MID must make electricity customers a top priority

Bond ratings. Dam relicensing. Green energy. Natural gas prices. Pension costs. Cash reserves. Worker pay. Canals. State water grabs.

Somehow, in trying to cope with all these crucial concerns, the most important got shuffled to the bottom of the deck. What about Modesto Irrigation District’s residential customers?

What about the family of five working three jobs to make car payments and keep the lights on? What about the couple on a fixed income weighing the cost of electricity against the price of prescriptions? What about those who read The Bee’s analysis of MID revenue last Sunday and became outraged that they’re paying more for each kilowatt-hour than their neighbors in Turlock and far more than those in Sacramento?

There are 95,000 residential customers in the district and beyond. How could MID forget about them?

MID was once one of Modesto’s most prized assets. It was created by visionary farmers who, 130 years ago, staked their fortunes on the belief that, with enough water, they could grow anything. Later, it was nurtured by people who agreed to pay parcel taxes and more for electricity so the district could help its partners build bigger and better facilities, including the largest dam in California not owned by the state or federal governments.

For decades, Modesto residents and businesses were rewarded with some of the lowest electricity rates in the nation. At the same time, farmers paid very little for the water flowing out of Don Pedro Reservoir. Many came to feel entitled to cheap power and cheaper water.

Unfortunately, no utility – public or private – now can deliver power or water cheaply.

The drought proved that water is not only scarce, but valuable – often selling for 25 to 30 times what area farmers pay. And power, with ever-increasing state stipulations, long ago ceased being inexpensive.

The state requires that 20 percent of power come from “renewable” sources, but refuses to allow electricity generated at dams – the oldest and most environmentally friendly method – to be counted. By 2020, a third of all power must come from solar or wind; not dirty-but-cheap coal. But every utility provider faces those issues.

The reason MID’s electricity prices have risen even beyond those of investor-owned utilities appears to be painfully simple: those feelings of entitlement.

Over the past few decades, MID’s board of directors – historically dominated by farmers – has consistently made it a top priority to keep water rates low, even by rejecting modernization.

Several years ago, MID shelved a study to deliver water through a pressurized system even though other, more innovative districts proved the concept. MID’s delivery mechanisms are outdated, meaning a lot of irrigation water ends up in the river instead of on orchards where it belongs – sometimes 20,000 or even 45,000 acre-feet flow away because farmers don’t need it or can’t take it when it’s in the canals. Better delivery and retention systems could recapture that water.

But instead of modernizing the irrigation system, too many directors have been willing to cannibalize it in pursuit of short-term gains.

MID has long insisted it can’t possibly separate the costs of providing electricity and water. Pure bunk.

Consider the “falling water charge,” which up until two years ago, amounted to up to $8 million. This charge equates water to fuel, which flows through turbines to create power. The district added that cost to the electricity side. Now, it uses a direct transfer. The district also puts most of the district’s dam maintenance costs in that column. This makes electricity look more expensive, justifying higher fees. It also justifies lower water rates.

Cost-of-delivery studies have been done, some even discussed in open meetings. Several years ago, a study put the cost of delivery around $65 an acre-foot, about quadruple what farmers were then paying. Yet, the board has only recently voted to increase rates, and it still comes nowhere close to covering cost of delivery.

The justification for keeping water rates laughably low while electricity rates have soared appears to be that without water, there is no electricity. But water provides only about 8 percent of MID’s power; the rest comes from a variety of sources, mostly natural gas.

If past boards were serious about being fair with all constituents, water rates would have reflected those increased costs. If directors had the vision of their forefathers, they would have increased rates enough to invest in water-delivery and storage improvements. In a county with a $4 billion ag industry, farmers can afford it.

Instead, we’ve seen what amounts to a surcharge on electricity with the proceeds turned over – through artificially lower rates – to those buying water.

Under 2010’s Proposition 26, public entities cannot charge customers more than the cost of service. Which explains why some electricity customers are suing.

The district doesn’t like our reporting on electricity charges. But we don’t like accounting that stacks additional costs on those – rich, poor and in between – who buy electricity while artificially lowering the price of water to farmers.

Whether or not the district prevails in its lawsuits is immaterial. MID, once the pride of the region, needs an overhaul.

It must throw out an accounting system that mingles costs in an effort to obfuscate the facts. It should show three distinct cost/revenue structures – one for drinking water provided the city, one for electricity and one for irrigation water.

It must stop cannibalizing its facilities and start upgrading, requiring those who get the most benefits to pay most of the costs.

But most important, it must stop shuffling thousands of residential electricity customers to the bottom of the deck.

This story was originally published June 10, 2016 at 4:33 PM with the headline "MID must make electricity customers a top priority."