On November 24, 1999 the Mayor signed the Seattle City Council approved ordinance that specifies new electricity rates for Seattle City Light effective December 24, 1999. This ordinance incorporates policy decisions made during Council's review of the Executive's September rate proposal and has an average rate increase for the first two years of 3.2% followed by a further 3.0% increase in 2002. For more than half of Seattle's residential customers, bills would increase less than a dollar per month in 2000. For high-use customers it would be more; for low-use customers, less.
Seattle City Light has not raised the average rate since 1996. During this period, rates for some customers have actually gone down. When adjusted for inflation the average rate in 2000 will be lower than in any year since 1983.
The rate increase is necessary to cover increased operating costs and to finance several critical investments in Seattle's city-owned power system, most notably:
Seattle's power plants, transmission lines, overhead and underground distribution systems all require major investments to maintain the reliability and high-quality service our customers expect.
We will continue to invest in salmon and habitat restoration on the rivers where we operate our generating plants.
We will increase our maintenance of the City's aging street light infrastructure. Responsibility for all City street lighting programs will be financed by electricity rates instead of general tax revenues.
We will make investments in our community to support neighborhood plans. Seattle's neighborhoods have worked long and hard to develop a vision for their future and SCL is poised to help.
The new rates spread costs more equitably among all customers. Medium and large businesses in the downtown core will pay more because they are served by the Downtown Network, the most reliable and most costly part of Seattle City Light's distribution system. Many suburban customers will also pay more to offset the cost of the increasingly expensive power Seattle City Light must purchase to meet suburban demand.
For most customers, annual Seattle City Light bills in 2000 will continue to be well below those charged to comparable customers by other regional utilities (
Electric rates consist of two components: power and retail services.
Power costs (the per kWh cost of the electricity itself) change very little over the rate period, increasing by only 1.1% from their 1998 levels. Costs are stable even though we plan to invest more than $27.2 million in the 2000-2002 rate period in improvements to our Boundary Project, which supplies almost half of Seattle's electricity. During the period covered by the rate ordinance, market prices are projected to increase sharply and our purchased power costs will rise accordingly. However, the inexpensive power from our City-owned Skagit and Boundary Projects and a decision by the Council to spread the costs of a power purchase contract with British Columbia over a longer period of time will keep the power component of our customers' bills well under market. In 2002, Seattle City Light energy will cost an average of $22.05 per megawatt hour as compared to the projected Northwest market price of $34.
Retail services costs (distribution, billing, customer service, etc.) are up by 12.2%, primarily due to extensive capital improvements in our retail services system. We will invest more than $50 million in the 2000-2002 rate period in the downtown network system to enhance reliability and increase capacity to meet projected downtown growth well into the next century.
Qualified customers will continue to receive rate assistance in two forms. Low-income rates are 50% of the regular residential rates. Direct payment assistance provides funds to help pay electric bills. Seattle City Light residential customers pay approximately 0.08 cents per kWh to fund low-income assistance programs (less than seventy cents per month on the average residential bill). This is expected to generate between $6.7 and $7.3 million per year in the 2000-2002 rate period.
Peak and off-peak hours will be redefined with Saturday daytime now falling in the peak period. This affects only Large and High Demand General Service customers whose rates vary by time of day.
The power factor standard will be raised from 0.95 to 0.97 in order to match the standard that the Bonneville Power Administration requires Seattle City Light to meet at our points of interconnection. The rate paid by those who do not meet the standard remains unchanged.
Seattle City Light discussed rate issues with the Rates Advisory Committee (RAC), a panel representing a cross section of SCL customers appointed by the Mayor and the City Council. The Rates Advisory Committee has transmitted its recommendations to the Mayor and City Council.
Separate Rates for Large and Medium Downtown Network Customers
Seattle City Light provides network distribution services in the downtown business core, First Hill and the University District. Network distribution differs from normal overhead and underground distribution in that it provides redundant and alternate paths of power flow. Hence, network systems are highly reliable, but they are also far more expensive to build and maintain. While network accounts are about 5% of SCL's customer base, they account for approximately 16% of the utility's load. Yet maintenance of network transformers and associated equipment was 46% of all transformer maintenance costs in 1998 and 33% of transformer investment was for the network. Work on the network ducts and vaults constituted 20% of maintenance and 29% of investment expenditures on the entire system of poles, wires, ducts, and vaults. In recognition of these higher costs, enhanced levels of service and greater reliability enjoyed by network customers, the adopted rates include a special network rate designed to recover this cost from the customers receiving the benefits.
