Saturday, June 28, 2008

last updated: November 25, 2007 02:49:31 AM

Elected officials aren't supposed to be rubber stamps. So it was good to see Modesto Irrigation District directors toss a plan for increasing electric rates back into the laps of staff.

Virtually every utility in the state either has gotten or is requesting a rate increase. The Turlock Irrigation and Sacramento Municipal Utilities districts raised rates last summer; Pacific Gas & Electric Co. wants higher rates for 2008. The same conditions driving those price hikes are affecting the MID.

In a workshop Nov. 13, staff made its case. The directors replied that they wanted more information and more creativity before their next board meeting, which is Tuesday.

So do we.

Unfortunately, no amount of creativity can change the hard economic facts. The demand for electricity is rising around the world; American utilities are bidding in a global market for resources that are increasingly hard to get.

Power is generated in many ways, and the least costly methods usually are the most polluting and the least polluting the most costly. Timing adds another dimension. Power generated during peak demand -- about 4 p.m. in mid-August -- costs more than power generated at midnight in May.

Alarmed over climate change, California will require by 2017 that 20 percent of all electricity generation be nonpolluting. The regulation is aimed at reducing reliance on coal and its noxious and carbon-dioxide-filled emissions. Fifteen percent of the MID's electricity comes from a coal plant in New Mexico. That supply will be grandfathered in, but any increased demand will have to be met elsewhere.

Then there's the MID's credit rating, which is based on how much money it has in the bank. To build several necessary and expensive projects, the MID will issue bonds. The interest rates that the MID must pay on those bonds will be set by agencies that check on the MID's reserves. If they aren't large enough, the rates go up. The MID's reserves have fallen from $155 million two years ago to

$132 million today -- in part because the board did not raise electricity rates as much as staff suggested. Asked if interest rates have gone up in response, MID General Manager Allen Short responded: "Not yet."

However you do the math, customers face a fourth rate increase in four years.

How the increase is implemented; who gets hit the hardest; who gets a break -- these are the decisions that the five elected board members must make. Such difficult choices require both foresight and creativity. In making those choices, we hope the board considers:

Tier structure: The MID provides an incentive to conserve by providing the first 500 kilowatt-hours at a lower cost than any additional power. But TID customers get the first 700 kwh at the lowest rate. Since the average residential customer uses 800 kwh a month, it means those just scrimping by in Turlock pay the least amount for 87 percent of their power and MID customers get only 62 percent at the lowest cost. The MID could lessen the impact on those willing to conserve by selling its first 700 kilowatts at the lowest rate and charging more for those who consume more. Staff has recommended looking at the tier structure; it's a good idea.

Time-of-use metering: Staff is pushing a pilot program to charge more for power used during peak demand than for power used during off-peak. It's a good idea but will take years to implement, in part because the residential meters will have to be replaced. Additional residential tiers can make a difference immediately.

Surcharges: There's a permanence in rate increases; surcharges can be more easily applied or removed. The TID already has a surcharge; the MID needs one.

Hardship consideration: Stanislaus and San Joaquin counties -- where all MID customers live -- are ground zero in the nationwide foreclosure crisis. Many residents are struggling to stay afloat. The MID should review its policies to ensure that it has no unreasonable fees or onerous deposit requirements. It must work with distraught customers, not aggravate their problems.

Renewable investments: The interest off MID cash reserves reflects the board's good stewardship of community resources. So, too, are investments in renewable resources. The MID already is a leader in developing wind power. But the dozens of dairy farms in the district could provide a power resource much closer to home. Digesters can turn cow manure into methane, which generates electricity. Getting rid of cow manure is a problem for farmers, but it's an opportunity for the MID.

We don't expect MID directors to see into the future, but they can plan for it. Tough decisions require asking tough questions.

The MID board meets at 9 a.m. Tuesday in the district office at 1231 11th St., Modesto.

• Comments
• Add Comment
• Disclaimer