Previous Lompoc City Council members painted the current council into a corner because they had delayed an orderly schedule of electrical rate increases. Thus the staff is now predicting that at “the current projected pace of use of cash reserves, staff believes that with the 2011 rates in place currently, the Electric Fund will deplete its reserves by May 2023, and will reach a zero cash balance by November 2023.”
That’s not the place an enterprise wants to be in and a hole that it wouldn’t be able to dig itself out of without massive rate increases. Increasing utility rates is never elected officials’ favorite thing to do, thus the Lompoc City Council was faced with a difficult decision on April 18.
Skip even one year of adopting a low single-digit percentage increase, and you are guaranteeing a high rate increase in a future year. Skip two or three needed increases, and you are guaranteeing future double-digit increases. Failing to adopt needed utility rate increases will cause the utility to go bankrupt, and the city of Lompoc may find the decision-making process taken away from the council and administered by state level regulatory agencies and courts, with potential triple-digit increases.
Elected officials don’t like to raise user fees for service. When they do, customers (voters) aren’t going to be happy. For example, I applied the new proposed rate to my own electric bill. We use between 325 and 500 units of electricity during the winter months; however, it’s much higher during the summer because we can’t open the windows to cool the house because of the obnoxious cannabis odors coming from nearby county-approved grows.
The cost for each 325 to 500 units of power, average for my home, will be about $115 a month as opposed to the current rate of $70! As you can see, it’s going to put a big dent in our household budget.
Why has the cost of electrical service gone up so dramatically? One reason is that over the last 12 years, labor and material costs have gone up to operate and maintain the distribution system. In addition, the cost to produce electricity and bring it to Lompoc has increased.
For example, the Northern California Power Agency (NCPA), which is owned by several participating cities, generates power for our city from geothermal wells (renewable and reliable energy). But the staff says it isn’t enough to match the power needed to supply the city’s current system load. Therefore, Lompoc must purchase additional power from the open market.
Considering that the political party in power in our county and state has launched an all-out war on fossil fuels to generate electricity, the state only produces enough power to supply less that 20 percent of our daily needs, so we buy power from out-of-state suppliers, which according to staff represents “a five-fold increase year over year.”
Another factor is the cost associated with moving the power into the city. To do that, Lompoc relies on conveyance systems owned, operated, and maintained by for-profit utilities such as PG&E. Over the last couple of years, PG&E has upgraded the conveyance system, replaced aged equipment, and cleared vegetation away from the aboveground systems. These improvements cost hundreds of millions of dollars, and that cost is passed on to customers like the city of Lompoc.
But are the rate increase tables equitable? They assume that every residential customer at all income levels can afford to pay either a 30 percent or up to 50 percent rate increase. California Assembly Bill 205 appears to address that situation, but it only applies to utilities regulated by the Public Utilities Commission. The City Council regulates all utilities in our city.
Other electric PUC-regulated utilities are using an income-based approach to rate increases instead of the approach being considered in the staff proposal. This assures that low- and fixed-income residents are provided power at a lower cost, but it is also what many people consider “income redistribution” or a regressive fee structure.
What’s “fair” in this situation? Nothing is free in our society even though some people in elected positions think it should be. The government consists of resources (people and materials) that cost a lot of money and it must come from the users of those services, just like car repair shops, plumbers, electricians, landscapers, or any other service people use.
The right and “fair” way to assure that the electric utility was on sound economic footing was to allow the incremental rate increases that the council approved in 2011. Keep in mind that there have been only a handful of actions on electric rates since 1992.
Had the previous council majorities not tried to buy votes by nixing necessary rate increases, it is likely the current big increase would not have been needed. Even though some additional increases would likely have been needed today because of increased costs, they would not have been nearly as dramatic as the ones being proposed.
The City Council approved the rate increases and asked for a progress report in six months; they had no other choice. It makes you wonder what other fiscal surprises are lurking in the weeds because of the poorly informed choices made by past council members.
Ron Fink writes to the Sun from Lompoc. Send a letter for publication to [email protected].