Seattle City Councilmember Bruce Harrell

During 2008, the City announced City Light rates will not increase in 2009. This announcement demonstrates my commitment to pursue policies that ensure low and consistent rates for you, the owners and customers of City Light. My most recent action was an analysis of City Light’s proposed 2009-2010 budget. Seattle City Light should be the best public utility in the nation. It has that potential and employees with that talent and my decisions are based on that presumption. In July 2008, J. D. Power and Associates showed that City Light is ranked number five among midsize west coast public power utilities. Under the leadership of Superintendent Jorge Carrasco and the hard work of the employees, the utility should be commended for making City Light an industry leader. That said, City Light’s budget presented the Council with some tough decisions. After careful analysis by Council staff (led by Mr. Tony Kilduff, an extremely capable Central Staff member), the Council decided to withhold funding for certain projects and the addition of certain full time positions, which totaled approximately $18 million. I believed these decisions made strategic and fiscal sense for the utility and provide us with the best scenario to avoid rate pressure in the coming year without jeopardizing the utility’s implementation of its strategic plan, compliance with its conservation plan, or commitment to provide reliable and consistent service. The electric rates imposed by City Light on commercial and residential customers are among the lowest in the country when compared with similar cities and my goal will be to keep it that way and not use this fact as a means to automatically hike rates.

I was recently presented with an analysis of City Light’s financial condition conducted by a local industrial organization. The conclusion of the study argued that City Light is in a position to reduce rates for some customers. At this stage, the City has announced that rates will not increase in 2009. As stated above, I have been working to eliminate the unnecessary loading of items in the rate base; consistently examining its Capital Improvement Plans and headcount; and evaluating the business processes used by City Light. At this point the Council’s technical staff and I are examining the rate reduction issue but during this process, I would like to share a few observations:

• City Light already provides the lowest commercial and residential electric rates for comparably sized cities. The rates it charges its largest customers are also very competitive. City Light has not raised rates since 2003. In fact, it has cumulatively lowered rates by 12% since that time in absolute terms (for a ratepayer saving of $144 million). If inflation were factored in, the real decrease would be greater;
• City Light maintains a relatively small operating cash reserve. In order to meet its obligation to maintain a certain level of cash reserve, it was necessary to enact legislation authorizing City Light to borrow against the City’s cash pool to meet its short term debt obligation. I am concerned that some may have an unrealistic picture of the utility’s cash reserves;
• City Light’s measures of reliability indicate the need to maintain and improve upon the recent record of infrastructure improvements; and
• One of the ways City Light keeps retail rates low is by selling surplus power on the West Coast wholesale market. The sales prices for surplus energy are falling rapidly from their highs during mid-2008 and are expected to remain low throughout the next year. Consequently, there is a high probability that City Light will not realize as much revenue from this source as it has in the recent past.

In short, City Light, the Mayor and the Council will continuously collaborate to find ways to establish the appropriate rates. This involves keeping expenses down but consistent with the requirements for a reliable infrastructure and excellent customer service; maximizing the value of surplus energy; and providing rate structures that more closely track both the cost of energy provided and customer consumption. If done properly, we will ensure that customers receive the appropriate price signals and those who conserve more can realize more benefits.