Think MID’s rates are low? You’d better think again

It’s hot, so you crank up the air conditioning and brace for a higher electric bill.

In the old days, you might have taken some comfort in knowing that the Modesto Irrigation District’s prices were the lowest around. But a new Modesto Bee analysis finds that MID is making more money off residential customers than neighboring utilities and others throughout California, including Pacific Gas and Electric Co.

Regular folks in MID’s area also shoulder a higher burden than elsewhere to benefit local wineries, canneries and other industry, the analysis shows – in addition to subsidizing farmers’ water.

“They have the money and the lawyers, and you’re just the little person,” said Modesto’s Raymond Ortiz, an MID customer living on a fixed income. “You don’t have a recourse.”

A pair of unrelated class-action lawsuits aims to change that, both demanding refunds for those unfairly paying more so that big companies and farms can pay less.

Payouts, if any, could be two years or more away, depending on whether the lawsuits succeed, experts say.

MID did not dispute The Bee’s findings or methodology, based on 19 years of revenue and energy-production data that the utility reported to a federal agency. But MID, preferring to use another measuring stick, insists that its average customer pays 28 percent less than those buying power from PG&E and insists MID complies with state law.

The Bee found:

▪ MID’s average revenue from residential customers inched above PG&E’s in 2008 and remains higher (18 cents per kilowatt-hour generated vs. 16.7 cents) despite no MID rate increases since 2011.

▪ MID’s residential income also is higher than the Turlock (15.7 cents) and Merced (16.2 cents) irrigation districts and much higher than the average for other California public utilities (14.5 cents).

▪ At the same time, MID’s average income from industrial customers (10.4 cents per kilowatt-hour) is rock-bottom when stacked next to its neighbors, other public utilities and PG&E. Unsurprisingly, the gap between MID’s high take from residential customers and low revenue from industry is much larger than for other utilities.

“All I can say is it’s too high,” said Carolyn Merritt of MID’s power prices. The disabled 74-year-old’s Modesto household shares monthly expense duties; she pays the MID bill, her son-in-law takes care of rent and gas and her granddaughter covers the water bill.

The U.S. Energy Information Administration, which supplied data used in The Bee’s analysis, does not compile prices, which can be tricky to present in apples-to-apples comparisons among utilities with widely varying circumstances. The agency instead collects sales and energy volume numbers, with breakdowns among residential, commercial and industrial classes, making simple revenue-per-kilowatt-hour computations “a proxy for retail rates and prices,” the agency says.

Prices still a bargain, MID says

MID historically has preferred to present a narrower picture based on prices charged to average customers.

For example, March 2015 numbers released by the district suggested a $152 bill for customers using 850 kilowatt-hours per month, compared with $187 charged by PG&E and $130 paid by TID customers.

“MID’s cost of service study uses a standard methodology widely employed in the utility industry,” district spokeswoman Melissa Williams said.

The Sacramento Municipal Utility District publishes a similar comparison, but based on an assumption that the average customer uses 750 kilowatt-hours a month for a $103 bill, compared with $133 in MID’s area and $166 charged by PG&E.

Prices charged by investor-owned utilities like PG&E are regulated by the California Public Utilities Commission, while nonprofit utilities such as SMUD, MID and TID are governed by locally elected boards with power to set rates.

SMUD’s board in 2003 adopted a policy mandating as a “core value of the district” that prices be competitive. The policy states that SMUD’s rates will stay at least 10 percent below PG&E’s; they’re 61 percent less, according to SMUD’s posted comparison.

According to The Bee’s revenue-based analysis, SMUD makes 29 percent less average profit from its residential customers than PG&E.

MID, which has no such policy, makes nearly 8 percent more average profit from its residential customers than PG&E, and 40 percent more than SMUD – also a public utility in a similar climate.

Why such a difference?

MID: Country strong

Modesto’s Steve Mohasci, who retired from a utility in Iowa, thinks it might have to do with representation. MID and SMUD board members represent geographic districts, but SMUD focuses on electricity while MID’s dual mission includes providing water for farmers. And the MID board historically has been controlled by farmers; currently, its grower-board members are Larry Byrd, Nick Blom and Jake Wenger.

“Residential customers are the cash cow for irrigation welfare,” Mohasci said.

This year, the farm water subsidy – benefiting about 600 farms, at the expense of 118,000 power customers – comes to more than $17 million; it costs MID $21.2 million to deliver water, while customers pay only $3.82 million.

