Monday, Nov. 03, 2008

12%-20% electricity rate hikes possible

MID, TID facing tough rules, growing fuel costs

Electricity customers could get sizable rate increases next year under proposals at the Modesto and Turlock irrigation districts.

The MID board on Tuesday will hold a public hearing on its proposal, which would raise residential rates 15 percent and business rates 12.5 percent to 20 percent.

A typical household, using 850 kilowatt-hours in a month, would pay about $137 for that power under the proposal.

A vote on the rates is not expected Tuesday.

The TID board will hold a Nov. 25 hearing on a proposal that includes a 13 percent residential increase. Commercial and industrial accounts could get increases of 12 percent to 20 percent.

The new rates for both districts would take effect Jan. 1.

Officials at both agencies said that even with the increases, their power would be cheaper than that provided by Pacific Gas & Electric Co.

The districts supply most homes and businesses in Stanislaus and northern Merced counties. In recent years, they have made inroads into some areas long served by PG&E, including the West Side of Stanislaus County, Oakdale, Riverbank, Escalon and Ripon.

PG&E raised its electricity rates 6 percent a month ago. It projects that rates for its gas customers will be 11 percent higher during the heart of this winter than they were a year before.

A few questions and answers about the MID and TID proposals:

Q. Why are they needed?

A. The districts face increasing costs for natural gas, which is the main fuel for generating electricity, and a shortage of cheap hydropower after two dry winters.

They also face state and federal mandates, including increased use of renewable sources.

MID estimates that without the increase, it would fall $49.3 million short of the $493.3 million needed for its 2009 budget. TID projects a $52.7 million shortfall.

Q. What are the options?

A. The districts could raise rates in two or more phases, as MID did with its most recent increases nearly a year ago.

They also could tinker with the tier structure on the bills. Customers pay a lower price per kilowatt-hour for the first several hundred used in a month, then a higher price for greater use. The idea is to encourage conservation. The boards could decide to make a larger share of the monthly use subject to the lower rate. They also could add tiers.

MID is looking at surcharges that would kick in if, for example, hydropower supplies fell below a certain point or natural gas prices rose. TID already uses surcharges.

Q. Can't these agencies tap their large reserves?

A. Yes, they can, but it's not wise, officials said. Having a lot of money in reserves helps the districts maintain high bond ratings, which mean low interest rates when they borrow money for capital projects. This ultimately saves ratepayers money, officials said.

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