Better-than-projected river flows mean Seattle City Light can sell enough surplus electricity to save residents from surcharges on their monthly electricity bills, at least through October 2017.
With the mountain snowpack in January and February unusually meager, City Light had estimated its 2014 revenues from wholesale power sales would bring in only about $47 million, about half what it expected. That would have triggered automatic surcharges beginning in October and rising as high as 4.5 percent for residential and commercial customers over the next three years.
The surcharge would have been in addition to an already approved rate increase of almost 5 percent a year through 2018.
Instead, the mountains got a winter’s worth of snow in March and April, and federal river-flow models now project more water available at City Light’s Boundary and Skagit River dams as well as from the Bonneville Power Administration.
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“While all forecasts can and will change, recent improvements in water conditions will allow Seattle City Light to generate more power, and that’s great news for our customers,” said General Manager and CEO Jorge Carrasco.
“As a result, we now expect to make enough money from sales of electricity to other utilities that we will avoid any rate surcharges for the foreseeable future,” Carrasco said.
Although wholesale electricity prices have stayed low because of the availability of low-cost natural gas — a competitor to the city’s surplus hydroelectric sales — the increased river flows mean the utility now expects to earn $89 million this year in sales to other utilities.
In 2010, forced to raise rates almost 14 percent to make up for a shortfall in wholesale revenue, the Seattle 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Money is added or withdrawn from the account quarterly to make up the difference between the budgeted wholesale revenue and the actual income.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.
In February, the City Council approved transferring the 2013 operating surplus of $8 million to the account.
With the average residential customer paying about $60 a month for electricity, a 1.5 percent surcharge translates to an additional 90 cents a month. Commercial customers pay the same surcharge but on much larger volumes of electricity.
About 90 percent of Seattle’s electricity comes from hydropower.
Eugene Wasserman, co-chairman of the City Light citizens review panel, said the utility’s six-year strategic plan reduces its dependency on wholesale power sales so that budgets anticipate less and less revenue from sales to other utilities. That will also insulate customers from future surcharges, he said, though snowpack and precipitation remain difficult to forecast.
For this year, he said, “We all got very lucky with the weather.”