Specifically, the higher network rate applies only to medium and large general service downtown network customers. Rates for these downtown network customers will increase roughly 9% in 2000 and a further 6% in 2002. These increases will bring network rates to 25% of the full cost-of-service differential in 2000 and to 50% in 2002. The question of full cost recovery from these customers will be left to a subsequent rates process. Residential and small general service customers served by the downtown network will pay the non-network rate, which recognizes that these customers do not require the high levels of capacity or reliability that would have caused the network to be developed. Although First Hill and the University District also have network service, these areas are served in part from overhead lines and are not experiencing the same high level of load growth that is stressing the system downtown and requiring extensive capital investment. Therefore, these two areas will continue to pay non-network rates through the rate period.
Separate Rates for Suburban Customers
Since its 1951 acquisition of Puget Sound Power and Light's facilities in the Seattle area, Seattle City Light has been the sole power provider in the City of Seattle, adjacent suburban cities, and parts of unincorporated King County. While not "owners" of the utility in the same sense as Seattle citizens, customers living in these areas have traditionally enjoyed the same rates and levels of service as Seattle residents. The newly adopted rates recognize the customer-owner status of Seattle citizens, giving them priority to the power output from City-owned low-cost generation resources. Meeting the demand from suburban areas forces Seattle City Light to acquire additional higher-cost resources, making the cost to serve these customers higher than the cost to serve similar customers in Seattle. The adopted rates are designed to recover this higher cost of service by charging these customers a slightly higher rate. The franchises recently granted to Seattle City Light by the cities of Shoreline, Lake Forest Park and Burien place a limit on the amount by which rates charged to customers in those jurisdictions can exceed rates charged to similar customers in the City of Seattle. Seattle City Light may charge up to 8% more for the energy portion of rates in franchise cities than is charged to Seattle customers (about 4% more for total rates). Beginning in December 1999, a medium use residential customer in the suburbs will pay about one dollar per month more than a comparable Seattle resident.
The City of Seattle General Fund currently pays Seattle City Light about $5 million per year for installing, maintaining and providing electricity to about 74,000 streetlights on public thoroughfares in the City of Seattle. These were traditionally owned by Seattle City Light and the Transportation Department. In order to consolidate responsibility for all public thoroughfare streetlighting in a single department, in June 1999 Council acted to transfer ownership of all 18,600 streetlights previously owned by the Transportation Department to Seattle City Light. Seattle City Light is now proposing to complete this consolidation of responsibility by changing the funding source for streetlights from general tax revenues to electric rate revenues. At the adopted increased streetlight rates and given planned service improvements, the payment transfer would equal $5.9 million per year for the two years beginning March 1, 2000, , and $6.6 million in the 2002 rate year. This additional cost is distributed to all customers within the City of Seattle. It adds about 57 cents per month to a typical Seattle in-city residential bill in 2000. This rises to about 62 cents per month in 2002.
Automatic Pass-Through of BPA Wheeling Rate Increase
The Mayor's proposal had assumed that BPA would increase its wheeling rates by 25% effective October 1, 2001 and that as a result Seattle City Light's wheeling costs would increase by $1.1 million in 2001 and by $4.6 million in 2002. A wheeling rate is the charge for use of another utility's transmission lines. Because of the uncertainty about the size of the wheeling rate increase, the Council decided to remove these amounts from the 2001 and 2002 revenue requirements and to provide for an automatic adjustment to Seattle City Light's rates to reflect the actual BPA wheeling rate increase once it becomes known. All energy charges will increase on October 1, 2001 with the size of the increase dependent on the actual size of the BPA wheeling rate increase.
Redefinition of Peak Period
Rates for Large and High-Demand General Service customers vary by time of day, with higher rates in the peak hours and lower rates in the off-peak hours. This reflects the hourly variations in wholesale power costs on the open market, and helps recover the costs to serve customers with high power use during peak hours. Current rates define the peak period as 6 am to 10 pm on weekdays. However, recent wholesale market prices in daylight hours on Saturday have been comparable to weekday peaks. The adopted rate structure extends peak hours to include 6 am to 10 pm on Saturdays.
Seasonal and End Block Adjustments
The adopted rates continue the same seasonal structure as current rates. Lower summer rates are charged March through August, and higher winter rates are charged September through February. Residential rates also continue to have a block structure with the charge for the first 10 kWh per day in the Summer and 16 kWh per day in the Winter remaining lower than the charge for consumption above these levels. The marginal cost of providing power and distribution services has both increased and become flatter across seasons compared to the costs used to design current rates. To take this into account, the adopted end-block residential rate rises relative to the first-block rate and summer rates rise more than winter rates.