Seattle City Light customers can expect surcharges from 1.5 percent to 4.5 percent on their electricity bills through the first quarter of 2017, depending on precipitation and wholesale energy prices.
A forecast prepared for the City Council Energy Committee shows a long-term trend of falling revenue from the utility’s wholesale electricity sales because of the continued availability of low-cost natural gas, a competitor to City Light’s surplus hydroelectricity.
The low precipitation so far this winter also means there could be less surplus power to sell, a trend that might be exacerbated over time by climate change.
Two weeks ago, the committee was told a 1.5 percent surcharge might be needed starting in August, but didn’t project the surcharge extending for several years or to be as high as now estimated.
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Under the projections released Tuesday, the city would impose a surcharge of 3 percent on electricity bills starting in October. That would rise to 4.5 percent in the third quarter of 2015. The surcharge would drop back to 3 percent after the first quarter of 2016 and then to 1.5 percent after the second quarter of 2016 and through March 2017.
For a typical homeowner paying about $60 a month for electricity, a 3 percent surcharge would add $1.80 per month, and 4.5 percent would add about $2.70 per month.
The same surcharge would be levied against commercial customers. A 3 percent surcharge would cost Nucor Steel, the utility’s biggest customer, about $56,000 per month. Boeing’s share of a 3 percent surcharge would be about $35,000 per month, based on 2012 usage.
The projected surcharge is on top of a nearly 5 percent annual rate increase for electricity through 2018 that the City Council already approved.
The surcharge kicks in automatically when a Rate Stabilization Account, designed to offset the fluctuating revenue from wholesale electricity sales, falls below $100 million.
When the balance drops below $90 million, a 1.5 percent surcharge is levied. If the balance drops below $80 million, a second 1.5 percent is added, and so on.
City Light ended 2013 with an operating surplus of $21 million. By putting that money into the stabilization account, the city should be able to delay a surcharge until October, said City Council analyst Tony Kilduff.
Energy Committee Chairwoman Kshama Sawant reiterated her stance that increases should be borne by commercial customers and not by people hard hit by the recession.
“Big businesses have recovered and are making profits at record rates while working families struggle with the cost of living. If there are new costs to be imposed, they should not be imposed on working families,” Sawant said.
But committee member Mike O’Brien said after the hearing that utility rates and the mechanisms to allocate costs among users are “long and complicated.” He said the relatively low costs of electricity in the region attracts businesses to the area and generates jobs.
“I don’t think we’re going to just jump in and change who pays what,” he said.
A citizens review panel is reviewing the rate structure. Eugene Wasserman, co-chairman of the panel, said the residential share of costs likely will remain the same, but that the committee is considering recommending different rates for different commercial users.
Customers who use electricity in spurts could pay more than those whose use is steady over time, he said.
Jorge Carrasco, CEO of City Light, told the Energy Committee that retail customers, both commercial and residential, will gradually bear more of the costs to operate the utility as less revenue comes in from wholesale electricity.
But he added that the utility still faces the vagaries of weather, water supply and energy prices.
“We don’t know what will happen. We could be better than expected. We could be worse,” he said.
Lynn Thompson: firstname.lastname@example.org or