Subject
A resolution adopting the Hermiston Energy Services Customer Service Policies, Rates, & Associated Fees Manual.
Summary and Background
In October, Hermiston Energy Services presented information and asked for direction to make adjustments to our retail rates for all service classes effective on bills calculated after December 31, 2020.
The primary factor in the need to adjust rates has been increases in wholesale electricity prices. Over the last four (4) years, HES’s wholesale power provider, Bonneville Power Administration (BPA), has increased the cost by about 18% to Hermiston Energy Services and other public utilities throughout the Northwest. HES’s wholesale power costs comprise over 54% of its total operating expenses.
We continue to expend great effort to keep BPA from raising its wholesale power rates. However, we expect an increase in HES’s wholesale electric rates again in October 2021.
HES has made significant adjustments to its budget over the past two years by reducing spending, converting its Construction Work Plan from two years to three, and deferring some maintenance. Unfortunately, this is not sustainable long term, and HES will require a rate adjustment to maintain a reliable and safe system for its customers.
Rate increases are an unfortunate and unavoidable part of the utility business, but I would like to spend a minute explaining what goes into the process of changing rates.
HES commissioned an independent Cost of Service Analysis (COSA) to help apply rate changes to better mirror how HES is charged for wholesale power and to reflect the cost of providing service to various rate classes.
Under the recommended rate adjustments from the COSA and feedback from Council in October, HES suggests a rate adjustment split into two parts; a 6.98% adjustment effective January 1, 2021, and a 6.9% adjustment effective October 1, 2021. Customer class rate percentage adjustments will vary (see below).
Hermiston Energy Services last approved a 1.87% rate adjustment in 2018. Hermiston Energy serves more than 5,200 accounts in Hermiston, Oregon.
In closing, increasing costs make energy efficiency and conservation more crucial than ever. HES works with residential, irrigation, and commercial customers who want to better manage their energy costs from individual consultations to online self-help resources. The best way for our customers to reduce their electric bill is to use less energy while still having the comforts they desire and deserve. Energy efficiency can help accomplish these goals.
Tie-In to Council Goals:
Exercise Fiscal Prudence: Setting appropriate cost based rates ensures Hermiston Energy Services' ability to provide safe and reliable service based on actual cost of service to the customer.
Fiscal Information
6.98% adjustment effective January 1, 2021, and a 6.9% adjustment effective October 1, 2021.
Alternatives and Recommendation
Alternatives
A - Not Approve
B - Change Implementation Date(s)
C - Adjust Overall Adjustment Percentage
Recommendation
Staff recommends approval of resolution adopting the updated Hermiston Energy Services Customer Service Policies, Rates, & Associated Fees Manual (see attached).
Requested Action/Motion
Motion to approve Resolution 2167 as drafted.
Submitted By: Nate Rivera