SEATTLE -- Seattle City Light's 1997 record net income and stringent cost controls will allow the utility to delay asking for a rate increase for 1999. In a letter to Mayor Paul Schell and the Seattle City Council, City Light Superintendent Gary Zarker commits to hold the line on rates for another year. The utility has maintained a stable financial picture for the last two years, at the same time it stringently cut costs. Seattle City Light already offers the lowest cost electricity of any major US city.
The utility's financial analysis, which reflects record net income for 1997, will be presented to the Seattle City Council's Utilities and Environmental Management Committee at 9:30 am, Thursday, May 7, 1998, in Council Chambers, 11th floor of the Municipal Building, 600 Fourth Avenue in Seattle.
"A number of things came together to allow us to keep rates flat," says City Light Superintendent Gary Zarker. "We had two excellent water years in '96 and '97 and interest rates were at a 20-year low. But by far the most significant element is the good work we've done to aggressively manage our costs. We'll pass these savings to our customer-owners by holding on to our low, stable rates."
City Light's rates are significantly lower than most comparable US cities. During the debate in Congress and the Washington State Legislature over calls to change the way the electric industry operates, City Light was showcased in both government and news reports as providing exceptionally reliable, environmentally sound electric service at a very low cost. Public ownership means City Light's "profits" are re-invested in the system, so even while keeping rates low, the utility maintains a strong capital improvement program.
The bulk of Seattle's power is generated at seven city-owned hydroelectric plants. These depend on rain and snowmelt to turn their waterwheels and generators, and power production varies considerably between wet and dry years. Both 1996 and 1997 were exceptionally good water years, and allowed City Light to meet Seattle's needs with power to spare. The surplus was sold outside Seattle, and this income was used to keep rates low for City Light's customer-owners.
But good weather alone is not enough to keep rates level. Good management is needed to take full advantage of these opportunities and bring the savings home. In 1997 City Light tightened its belt, kept its capital spending below projections, and cut its operating and maintenance cost by $2.2 million. The Department took full advantage of the 20-year low in interest rates by refinancing $94.7 million in outstanding debt. And by aggressively working the power market, the utility got top dollar for its surplus electricity and took in record surplus sales revenues.
"The Seattle City Council has been working closely with City Light to get overhead costs down," said Margaret Pageler, chair of the Utilities and Environmental Management Committee. "With lower predictable fixed costs we can meet the fluctuating revenue requirements created by adverse weather conditions."
The committee will take a comprehensive look at all of the power generation assets used by Seattle City Light at its May 7th meeting.