Seattle City Light’s successful efforts to hold down operating costs in 2013 could lesen the potential impact of surcharges that could be triggered by low wholesale energy prices and below normal snowpack could have on its customers.
City Light has $21 million left over from its 2013 budget as a result of sound management decisions throughout the year. City Light is asking the City Council to transfer that money into the utility’s rate stabilization account, which would delay the possibility of surcharges.
“We recognize the importance of providing reliable, affordable power to our customers,” General Manager and CEO Jorge Carrasco said. “We want to use the savings we achieved last year to help our customers avoid increases in their bills as much as we can.”
The proposed transfer was endorsed by the Council’s Energy Committee 2-0 Wednesday. If approved by the full Council, it would delay possible surcharges that could be triggered by low wholesale energy prices and below normal levels of the snowpack City Light depends on to power its hydroelectric dams.
Seattle City Light uses the revenue it receives from surplus energy sales to hold down costs for its customer-owners. The $100 million rate stabilization account was created in 2011 to protect the utility and its customers against the volatility associated with surplus energy sales and hydroelectric energy production. Without those reserves, any shortfalls in expected revenue could force the utility to cut back on maintenance work, tree trimming and other projects that support the reliable delivery of electricity while increasing future costs for repairs and outage response.
With the rate stabilization account in place, in years where revenue does not meet projections, the utility can draw funds to maintain the level of service it provides customers. If the account drops below $90 million, temporary surcharges are automatically triggered on all customers until the account is refilled, and then they go away.
Below-normal snowpack conditions currently affecting the watersheds that feed City Light’s hydroelectric dams mean the utility could have less electricity to sell. Low wholesale energy prices mean the utility might not get as much money for the electricity that it can sell. As a result, the utility’s most recent estimates suggest surplus energy sales might bring in about half of the money that was anticipated in the 2014 budget, a difference of about $36 million.
While snowpack conditions and wholesale energy prices could change, any shortfall in revenue will increase the likelihood that temporary surcharges will be triggered.
The current forecast suggests a 3 percent surcharge could go into effect in November. For a typical residential customer, that would add about $1.80 per month to electricity bills. For the average participant in the Utility Discount Program for low-income customers, the added cost would be about 80 cents per month.
“As we work to update City Light’s strategic plan, one of the considerations is how much should the utility depend upon revenue from wholesale energy sales to support its operations,” Carrasco said. “Resolving the current imbalance would reduce the likelihood of surcharges and provide our customers with even more predictable electricity costs.”