Seattle City Councilmember Bruce Harrell

At the September 17th meeting of the Energy and Technology Committee, the Committee took BOLD action to vote down the passage of Seattle City Light’s “Strategic Partnership policy.” Legislation was proposed to the Committee which would have authorized City Light to execute a contract with an Indiana-based company to perform significant elements of its surplus or wholesale energy trading functions. This trading activity can result in over $125 million of City Light’s revenue. City Light currently performs these functions in-house. However, Committee members Richard Conlin, Jean Godden, and Richard McIver and I expressed significant reservations with the proposal and this became very evident as the meeting progressed. As Committee Chair, I advocated that the Utility and its customers would be better served by building this function in-house with its own employees and thus owning the institutional knowledge and systems that will result from this investment. This “think-long” approach, I believe, is critical to sustaining a high-performance organization.

You may be asking why does City Light engage in the activity of power trading? By the very nature of its power portfolio, City Light has no choice but to be an active participant in the wholesale power market. Revenue from that activity typically accounts for 20 to 25 percent of its total revenue annually and offsets revenue that would otherwise have to come from ratepayers.

This function is central to City Light’s financial health and critical to meeting its customers’ power needs. Managing the portfolio and engaging in the market is challenging and a great deal of risk is inherent. With this knowledge, Council was faced with the policy question of whether or not the Utility should take the necessary steps to build the capability to meet those challenges in house or to allow that capability to deteriorate through lack of resources and on-going reduction of personnel — which could occur if the function were contracted out. The danger of involving a third party is that there is a strong possibility in the future the Utility would be forced to outsource the whole function due to the absence of institutional knowledge and personnel.

Maintaining and enhancing the power trading function would build valuable institutional knowledge and a personnel base that would give the Utility complete control over a function where the value of the market transactions is approximately $125 million annually. Given that the Utility has an annual budget of $1 billion and the power trading function is responsible for one-fifth of that revenue, I believe that it is important enough for the Utility to invest in building the function in-house. This may not be the “quick fix” option that the Strategic Partnership is argued to bring and it will involve more cost to the Utility on the front end, but in the long run the Utility will be stronger as a result. Optimized performance in this area could garner more revenue to City Light, which could be then passed on to ratepayers.

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