Mayor repeats call for West Coast price caps, proposes rate increase
SEATTLE -- Seattle City Light today proposed an 18 percent electricity rate increase to help the utility cope with soaring wholesale power costs and a drier than usual year. In a briefing before the City Council, the utility also outlined its strategy for becoming largely independent of the power market’s staggering costs. Seattle Mayor Paul Schell addressed the Council, repeating his appeal to the federal government to fix “California’s sadly mistaken deregulation policies, which have opened the way for price-gouging market manipulation by power companies and power brokers.” He called on the Federal Energy Regulatory Commission to step in and cap the price of market electricity throughout the West.
City Light Superintendent Gary Zarker told the City Council that he is proposing the rate increase “with the confidence that we are managing our way through a very difficult situation.” A contract with the Bonneville Power Administration for City Light’s full allotment of electricity, a share of power from a combustion turbine and a doubling of conservation efforts will eliminate the need for costly power market purchases, Zarker said.
While City Light should gain independence from the market by the end of this year, it will probably take about two years for the utility to fully recover from the financial losses currently being incurred, Zarker told the council.
Under the proposal, utility tax receipts from the increase would be used to subsidize rates for low- and fixed-income residents.
In considering the latest power cost adjustment, Zarker said City Light’s philosophy was to charge customers for known costs and not make customers pay up front for unpredictable future developments. But he said he would be back before the council if circumstances mandated further power cost adjustments.
In developing the proposed 18 percent increase, City Light assumed that West Coast power prices would fall or be capped at $150 per megawatt. Other factors putting pressure on rates include drier weather and the size of an expected rate increase from BPA. City Light assumed a 17 percent BPA rate increase when it signed its recent contract with the regional power supplier, but BPA is facing the same conditions as City Light and may raise rates in the future.
Mayor Schell criticized the federal government for allowing the West Coast energy situation to worsen. The FERC “is too timid to step in and solve the problem, as they should, on behalf of all consumers in the West,” Schell. “California’s greed and timid regulators risk throwing the West and Washington state into recession.”
Schell noted that California’s deregulation has “driven two utilities serving 25 million people into the ditch,” rendered their financial instruments almost worthless and is corroding that state’s economy.
The Seattle City Council adopted a 10 percent power cost adjustment in September. But power prices continued to climb, and the region experienced the third-driest November and December in the last 75 years.