Introduction to a Rate Adjustment
As a municipal utility, Seattle City Light is owned by the citizens of Seattle and governed by the elected officials of the Seattle City Council. In setting rates, the Council adheres to two long-standing principles:
- Rates should reflect the cost of serving the customer. Some customers cost more to serve than others, and rates need to be set such that no customer or group of customers subsidizes another.
- Rates should be set to cover City Light's operating costs and not to generate profits.
City Light rates are subject to regular reviews, usually at two-year intervals. These entail calculating how much it will cost City Light to operate during that period, and how much income needs to be generated from rates to meet these costs. It also entails determining the cost of service for the various groups of City Light customers, and designing rates to reflect these costs. Before approving new rates, the Council conducts an extensive review process, including public hearings.
In addition to regular reviews, City Light rates occasionally need in-course adjustments to keep up with unpredicted changes. For example, if the Bonneville Power Administration (BPA) lowers its power charges to City Light, it could mean a downward adjustment in rates. Likewise, higher purchased power prices (as we experienced in 2001) could mean an upward adjustment.