WENATCHEE — Chelan County PUD commissioners got their first look at a preliminary 2011 budget Monday. And it’s almost in the black.

The budget’s first draft is showing a $445,000 loss next year, way down from the $23 million to $25 million loss expected this year and an $18 million loss in 2009.

More trimming likely will happen before the commission gets its next budget update Nov. 15.

Kelly Boyd, the utility’s chief financial and risk officer, told commissioners that analysts are bracing for another tough year.

Figures for total budget comparisons with previous years will be ready for the next budget discussion Nov. 15, Boyd said.

Low spending levels for maintenance, operations and capital projects aren’t sustainable for the long term, Boyd said.

The recession, coupled with drought conditions that reduced flows and power generation through the utility’s dams, have hit all the region’s PUDs hard.

The budget includes expected operating revenues of $198.2 million, up 4 percent from 2010.

The gain is mostly attributable to new long-term power contracts with Alcoa and Puget Sound Energy that give the PUD a bigger share of the power produced at Rocky Reach Dam, Boyd said.

Revenues include an expected $51 million from surplus power sales.

Weather forecasters are predicting a wet “La Niña” winter — a condition that usually means extra spring runoff for more power production. But Boyd warned that it’s too early to accurately predict.

Operating expenses are budgeted at $148.7 million, a decrease of 3 percent from 2010.

Capital expenses of $65.2 million are about even with 2010. Most of the capital spending — $16.2 million — is tagged for hatcheries and fish.

The spending is necessary, Boyd said, to make sure the utility meets its federal fish-survival target before its first 10-year check point in 2013.

The utility will spend another $14.5 million to continue building out its fiber-optic network. About $10 million of that will come from a federal economic-stimulus grant.

$12.2 million is pegged for dam upgrades and nearly $10 million for improvements to power lines and transmission.

The preliminary budget also includes wage and salary increases.

Wages and salaries were frozen through August, when all employees except top management received an approximately 3 percent increase, on average.

Salaries of the top five executive managers remain frozen until February, Boyd said.

Union employees will, by contract, receive another 3 percent pay increase in August. This will add about $256,000 to the 2011 budget.

New merit raises of about 2.5 percent for salaried employees also could take effect in August, but Boyd said it was subject to further discussion. This could add about $311,000 to the budget, including promotion increases.

A 9 percent, temporary electric-rate surcharge will end in April, but a new schedule of conservation-focused rates are expected to take its place.

The 2011 budget anticipates that a 2 percent electric rate increase proposed this year to help the PUD cover fiber-buildout costs will be approved and become permanent, Boyd said.

Christine Pratt: 665-1173

pratt@wenatcheeworld.com