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  Rates 2000-2002
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Rate Increase
Effective December 24, 1999

  Frequently Asked Questions
These questions cover the rate increase that was adopted by the City Council in November 1999 and that took effect on December 24, 1999. An additional rate adjustment, proposed by City Light and adopted by the Council, is effective January 1, 2001. For information on the 1/1/01 increase, refer to Power Cost Adjustment Facts and the Comparison Chart in .pdf format. The Comparison Chart compares rates effective January 24, 1999 with current rates which include the Power Cost Adjustment.
  1. How much will City Light's rates increase? When will the increases go into effect?
  2. Why does City Light need a rate increase?
  3. What has City Light done to keep costs down?
  4. Rates for Seattle's Residential customers will increase by an average of 5.6% on December 24, while rates for High Demand customers will go up by only 1.3%. Why is there such a big difference in the size of the rate increase for different customer classes?
  5. The information on the City's Web site states that the average rate increase is 3.2%, but most percentage increases for individual customer classes range from 3.4% to 8.9%. How is the 3.2% calculated?
  6. Why is the increase in rates so much larger for Residential customers who consume more than the average amount of electricity?
  7. Will City Light continue with the customer charge?
  8. What about low-income customers?
  9. Why are rates going up so much for customers in the downtown Network?
  10. You say that the higher Network rates will recover only half of the difference between the cost of providing Network and non-Network service. Who makes up the difference?
  11. Why are you charging Suburban customers more than City customers after all these years of treating them the same?
  12. Why is City of Tukwila not subject to the Suburban rate differential?
  13. Why is the cost of streetlighting in Seattle being billed to Seattle customers?
  14. What about funds in the City's General Fund freed up by the sale of streetlights to Seattle City Light?
  15. Why are the rates changing now during the winter months when my usage is highest?
  16. I thought we needed to keep our rates low to meet the competition when the electricity industry is deregulated. What does this rate increase do to our competitiveness?
  17. Didn't Seattle City Light make more money in 1999 from surplus energy sales? Shouldn't that keep rates down?
  18. You cite your investments in salmon habitat restoration as one reason for the rate increase. Why is Seattle City Light investing in salmon habitat restoration?
  19. Seattle City Light usually increases rates on March 1. Why did you advance the effective date of this rate increase to December 24? Was it to make the rates effective before Initiative 695 goes into effect on January 1?
  20. I have other questions about this rate increase. Whom should I contact?

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  Q1: How much will Seattle City Light's rates increase? When will the increases go into effect?
  A1: The rate ordinance adopted in November 1999 authorizes three rate adjustments or increases. The first adjustment went into effect December 24, 1999. On that date, the average annual rate increased by 3.2% over all customer classes. The percentage increase is different for each customer class. To see a listing of these new rates visit the Rates Detail Tables page.

On October 1, 2001 there will be a further adjustment to rates to pass through an increase in the Bonneville Power Administration's (BPA) transmission rates. The exact size of this adjustment won't be known until BPA adopts its final transmission rates. The adjustment for all classes should not be much more than one percent.

On March 1, 2002 there will be a further rate increase averaging 3.0% for the system as a whole. Again, the increase will be different for each customer class. Preliminary 2002 rates are listed at the web site identified above. These rates will be adjusted to reflect the BPA transmission rate increase, once the amount is known.

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  Q2: Why does Seattle City Light need a rate increase?
  A2: Seattle City Light has not had a general rate increase since March 1, 1996. Since the last rate increase, our costs have increased because:
  • Inflation has raised our operating expenses, even though we have taken action to hold these costs down.
  • We need to buy more power in the wholesale power market to serve increasing customer demand and to offset a reduction in power available through long-term contracts with other utilities. Prices in the wholesale market have increased sharply since we last set rates.
  • We continue to invest in maintaining and improving our generating and distribution plant, some of which is very old. We finance most of these costs by issuing bonds. The amount we have to pay our bondholders in principal and interest is increasing.

