Residential customers of Clark Public Utilities will pay more for electricity under a unanimous decision by the utility’s three commissioners on Tuesday.
However, while rates will go up beginning Nov. 1 — about 3.9 percent for a household that burns 1,200 kilowatt-hours per month — monthly bills will actually go down for two years, thanks to a refund connected to a complicated legal settlement.
The rate hike adopted by commissioners Nancy Barnes, Carol Curtis and Byron Hanke aims to bridge a $9.7 million revenue shortfall on an anticipated $376.42 million electric system budget for 2012.
It adds $2 to the base monthly residential customer charge, raising it to $12, and boosts the energy cost, which is currently 7.98 cents per kilowatt-hour, to 8.16 cents per kilowatt-hour.
Wayne Nelson, the utility’s general manager, said a cost-of-service analysis by the utility showed that even the higher base charge to a residential customer is “below what it should be.” That analysis said the base monthly customer charge could go as high as $15 or $16, Nelson said.
A household that burns 1,200 kilowatt-hours a month now receives a bill of $105.76. That household’s bill would actually fall to $103.07, however, because customers will get a credit of 0.5 of a cent per kilowatt-hour on their bills each month for the next two years.
Utility officials anticipate that after 2013, when the refund expires, residential customers will pay the new, higher rate, which would raise the same household’s monthly bill to roughly $110.
Commercial and industrial employers also will pay higher rates, although they face smaller increases than households.
Industrial and commercial employers will pay 1 percent more to power their operations under rates approved Tuesday.
For an industrial employer that pays roughly $1 million per month for electricity, a rate increase of 1 percent adds $10,000 to their bill.
In boosting residential customers’ rates by more than businesses’ rates, commissioners said the utility’s cost-of-service analysis showed that it’s more expensive to provide power to households, which, unlike industrial and commercial customers, use energy in a volatile manner.
Weather a factor
Clark Public Utilities, which provides electricity to more than 183,000 residential and business customers in Clark County, currently gets its energy from the Bonneville Power Administration, its own gas-fired River Road Generating Plant and purchases on the open market.
The BPA’s decision this month to increase wholesale power rates is a major driver of the utility’s projected budget gap, which commissioners decided Tuesday to cover with rate increases.
The other big factor is Initiative 937, approved by Washington voters in 2006. The law requires large utilities to get 15 percent of their power from renewable sources by the year 2020, following step-up requirements of 3 percent in 2012 and 9 percent in 2016.
Complying with I-937, including adding wind to its energy mix and investing in conservation measures, bumps up the cost to Clark Public Utilities of providing power to the region.
After factoring in those additional expenses, and accounting for some cost reductions, officials initially estimated the utility faced a budget shortfall of $13.7 million.
That prompted utility commissioners to consider hiking rates by as much as 4.9 percent for residential customers and 3.9 percent for industrial and commercial customers.
However, a forecast of wetter, cooler weather gives the utility an opportunity to reap savings by purchasing power cheaply on the open market and by not running its gas-fired River Road plant, said Rick Dyer, director of finance for Clark Public Utilities. That should shrink the utility’s estimated deficit to $9.7 million based on certain market dynamics, he said.
Clark Public Utilities last raised rates in August 2010, when commissioners adopted a 5.7 percent increase to cover a projected year-end shortfall.
Tuesday’s rate hike was the third since 2003.