At this morning's council briefings meeting—her second as a city council member—Kshama Sawant, the newly appointed head of the council committee that oversees City Light, raised objections to a potential three-percent surcharge on City Light bills, which she said would be "unacceptable at a time when working people are already struggling," adding that "the council has an obligation to make sure this doesn't happen."
However, according to City Light (as well as Sawant's fellow City Light committee member Sally Clark), there's no "no imminent threat" that City Light will have to put the surcharge in place.
City Light spokesman Scott Thomsen says the surcharge, which the city council approved in 2010, goes into effect only if the city's rate stabilization account—a cash reserve the city can dip into if market prices drop too low or revenue from surplus electric sales dips too far—drops below $90 million. Currently, it's at about $98 million. If it does drop below the $90 million threshold, the city automatically charges a temporary surcharge of 1.5 percent on its electrical customers. That surcharge rises to 3 percent if the account drops below $80 million, and to 4.5 percent if it dips below $70 million.
"We built the reserve so that instead of immediately going into a rate increase ... we can replenish the rate stabilization account using a temporary surcharge," Clark says.
Clark adds: "Any rate increase falls disproportionately on people who don't have a lot of discretionary income, but it is a little more complicated than that, because different classes of users"—businesses of different sizes, residential customers—pay different rates, so it's a little hard to say it's definitely going to be painful to just one group of people."
Thomsen says City Light transferred unanticipatd revenues into the surplus account, and that the account is now well above $90 million. "We're confident that in the first quarter [of 2014], we're not going to be anywhere close to dropping to $90 million," Thomsen says. "The further near the endof the year you get, the fuzzier the numbers get."
Clark says another reason for the automatic surcharge is that the bond markets—which stipulate City Light's bond rating—base their assessments on whether the utility has money in reserve. "The markets don't really like it if you have to make a political decision every time you have to pay your bills."