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  Q3:  What has Seattle City Light done to keep costs down?
  A3:  Over the past several years we have reduced costs and staffing levels. In 1998 our staffing level was lower than in 1994 by the equivalent of more than 100 full-time employees. We have eliminated some of our programs, such as the appliance repair program. Our rate proposal assumes that we will further reduce operating costs by $5 million in 2000, with the bulk of the reductions coming from administrative areas. By keeping the lid on our costs we have been able to limit the rate of growth in our operating costs (leaving aside power costs) to half the rate of inflation.

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  Q4: Rates for Seattle's Residential customers will increase by an average of 5.6% on December 24, while rates for High Demand customers will go up by only 1.3%. Why is there such a big difference in the size of the rate increase for different customer classes?
  A4: The City sets electric rates so that the amount recovered from a given customer class reflects the cost of providing service to that class. The Residential rate increase is higher because the cost of serving these customers has increased more than the cost of serving non-Residential customers. In addition, consumption outside of the Residential class is increasing faster. This means that the fixed costs of service are spread over a wider base for non-Residential customers and the rate increase (or the increase in the cost per kWh consumed) is lower.

The Residential class is not the only class that will receive above-average increases. Rates for the new Network classes (Medium Network General Service and Large Network General Service) will receive the highest increases. (See information below.)

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  Q5: The information on the City's Web site states that the average rate increase is 3.2%, but most percentage increases for individual customer classes range from 3.4% to 8.9%. How is the 3.2% calculated?
  A5: The increase of 3.2% is the average across all customer classes. Some classes will see increases higher than the average; others lower. Classes with the highest percentage increases (Suburban and Network customers) account for a fairly small share of total consumption, so their higher-than-average increases do not greatly affect the average. Other classes, such as High Demand and Medium Non-Network General Service, which account for a much larger share of total consumption, receive percentage increases that are below the average. The table below shows the projected consumption of each customer class in the 2001 rate year (3/1/01-2/29/02) and the percentage share of each class in the total.

Rates Table

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  Q6: Why is the increase in rates so much larger for Residential customers who consume more than the average amount of electricity?
  A6: Our Residential rates are based on a two-tiered rate structure. The first block of consumption (up to 10 kilowatt-hours per day from March through August and 16 kWh per day from September through February) is charged at a lower rate than consumption above these thresholds. City policy requires us to set the rate in the second-block of consumption at a level reflecting the cost of power in the wholesale market. This cost has been rising for the past few years and is expected to rise more in the future. Therefore, we are increasing the Residential rate in the second block of consumption more than the rate in the first block. Those who consume relatively large amounts of electricity will have a higher proportion of their consumption charged at the second-block rate and will see a larger increase.

Residential customers within Seattle consuming an average of 1,500 kWh per month will see their annual costs increase from $794 (under rates in effect before December 24, 1999) to $945 under the preliminary rates that will take effect on March 1, 2002. Customers with consumption at this level generally have electric heat. If you are an electric-heat customer and have not yet taken steps to conserve, you might want to contact our conservation staff for assistance in reducing your bills. Visit the Seattle City Light Conservation Pages or call 206.684.3800.

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  Q7: Will Seattle City Light continue with the customer charge?
  A7: Yes, the new Residential rates include a customer charge. Many utilities use this type of charge to recover costs that do not vary with the level of consumption (meter reading, billing, etc.). There will be no increase to this charge. However, the charge has been restated as $0.0973 per day, instead of $2.92 per month, because the amount billed is actually computed as $0.973 times the number of days in the billing cycle. (A charge of $0.0973 per day is equal to $2.92 per 30-day month.)

