The council's energy committee, headed up by council member Kshama Sawant, approved legislation today to transfer $21 million from City Light's "light fund" into its rate stabilization account, which the council set up back in 2004 to deal with fluctuations in the wholesale market for power.
Sawant has expressed concern in the past about the surcharge, which she says shouldn't apply equally to low-income power users and wealthy corporations.
Although she voted for today's legislation, she noted pointedly, "going forward, one of the points we should be discussing is who the rate surcharges or the rate increases fall on. … Big businesses have recovered and they’re making profits at historic rates but … working families have not."
The electric utility makes most of its revenues from retail power sales—the bills you, I, and every company in Seattle pay to keep the lights on. But they also make money from selling excess hydro power on the wholesale market—and for several years, Seattle has been "long" on power (meaning we have an excess to sell) at the same time that the market has been weak (meaning revenues from wholesale power sales have been lower than the city budgeted for).
"There's nothing wrong with City Light being wrong on power," council central staffer Tony Kilduff said this morning. "The problem is that they've come to depend on it for their day-to-day operations."
That means the city hasn't been able to keep its rate stabilization fund, a cash fund that allows the city to moderates the impacts of wholesale power sales shortfalls, at the level it wants—about $100 million—forcing the city to continually transfer money from the light fund, which helps fund City Light's capital and operations budgets, into the rate stabilization account. This year, for example, the city budgeted $85 million in wholesale revenues to go into the account; right now, it's projecting less than $50 million.
Obviously, that isn't a stable long-term solution. So when the account dips below $90 million, City Light automatically issues a surcharge on all retail customers—initially 1.5 percent, followed by a 3 percent surcharge when it gets below $80 million, and 4.5 percent (the max) when it dips below $70 million.
Today's transfer will stave off surcharges until the fourth quarter of this year; after that, though, the surcharge will kick in at a rate of 3 percent, rising to 4.5 percent in the first part of 2015 and gradually dropping off through the first quarter of 2017 and going down to zero thereafter.