City Light: Soft market for surplus energy sales triggers electricity surcharge

Wednesday, July 6, 2016

Typical residential bill would increase by $1 per month, starting in August

Low revenue from the surplus energy Seattle City Light sells to other utilities has triggered a 1.5 percent surcharge on electricity rates, starting in August.

City Light generates power at its hydroelectric projects. When the utility has more electricity than its customers need, it sells that power to other utilities and uses the money to keep prices low for its retail customers.

For 2016, City Light anticipated $60 million in revenue from such wholesale energy sales, but the utility is on track to earn only about $43.5 million as a result of warm spring weather at a time of low prices on the wholesale energy market.

The warm weather melted mountain snow earlier than is typical, which meant City Light’s hydroelectric projects were producing surplus energy at a time of lower demand and lower prices than the utility might have seen in June or July.

To make up the difference between what was expected in the budget and actual revenue, City Light draws from a rate stabilization account created in 2010 to offset the volatility that comes with generating and selling hydropower. If the amount in the account dips to $90 million or below, a 1.5 percent surcharge is automatically applied to every customer’s bill until the account is refilled to $100 million.

The rate stabilization account had $89.1 million in it June 30, which triggers a surcharge that will be applied to customer bills, starting in August. The surcharge will add $1 to the typical residential customer bill every month. This is the first time an automatic surcharge has been triggered since the rate stabilization account was created.

Based on current financial forecasts, City Light projects that the surcharge could stay in place into 2019. Should the rate stabilization account’s balance fall to $80 million or below, the surcharge would automatically increase to 3 percent.

Once the account balance is refilled to $100 million, the surcharge is automatically removed. If strong surplus energy sales ever push the rate stabilization account’s balance to more than $125 million, the City Council can choose to reduce rates, have City Light pay down existing debt or direct the utility to pay for capital expenses with cash instead of borrowing money.


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