Seattle City Light faces millions in lost revenue

Seattle residents are using energy quite efficiently. That is bad news for Seattle City Light, which is facing a revenue shortfall worth millions.

Between 2012 and 2016, Seattle City Light did not recover $133 million in revenue that the city council had planned for.

City Light’s excess revenue goes into a reserve account for such shortfalls. If that account drops below $90 million, a 1.5-percent surcharge is placed on customers’ bills to fill it back up. That happened in January.

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“This is not a phenomenon that’s unique to City Light, it’s a phenomenon being experienced across the country,” Seattle City Light CFO Paula Laschober told a council committee recently. “Energy use peaked in 2007 and since then has been declining.”

At the council’s Energy and Environment Committee meeting, members were briefed on the shortfall. Tony Kilduff with council’s central staff explained that the city generally sets revenue collection goals in its strategic plan. This ensures the revenue collected covers the cost of energy.

“… That has not been happening over the last few years, not because of under-collecting in the sense of not collecting money from the customers, but the customers are consuming considerably less,” Kilduff explained.

Seattle City Light lost revenue

But energy efficiency is only part of the issue. There are a few factors that add up to the declining revenue.

• Mild winters: Winters have not been as frigid for Seattle in recent years. That translates into lower energy bills during the winter when use is typically higher.

• Wholesale energy prices have fallen: Seattle makes much of its own energy with hydroelectric generators. The city often makes more energy than it needs and sells off excess to other utilities. But prices for that energy have gone down.

• Forecasting energy demand: Seattle overshot its forecasting of energy demand by 2-4 percent, meaning it expected to sell more energy to customers than they ended up using in recent years.

Laschober explained that conservation programs and efficient technology have also drawn down on the need for electricity. Energy use has decreased in Seattle’s residential areas more than anywhere else – those areas account for a third of consumption, but add up to 57 percent of the lost revenue. Laschober notes that LED lighting, which uses less energy, was 1 percent of sales in 2011. In 2015, it was 24 percent.

Seattle City Light’s solution to the issue has been to start the 1.5 percent surcharge to recharge its reserve account. The utility has also brought in a consultant to analyze its forecasting system. Laschober said that the utility will have to stop relying on data for past customer trends when it predicts future demand. That data doesn’t account for newer conservation programs, technology, or weather. Instead, the utility will rely on what is called “end-use-data,” which considers the other factors.

Fingers are crossed at Seattle City Light because the utility is expecting energy use to continue to decline.

“All of the things we are seeing on the horizon are indicating that there is likely to be even less demand at the retail level for energy,” Kilduff said. “We have ongoing improvements in energy efficiency components, not just LEDs; solar panels have become more cost effective because of all the subsidies provided for them, they are also becoming more efficient. And as battery technology has been improving, this is leading to the likelihood there will be less and less retail demand.”

“Unless we can find a way to boost it for some good purpose,” he said. “One really good purpose would be displacing gasoline consumption if we could figure out a way to do that – if the state would let us.”

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