City Hall

Sawant's Flat Rate Proposal Falls Flat

A proposal that would have the city consider moving toward a single rate for all electric customers fell flat in a council committee today.

By Erica C. Barnett September 24, 2014

Seattle City Council member Kshama Sawant's proposal directing City Light to consider charging residential and business customers a single, flat rate lost steam in her energy committee this morning, failing to win even a perfunctory second to bring the proposal up for a vote to send the measure to the full council.

Both of Sawant's fellow committee members, Mike O'Brien and Sally Clark, said they couldn't support her resolution, which would have encouraged City Light to dramatically increase electricity rates for larger businesses while lowering them for all classes of residential customers and eliminating  Instead, the committee approved legislation increasing residential rates by just over 4 percent next year, and by just under 5 percent in 2016.

The proposal, which we mentioned in Fizz this morning, would have directed the council to "review Seattle City Light's customer class design and cost allocation among those classes with a view to lowering the costs to Seattle City Light's non-business customers beginning in 2016. The review will include consideration of merging the residential and general service classes for all customers within the City of Seattle."

Currently, City Light charges large businesses lower rates because they're cheaper to serve. (To serve 1,000 single-family residents, for example, City Light has to string wires to 1,000 homes, install 1,000 individual meters for every house, bill 1,000 separate households, and read 1,000 different meters. A company with 1,000 employees has a centralized metering system, lower infrastructure costs, and a single bill.) The utility also charges customers different rates by season and time of day to encourage conservation.

In 2013, according to the analysis Sawant staffer Ted Virdone presented at this morning's meeting, the average residential City Light customer pays 8.41 cents per kilowatt hour, while the average "big business" paid just 5.41 cents per kw/h. Based on those rates, Sawant estimated, a residential customer running a typical refrigerator for one year would pay around $67.28, while a business customer would be charged just $43.76 to run that same refrigerator.

At this morning's meeting, Sawant said the current rules were "arbitrarily decided" based on "a sales tactic that for-profit corporations use to ensure that they pay lower rates than working people." She added, "If corporations are going to pay less than ordinary people, then where is their incentive to conserve? The only incentive that big business responds to in terms of conservation is, 'how much is my electricity billl?'" 

O'Brien and Clark countered that imposing a single, flat rate per kilowatt hour could undermine the city's efforts to encourage both residential and business ratepayers to conserve by charging more, for example, during the summer and at high-use times of day.

"I appreciate the intent about fairness and equity, but I think this would actually undermine what we’re tying to achieve" in terms of conservation, O'Brien said. "I think sending those type of [price] signals is really important to the type of conservation efforts we want to [encourage]." Contacted after the meeting, O'Brien added, "It's a very simplistic principle: 'I should be treated the same as Boeing.' I get the idea," O'Brien said, but he doesn't agree. 

Also contacted after the meeting, Clark added, "I think council member Sawant's thinking is that it's progressive because everyone would pay a single per-kilowatt charge. But that doesn't address a whole lot of other progressive outcomes. How does a single kilowatt charge mesh with our conservation goals? How does it mesh with our legal mandate to match the cost of providing service to rates? And does a single kilowatt charge reflect the cost of providing service to a large business versus a residential consumer?"

Clark and O'Brien suggested that a better venue for a discussion about rates would be the upcoming meetings of an appointed seven-member rate review panel, which will make recommendations on the proposed rate increases next year; under Sawant's proposal, a single city council central staffer would spend three months looking at the impacts of a flat rate structure.

"I think council member Sawant’s done a good job raising questions about equity it plays in to rate structures," O'Brien said. "I think City Light has heard that and will ensure that that’s a part of the rate review happening in 2015."

Sawant staffer Verdone countered that the rate review panel is dominated by "high-capacity businesses that make out like bandits," such as Boeing, "and aren't likely to vote for something that costs them money." 

Clark says she doesn't "know how you have this discussion in Seattle without businesses being part of it. They are also ratepayers and investors and owners of the utility. I get that there's a self-interest there, but there are tons of people involved."

Clark adds that she didn't second Sawant's motion to move her resolution forward—a common practice known as a courtesy second—because she knew there was no way it would win over a majority of the nine-member council. 


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