Tacoma Power rates could rise, partly due to Click broadband plan

Rate increases could be imminent for Tacoma Power customers: The utility has pitched hikes of 5.9 percent for 2017 and again in 2018.

If passed, they would be the highest rate hikes in more than a decade. Costs are going up, the utility says, at the same time people are using less electricity in their homes and businesses. Plus, the price Tacoma Power can get for wholesaling electricity has dropped dramatically.

“From a financial standpoint, the most significant thing happening at Tacoma Power and at other utilities is a substantial decline in revenues,” said Tacoma Power superintendent Chris Robinson at an October budget presentation. “Retail demand is decreasing. People are using less electricity on the residential and commercial side — part of it is our own doing, we’ve been very aggressively promoting energy conservation in Tacoma, and our customers have taken us up on that.”

Because the hikes wouldn’t take effect until April each year, they average out to a 7.5 percent increase in customers’ bills over the two-year period, the utility said in a memo to City Council members.

Of that total two-year rate increase, Tacoma Public Utilities said about 0.7 percent is attributable to the costs of operating and upgrading Click Cable TV as it expands into a new business model as a municipally owned and operated service offering retail phone and internet service directly to customers instead of leasing its network to private companies that then sell internet access.

There’s $20.3 million in the budget for capital projects for Click, including about $11 million for upgrading the network to gigabit internet speeds. Operating costs for Click are projected at about $68 million; its revenues are projected at about $61.3 million.

Where Click’s commercial revenues fall short, electric ratepayer revenues pick up the slack. In September, the TPU board approved a funding plan for Click’s expansion that directs power revenues to subsidize Click if it can’t make enough money to meet expenses as it transitions to a new business model. That proposal allows Click to access between $6 million and $10 million in electric revenues per year.

Since TPU is under the umbrella of city government, the City Council was expected to vote on the Click funding plan after the utility board approved it. But Mayor Marilyn Strickland, long a champion of Click’s expansion, said earlier this month that when the City Council votes on the 2017-18 budget that includes money for Click’s expansion, it will have effectively approved Click’s transition to selling retail broadband internet and phone service.

The City Council is expected to vote on the budget at its meeting Tuesday.

Utility officials say they are unsure whether the council’s approval of the budget is enough to allow them to move forward on the Click business plan. They are seeking direction from legal staff.

Click, which TPU management says is losing millions of dollars a year, hasn’t had a rate increase since 2014, TPU spokesman Bob Mack said. When the City Council adopted the 2015-16 budget, it assumed two rate hikes for Click Cable TV: A 17.5 percent increase in 2015 and another 10 percent in 2016, he said. Neither of those went into effect. The 2015 rate increase was approved by the utility board but was blocked by the council.

“Click has been operating the cable for this current biennium, 2015 to 2016, with no cable TV rate increase, so costs have gone up but the rates for revenue have not gone up,” Mack said. Subscriber numbers also have dropped in that time, he said.

Tacoma Power’s proposed budget assumes rate increases for Click in the next two years, too, Mack said: A 10 percent cable TV rate increase is assumed for 2017 and an 8.25 percent hike in 2018. Those numbers might shift, but the budget assumes an additional $9 million in revenue over two years, he said.

The funding plan the utility board approved assumes fewer and fewer people will subscribe to Click Cable TV across the next nine years, but assumes a three-fold leap in both retail internet and phone customers for Click between 2017 and 2025.

The council this month approved spending up to $100,000 — to be reimbursed by TPU — to have an independent auditor look at Click’s books to determine whether the current cost-sharing method between Click and Tacoma Power, which uses part of Click’s network, is fair. That split has Click shouldering 94 percent of its operating and maintenance expenses, and Tacoma Power picking up 6 percent.

This story was originally published November 21, 2016 at 4:10 PM with the headline "Tacoma Power rates could rise, partly due to Click broadband plan."