SMUD plans to hike rates: Thrifty homes could escape rise

By Carrie Peyton Bee Staff Writer (Published Feb. 21, 2001) A proposed electricity rate increase would hit hardest at farms, small businesses and the 10 percent of households that use the most energy under a proposal unveiled Tuesday by the Sacramento Municipal Utility District.

"This is a dark day, a very dark day," SMUD director Susan Patterson said.

Proposed SMUD rate increase Sacramento-area electric rates would increase 13 percent to 25 percent in May under a proposal unveiled Tuesday by the Sacramento Municipal Utility District. The increase would generate an additional $124 million and bring the classes of customers -- residential, commercial, industrial and agricultural -- closer to 100 percent of what it costs SMUD to serve each.

Residential Current annual revenue (millions): $376 Proposed rate increase: 13% * Current percent of SMUD costs paid by customer: 105% Proposed percent of SMUD costs paid by customer: 103%

Small commercial Current annual revenue (millions): $112 Proposed rate increase: 25% Current percent of SMUD costs paid by customer: 83% Proposed percent of SMUD costs paid by customer: 89%

Medium commercial Current annual revenue (millions): $182 Proposed rate increase: 16% Current percent of SMUD costs paid by customer: 108% Proposed percent of SMUD costs paid by customer: 108%

Large industrial Current annual revenue (millions): $95 Proposed rate increase: 16% Current percent of SMUD costs paid by customer: 95% Proposed percent of SMUD costs paid by customer: 95%

Agricultural Current annual revenue (millions): $6 Proposed rate increase: 25% Current percent of SMUD costs paid by customer: 66% Proposed percent of SMUD costs paid by customer: 71%

Lighting Current annual revenue (millions): $6 Proposed rate increase: 15% Current percent of SMUD costs paid by customer: 103% Proposed percent of SMUD costs paid by customer: 102%

* Depending on level of usage

Source: Sacramento Municipal Utility District

After 10 years without raising prices, the utility has concluded it needs an extra $124 million -- about a 16 percent boost in revenues -- to make it through the year. The money would help pay skyrocketing bills for wholesale electricity that SMUD resells to consumers and for the natural gas that fuels some SMUD power plants.

And things could get worse if rainfall for the rest of the year dips well below average, SMUD general manager Jan Schori said. In that case, an extra 3 percent surcharge would have to be tacked onto rate hikes that are already proposed to range from 13 percent to 25 percent.

The increases, tentatively scheduled to go into effect in mid-May, wouldn't touch the vast majority of residential consumers.

About 70 percent of households would be spared because their thrifty energy habits keep their usage below a baseline amount that varies by season.

But the energy-hungriest 10 percent of households would see a 16 percent increase on the final few kilowatt hours they consume each month.

"The more you use, the more money you will pay," Schori said.

Agricultural and small commercial users would face 25 percent increases as part of an effort to bring their bills closer to what it costs to serve them, she said.

Today, no category of customer pays exactly what it costs to serve that group, according to SMUD's rate calculations. Some, such as large industrial users, pay less and others, including residential users, pay more. Over time, Schori said, she wants those rates to move closer to cost, but SMUD hopes to make the changes slowly so that no one group gets hit hard with a huge increase.

The rate-hike proposals come as legislators, the governor and state regulators are debating statewide changes that could increase bills for customers of Pacific Gas and Electric Co. and other investor-owned utilities. But today, PG&E's top price for residential users is 14.32 cents per kilowatt hour, well below the 16.22 cent top rate proposed by SMUD.

The difference is that SMUD is proposing a step that is still just being considered for PG&E -- adding more "tiers" to electric bills. The idea is to increase conservation by delivering an extra ding to the pocketbooks of those who use the most power.

SMUD's proposed new residential rates do just that, changing from two tiers to three. The lowest tier would see no increase, the middle tier would see a 10 percent boost, and the top tier would pay a summer rate of 16.22 cents per kilowatt hour for usage beyond 1,000 kilowatt hours per month.

"Folks who want to run their air conditioner all day are going to pay for it," said Patterson, one of seven elected SMUD board members who will vote on the rate-hike proposal.

Schori has asked the board to make a final decision on the increases by May 1 so they can be imposed by mid-May. A final public rate hearing is tentatively scheduled for April 19.

Before then, the ratepayer-owned utility will hold a series of eight workshops on the proposed increases, along with nine neighborhood meetings that will cover both electricity rates and ways that households and businesses can conserve.

Directors may well decide they want to tweak Schori's rate proposals, board President Larry Carr said. Carr said he is troubled that some customer classes, such as agriculture and small commercial, pay proportionately lower rates, but he said he also doesn't want to raise rates too sharply for any group.

Agricultural consumers' rates would go up 76 percent and small commercial 41 percent if they were to be brought fully in line with costs, while residential rates would increase by an average of 10 percent, according to SMUD calculations.

Carr said SMUD directors want to hear from customers about what their preferences are.

"A public utility reflects the values of the community," he said.

Under the current proposal, residential rates would go up an average of 13 percent, lighting rates by 15 percent, medium commercial and large industrial rates by 16 percent, and agricultural and small commercial by 25 percent.

SMUD's preliminary calculations show that the residential increase would boost an average residential bill by $9 from $67 to $76 per month. SMUD previously has pegged average residential bills at around $62 per month, but it updated the estimate as part of its rate studies.

http://www.capitolalert.com/news/capalert01_20010221.html

-- Martin Thompson (mthom1927@aol.com), February 21, 2001