CITY LIGHT SUPERINTENDENT CONFIRMATION

On Monday, February 2, the Council voted unanimously to confirm the nomination of Jorge Carrasco as the new Superintendent of Seattle City Light for a four-year term.

The Council carefully reviewed Mr. Carrasco's qualifications, and researched his background and history. We also held a public hearing as well as a public meeting at which Councilmembers questioned him for more than two hours on his experience and views.

I concluded, as did the other members of the Council, that Mr. Carrasco was a well-qualified candidate. He knows civic service and municipal administration. He has had experience running utilities, including overseeing the Austin, Texas municipal electric utility, comparable in size to Seattle City Light. As a manager, he has not been afraid to make changes, and our interviews demonstrated his ability to learn over time and adapt to new circumstances. He also has a clear commitment to the values that are important to Seattle and to public power.

With this new leadership, Seattle City Light is poised to build on its strengths and take the final steps to overcome the adversities of the last few years. In 2004 City Light will make the final payment on its short-term debt incurred as a result of the California energy crisis. The people of Seattle care very deeply about public power, environmental stewardship, and affordable and efficient service to people and businesses. I look forward to having management at City Light ready to make the changes necessary to bring City Light into the 21st century.

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NUCOR STEEL RATE PROPOSAL

The Council has not yet made a decision on the proposed City Light rate agreement with Nucor Steel. While I certainly support working with Nucor Steel in ways that are feasible and appropriate for City government, I do not support the agreement as currently proposed due to the unfair burden it would place on other City Light ratepayers.

As all of us are aware, City Light is just emerging from a difficult financial situation precipitated by the need to purchase energy at premium prices during the 2001 California energy crisis. City Light will make the final payment on its short-term debt this year, and rates are now stabilized for the foreseeable future.

Birmingham Steel, former owners of the steel plant now operated by Nucor, was in deep financial trouble, and its situation was exacerbated by the rate increases of 2001-2002. The City developed an agreement with Birmingham to defer some of those rate increases, to be paid back (with interest) in future years. Birmingham eventually went bankrupt anyway, and Nucor took over the plant and the agreement.

After benefiting from the lower rates in 2003, Nucor is now proposing to pay a lump sum to liquidate the repayment obligations. Most Councilmembers support this concept, recognizing that the former owner incurred some of these obligations and accepting that a discounted repayment is appropriate.

However, Nucor is also requesting a special rate schedule for 2004 that would be lower than other industrial customers. Unlike the previous agreement, there would be no future repayment of the lost revenues. Staff estimates that the Nucor proposal would cost Seattle City Light between $2 and $5 million in 2004. If other industrial customers sought similar rate breaks, losses could be even larger.

The City Council and Mayor adopted principles for electric rate making in Resolution 28004 in 1989. Among these principles were that rates should be based on cost of service to the customer, that rates should reflect a fair apportionment of the different costs of providing service among different groups of customers, and that rate levels and rate structures should be changed in an orderly manner over time. While the earlier agreement with Birmingham arguably stretched these principles, it was made in a time of crisis and designed to ultimately hold other ratepayers harmless through the repayment provisions (the resolution did have a clause allowing emergency adjustments if required by 'extraordinary events').

Nucor has argued that it should have a lower rate because Seattle's industrial rates are unfairly high and because it is offering to allow its service to be interrupted if City Light could sell the power for a higher price on the market. They have also suggested that lower rates are necessary to justify their investment in additional capacity for the Seattle plant.

Contrary to some suggestions, Nucor has never suggested, publicly or in writing, that the Seattle plant could be shut down and the jobs lost. This is unlikely because the Seattle plant is among the most efficient in the country, using 60% less energy per unit than the average plant, partly thanks to more than a million dollars in conservation investments paid for by Seattle City Light under conservation incentive programs.

The appropriate time to consider whether Seattle's industrial rates are unfair is during a full-scale rate review. This is scheduled to happen within the next year. The value of the interruption clause offered by Nucor is clearly much less than the value of the rate reduction.

