Chastened by a customer backlash against an electric rate increase in September, commissioners for Clark Public Utilities are considering whether build up cash reserves in 2011.
The reserve created by that rate hike would provide a small cushion in the utility’s proposed $273 million electric system budget.
The utility’s three elected commissioners indicated Tuesday that a projected year-end budget surplus of almost $10 million could be used as a first installment on a new reserve fund. Commissioners would use the reserve account to forestall future rate hikes.
Historically, commissioners have resisted building a large cash reserve in favor of keeping rates as low as possible for as long as possible.
Then came the 5.7 percent rate hike in September.
Commissioner Nancy Barnes said many customers complained bitterly about a rate increase in an economy wracked by recession. She said a looming budgetary shortfall left Clark with little wiggle room to keep the lights on without a rate hike. Commissioners noted that the electric system employs about the same number of employees as it did two decades ago, when it had far fewer customers.
“It doesn’t resonate with an angry public,” Barnes said. “People that are angry say, ‘Just cut something off and show me that you’ve bled.’”
The utility established a rate stabilization fund in 2004.
For the first three years, commissioners built it up to $18 million with relatively small year-end budget surpluses. The fund has now dwindled to $2.7 million, after commissioners began tapping it to offset higher power costs over the past three years.
Commissioners are now considering building a reserve cushion of as much as $25 million over several years.
Barnes noted that the utility may be able to begin rebuilding the reserve fund if the cost of natural gas drops. The utility, which uses gas to fuel its River Road Generating Plant, expects to spend $124.4 million next year fueling its 13-year-old power plant in the Vancouver Lake lowlands. The cost of natural gas accounts for the biggest single portion of the money Clark expects to spend directly on power supply next year.
Direct expenditures for power comprises almost 70 percent of the utility’s total electric system budget.
Utility officials said the utility also may benefit from a cash reserve when the utility enters into a new “slice” contract with the Bonneville Power Administration in October.
“This new contract with Bonneville is going to create cash-flow problems for the utility,” said Wayne Nelson, Clark’s general manager.
In contrast to a “block” purchase of energy at a fixed price, the slice option refers to the utility receiving a fixed percentage of Bonneville’s overall energy output. When the federal hydropower system generates plenty of energy, Clark will benefit from the arrangement by reselling surplus power. During drought years, however, the utility could be forced to buy energy on the open market to keep the lights on locally.
Commissioners plan to adopt separate budgets for the electric, water and generating systems Dec. 14.