Seattle City Light customers could face a 1.5 percent surcharge on their electricity bill by August because of the light mountain snowpack and low wholesale energy prices.
For a typical homeowner paying about $60 a month for electricity, that’s an additional 90 cents a month. But City Light and elected city leaders fear the shortfall in revenues is likely to continue because of climate change and the effectiveness of fracking at driving down the price of natural gas, a competitor to hydroelectricity sales.
The warning of a rate surcharge also comes just a day after Seattle Public Utilities said it wants to raise rates for water, sewage, garbage and stormwater collection about 5 percent annually through 2020 to maintain existing services.
City Councilmember Kshama Sawant, in her first meeting as chair of the council Energy Committee on Wednesday, said the burden for rate increases should not fall on economically struggling residents.
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“Seattle is becoming very expensive to live in. If there are any rate increases to come, they should fall on big corporations that can afford it and not on working families,” she said after the hearing.
Two years ago, City Light adopted a six-year strategic plan aimed at stabilizing rates that shot up as much as 58 percent during the Enron-fueled energy crisis of 2001. The annual revenue the utility generates by selling surplus electricity on the wholesale market also has fluctuated wildly over the past decade, from a high of $140 million to a low of $54 million.
In 2010, forced to raise rates almost 14 percent to make up for another shortfall in wholesale revenue, the City Council created a Rate Stabilization Account of $100 million. When the balance drops below $90 million, an automatic 1.5 percent surcharge to all customers kicks in. If the balance drops below $80 million, a second 1.5 percent surcharge is added.
Money is added or withdrawn from the account quarterly to make up the difference between the budgeted wholesale revenue and the actual income. For the past two years, the utility has avoided surcharges, despite lower-than-projected wholesale revenue, by transferring year-end cash surpluses into the account.
But the wholesale revenues, budgeted for $85 million in 2014, are now forecast to be only $47 million. Energy prices remain low, and the amount of surplus energy the city can sell on the wholesale market is dependent on the water supply. More than 90 percent of the city’s electricity is generated by hydropower.
“It’s looking pretty dismal,” City Light CEO Jorge Carrasco told the Energy Committee, which also included Councilmembers Mike O’Brien, the past chair, and Sally Clark.
City Light has asked the council to approve transferring up to $8 million, its 2013 operating surplus, into the Rate Stabilization Account. But Carrasco acknowledged that given the trend of lower-than-projected revenue, the additional money would only delay the need for a surcharge, likely until August.
O’Brien, a former Sierra Club activist, said that both climate change and fracking, while not in the city’s control, are having “direct negative impacts to what’s going on in Seattle.”
City Council staffer Tony Kilduff told the committee that while the utility has budgeted for declining wholesale revenues over the next six years, it isn’t acting aggressively enough to avoid persistent surcharges.
“I see no reason to believe the situation is going to improve over the next two or three years,” he said.
The surcharge will fall equally on commercial and residential customers. Nucor Steel, for example, paid about $22.5 million in 2012 for electricity. Its 1.5 percent surcharge would be about $28,000 per month. Boeing, which paid $14.3 million in 2014, would face a surcharge of about $17,500 per month.
Two of the other largest electricity consumers are public entities — the University of Washington and the city of Seattle, which pays City Light for the costs to install, power, repair and replace streetlights.
“When Kshama was asking who pays, the majority of the burden for a surcharge falls on commercial customers,” said Scott Thomsen, spokesman for the utility.
Sawant was elected in November as a candidate from the Socialist Alternative party. A former economics instructor at Seattle Central Community College, she said the committee in the coming months would examine issues including the situation of workers at City Light, executive salaries, and the relation between global financial markets and the rates people in Seattle pay.
Carrasco, who took over leadership of the utility in 2004, is the highest-paid city employee, making $236,000 in 2012. But he is among the lowest-paid large-utility executives, according to a survey by the American Public Power Association. He was a finalist last year for the top job at an Arizona public utility that would have paid between $500,000 and $700,000.
Former Seattle Mayor Mike McGinn last year asked for a $40,000 bonus for Carrasco, but the City Council did not act on the request.
Sawant’s first committee meeting attracted several television news crews as well as a score of her party’s activists. In her opening remarks, Sawant said she hoped the typically empty seats for City Light Committee hearings would be filled in the coming months with engaged residents.
She also promised to hold some committee meetings outside of City Hall and at times more convenient for working people.
Lynn Thompson: email@example.com or 206-464-8305. On Twitter @lthompsontimes