The City very reluctantly entered into a rate negotiation with Birmingham, a financially precarious company, in a time of skyrocketing rates, and still required that the resulting contract provide for full repayment with interest of the temporary rate reduction. Providing a rate reduction with no repayment provision to a stable company at a time of stable -- and perhaps even declining -- rates would be unprecedented. And, while City Light's finances have stabilized, it has not fully recovered its financial health.

This rate reduction would also be unfair to City Light's other ratepayers, who would be required to make up for the lost revenues. All ratepayers have suffered from the energy crisis and City Light's financial buffeting. When the time comes that rates can be adjusted in a positive direction, all should benefit.

I hope that Nucor will appreciate the concerns that has led most Councilmembers to similar conclusions, and will negotiate a settlement of the outstanding debt without asking for special, and inappropriate, rate treatment for the future.

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MONORAIL PROGRESS UPDATE

The monorail is being planned and constructed by the Seattle Monorail Project, which is an independent governing agency, not under the authority of the City of Seattle. The SMP Board also makes the decisions about station locations and route.

However, the City Council has areas of both authority and responsibility over the construction of the monorail. As steward of the public trust in City right-of-way, the City has an opportunity and obligation to ensure that the plan is workable and effective before granting the SMP authority to use the right-of-way. The City also owns the Seattle Center and other property, such as the parkland around Longfellow Creek and near the proposed Avalon station, and has the sole discretion to determine whether to allow that land to be used for monorail purposes.

Core interests of the City are to ensure that the monorail is well-integrated with other transportation modes to allow people to access the monorail and make connections; to ensure that the route and stations appropriately match the land use and character of the communities they impact; and to ensure that there is appropriate mitigation for adverse impacts that the monorail might cause.

Ideally, the SMP would effectively manage most of these issues, and would work in close consultation with the City to address any conflicts. Unfortunately, there are several examples of situations where the SMP's emphasis on moving rapidly has led to problematic decisions: as the saying goes, the more haste, the less speed. The outstanding example is the failure to accurately forecast revenues, a mistake that has resulted in significant delays and increased costs. Other examples of potentially problematic choices include:

There are many such examples, and many emails and letters critical of the choices being made are coming to the Council. It is surprising how many writers identify themselves as monorail supporters who are disappointed, alarmed, or, in frustration, becoming opponents as a result of this poor decision-making. The City's Monorail Review Panel, a team of Planning and Design Commission members who are reviewing the SMP proposals, has also voiced many of these concerns.

Recently a representative of one of the teams that will be bidding on the construction contract informed my office that the insistence of the SMP on opening something in 2007, rather than letting the contractor set the schedule and build the whole line as efficiently as possible for the 2009 completion date, could cost many millions of dollars in unnecessary expenses.

While there may be people who would foster delay in order to scuttle the project, that is not my approach. If I decide that the monorail won't work, I will say so. Raising concerns and asking that they be addressed is not obstructionist. It is only by addressing legitimate concerns that the project can establish its ability to move forward. The SMP's major mistake was failing to take the time to properly project revenues, which has required cutting back on the project and straining every effort to find a way to recover.

The SMP must avoid making more mistakes and further compromising the viability of the project as a transportation system by evading crucial decisions and cutting more corners. 2004 will be a crucial year, as the SMP moves into the process of identifying a contractor and seeks approval for its planned route and stations from the City. It is imperative that the SMP take the time to do it right, rather than papering over problems by claiming the need for haste. If this project is now so fragile that taking the time to make good decisions endangers its ability to go forward, then the project is doomed to failure.

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QUOTE:
"Because of the greatness of our city, the fruits of the whole world flow upon us."

-- Pericles of Athens

DEEP THOUGHT:
"There are two kinds of levees - those that have failed and those that will fail. Never buy into a development called Riverbend Estates."

-- Jeffrey Mount, geologist

Citizen participation and engagement are critical for maintaining democracy -- fostering it is a key task of elected officials. It's my hope that this newsletter will inform you about issues, inspire you to get involved, and that together we can make things work better in this great city. Please send me your feedback, so we can keep things lively, interesting, and useful. And please forward it along to friends who might be interested.

Richard Conlin
Your Seattle City Councilmember

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