The Sacramento Municipal Utility District said Monday that it will drop its hydroelectric rate surcharge on customer bills effective next month, a byproduct of strong storms filling reservoirs in the utility’s hydroelectric generation system in the Sierra Nevada.
The current 1.3 percent surcharge went into effect in April 2015 amid other regional water restrictions adopted during the ongoing drought.
The surcharge was one of several mechanisms SMUD adopted to reduce financial volatility from swings in precipitation and hydroelectric power generation.
SMUD said the impact of the surcharge was about $1.20 a month for residential customers using an average of 750 kilowatt-hours. Business customers who tend to use more electricity may see more savings.
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The surcharge was triggered last year after SMUD exhausted an account it maintains to pay for replacement power in years of tight water supplies. SMUD said its Hydro Rate Stabilization Fund, HRSF for short, was drawn down about $40 million during the drought years since 2011.
SMUD said comparatively robust amounts of rain and snow this winter are not only negating the surcharge but opening the door to push “a small amount” of funds back into the HRSF.
“The good news is that our reservoirs are filling, and with more storms on the horizon, we are hopeful we can even start transferring to the HRSF,” said Jennifer Davidson, SMUD’s budget director. “Our customers not only get some bill savings, the electric company they own might be able to begin rebuilding the account SMUD relies on in future dry years.”
The amount of the hydro surcharge and transfers to and from the HRSF is determined by a formula based on annual precipitation and wholesale energy prices. SMUD said the exact amount of money that will be transferred will be calculated on March 31.
SMUD uses precipitation records from a weather station at Pacific House in El Dorado County to determine the hydro rate. SMUD said weekend storms dumped 5.6 inches of rain at Pacific House, bringing the annual amount there to nearly 52 inches since April 1, 2015.
SMUD also tracks precipitation at its Fresh Pond facility east of Pollock Pines. Fresh Pond has received 6.3 inches of rain since March 1, which is 70 percent of the historical average for the full month. Since the start of the water year on October 1, Fresh Pond has logged 49.6 inches, which the utility said is slightly above average for this time of year and closing in on the 12-month average of 57.3 inches.
The Sacramento utility says hydro power is its most economical energy source, and the 688-megawatt Upper American River Project can provide about 15 percent of customers’ annual electricity needs based on average water supplies. The system was built more than 60 years ago.