The Turlock Irrigation District expects to raise electric rates in February, but the cost and the structure of the increase have yet to be decided.
Though specifics remain uncertain, a rate increase is unavoidable, said Chris Poley, TID Utility Rate Analyst, as the district's costs will far exceed revenues in the coming years.
"It was clear to staff that a rate increase was necessary," Poley said.
"Very preliminary" budget projections see the district's electric revenues fall $36 million short of expenses in 2012. By 2013, TID would be operating at a $49 million deficit without a rate increase.
The rate increase is currently projected at 4 to 7 percent annually for the next two years, but the final percentages will change based on new budget data. For the average TID residential customer, a 4 percent increase would tally about $4 per month, while a 14 percent increase would total about $15.
When some large TID industrial customers were informed of the potential rate increase at a special meeting, they were pleasantly surprised, Poley said.
"One said, 'It's not as much as I thought it was going to be,'" Poley said.
Structure of increase unknown
The exact structure of the rate increase, like the amount of the increase, remains in flux.
Poley said TID may choose to implement a flat, across the board per-kilowatt-hour charge. Instead, the District could increase base charges, like the flat-rate customer charge or demand charge, by a flat percent. Or the District could increase charges differently between different rate groups - like residential, farm, and industrial - based on TID's true cost of serving those groups.
It's not even certain that the increase will be spread across two years, though TID directors supported the strategy in June.
"Not only have we not eliminated any of these options, we're also willing to consider new options," Poley said.
The district last increased rates in 2009, when electric costs went up 15 percent systemwide. At that time, the TID chose to weight the increase based on true costs of service, with residential customers seeing a 13 percent increase while some other customers - like large industrial - saw their rates increase 20 percent or more.
Before that, rates jumped 15 percent in 2006. Over the last 10 years, TID rates have risen about 54 percent.
Despite the increases, TID remains among the most affordable electric utilities, providing the average residential customer's electricity at a cost of 14 cents per kilowatt-hour. That's less than Modesto Irrigation District's 17.7 cents-per-kWh charge, or Pacific Gas & Electric's 17.5 cents-per-kWh charge, but more than Sacramento Municipal Utilities District's 12.5 cents-per-kWh charge.
The District has kept costs low, in part, by managing employee costs; all management staff have seen pay frozen for the past two years, while union employees have received only a minimal cost-of-living raise, per the terms of their labor agreements.
Public workshops planned to discuss rate increase
The structure of the rate increase, which will be effective Feb. 1, 2012, will be determined in large part by public comment received at a series of public meetings scheduled for the coming weeks.
The meetings represent a change of pace for the district, which did not engage in a public outreach effort before raising fees in 2009.
Two workshops will be held today in the TID Boardroom, located at 333 E. Canal Dr., Turlock. The first will run from 9 a.m. to 10:30 a.m., while an evening meeting is scheduled for 6 p.m. to 7:30 p.m.
A third meeting will be held from 6 to 7:30 p.m. Thursday in the City of Patterson Council Chambers, located at 1 Plaza. A final meeting will be held from 6 to 7:30 p.m. Aug. 11 in Ceres, at the Ceres Community Center, 2701 Fourth St.
All four workshops will cover the same topics, explaining the district's financial situation and providing an opportunity for the public to comment on the rate changes. Those unable to attend a meeting may e-mail questions or comments to firstname.lastname@example.org or mail TID, Attn: Public Information, P.O. Box 949, Turlock, CA 95381.
Rate increase due to new generation costs
While more exact projections aren't expected until November, TID's costs are guaranteed to spike due to two new large-scale power generation projects: the Tuolumne Wind Project, a 136.6 megawatt wind power plant in Klickitat County, Washington, and the Almond Power Plant expansion, adding 174 MW of power to the District's existing 50 MW natural gas plant near Crows Landing.
Completed in 2009, the Wind Project was built largely to meet state requirements that utilities source 20 percent of their energy from renewable resources by 2017, and 33 percent by 2020. Thus far, the facility has operated to TID expectations, Poley said, with TID safely meeting standards through 2021.
The under-construction Almond Plant expansion, expected to begin operation in Summer 2012, is intended to relieve operating constraints for the district. The fast-starting generators will allow TID to quickly respond to increased demand, while the additional generation capacity will allow the district to operate other power plants more effectively.
But the district must pay for the two large plants, with $16 million annual payments on the Wind Project's principle starting in 2012, $9 million in annual debt service on the Almond expansion, and a further $10 million for Almond operating and maintenance costs in 2013.
The remainder of the $36 million retail electric revenue shortfall projected for 2012 comes from an anticipated reduction in TID's Power Supply Adjustment fee. That fee, a 1 cent per kilowatt-hour fee charged due to high fuel costs, is anticipated to drop sharply, seeing TID lose as much as $20 million in revenue. In one sense, the potential rate increase will be somewhat mitigated by the falling PSA, with customers paying more in base rates instead of funds previously paid through the PSA.
Despite the high costs of generation, TID expects to build another large renewable energy plant sometime around 2018 in order to meet the 33 percent by 2020 standard. The District plans to wait as long as possible to make that investment, however, due to the continually falling cost of green energy.
"We are not going to make any more commitments unless we see something that is cost-effective," Poley said.
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