Modest increase is justified

No one likes to see their monthly bills go up in good times, much less in times like these.

The Snohomish County PUD knows that, and so has offered a thorough explanation of the reasoning behind a proposed 2.9 percent average rate increase for electricity. If approved by the utility’s elected commissioners, an average rate hike of $2.56 per month for residential customers would go into effect April 1.

We think the reasoning is sound. It continues a prudent course of budget management, cost containment and policy choices that have characterized the PUD over the last decade.

After drawing from reserves and applying some bond proceeds to the utility’s 2012 budget, the proposed rate increase would close a remaining shortfall of $11 million. Several forces have driven costs higher:

•The cost of hydropower the PUD buys from the Bonneville Power Administration will be $7 million higher this year than in 2010.

•Federal relicensing of the utility’s Jackson Hydro Project cost more than $10 million, and other mandates have combined to increase costs an additional $1 million a year.

•The closure of the Kimberly-Clark plant in Everett means a $7 million annual revenue loss.

•Conservation investments have increased by $6 million, a wise move that will reduce the need for more expensive generation down the road.

•Contributions to the PUD’s low-income energy assistance programs are up by $4.5 million, reflecting the community value of helping our most vulnerable families keep the power on.

Following a 0.9 percent rate increase last year (a pass-through of a BPA price increase), this one would mean a total average increase of 3.8 percent from 2010 through 2012. During the same period, Puget Sound Energy and Seattle City Light each have had double-digit rate hikes. The PUD’s overall rates will remain comparitively lower.

And as a portion of personal income, electricity from the PUD costs less today than at any time in the past 40 years.

As a not-for-profit, public utility, the PUD’s revenues must cover operations and maintenance costs, and be sufficient to keep interest rates on capital projects as low as possible. Drawing more from reserves in order to avoid a rate hike could lead to higher borrowing costs, forcing rates even higher in the future.

Better to live with a relatively modest increase now.