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  Q8: What about low-income customers?
  A8: Low-income customers who meet income eligibility criteria will continue to pay rates that are only half of the standard rates. In addition, Seattle City Light and other agencies offer financial assistance to customers who fall behind in paying their bills and are at risk of having their power cut off. We also offer subsidized appliance repair services and free weatherization to eligible low-income customers. Customers having difficulty meeting the payment due date should call 206.684.3800 to discuss flexible payment arrangements.

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  Q9: Why are rates going up so much for customers in the downtown Network?
  A9: It costs a lot more to provide service in the downtown network area. It takes 2-4 transformers, instead of just one, to serve these customers. Also specialized equipment is used that is not required for regular service. This extra equipment gives Network customers greater reliability. If one component fails, there is another one to fall back on. Because Network service costs more and gives customers better service, it seems only fair to charge these customers higher rates.

With higher rates, Network customers will have more incentive to conserve electicity. This will help to postpone the day when expensive investments are needed to serve increasing demand in the downtown area. We have energy conservation programs, including cash incentives, to help Network customers reduce their use of electricity. Please call 206.684.3800 to inquire.

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  Q10: You say that the higher Network rates will recover only half of the difference between the cost of providing Network and non-Network service. Who makes up the difference?
  A10: Under the old rate structures (prior to December 24, 1999), the entire cost difference between the Network and non-Network service was spread over all customer classes. All customers were paying for the higher cost of Network service. Under the new rate structure for 2000-2002, the portion of this cost differential paid by non-Network classes will diminish. If and when Network rates are set to recognize the full cost differential between Network and non-Network service, all Network costs will be recovered from Network customers. None of these costs will be paid by non-Network customers. This is the course Seattle City Light has recommended. In the meantime, some network costs will continue to be paid by non-Network customers.

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  Q11: Why are you charging Suburban customers more than City customers after all these years of treating them the same?
  A11: The citizens of Seattle are the owners of Seattle City Light and thus are given priority in allocating the utility's low-cost hydro resources. Suburban cities can choose to form their own municipal electric utilities and leave our system. This makes service to the suburbs more risky for Seattle City Light. Also, it is appropriate to consider Suburban customers as served by power purchased in the wholesale market, since this is where we get the power needed to serve increments in demand for power. Since the cost of power in the wholesale market is higher than Seattle City Light generated power, it is fair to charge Suburban customers higher rates.

In 1998 Seattle City Light worked with the representatives of three suburban cities (Shoreline, Lake Forest Park and Burien) to fashion franchise agreements that state the terms under which service will be supplied to Suburban customers for the next fifteen years. These agreements provide that:
  • Customers in those three cities will continue to be served by Seattle City Light, thus making them eligible to receive power at rates far below those offered by neighboring utilities (Snohomish PUD and Puget Sound Energy)
  • Seattle City Light will make payments to the three cities equal to 6% of the energy portion of billings to Suburban customers
  • The rates Seattle City Light charges Suburban customers cannot exceed Seattle customer rates by more than 8% of the energy portion of billings. (The energy portion of a bill is about half of the total bill.)

The new Suburban rates are based on these agreements, which were approved by the elected officials in the three cities mentioned above. Effective December 24, 1999, rates for customers outside the City of Seattle (with the exception of City of Tukwila) will include an 8% surcharge on the energy portion of the bill. Since energy represents about half of the total bill, this translates into a differential of about 4% on the total bill.

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  Q12: Why is City of Tukwila not subject to the Suburban rate differential?
  A12: Since 1958, Seattle City Light has had a franchise agreement with Tukwila which requires that their customers pay the same rates as Seattle customers. As long as this franchise continues, rates in Tukwila and Seattle will be the same.

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  Q13: Why is the cost of streetlighting in Seattle being billed to Seattle customers?
  A13: The City Council has approved the sale of Seattle's streetlights from the Department of Transportation to Seattle City Light. Many of these streetlights are in a state of disrepair. Given the limited funding available to the Department of Transportation from the City's General Fund, it is unlikely that funds could have been made available to do the necessary repairs and renovations to streetlights if this responsibility had remained with the City's Department of Transportation. Seattle City Light will increase the resources it devotes to the upkeep of streetlights and will recover those costs from the general ratepayer in the City of Seattle, rather than from the General Fund. Without this change in financing, the condition of streetlights would likely continue to deteriorate.

