The Sacramento Municipal Utility District has not raised rates since 2011, but a combination of factors has prompted not only a proposal for new hikes but a long-term shift to start charging people based on when they use electricity.
John Di Stasio, SMUD's general manager and CEO, has recommended raising residential and commercial electricity rates by 2.5 percent in both 2014 and 2015.
He also has recommended changing the utility's tiered rate structure to one flat rate by 2017, with a goal of moving all residential customers to time-of-use rates by 2018.
His recommendations must still be approved by the SMUD board.
Before any vote, the board will hold a series of public meetings to consider the recommendations and obtain customer feedback. A first public workshop has been set for 6 p.m. May 28 at SMUD headquarters, 6201 S St.
During a meeting Monday with the editorial board of The Bee, Di Stasio and other SMUD officials outlined the recommendations Di Stasio formally presented to SMUD's board last Thursday.
SMUD said the average monthly residential bill - based on 750 kilowatts of usage - would increase $2 to $4 a month as a result of the dual 2.5 percent increases. The utility said the current average monthly bill is $91.92.
Di Stasio cited three reasons behind the proposed rate hikes: increasing costs of renewable energy as SMUD strives to reach a state mandate of 33 percent by 2020, a rise in the number of low-income customers receiving Energy Assistance Program Rate discounts, and increased costs of debt service on infrastructure.
Di Stasio said the proposed multistep process of going to one flat rate, followed by a proposed introduction of time-of-use rates, was largely fostered by the proliferation of smart meters and other technology that enables SMUD to get more detailed energy-use information to households.
He said SMUD plans to step up its efforts to put information in the hands of households, which can then make informed decisions about how they use energy, particularly in heavy-use peak hours (4 to 7 p.m.) of the hot summer months.
While noting that "nobody right now wants to see rates go up for anything," Di Stasio said financial pressures had dictated his recommendations. He said SMUD has the third-lowest average energy cost (per kilowatt-hour) among the 19 largest electric utilities in the state.
On Monday, Di Stasio clicked off the financial pressures in rapid order.
He said SMUD is spending to expand renewable energy sources, a byproduct of 2011 legislation requiring power companies to obtain up to 33 percent of their energy supplies from green sources, up from the previous 20 percent. At the time, most utilities anticipated that the mandate would prompt rate increases.
Di Stasio said the fiscal cost of Energy Assistance Program Rate discounts was $12 million in 2005. In 2012, it was $36 million; in 2014, it's projected to be $50 million.
He said the utility's cost of debt service on infrastructure was increasing at a rate of $15 million a year.
In 2006, SMUD offered a limited pilot program for time-of-use residential rates, but the new recommendation would move all residential customers to time-based pricing by 2018. SMUD commercial customers already operate under a time-of-use rate system.
Under Di Stasio's recommendation, SMUD's tiered summer and winter/spring/fall "base usage" and "base plus" rates would gradually change from 2014 to 2016, with some customers' base plus use priced at the lower-cost base usage. Over three years, the price difference between base usage and base plus will narrow.
By 2017, under the proposal, the summer flat rate would be 12.15 cents per kilowatt-hour, and the winter/spring/fall rate would be 10.6 cents per kilowatt-hour.
The gradual change will create a mixed effect on residential bills; some will go up but others will go down, based on monthly usage.
Di Stasio said a gradual rate restructuring was recommended, because an immediate changeover from a tiered system to time-of-use would produce "sticker shock" on some bills.
He also noted that the gradual change will give SMUD time to get more precise energy-use information to consumers, giving customers more control over energy costs, based on time of use. SMUD aims to acquaint customers with more energy-management technologies and services, including solar.
Di Stasio said he did not know how much pushback the recommendations might prompt, but he said SMUD has been trying to tighten its belt, even as it lost large commercial customers as businesses closed during the recession. He said SMUD's current staff is 90 percent of what it was in 2004.
"I think we've been good stewards of the public's trust," he said. "I think the public should know what we've done internally before asking for a rate increase."
Call The Bee's Mark Glover, (916) 321-1184.