Just a month after a bleak forecast that Seattle City Light customers would likely see surcharges on their energy bills starting in October and continuing for the next three years, the utility said Wednesday that heavy snowfall in February and subsequent storms in March likely will eliminate surcharges this year.
Going forward, utility officials say, customers might still see surcharges starting next year, but they likely would be lower than previously estimated and would extend only until mid-2016.
“We’re doing everything we can to avoid any surcharges,” said Sephir Hamilton, chief of staff for City Light. “Another good water year and additional cost savings by the utility and we may not need surcharges at all.”
The dry weather in December and January raised concerns about how much energy City Light would be able to generate and sell on the wholesale market, potentially reducing its operating budget.
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City Light still faces declining revenues from wholesale energy sales because of the low cost of natural gas, which competes with the sale of the city’s surplus hydroelectricity.
A Rate Stabilization Account of $100 million, created by the City Council in 2010, was meant to act as a buffer to fluctuating wholesale revenues. When the account drops to $90 million, a 1.5 percent surcharge is automatically added to all customers’ bills. If the balance drops below $80 million, a second 1.5 percent surcharge is added. That continues until the account is replenished.
For the past two years, the utility has avoided surcharges, despite falling wholesale revenue, by transferring year-end cash surpluses into the account.
In February, City Light transferred $21 million in savings left over from 2013, pushing off a potential surcharge until October.
Now, with the improved snowpack, City Light likely will have more electricity to sell than had been anticipated just a month ago. Utility officials say revenue this year could exceed projections by $19 million, pushing the trigger for a surcharge into 2015.
The utility’s strategic plan calls for less and less of its revenue to come from its sale of electricity to other utilities and for customers to increasingly shoulder more of the costs.
City Councilmember Kshama Sawant, chair of the Council’s Energy Committee, welcomed the report of lower-than-anticipated surcharges, but repeated her conviction that large businesses and industrial users should pay more for their share of electricity.
“This is good news to ratepayers,” she said in an emailed statement. “However, we cannot depend on the good luck of precipitation. We need to fundamentally shift the burden of paying for energy off of poor and working-class people represented in residential ratepayers and onto big businesses.”
Hamilton, the utility’s chief of staff, said projections now call for a 1.5 percent surcharge in the first two quarters of 2015, climbing to 3 percent through the first quarter of 2016, and dropping again to 1.5 percent through the second quarter of 2016.
For a typical homeowner paying about $60 a month for electricity, a 1.5 percent surcharge equals an additional 90 cents a month. Commercial users pay the same surcharge percentage on electricity use. Nuccor Steel, for example, would pay about $28,000 more a month and Boeing about $17,500 more a month with a 1.5 percent surcharge, based on 2012 consumption.
Hamilton cautioned that those predictions are dependent on typical levels of precipitation, something that’s proved difficult to forecast.
The National Weather Service said the snowpack in January was about 77 percent of a typical year’s. By Wednesday, it was 112 percent, said Josh Smith, a meteorologist based at Sand Point. In the North Cascades, where several City Light dams generate power, the snowpack at Hart’s Pass almost doubled, from 20 inches to almost 45 inches, between Jan. 19 and March 19, he said.
Hamilton characterized the precipitation since October as moving from fair to poor to good. But he also noted that the wholesale prices for energy haven’t rebounded and probably won’t.
“Tell your readers to keep doing a rain dance,” he said.
Lynn Thompson: firstname.lastname@example.org or 206-464-8305. On Twitter @lthompsontimes