PUD electric rates expected to rise

Allison Arthur, The Leader
Posted 8/30/16

Electricity rates in East Jefferson County could be on the rise as early as January 2017.

Jefferson County Public Utility District (PUD) commissioners are to weigh in on the issue at 5 p.m., …

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PUD electric rates expected to rise

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Electricity rates in East Jefferson County could be on the rise as early as January 2017.

Jefferson County Public Utility District (PUD) commissioners are to weigh in on the issue at 5 p.m., Tuesday, Sept. 6 at the PUD Administration Building at 230 Chimacum Road in Port Hadlock.

Commissioners heard from EES Consulting Aug. 24 on a cost-of-service and rate-design study that looks at various rates charged to customers. Commissioners also heard from members of the public, some of whom suggested the board get on with a rate increase sooner rather than later and get the PUD's financial house in order before making any major changes between classes of customers.

And Rick Thompson, Chimacum School District superintendent, urged commissioners to be gentle with schools.

“Some of the initial figures [on rate increases] we saw would equate to, say, laying off a teacher and increasing class size,” Thompson said.

The board made no decisions on recommendations made by EES to raise rates to support the system's cost as well as to absorb cost increases from the Bonneville Power Administration (BPA), which sells power to the PUD.

The PUD has not raised rates since it purchased the power system from Puget Sound Energy for $115 million in April 2013. In the meantime, PSE's rates have risen roughly 6 percent.

WHO PAYS WHAT?

The EES study suggests that residential customers – the vast majority of customers – are paying 98.9 percent of their fair share of operational costs. But it concluded that customers in a rate class called irrigation – farming – pay 44.8 percent of their fair share; schools pay 55.8 percent of their fair share; and street lighting pays 66.9 percent of its fair share. Rate hikes in those three areas have been suggested.

“There will be a whole list of policy questions that the board will have to decide,” said PUD manager Jim Parker. “For example, do we borrow more money to make capital improvements and spread out the cost? Do they want to increase low-income [support]. Do we tighten our belt? Do we want a large one-time rate increase or lower amounts? Do we consolidate certain rates?”

Once the board weighs in on where it wants EES to go with changes, EES takes those policy decisions into account and returns for another workshop with the board in early October, when the board also weighs in on its 2017 budget, Parker said.

“It could be prior to next year, but probably Jan. 1 is a reasonable time. It would depend on the rate structure,” Parker said of when new rates might be implemented.

BASE RATE

Questions that the board must weigh include whether to raise the base rate from $7.49 a month, reduce the district's capital program to lower costs or consider borrowing money to slow rate hikes.

Parker said he thinks the base rate should be increased. But a decision about rates isn't his to make. It's up to the three elected commissioners to do that.

Every year, the district pays $6 million in interest and principal on what is now a 25-year loan for purchase of the system. Parker reasons that with about 20,000 customers, that calculates to about $300 per customer per year, or roughly $30 a month.

Then there's the cost of maintaining the infrastructure and making capital improvements.

There's also the issue of discounts for low-income customers. PSE subsidized low-income users here by $450,000 a year.

The PUD, a public entity, cannot legally give such subsidies. The PUD started a voluntary program called Power Boost for customers who can afford to pay a little each month to help customers who cannot.

Power Boost raised $15,700 in 2013, and $73,100 in 2014. Contributions fell to $36,600 in 2015. As of July 2016, $17,274 had been raised, according to the PUD.

A citizens advisory board recommended that the PUD set aside $600,000 in support: $500,000 in assistance to 1,000 people at $500 a year, and $100,000 a year to cover the program's administrative costs.

To support that proposal, the PUD would need to raise the base rate by $2.50 per month, Parker estimated.

EES concluded that Jefferson PUD's monthly base rate of $7.49 was one of the lowest in the state. It's below the monthly base rate of $12 that Clark County PUD charges, and well below Mason PUD 1 (which serves Jefferson County south of Mount Walker), which charges $31.66 a month, and Gray Harbor PUD, which charges $39 a month as a base rate, EES discovered.

POLITICS IN 2016

The base-rate issue could become a political point.

