The Turlock Irrigation District may increase electric rates by $14 per month for the average household over the next three years, as the district struggles to absorb the cost of meeting a state-mandated 30 percent renewable energy requirement.
The Turlock Irrigation District unveiled the structure of the proposed rate increase – 4 percent per year for the next three years – at Tuesday’s TID Board meeting, following two months of public comment on the notion. Directors will vote on the rate increase at their Nov. 22 meeting.
Under the plan, an average residence, using about 1,000 kilowatt-hours of electricity per month, would pay an additional $4 per month in 2012, then a further $5 per month in 2013 and $5 per month in 2014. The exact amount of the increase, charged per kilowatt-hour in slightly differing amounts to different ratepayer groups like residential and commercial, would differ for individual customers based on energy used and use category.
The district plans to bill the rate increase as a separate charge on consumers’ bills, tabbed an “Environmental Charge.” The nomenclature is intended to convey that the rate increased was forced in large part by the high cost of green energy.
“We're making it obvious to the public that these laws that are being passed in Sacramento, they have an effect,” said Jim Farrar, TID assistant general manager, resource management, planning and rates.
State laws require TID to source 30 percent of its electricity from renewable resources by 2020, and limit greenhouse gas emissions through a cap-and-trade program which goes into effect in 2012. Meeting those mandates – mainly through the cost of constructing the district’s $427 million Tuolumne Wind Project, a 136.6 megawatt wind power plant in Klickitat County, Wash. – costs the district about 2.8 cents-per-kilowatt hour, a figure which the Environmental Charge would near by 2014.
Despite the costs, the district has no choice but to meet the mandates, staff said.
“That would be great if we could obey the laws we voted for and ignore the ones we didn’t,” Farrar said. “I wish we had that choice.”
The district last increased rates in 2009, when electric costs went up 15 percent systemwide. The proposed increase would raise rates a similar amount, but spread over three years rather than one.
“The customers won't have to pay that all at once to reflect the rate shock and the current economic condition,” Farrar said.
The three-year implementation plan was driven by public input, the district said. TID officials initially projected a four-to-seven percent increase each year for the next two years, but public comment suggested the sudden increase may be too much for some households to bear, given the weak economy.
To allow for the three-year rate increase, the district would dip into its Rate Stabilization Fund, a rainy-day account intended to prevent sudden price increases from effecting consumers. The plan calls for TID to spend $12 million from the RSF in 2012, $7.4 million in 2013, and $346,000 in 2014.
Without a rate increase, TID projects a $38 million budget shortfall in 2012. That shortfall is projected to climb to nearly $50 million by 2013.
But TID Director Michael Frantz, who is currently seeking reelection, said Tuesday he believes there may be an alternative to a rate increase.
“I’m still unconvinced that this is our only and best path,” Frantz said. “I think our public is unconvinced.”
Frantz suggested that the district consider cutting the budget more to account for the shortfalls, allowing for a smaller rate increase. He also suggested dipping further into the RSF in the early years of a rate increase.
Farrar said, while reducing costs is always ideal, the district is already running a tight ship without room to save an additional $38 million. He believes the proposal is the best way to meet the district’s budget projections while satisfying consumers.
“There were a lot of people wanting different things,” Farrar said. “This was the best route possible to meet what you were asking.”
But Tuesday’s proposal may not represent the exact solution directors consider on Nov. 22, Farrar said. Staff will continue to refine the proposal until the hearing to reflect changing budget projections.
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