City Budget Comments on the Electricity Debacle

The City tries to explain why it is such a great deal for the City to own the electric company and how it wasn't their fault that they lost money and how they are going to reestablish the solvency of the electric company by charging you more $.

Here is the description in the FY2020 City budget. Text in Red is the blogger's comments.

Stabilization of the Electric Fund and Purchased Power Costs

The City derives multiple benefits from owning an electric utility. (Yes the ratepayer is captive with no way out.) The utility provides a payment to the General Fund as a “return on investment (ROI)”, which is common for a municipally owned utility, and has provided over $50 million in funding of general services since 2008, helping keep property taxes low. (Yes they over charge the ratepayers, who are captive, and transfer the $ to the General Fund where Council can spend on their pet projects.) While very fiscally healthy for the last 100 years, the past few years have produced changes that detrimentally impacted the financial condition of the fund.

The City signed long term contracts for wind and solar energy during a time when market forecasts indicated that the pricing locked in by the City would be fruitful to either meet the City’s peak energy demands at the consistent price, and that the City would be able to clear its excess energy (its long position) into a market where the impact would not affect the City’s retail rates. (I guess it is the market forecaster's fault, who ever they are.) Because rates in today’s energy market often clear for less than the City’s contracted rates, losses occur on some of the excess energy. In FY2018, the City ended its electric operations at a $6.8 million shortfall, leaving the fund out of compliance with City fiscal policies.

Several one‐time strategies were implemented to improve the position of the fund, including selling debt for capital needs (Great! More debt.) and a reduction of the transfer to the General Fund by $1.725 million from the original adopted FY2019 budget, but ultimately the City had to make Power Cost Adjustment (PCA) increases to customers during FY2019. In February of 2019, the City increased PCA by $0.0135 per kWh, resulting in an $8.9 million increase in revenue through September to improve fund balance. In June 2019, the PCA increased again by $0.00625, to a total of $0.02375 per kWh to bring in an additional $4.1 million to meet year‐end purchased power obligations and 90‐day contingency reserve required by City policy. For FY2020, electric revenue is budgeted to increase by $4.8 million due to anticipated customer growth and the full year impact of the power cost adjustments (PCA) made in June 2019. 

A full twelve months of the June PCA of $0.02375 per kWh, adjusted for seasonality, is approximately $15.6 million. This amount is necessary to meet expenditure obligations and to restore the fund’s rate stabilization reserve. The General Fund will continue to reduce the ROI it receives from electric by $1 million during FY2020.

So it is costing the ratepayers $15.6M/year to fix the city's mistakes!