Our View: MID should account for water and power rates

In explaining why it was necessary to restructure its electricity rates, Modesto Irrigation District told us exactly what percentage of its costs are fixed and what percentage varies with the price of natural gas. That indicates MID knows well – down to the penny, we’re certain – what it costs to create power and deliver it to customers.

Why then can’t MID explain the same for water?

Why won’t MID break down the costs of its two vastly different enterprises? Why can’t MID tell us why it continues to offer farmers water at far below cost?

MID has realized significant savings as the price of natural gas has plummeted; returning some of that to ratepayers is fair. But continuing to subsidize water deliveries through electricity bills is not.

The district claims it can’t separate the costs and benefits of electricity and water; that electricity generated at Don Pedro Dam is inextricably tied to the delivery of irrigation water. That doesn’t account for the value of canals used as city storm drains, operating a drinking water plant and providing other services.

“We operate the entire organization as a single organization,” said one executive. A single organization made up of two very distinct parts.

MID knows exactly what it spends for every service it delivers. It should put a price on each and settle up with ratepayers on both sides of the house.

Credible sources say irrigation water subsidies have amounted to over $100 million through the years. If they’re wrong, MID should show us.

This electricity rate change offered an excellent opportunity. Instead, MID addressed one tiny inequity while leaving intact an enormous – and growing – injustice.

The board voted to increase the fixed-charge fee by 60 percent, and triple the one-time connection fee for solar panels. For justification, it noted that 60 percent of its electricity costs are “fixed.” Other public and investor-owned utilities across the nation are making similar moves. At the same time, MID will allow charges based on use to fall. The net result will be an “average” reduction of roughly $2 – maybe 1 percent.

Those who generate their own power through rooftop solar arrays won’t even see those meager savings. Instead, the fixed-charge increase will send their bills up by 60 percent, as the fixed-charge fee rises from $12.50 a month to $20.

MID can call it a bookkeeping change, but we think it has more to do with the future of rooftop solar. In California, rooftop panels generated 3.2 gigawatts last year; it could be over 4 gigawatts this year.

From Bakersfield to Redding with Modesto smack in the middle, the Central Valley might be the greatest place on earth to tap into that generation. With roughly 1.3 million homes (not counting apartments), there’s almost limitless rooftop potential. A Morgan Stanley “blue paper” described a new generation of batteries due to arrive by 2020 which will store enough charge to power a house through several cloudy days and nights.

We doubt many will unplug entirely, but they’ll be buying far, far fewer MID electrons. From such customers, MID’s only income will be that monthly fixed-charge fee.

MID officials say such considerations never entered their thinking on the new rate structure; that it’s based on what is true today.

At the same time, we understand that MID’s bookkeepers are constantly working the numbers, making projections, hedging costs, squeezing every volt for that last electron. That’s what good bookkeepers do.

Bookkeeping is a wonderful thing. You can use it to explain just about any decision you want to make, just as long as you refuse to explain how you keep the books.

This story was originally published November 17, 2015 at 5:18 PM with the headline "Our View: MID should account for water and power rates."