City Councilmember Kshama Sawant's proposal to explore a dramatic restructuring of Seattle City Light's electricity rates died in a committee meeting on Wednesday.
Mike O'Brien and Sally Clark, the other two members of the Energy Committee, declined to second Sawant's motion to allow a vote on the resolution she had proposed. The resolution called for the Council to review whether it would make sense to lump all of City Light's ratepayers into one group that would pay the same electricity prices.
The utility currently charges different rates to residential users, as well as small, medium and large businesses. Sawant's staff prepared a presentation for Wednesday's meeting that included figures illustrating the lower average prices per kilowatt hour that big business pay compared to residential users. Sawant, who chairs the Energy Committee, has questioned the equity of the current rate structure.
City Light's rates are designed to recover the cost of providing service to each ratepayer group. Merging all of the groups would result in a substantial increase in average electricity prices for larger-sized businesses and decreases in average rates for residential customers, according to the presentation.
But O'Brien pointed out that providing electricity service to thousands of homes is far different than delivering it to, for example, a single large business, noting that reaching residential customers requires a wider network of wires and meters, as well as handling more bills.
He also emphasized the importance of being able to build price signals into rates that encourage conservation and discourage use at certain times of day. Rates are currently structured so that commercial or industrial users that use the most electricity pay higher prices when demand peaks between 6 a.m. and 10 p.m. Price signals are also built into the residential rates, to a certain extent. Depending on the time of year, the price for the first 10 or 16 kilowatt hours of residential electricity is lower than the price for any additional power a customer uses.
"Going to a flat rate structure where everyone is treated the same, you know, I appreciate the intent, it's about fairness and equity," O'Brien said. "But I think this would actually undermine what we're trying to achieve."
Seattle City Light did not return requests for comment about their rate structure or Sawant's proposal.
Asked about the potential downsides of structuring prices for a single ratepayer group, Janice Beecher, director of the Institute of Public Utilities Policy Research and Education at Michigan State University, pointed to a number of factors.
"Equalizing rates can undermine price signals to achieve economic efficiency, and also raise equity and fairness concerns," she said in an email. "A departure from cost-based rates would likely cause large-volume users to complain — they might even threaten to litigate or to bypass the system and self-supply, leaving [the] remaining customers to cover the fixed costs of the system."
Clark sided with O'Brien, saying that she was not supportive of creating a single ratepayer group and that the current City Light price structure balanced a complicated set of policy objectives. Clark also said that she wanted to hear more input from a City Light rate review panel and other experts. With a rate study coming up next year, she said, "Clearly this is on the record as part of the discussion."
Sawant pushed back at the suggestion that the Council should tread lightly with a rate system that is complex,
"What complexity the Council decides to undertake is a political question," she said. Attempting to make her point, Sawant noted that the $15 minimum wage ordinance that the Council and the mayor approved earlier this year, which was viewed by some as complicated. "I was actually the one arguing for simplicity," she remarked.
O'Brien said he would be open to discussing some of the issues Sawant and her staff had raised. "I think there's a fair question about, are we divvying up the costs fairly amongst others?"
According to the presentation prepared by Sawant's staff, creating one ratepayer group would result in an average price of 8.1 cents per kilowatt hour in 2015 for all users. By comparison, average per kilowatt hour prices in 2013 was 8.4 cents for residential users, 7.2 cents for small businesses and 6.1 cents for large businesses.
Sawant stressed that her proposal was only a baby step toward actually changing the rate structure, and that other ideas might arise as staffers from the Council and City Light looked into the concept of a single ratepayer group.
"I think that simply looking into something is a very reasonable and very, very understated request that workers and ordinary people are making," Sawant said.
With neither of her colleagues showing much enthusiasm for her resolution late in the meeting, Sawant took a jab at the Council's progressive bona fides.
"It troubles me that every time we talk about a progressive measure that could potentially be done on the Council, the response is 'well you know we're happy to do other things, but not this, or not at this time,' " she said. "I would urge the Council to reflect on that."
Clark did not share that view.
"I would probably respectfully disagree that this is a progressive approach," she shot back, noting again, that in her view, it was not clear a single ratepayer structure would achieve the city's environmental and conservation goals. "You could widely debate that."
When Sawant moved for a vote on the resolution, O'Brien said he was not prepared to second it. Neither was Clark. Sawant then asked the Council staff if she needed someone to second the motion to proceed with the vote. She did, staffers confirmed.
"Do I get a second just to vote on it?" Sawant asked.
Both O'Brien and Clark declined her request.