Feb 21 2010
How City Light Can Address Wholesale Revenue Volatility: Creation of City Light Rate Stabilization Fund
As Chair of the Energy, Technology, and Civil Rights Committee (ETC), one area of concern that I have raised is how to deal with the volatility of wholesale power revenue. This is trading activity that of course, comes with some degree of risk. Given the fortunate economies that surrounded City Light’s trading activity in years past, the Council was never really forced to address this issue. Now it is time.
At the ETC meeting on February 3rd the Committee agreed to recommend establishing a $100 million Revenue Stabilization Fund (RSF) for City Light. The RSF has been identified as the best approach to help protect customers and the Utility from the volatility of wholesale power revenue. You may know, the Council passed a Resolution that established transitional financial policies for setting electric rates in 2010 and this RSF is part of the permanent financial policy strategy that I would like to see take effect this spring.
The ETC discussion now focuses on how to build the RSF. Current ideas consist of re-directing $25 million from City Light’s existing emergency reserve/contingency fund; and identifying City Light’s surplus property that could be sold. The sale of surplus real estate could generate nearly $10 million. Also, refinancing City Light’s outstanding debt could generate millions in savings and we are developing other ideas to build the RSF.
Along with the restructured financial policies, the ETC is also gearing up to redefine the governance of City Light with the new City Light Review Panel. This group replaces the City Light Advisory Committee which terminated on January 31st. The Review Panel differs from the Advisory Committee in that their charge will be targeted on strategic planning, financial policies and rates. It will consist of nine members comprised from a cross section of citizens. Additionally, the group will absorb the duties of the ad hoc Rate Advisory Committee. This new structure will allow the members to be immersed in the issues they are charged with and be able to seamlessly shift gears to rate discussions.
It has always been my goal to develop policies that protect the people from unreasonable rate increases. The RSF and the City Light Review Panel are tools that will help achieve that goal.