MID board turns down electric rate increase

Electricity prices won’t go up for at least three months, and maybe not for a year, Modesto Irrigation District leaders decided Tuesday after a lengthy hearing focused largely on fairness.

Several people in the audience protested a longstanding policy of electricity customers subsidizing farmers’ low irrigation prices. Others said a separate inequity favors large commercial and industrial power users at the expense of MID’s 95,000 residential customers.

“We need to be more educated” before voting on rate hikes, said board member John Mensinger. A workshop to enlighten the board is expected in February or March and could be followed by a formal vote on boosting electricity bills, but probably not by as much as MID staff had proposed this month.

The district predicts a $12 million budget gap for 2015, which might have been erased if the board on Tuesday had agreed to raise power rates an average of 3.5 percent, including residential, commercial and industrial categories. Postponing a rate hike means MID will rely on reserves of about $185 million.

That savings account was meant for “times like this,” board member Larry Byrd said.

He and board member Paul Campbell said they oppose a rate hike and don’t want to talk about it for another year. The three others – Mensinger, Nick Blom and Jake Wenger – remain open to the idea of higher power rates, but perhaps smaller than 3.5 percent; Blom said 1 percent or 1.5 percent might be more reasonable.

They want to discuss options in February or March, after learning more about commercial and industrial rates and comparing what other utilities are charging.

That would occur after a debate scheduled for January over whether to raise irrigation rates. Some board members said they’d like to begin reversing the policy that has been costing electricity customers more than $11 million per year, by starting to charge farmers an amount closer to the true cost of delivering water.

Critics argued that subsidizing farmers is MID’s root problem and said that should be corrected before considering electricity prices.

“(Residential customers) are overpaying, and you want to increase their rates again? I disagree strongly,” said Dale Bosowski, a former MID senior resource manager who recently retired. “As a 36-year employee of MID, it kind of embarrasses me that you do that.”

Lee Delano, a former MID assistant general manager who left in 1989, used strong words as well. “I’m shocked you’re trying for this raise,” Delano said, questioning the honesty of the district’s justification for raising rates. “It’s absolutely ridiculous.”

In a unanimous vote, the board first committed to taking action on irrigation rates in January. Some have warned farmers to brace for higher water prices; the board early this year raised rates 10 percent in a series of motions combating drought, but previous boards over at least a couple of decades had gone soft on commitments to gradually erase the subsidy.

No board member spoke in favor of the staff proposal for a 3.5 percent electricity bump. Jimi Netniss, the district’s budget and rates administrator, said MID revenue in 2015 will be short $12 million and blamed higher costs for transporting the natural gas that’s burned to make energy, among other rising costs.

He had said the proposal would raise an average home bill $5 or $6 per month, but he acknowledged Tuesday that as many as two-thirds of residential customers would pay more than that.

Netniss also said industrial customers would see a 4 percent hike, but Steven Lillie, senior electrical engineer at Del Monte in Oakdale, challenged that, saying his calculations show his company would pay 7 percent more. Over eight months, that would cost Del Monte about $114,000 more than the current rate, he said.

Mensinger asked for detailed explanations on commercial and industrial rates, including comparisons with other utilities. “It would be wonderful if staff could explain why our rates are what they are,” he said.

A year ago, a Modesto Bee analysis of 20 years of electricity rates found a long record of preferential treatment for industrial customers. Residential prices had been lower than those charged by neighboring utilities in 2003, but since have increased at a much more rapid pace; average families last year in Modesto were paying $261 more per year than those in Turlock, and $300 more than those in Merced.

“Everyone wants to squeeze the little guy,” said Emerson Drake, a Modesto resident and frequent MID critic.

Bosowski crunched numbers on his own and came up with similar conclusions. So did Steve Mohasci, who retired from an Iowa utility and said MID’s industrial rate is lower than that charged by the Turlock Irrigation District and investor-owned Pacific Gas & Electric Co.

Private utilities must seek permission for rate hikes through the California Public Utilities Commission, while public utilities such as MID and TID make their own rules and answer to voters.

Former Modesto councilman Bruce Frohman said farmers should not pay more for water because flood irrigating helps replenish underground aquifers. Grower John Boer said, “I feel I’m paying my share on both ends,” meaning water and electricity.

The district has acknowledged that farmers pay $11 million less than it costs to deliver their water each year.

“It’s been shown that we are not charging cost of service,” Mensinger said, predicting a change in the subsidy policy. Other board members did not signal whether they agree, preferring to take up the question after dealing with irrigation prices and learning more about power rate formulas.

This story was originally published November 25, 2014 at 12:43 PM with the headline "MID board turns down electric rate increase."