A recent Crosscut story reported a finding from the state auditor that Seattle City Light, Seattle'ês municipally owned electric utility, is used by the city as a revenue gathering or tax collection agency. Apparently not illegal, but certainly deceptive is a practice where the city bills City Light excessively for administrative services. City Light, in turn, passes on the extra charges to its ratepayers as electricity costs.
It turns out that there is more to the story, and that there will apparently be more in the way of rate increases coming at City Light customers, thanks to city council action on Monday (March 22).
Crosscut was sent information by a reader that the practice of overcharging City Light for city administrative services is only part of the story. Not mentioned in the article was that an additional utility tax on these increased rates goes directly to the city general fund. The reader suggests that's the real reason city wants to raise rates is the additional utility tax boosts the increase 9 percent to 13 percent.
The city has had an appointed Citizen Advisory Committee as an independent overseer of how the utility works. While the committee has no regulatory power other than publishing its findings and hoping the city council or mayor will intervene if problems are pointed out, the committee's reports are important and sometimes revealing. A statement from one such report released in 2009 stands out. The report states that, "in more than one instance in recent years, we have seen the financial forecast — usually via its wholesale power revenue component — manipulated in order to justify a rate level that is wholly unrelated to City Light's needs or strategic priorities."
If the council-approved 13.8 percent increase that took effect in January weren't enough, City Light recently said a low snowpack will impact this summer's power sales, and it asked for an additional 4.5 percent increase as a surcharge. Following a recommendation from Seattle City Council's energy committee, the council unanimously voted the additional 4.5 percent rate increase for Seattle City Light. The rate increase will go into effect when the mayor signs Council Bill 116817.
The energy committee had brushed aside concerns from the Boeing Co., Nucor Steel Seattle, the Industrial Customers of Northwest Seattle, the Manufacturing Industrial Council, the Greater Seattle Chamber of Commerce, and the North Seattle Industrial Association about the need for the rate increase. The impact on Seattle's business climate will be significant. Apparently, more private sector jobs will be lost in order to keep city workers employed.
Boeing, in its letter to the committee, explained some of reasons why the business community is opposed to it. Boeing talked about how the rate increase will not be used to replace any losses from this year's low snowpack but rather will be used to fund an account for future use.
In a press release, the council said a new rate stabilization account, set up in part with the money from the rate increase, will protect City Light's bond rating and protect ratepayers against future rate fluctuations. At the full council meeting, members took pains to say that the ordinance has automatic provisions for lowering the surcharge as the fund grows, with an eye toward eventually having the surcharge eliminated.
Combined with January's 2010 13.8 percent rate hike, the total rate increase for 2010 is more than 18 percent. Seattle City Light has said they will probably be looking for a rate increase of 6 percent in 2011. So over a two-year period, Seattle City Light rates will be 25 percent higher than in 2009.
All of this rate increase activity comes at a time of one of Seattle's and the nation'ês deepest recessions. The employees of City Light and other parts of city government are eager to keep their jobs, and some in the ranks are rebelling against possible staff reductions or reduced wages. Some City Light employees will seek to use the courts to claim they can'êt be let go, and other city workers have formed an organization called Working Seattle to argue against lower wages or being fired.
Although the council points to a demand from the energy committee for a plan by the end of the month from City Light on budget cuts, there is so far no indication from the committee that City Light has made any significant commitment to lower operating costs or to reduce payroll to prevent raising rates. City Hall's solution is to keep the high-paying jobs and pass the higher costs on to Seattle's residents, among whom unemployment is running about 9.5 percent.
Seattle seems to be taking a much different approach than San Francisco. The San Francisco Chronicle reported earlier this month: "Emotions ranged from disbelief to despair to downright anger Friday as 15,000 San Francisco city workers received pink slips. But Mayor Gavin Newsom reiterated that his controversial plan to rehire them under shortened workweeks would wind up saving thousands of jobs."