The class actions call that an illegal tax prohibited by state law unless MID asks for voter approval, which it has not. MID reaped an average yearly electricity profit of $93 million from 2010 to 2014, for a five-year total of $466 million, previous Bee analyses found. MID says it uses the money to repay debt and build reserves nearing $200 million.

Such cases tend to “trigger something in people,” said Southern California attorney Timothy Blood, who specializes in class-action lawsuits but is not involved in either confronting MID. “When you have to pay (a utility) every month, you feel like half the time they’re screwing you one way or another.”

“They (cheat) people $100 here, $200 there and nobody sues because they’re doing it to poor people,” said Jane Krikorian, advocacy supervisor for the Utility Consumers Action Network, which fights utilities in San Diego. “It’s very difficult to get oversight with these public irrigation districts.”

MID board members John Mensinger and Paul Campbell are not farmers, but Campbell – like Byrd, Blom and Wenger – represents a voting district that is mostly rural. Mensinger’s district is the only one that is purely urban.

“My goal is to increase (water) rates that farmers pay. We’ve been somewhat successful,” Mensinger said, referring to a series of water price increases in recent years, while power rates have held steady.

Progress at a snail’s pace

Even so, farmers currently pay 18 percent of MID’s cost for delivering farm water; a previous Bee report calculated that at the pace the board has moved in the past 15 years, it would take 212 years for farm water income to cover costs.

“I’m beginning to slightly regret that I haven’t been perhaps more vigorous” in advocating for residential ratepayers, said Mensinger, who has stood alone in their defense without rocking fellow board members’ boat. “By compromising with the others, I am helping to make progress in the right direction, just not as fast as I would like.”

Campbell says it hasn’t been proved that electricity customers are subsidizing farmers.

Farm advocates say MID deserves but gets no credit for replenishing groundwater aquifers and for canals that support power poles and carry stormwater from Modesto streets. But MID has resisted calls to separate its water and power bookkeeping, making it difficult to pinpoint true costs for each service.

“Those questions are not fully answered,” Campbell said, “so it just wouldn’t make sense to weigh in till I know. Everyone is just speculating.”

Meanwhile, the local water table is much healthier than elsewhere, Campbell noted, because Modesto doesn’t have to pump as much groundwater for its tap customers, as it’s augmented by MID-treated river water.

“We are so fortunate in Modesto because our aquifer is so solid,” Campbell said. “Compared with most of the rest of California, the position we’re in is astonishingly fantastic.”

One of the lawsuits accuses MID of overcharging residential power customers while coddling big business.

Experts say there are reasons that all utilities charge higher rates to residents, whose demand for electricity swings wildly with the weather. When it’s hot – like now – air conditioning drives power demand way up, while needs of factories and canneries are much more stable, predictable and more or less constant.

Big industry = good jobs

When industry looks for the right location, utility costs are always high on the list, said David White, Stanislaus Business Alliance chief executive officer. “It’s one of the most important site-selection criteria,” he said.

“These are the ones that drive the economy,” White said. “They hire people who take their paycheck and spend money buying goods and services in the community. But if costs become too high, that can drive them to relocate to another state where the business climate is friendlier.”

Food and beverage processors in Stanislaus County produce more than any other California county except for Los Angeles, according to a 2015 study commissioned by the California League of Food Processors.

“MID and TID are some of our greatest assets,” White said. “We need to do everything we can to make sure they remain competitive. If you don’t have a company, you don’t have jobs and everyone suffers.”

For 15,000 people without jobs or living-wage income, MID offers rate relief through its CARES program; the average uses 675 kilowatt-hours per month, paying $92, MID says.

“I really enjoy that,” said Modesto’s Michael Weatherwax, who said his latest bill came to only $43 – before the current hot spell.

But why should regular people – in an area beset by chronic high unemployment – pay so much more than local industry for power, in higher amounts compared to elsewhere?

The average public utility in California, for instance, gets 26 percent more average revenue from residential customers than from industry, while MID gets 73 percent more.

“TURN is always concerned about large industrial and commercial customers paying their fair share,” said Mindy Spatt, spokeswoman for The Utility Reform Network in San Francisco. “Consumers have to be vigilant.”

“They just squeeze it out of these poor people,” said Krikorian, the San Diego consumer advocate, of utilities in general. Shut-off threats, she said, “can be like a big hammer coming down on people. We see big companies unfairly stomping on the little person. We’re talking about water and electricity – you die without it.”

This story was originally published June 5, 2016 at 6:02 AM with the headline "Think MID’s rates are low? You’d better think again."