33% rate surge to zap PUD customers

By KATHY DAY

Herald Writer

EVERETT — Residents of Snohomish County and Camano Island will pay 33 percent more for their electricity — $22 on an average monthly bill of $63 — beginning Jan. 1.

And under the measure adopted Wednesday by Snohomish County PUD commissioners, commercial customers will pay 38.5 percent more and industrial users will pay 41 percent more.

Faced with mounting losses from escalating power costs and the need to maintain a reserve for bond payments, the PUD’s three board members agreed a rate increase was a necessary evil.

While officials on Tuesday said fears of an imminent power shortage had ended, PUD commissioner Kathy Vaughn said the financial fallout continues. "The crisis is here financially," she said.

Commissioner Don Berkey said the district needs to "send a strong message: Turn off your lights and save energy." He added, "The dishes get just as clean at 10 at night."

Commissioner Cynthia First said she wants the district to "accelerate public discussion on new generation. I don’t think conservation is the total answer." She asked for a staff report on the subject in January.

The district’s financial staff arrived at the varying rate hikes through a formula that will be applied only to the actual amount of electricity used.

The increase will affect schools, cities, state and county facilities as well as area businesses. Andy Muntz, Mukilteo School District spokesman, said the district was anticipating a rate increase "but not of this magnitude."

The PUD, which buys some of its power on the open market, was pushed into the corner by circumstances that are wreaking havoc with the electric market throughout the West, officials have said.

Puget Sound Energy, which serves residents of Whidbey Island and Skagit County, is the exception, at least for now. It will be raising rates only 1.5 percent for 2001 because it has long-term contracts to meet customers needs, according to spokeswoman Dorothy Bracken.

Pressures from cold, dry weather have reduced output from the region’s hydroelectric facilities, including the PUD’s Jackson Hydroelectric Plant, which expects to produce 40 percent less power through March than projected.

Further muddying the water is the situation in California, which normally ships power north during the winter. But because that state is in the throes of an unsuccessful experiment with deregulation and is facing shortages of its own, no power is coming this way.

Combine all of that with growing demand and the fact that little has been done to construct new generating facilities, and PUD managers and staff say they had little choice but to call for a big rate increase.

During his explanation of the PUD’s predicament, Assistant General Manager Glenn McPherson noted that based on November prices, which tripled from a year ago, a 16 percent rate hike would leave the district $12 million short.

At December’s prices — triple those of November — a 35 percent increase leaves the district with a $38 million shortage, a smaller reserve and no money for debt service or a rate cushion, McPherson said.

If power costs drop back to November levels, a 35 percent hike would raise net income to $45 million and put $57 million in the rate fund ,as well as cover the debt service requirements and restore a cash balance.

Because of the uncertainty of power costs, commissioners asked for a status report at each meeting. If necessary, they could initiate another hike if the new rates don’t make up for the losses, or decrease rates if the picture improves.

What the commission didn’t deal with is what Berkey called the double whammy, the as yet unknown increase in power costs that will come from the district’s next contract with the Bonneville Power Administration.

PUD commissioners have decided to increase the amount of power the PUD buys from the federal hydropower system, a move that will eliminate some of the wild price fluctuations it faces now on the open market.

Several weeks ago, when the commissioners first looked at the 2001 budget, they were talking about potential raises of 3 percent to 4 percent for each of the next three years. But now they want to wait for more specific information before addressing the BPA situation.