Tacoma Power customers likely will see a bigger-than-usual bump in their electricity bills this spring, but it’s a more routine increase to the city’s water rates that has attracted citizen concern.
The Tacoma Public Utilities board voted Wednesday to approve the rate hikes for water and power service in 2017 and 2018. The rate increases were built into the two-year budget the City Council passed in November, but have to be approved separately by both the board and the council to take effect.
If approved by the council, the first round of rate hikes would go into effect April 1. The second would hit in April 2018.
Tacoma Power’s proposed average rate hike of 5.9 percent is the highest since at least 2005. Tacoma Water’s proposed average rate hike of 4 percent mirrors rate increases in 2015 and 2016, which were the lowest since 2010.
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Tacoma Power is proposing rate hikes averaging 5.9 percent across the system in both 2017 and 2018. Residential customers would see a 5.5 percent annual increase, and large industrial customers would see a 9.99 percent rate increase. Small commercial customers would see an increase of 2.21 percent, while commercial customers in the general service rate class would see an increase of 6.45 percent.
Tacoma Water is proposing rate increases averaging 4 percent in both 2017 and 2018. Residential customers would see a 4 percent increase, and large volume commercial customers, such as Niagara Bottling, would see a 6.9 percent hike. Other commercial users would see a 4.3 percent increase.
Tacoma Power superintendent Chris Robinson told the City Council last fall that the utility’s costs are going up, and at the same time people are using less electricity in their homes and businesses due to aggressive conservation efforts.
Also, the price the utility can get for wholesaling electricity has dropped dramatically, he said. A small portion of the cumulative two-year rate increase would go toward expanding Click Cable TV into a business model where it also would sell retail phone and broadband internet service directly to its customers. That would mean significant capital costs.
Tacoma Water’s need for rate increases comes from rising costs, decreased demand, fewer wholesale customers and rising debt service payments, utility staff said in the fall budget presentation.
Residents who showed up to the utility board’s public hearing and meeting mostly spoke about water rates, but some also said they felt they weren’t given enough notice about public hearings and meetings on the rate increases. Several said they thought news of a potential rate increase should be printed on their electricity and power bills, where they’re more likely to see it, before the meetings happen.
Many who spoke also said they thought Tacoma Water should spend down more of its reserves before it increases rates on its customers.
Tacoma Water has $138.5 million combined in capital and operating reserves, TPU said, which the utility is planning to spend down to $41.5 million over the next 10 years. Tacoma Water staff said they plan to spend down about $10 million in operating reserves and $8 million in capital reserves in this biennium, which in part helps offset a bigger rate increase.
TPU staff said Tacoma Power’s reserves were forecast to be about $197 million at the end of 2016. Spokeswoman Chris Gleason said that translates into approximately 224 days liquidity on hand. The target that the utility uses to set rates is 180 days liquidity on hand, Gleason said.
Board member Karen Larkin said because running power and water utilities is so volatile and dependent on things like weather, they need to maintain a comfortable level of reserves.
“One thing I believe as a board member and utility manger is for our customers and citizens, we have some predictability and consistency in rates,” Larkin said. “So one of the things that happened if we said, ‘We’ve got big cash reserves, let’s buy down rates this year,’ we’d pay for that in the future — maybe a 0 percent rate increase one year, and a 15 percent rate increase the next year.”