MID examines surcharges

The idea of applying surcharges on electricity bills to cover specific costs in supplying power got its first detailed look from the Modesto Irrigation District board Tuesday.

The board considered adding, for example, a surcharge reflecting the cost of natural gas, the main fuel for power plants.

Another surcharge might cover the extra cost of solar and wind power compared with conventional sources.

"Green energy is a good thing, it's clean, but it comes at a higher cost," said Jimi Netniss, budget and rates administrator for the district.

The board has not yet scheduled a vote on the surcharges, which would be on top of a 7 percent increase in overall rates approved last month.

That was less than the 11 percent proposed by the MID staff, but the board agreed to consider surcharges to make up at least part of the difference.

The rate hike raised the average residential bill from about $130 to $139 a month.

A renewable energy surcharge would add an estimated $1.35, Netniss said. This reflects a state mandate to get 33 percent of electricity from these sources by 2020; the MID is at 12 percent.

A surcharge averaging $3 a month could cover the district's costs in meeting rules aimed at curbing climate change. Officials expect to spend upwards of $10 million a year on efforts to reduce the carbon emissions believed to be responsible for global warming.

"The important thing is that somehow we need to communicate that there's a cost associated with that and that we can't do these things without paying for them," Director Tom Van Groningen said.

The staff did not have an estimate for the monthly surcharge tied to overall power supply costs. It could be substantial, however, because this is by far the biggest expense for the district, outpacing salaries and other costs.

This surcharge could rise if gas got expensive or if cheap hydroelectricity was in short supply. If power supply costs got especially low, customers could get a credit on their bills.

Dave Thomas, president of the Stanislaus Taxpayers Association, said surcharges could be hard on ratepayers because they would not know how much to budget for their monthly bills.

Several utilities in Northern California use surcharges, including a Turlock Irrigation District levy that changes with power supply costs.

Also Tuesday, the board heard an update on a gas- fueled power plant that MID and 13 partners have been planning in Lodi.

The district could have to pull out or reduce its 23.5 percent stake because the 7 percent rate increase left it short of the income that bond rating agencies like to see. The partners are close to issuing bonds for the 280-megawatt project.

MID General Manager Allen Short said that if the district pulls out, it could recoup its $9.4 million investment in the plant from a utility that takes its place.

But he said the district would have to buy power from elsewhere to replace the inexpensive supply that would have come from Lodi.

The board will consider the issue Feb. 23.

Bee staff writer John Holland can be reached at jholland@modbee.com or 578-2385.