Barney Burke, incumbent District 1 commissioner, and election challenger Jeff Randall agree that the current rate structure encourages conservation. Burke is open to a small increase, Randall is not.

Commissioner Ken Collins said he is open to a gradual rise in the base rate of up to $15 a month over the next five years.

Commissioner Wayne King declined the Leader's email invitation to comment on the rate issue. He told Peninsula Daily News that he supported a base rate increase of 10 percent or more.

“From a strategic standpoint, I think one of the most important things a power utility can do is have a rate structure that encourages conservation, because this is the most cost-effective way to meet load growth and reduce carbon,” incumbent Burke wrote in an email.

“Although some PUDs have base rates of $20 or more and flat consumption rates, I believe that sends the wrong message to customers about the value of conservation. We should set our rates using the values and goals of our customers, instead of copying what another community has chosen,” Burke wrote.

Randall, who has been active in bond campaigns for the City of Port Townsend and Port Townsend School District, has noted that if PSE still provided electric service here, any rate increase would be reviewed and approved by the Washington State Utilities and Transportation Commission (UTC). Because the PUD is now owned by customers and not regulated by the state, “Our PUD is regulated by voters through their election of PUD commissioners, who set PUD rates and policies," Randall said.

Because the PUD rates have been reviewed by the UTC, Randall said, he views them as “valid and fair.”

That said, Randall argues that EES Consulting's proposal to increase the cost of power supplied to schools by as much as 35 percent is too much.

“The proposed rate change would increase the public school's annual electricity costs by 35 percent. For the Port Townsend School District, the annual cost increase would be about $80,000. That is the cost of a teacher for each of our school districts,” Randall wrote in a prepared statement because he could not attend the PUD's Aug. 24 meeting.

Randall also said he thinks the residential rates and fees encourage conservation.

“Keeping the monthly fee low means that a residential power bill is based almost entirely upon actual power usage and therefore encourages conservation,” Randall wrote, urging the board to reject a recommendation to increase the monthly fee to $15 or $20.

Burke said he agreed with customers who voiced support for implementing a rate increase by Jan. 1, 2017. Burke noted that every $4 increase – whether from a base rate or consumption rate increase – generates about $1 million.

Burke also said he disagreed with EES's recommendation to increase the customer charge for net metering and he also supported expanding a low-income rate to people who are not seniors or disabled.

As for school rate increase, Burke said he didn't think the board is in a hurry to adjust the school rates, especially if a general rate is increased. He said he would not want to implement a school rate increase on top of a general-rate increase.

STABILIZING REVENUES

Commissioner Collins said that increasing the base rate would help “stabilize the revenue flow into the PUD, which now varies greatly due to consumption differences between winter and summer.

“I also think the PUD should consider a minor increase in the consumption rates, but maintain a differential between the two rates of usage, above and below 600 kw per month, to encourage conservation,” Collins said. The reality is that increasing the base rate to $15 per month would generate $2 million a year, and the PUD needs to make improvements to the system in order to reduce outages from failing equipment, he noted.

Collins said he plans to push for increasing rates as soon as possible and regrets not having tackled the issue sooner, even though the PUD has had to deal with many other issues of what he called “equal urgency over the past year.”

Collins also said he is strongly opposed to abruptly raising the charges to schools and does not support any rate consolidation that increases costs dramatically. He said he'd like to work with the schools to explore ways they can be more efficient, perhaps add rooftop solar installations or “smart” technologies.

The PUD needs to help customers understand rates, he said.

“It was remarkable that the recent survey found that a large number of customers believed that their rates had already gone up, even though rates had actually been unchanged for the past three years,” Collins wrote in an email.

“Overall, I think it is important to view JPUD rates in context,” Collins concluded. “Washington has the lowest electricity charges across all 50 states. Like most other things, cost are increasing. The price of electricity that the PUD buys from BPA went up 6 percent this past year and is expected to increase again next year. We need to anticipate at least the near-term future and ideally look further down the road towards innovation and greater self-sufficiency."

Editor's note: A number in this article was corrected from the print version. Every $4 generated in either a rate increase or consumption increase brings in $1 million in revenue.

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