSU.
Pierce said the increase is an additional 1.8 cent charge per kilowatt and that the rate cannot be reduced for 18 months, even if kilowatt usage went back above 30 kilowatts.
Riddle said PGE’s rate increases are in accordance with Oregon Senate bill 1149, passed in 2002. He said the billing is based on the volume of energy demanded, not on basic use.
He said kilowatt usage is a day-to-day difference that will not cause a change in billing, but that change in demand for kilowatts, which he said happened in the PSU laboratories, will cause the billing rate change. He said that if PSU were to combine the current 50 power meters into one meter for the entire school, the university would not have to deal with this problem again.
Pierce said it is possible for the university to combine the meters, but that it would cost far too much to be a reasonable expense. If the laboratory meter does spend 18 months above the 30-kilowatt usage level, the bill rate will change back to the cheaper level of billing, according to Riddle.
Pierce said the reduction in the size of the budget shortfall, almost $200,000 estimated so far, came in a large part due to the campus response to an e-mail Desrochers sent campus-wide asking people to turn off lights, computers and to generally conserve electricity, as the administration has developed a utilities task force with the aim of reducing energy costs.
Despite the savings that have already occurred, Pierce recognized that there will still be a shortfall and said the money to make up for the shortfall will first come from any excess funds in the Facilities department.
“Then I’ll have to go and say sorry to the university,” Pierce said, “we used more electricity and gas than you gave us to fund.”