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  Q14: What about the funds in the City's General Fund freed up by the sale of streetlights to Seattle City Light?
  A14: The City intends to invest these funds in the City's transportation infrastructure -- repair of potholes, repair of bridges and arterials, etc. -- where there is a long backlog of unmet needs.

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  Q15: Why are the rates changing now during the winter months when my usage is highest?
  A15: Rates for most customers (excluding downtown Network customers) increased very little (if at all) when the new rates took effect on December 24. Seattle City Light's rates are set to reflect costs at different times of the year. Since costs in the summer months have increased more than costs in the winter months, the rate increase will be felt more in the summer rate period starting March 1, 2000.

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  Q16: I thought we needed to keep our rates low to meet the competition when the electricity industry is deregulated. What does this rate increase do to our competitiveness?
  A16: Even with the rate increase our rates for most classes remain lower than comparable utilities in the region - much lower than Puget Sound Energy and generally lower than Snohomish PUD. Our residential rates are lower than Tacoma City Light's, but Tacoma offers very low rates to its largest industrial customers, which makes its average rate lower than ours.

SCL is becoming more, not less, competitive. The key indicator of competitiveness is how our power costs compare with the price of power in the wholesale market. Our own power costs will continue to be well below the projected market price of power for the foreseeable future. In fact, the gap between our power costs and the market price is expected to increase in the future.

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  Q17: Didn't Seattle City Light make more money in 1999 from surplus energy sales? Shouldn't that keep rates down?
  A17: The new rate ordinance takes into account the favorable water conditions we had in 1999. Last year was a good year for surplus energy sales due to heavy winter snows. With more revenue from our surplus energy sales, we borrowed less money in 1999 than we would have under normal water conditions. Our future payments of principal and interest will therefore be lower. Our strong performance in 1999 mitigated, but did not eliminate, the need for a rate increase.

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  Q18: You cite your investments in salmon habitat restoration as one reason for the rate increase. Why is Seattle City Light investing in salmon habitat restoration?
  A18: Seattle City Light operates hydroelectric generating plants in the Skagit, Cedar and Snohomish River watersheds. Each of these watersheds is home to species of anadrymous fish, some of which have been listed as endangered or threatened under the Endangered Species Act. Seattle City Light has been very successful in running its plants in ways that protected native fish. However, we need to do more, in cooperation with other City agencies, to respond to the recent listing of Puget Sound chinook salmon as endangered. Visit the Saving Our Salmon for more information.

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  Q:19 Seattle City Light usually increases rates on March 1. Why did you advance the effective date of this rate increase to December 24? Was it to make the rates effective before Initiative 695 goes into effect on January 1?
  A19: The City had planned to increase electric rates for 2000-2002 long before Initiative 695 had been certified for the ballot. I-695 has created uncertainty regarding the rate-setting authority of the City. Given its obligation to run the utility in a financially responsible manner, the City Council decided to make rates effective before the end of 1999. The rates that went into effect on December 24, 1999 will be in place for twenty-six months, rather than the normal rate period of one year. During that time, we hope that the uncertainties created by I-695 will be resolved. Future rate-setting practices can then be revised, if necessary, to conform to the decisions of the courts on the meaning of I-695. In the meantime, the rates effective December 24 will cover costs and meet financial guidelines through the end of 2001.

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  Q20: I have other questions about this rate increase. Whom should I contact?
  A20: Seattle City Light staff will be glad to answer your questions and discuss with you the rationale behind our rate-setting practices. You may call us at 206.684.3000 or send an e-mail at respond.scl@ci.seattle.wa.us. We are always interested in how our customers feel about our policies.
 

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