SEATTLE -- The Seattle City Council today approved a temporary increase in electric rates in response to this year’s unexpected rise in wholesale electricity prices.
The 0.4-cents-per-kilowatt-hour rate adjustment amounts to an 8-10 percent increase, or about $3 per month for the average residential City Light customer. The increase for low-income customers is 0.2 cents per kilowatt-hour.
“This is a short-term response to high power costs,” said Heidi Wills, chair of the City Council’s Energy and Environmental Policy Committee. “Fortunately, we have a long-term strategy in place that will make this increase temporary.”
The power-cost adjustment will take effect Jan. 1 and could be removed within about 18 months.
The ordinance passed by the council also contains a provision that would set aside a maximum of $500,000 from the power cost adjustment revenues to fund existing or new City Light conservation programs. “Conservation is key to breaking away from the wholesale market,” Wills said. “Every kilowatt-hour we conserve is one that we don’t have buy.”
Wholesale electricity prices in the Western United States rose to unprecedented levels this year, driven up by high demand, low supply and the instability of California’s newly deregulated electric utility market. Prices that had been holding steady for several years at $20-$30 per megawatt-hour soared at times this summer to more than $1,000 per megawatt-hour. Prices have moderated some, but are still reaching the $200 range.
City Light’s power costs have increased by more than $55 million this year and are expected to run about $15 million ahead of projections in 2001.
“The good news is that City Light is taking steps to reduce its need for wholesale power,” Wills said. “We will increase conservation, develop new renewable resources, buy more power from the Bonneville Power Administration and get some of the output of a new combustion turbine. That means less reliance on expensive wholesale power in the future. Even with the power cost adjustment, City Light rates remain the lowest among the nation’s 25 largest urban areas.”
City Light’s own dams produce most but not all of the power needed to serve its customers. The utility currently buys about 15 percent of its power from the wholesale market. But that small percentage consumes about 40 percent of City Light’s power budget.
The utility is moving to secure long-term contracts for power supplies that would make it independent from the wholesale market within just a few years.