The Turlock Irrigation District (TID) presented their 2012 Proposed Changes to Electric Rate Schedules at a public workshop during the October 18, 2011, TID Board of Directors Meeting. The proposed changes took into consideration guidance from the Board to use rate stabilization funds and customer input from a series of public workshops held in Patterson, Turlock and Ceres.
The rate increase is necessary to cover the cost of compliance new state environmental laws: 1) AB 32 requires a limit in greenhouse gases through a cap-and-trade program, and 2) SB1X2 requires that 33% of power must come from renewable energy source. To comply, TID constructed the Tuolumne Wind Project at a cost of $427 million to generate 136.6 megawatts of wind energy.
The proposed rate increase is based on the projected annual cost of the Tuolumne Wind Project and the AB 32 cap-and-trade program which is $45 million and $10 million respectively. Estimated cost per kilowatt-hour is 2.8 cents by 2014 which would create a budget shortfall of $38 million in 2012 and $50 million by 2014.
Residential customers commented that spreading the rate increase over 3 years versus 2 would be better. Commercial customers commented that the increase should be separated out to show the cost of environmental compliance. Staff looked at these suggestions taking into consideration what the effect of a lower percent increase over more years would be, the balance of the rate stabilization fund, limits on environmental charges and that changes would provide appropriate coverage ratios to maintain TID’s credit rating.
Staff found that the Rate Stabilization Fund is capable of sustaining a multi-year draw down and that a separate charge to cover the cost of environmental compliance can be created. The Environmental Charge will be billed to all customers based on energy consumption. The rate would increase by 4% each year over a 3 year period to reach the 2.8 cents to cover environmental compliance costs.
What this means for the average residential customer would be an additional $4 per month in 2012, then another $5 per month in 2013 and 2014, for a total increase of $14.
TID Director Michael Frantz questioned if every alternative had been explored before increasing rates.
"You’re given the budget to work with and this is your best recommendation based on what we have given you. So if we want you to increase less, then we need to, as a group, collectively bring back a budget with cuts in order for you to recommend a lower rate increase,” stated Director Frantz.
“There are options given in this budget but we think this is the best way to ease into the costs. You can certainly push on those costs and that’s your prerogative, and maybe your job,” said Jim Farrar, Assistant General Manager Resource Management. “Then it would be up to the management team to tell you that if you cut these costs, here are the risks and the effects."
If the Board is able to find additional cuts in the 2012 Budget then the rate increase can be adjusted according to those cuts.
The Board will continue discussing the proposed budget at their October 25th and November 8th meetings before bringing it back to the Board again on November 22nd. The final budget and rates will be adopted by the Board on December 6th.
The proposed rate increase will be posted on TID’s website for public review on Friday, October 21, 2011.