OPD5 Board Discusses 2024 Preliminary Budget

By VERNON ROBISON

The Progress

The Overton Power District (OPD5) board of directors voted to approve a preliminary budget document for 2024 during a meeting held on Wednesday, Dec. 13 in Mesquite.

The budget document provided an estimate of income, expenses and cash flows for the coming year, and it included the costs expected for purchased power, wages, benefits, materials, supplies and other expenses.

Board members recognized that the projections for cost of purchased power would be fluid in the upcoming year as the district may be renegotiating its power contract in the approaching months.

In a report earlier in the meeting, OPD5 General Manager Mendis Cooper had told board members that he had been in talks with power brokers in the region for quite some time, including Morgan Stanley, the company currently under contract to purchase power for OPD5.

“We have seen in the last few weeks that forward gas prices have started to drop off a little bit,” Cooper said. “So our negotiations for a new power contract have really picked up steam. Our goal is to try and finalize that contract in the February to March timeframe.”

Cooper added that he had also been talking to the National Rural Utilities Cooperative Finance Corporation (CFC), the district’s main lender, on where the OPD5 rates ought to be, given these changes.

“CFC should have our rate study done before then,” Cooper said. “Right now I am predicting that we are going to need a rate increase. But it is a matter of dialing in just what that needs to be.”

Cooper emphasized that any rate increase would be directly tied to what the cost of power does under the new contract.
“Nothing else at the district has changed as far as operating costs go,” he said. “So any rate increase will be specifically designed to meet what those new costs are.”

OPD5 Finance Manager MeLisa Garcia presented the new budget document to the board during the meeting.

She reported that the district is projected to bring a total revenue of $45.3 million in 2024.
Garcia then displayed a pie chart showing where those funds are spent in the district. A total of 45 percent of all revenues go to cost of power, she said. Payroll wages and benefits account for about 20 percent. Interest debt service takes about 4 percent while depreciation is 6 percent.

Twenty percent, or $9.1 million is expected to go to margins next year, she said.
The district sets aside its margins to pay for upcoming capital infrastructure improvements. While waiting for the projects to begin, those funds are invested in various instruments to both preserve the principal and bring the best return.

Garcia said that those investments had yielded slightly over $1 million in interest in 2023. She projected that number to come in slightly lower at $950,000 for 2024.
“I wanted to be a little conservative in case the market changes,” Garcia explained about the return projections. “Also I anticipate that we are going to start dipping into those investments so we won’t have as much money earning interest for us.”

The district has roughly $23 million in capital projects budgeted for 2024. These are planned to bring more reliability to OPD5 ratepayers.

With this being the case, Garcia projected that OPD5 would have a cash balance of $20.3 million at the end of 2024; down from $39 million when the year begins.

Even so, the cash balance will still stay well above the OPD5 target of keeping at least 3 months of working cash as a reserve, Cooper said. That is roughly around $10-$12 million targeted to stay in reserves, he said

This will leave the district in solid standing in all of its key financial measures and requirements, Garcia said.