Snowpack, wholesale prices and contract horizon redraw the power picture

WENATCHEE — A snowpack that appears average on paper but is missing at lower elevations, softer wholesale power prices and a major contract set to expire in 2028 are converging to reshape Chelan County PUD’s revenue outlook, commissioners heard Tuesday, February 17.

Utility staff told the board that early water supply forecasts for the Columbia River system, currently near 100 percent of average, are likely overstated because they do not capture the lack of snow at lower elevations. That gap, they said, could reduce generation and increase the district’s exposure to power markets in the months ahead, even in what is nominally an “average” water year.

Chelan PUD commissioners — Chair Kelly Allen and commissioners Randy Smith, Steve McKenna and Carnan Bergren in the room, with Garry Arsenault attending remotely — received the quarterly energy update from Jeff Johnson, director of Energy Operations Planning and Trading, and Dave Nelson, director of Energy Structure and Trading. General Manager Kirk Hudson was also present.

“This year should be better,” Johnson said of runoff projections, comparing the current forecast to the past several years, which ranked near the bottom of the historical record. “But again, probably less than average when it’s all said and done.”

The amount of water available to run through the district’s dams is a primary driver of how much electricity Chelan PUD can generate and sell. When river flows are lower, the utility must rely more heavily on market purchases to meet its obligations, and it has less surplus power to sell at wholesale rates.

Those market conditions have already shifted. Power prices settled well below budgeted levels in 2025, and the forward price curve for 2026 is also trending down, staff said, reflecting milder winter weather and lower natural gas prices across much of the country.

Even so, the district finished the year with energy-related revenues above budget because of items that are not forecast in advance, including proceeds from the Climate Commitment Act (CCA).

Looking beyond annual water conditions, staff also pointed commissioners to a longer-term revenue transition: the Alcoa contract, which expires in October 2028. The agreement has historically been a major component of the district’s power sales portfolio, and planning is now underway for what will replace it.

“That’s a contract that we’re now in the process of looking at options for what we would do to replace that going forward,” Nelson said.

At the same time, Chelan PUD is preparing for participation in new regional market structures that will change how utilities buy, sell and plan for electricity.

The Western Resource Adequacy Program (WRAP) will begin its first binding compliance period in the winter of 2027–28. Although that deadline is still several years away, Johnson said the district is already positioning its portfolio to meet the program’s requirements.

“Chelan [PUD], in the spirit of trying to ensure compliance and in the spirit of ensuring adequacy within its footprint, we are treating Chelan as though we’re binding today,” he said.

Participation in the Southwest Power Pool’s Markets+ program (SPP Markets+) is expected to follow, most likely in 2028. The district is working through the operational, transmission and settlement changes required to join, with multiple internal teams and outside consultants assessing what will be needed.

Locally, water conditions at Lake Chelan have added another layer of complexity. A December storm sent a surge of inflow into the lake, forcing operators to spill water earlier than planned to protect downstream habitat and maintain required operating ranges.

Hudson noted that the rapid rise erased what had been a planned drawdown, creating unusual winter conditions for shoreline property owners and requiring quick adjustments by staff.

“It’s kind of an unusual and challenging year managing lake levels with that amount of water coming in in December,” he said.

Commissioners said the combined briefing spanning water supply, markets and long-term contracts underscored how quickly the utility’s operating environment is changing.

“This was a fascinating presentation,” one commissioner said. “Thank you so much.”

Despite the uncertainties, staff emphasized that the district remains within its hedging policies and resource planning targets and is preparing years in advance for both market participation and the post-Alcoa power sales portfolio.

For Chelan PUD, the message was that an “average” water year no longer guarantees average financial results — and that the decisions being made now will shape rates, reliability and revenue stability well into the next decade.

Andrew Simpson: 509-433-7626 or andrew@ward.media