Water and electric supply and affordability – 2010
Related GRI Indicators

Click on the indicator numbers below to read more about our performance related to this topic.

EC 1: Direct Economic Value Generated and Distributed
EU 23: Customer Assistance Programs
EU 1: Power Resource Portfolio Capacity
EU 2: Power Resource Portfolio Output
EU 10: Long-term Electricity Supply and Demand
EU 3: Retail and Wholesale Electric Sales
EU 6: Short and Long-term Electricity Resource Planning
WU 1: Water Supply and Treatment Capacity
WU 15: Average Water Outage Duration
WU 16: Water Outage Frequency
WU 2: Finished Water Production
WU 3: Water Sales
WU 7: Short and Long-term Water Resource Planning
WU 9: Long-term Water Supply Planning
EU 28: Power Outage Frequency
EU 29: Average Power Outage Duration

Carmen-Smith Power Plant

Balancing the need to make investments for adequate supply and reliable infrastructure while keeping utility bills affordable for our customers can be a challenge in the best of times. It is a much bigger challenge in times like these.

The persistent economic recession has taken its toll on many in our community. The slowdown in the economy since late 2008 has meant that many of us have had to tighten our belts to compensate for reduced work hours or cuts to benefits. For some of our customers it has meant the loss of a job and an extended period of unemployment. In some cases it has meant the loss of a home.

The slow economic recovery has also impacted EWEB. When economic activity declines, so does demand for electricity and water.

In the past, a decrease in local electricity sales did not have a negative financial impact on EWEB, as surplus power could usually be sold to other regional utilities at a price higher than its cost to acquire. Revenue from surplus power sales has historically played an important role in keeping EWEB electric rates low by providing EWEB a revenue source that could offset investments in infrastructure that otherwise would otherwise have been borne by EWEB retail customers. It also helps justify an aggressive approach to energy efficiency and conservation as EWEB could acquire energy savings at a cost lower than the regional price for power so the more energy EWEB customers saved the more surplus power revenue EWEB generated.

In recent years, however, the price other regional utilities are willing the pay for EWEB's surplus power has fallen well below historic norms. As a result, revenue from surplus power sales has declined by more than $35 million a year since 2008. Additionally, beginning in 2011, EWEB will start receiving less electricity from the Bonneville Power Administration (BPA), further eroding EWEB's ability to generate revenue from surplus power sales.

Concurrent with the decline in surplus power sales revenue, a number of EWEB's costs have also risen. The most significant is an increase in the cost to acquire electricity from BPA. Also in 2010, EWEB's latest wind generating project, Harvest Wind, came on-line with a cost of production above currently depressed market prices.

Finally, EWEB is planning for several major capital improvement projects over the next decade. Projects include:

Current Strategies and Performance Highlights

Customer assistance

EWEB is committed to supporting customers in financial hardship during the ongoing economic downturn and to empower limited-income customers with the tools they need to effectively manage their utility bills. In 2010, EWEB provided more than $3.8 million in customer assistance through the following programs:

  • Community Care
  • Customer Care
  • Limited-Income energy management programs

In response to the recent economic downturn, EWEB's elected Commissioners created Community Care in 2009, an economic assistance fund to help those struggling to pay their utility bills due to job loss, cutbacks in work hours and benefits or other factors. In 2009, the program provided more than $4 million to families in need, over and above EWEB's regular limited-income assistance.

Recognizing the ongoing need, the Commissioners voted to extend the program, with an additional $1.7 million provided in 2010. At the start of the recession, a significant amount of funding was put into the job loss program for individuals or families who were collecting unemployment, however as the recession wore on in 2010, EWEB adjusted the design of Community Care program to place a greater emphasis on supporting customers experiencing sustained economic hardship.

Through 2010, funding for the Community Care program came from revenue generated through the sale of surplus power. Rather than keep these funds in reserve, EWEB is returning them to our customers during a time of community need.

Typical regional monthly electric and water bill

Financial management

Although there was a significant decrease in customer electricity and water consumption related to poor economic conditions, EWEB's financial position remains relatively strong. EWEB's ability to weather the economic downturn is the result of prudent business practices and conservative budgeting assumptions that deliberately yield cash reserves.

Due to recessionary pressures on our revenues and increased costs, EWEB undertook a series of measures that reduced our 2010 budget by about $2 million, with plans to cut another $2.5 million from our 2011 budget. However EWEB could not balance the budget with cuts alone without significantly affecting electric and water service reliability and other customer services. In response, EWEB augmented its financial position with retail rate increases for both the electric and water utilities.

In 2010, EWEB's elected Board of Commissioners approved an overall increase in rate revenue of 7.3% for the water utility. The resulting revenue will allow EWEB to continue to finance investments in water capital improvements to ensure reliable service and the delivery of high quality water. The rate increase is expected to raise $1.7 million in additional revenue.

The Board also approved a small electric rate increase of 1.9%. The need for the rate increase, which is expected to raise $3.3 million in additional revenue, was driven by

  • Lower surplus power revenues;
  • Investments in major capital projects; and,
  • New power generating facilities and power purchase contracts.
Opportunities and Challenges

Looking to the next few years, several factors will continue to put upward pressure on rates.

The prolonged and tentative pace of economic recovery means that EWEB's surplus power revenues are not expected to return to pre-recessionary levels for some time. The slow economic recovery is also likely to result in continued demand for customer assistance programs.

At the same time, EWEB's has an obligation to invest in critical infrastructure projects to provide adequate and reliable water and power to our customers.

These factors, taken together, will require additional revenue generated through retail rates. In order to meet forecasted revenue requirements and maintain adequate cash reserves, EWEB anticipates multiple rate increases over the next five years.

While it is anticipated that these rates will continue to remain competitive in comparison to neighboring utilities, some households will still have difficulty paying their water and electric bill. This underscores the need for continued co-investment – between EWEB and our customers – in energy and water efficiency measures and customer education programs that can lower total monthly bills.

If the economy does not return to pre-recessionary levels for some time, EWEB will also be faced with a decision about the appropriate level and source of funding for customer assistance programs. Historically those programs were funded by retail rates on the order of $1.7 million per year. EWEB anticipates working with partner agencies to determine an approach to match program funding levels to community need based on changes in economic conditions.

Finding a balance in the rate structure that allows investment in infrastructure for the next century and maintains the affordability of EWEB power will be the challenge. EWEB will continue to explore opportunities for innovation in its rate structure. Reconsidering how customers are charged for electric and water services could better reflect the different social and economic costs associated with seasonal and hourly peak and off-peak demand and incentivize the efficient use of resources while keeping the utility financially sound.