City of Lodi meter reader Alex Acosta explains the process he goes through to read electric meters, at Vineyard Christian Middle School on Tuesday afternoon. Lodi Electric Utility wants to implement an energy cost adjustment, which would set energy prices to fluctuate with the cost of bulk power. (Whitney Ramirez/News-Sentinel)

Cost adjustment coming?

Lodi's power rates may fluctuate with nation's energy market

If you live in Lodi, your electric bill could soon rise and fall depending on the whims of the nation's energy market.

The fluctuation could mean a 4 percent increase in your residential electric bill next year.

Lodi Electric Utility wants to implement an energy cost adjustment, which would automatically set different electric rates each month depending on the price of power. Rates would go up or down monthly with the energy market.

The utility currently uses a market cost adjustment, which requires the City Council to vote to raise rates based on power cost.

The council is expected to decide on the rate adjustment at its meeting tonight. If approved, the adjustment would go into effect in July's billing cycle.

Initially, rates are expected to decrease during the summer, Utility Director George Morrow said. Rates could be 1 to 2 cents per kilowatt hour lower from July to October but 1 to 3 cents higher from November to May, resulting in a 4 percent overall increase at the end of the year, according to the utility's 2007-08 projections.

Mayor Bob Johnson said the cost adjustment is fair because rates have the possibility to go down as well as up.

"If someone gets a penny or two raise on their bill with the possibility of it going down, I think it makes sense," he said.

Morrow said the adjustment would be revenue neutral, meaning the utility would regain what it spends on power. Without the adjustment, the utility could lose up to $3 million from its reserves to power costs.

"This type of thing gives you some financial improvement," Morrow said. "It allows you to recover costs for power supply."

Morrow said an automatic monthly rate adjustment gives the utility stability and is recommended by bond rating agencies, such as Fitch Ratings. Other municipal utilities with a similar rate adjustment include Roseville, Redding and Los Angeles.

The rate adjustment would be reviewed by the Budget and Finance Committee each month and there would be no discount offered to low-income customers.

Industrial customers could see the largest rate increase if the council adopts the automatic adjustment. Industrial rates could rise 7 percent next year, according to the utility's power cost projections.

Some industrial customers think this is too high. Bob Wheeler, plant manager at General Mills, expressed his concern in a letter to the council.

"I would ask that increases be stepped up on an annual basis of a smaller amount rather than the proposed 7.7 percent," Wheeler wrote. "It would be much easier on industrial customers such as us if you stepped up the cost when necessary to a smaller amount, say 5 percent this year and then another adjustment next year."

Industrial customers in Lodi already pay less for power than industrial customers elsewhere. Lodi's industrial rates are 25 percent lower than Pacific Gas and Electric's industrial rates while its residential rates are 3 percent lower.

Councilwoman Susan Hitchcock said the greater increase for industries is fair given their already discounted rates.

"I don't think that residential customers should be subsidizing industrial customers at that rate," she said.

Councilman Larry Hansen, who is a board member of Lodi's power cooperative Northern California Power Agency, supports the automatic rate adjustment.

"By doing this, you avoid that sudden one-time large percentage increase in the rates," he said. "In terms of our bonding agencies, folding this into it gives them more confidence that we are a solid entity."

Residents have mixed feelings about the cost adjustment.

Susan Beal said she wouldn't mind fluctuating electric rates.

"It seems like a crap shoot," she said. "One month the rates could be up. The next month they could be down."

Mike Mikbel said he was not optimistic that rates would go down.

"It doesn't matter what they do," he said. "My rates will still be too high."

Tonight's meeting is at 7 p.m. at Carnegie Forum 305 W. Pine St.

Contact reporter Matt Brown at mattb@lodinews.com.