Proposed Power Rate Hikes
by Editorial Board
Electricity Rate Increases
If you read the Idaho Statesman headlines from the past three months on Idaho Power Co.'s rate-increase requests, you may be excused for reaching for your wallet.
"Power bills could be rising, again," said the front-page headline April 16. "Power rates go up, again" - May 31. And then, last Saturday, the latest: "Idaho Power seeks rate hike."
Idaho needs reliable electrical power. Idaho Power needs to cover its costs and make a profit. But the drumbeat of news about bigger bills at a time when the economy is weakening makes it especially vital that state regulators closely review the company's latest request to make sure customers pay no more than they must.
Sadly, we have entered an era of rising electricity costs, and there is no end in sight.
The inexpensive, traditional source of Idaho Power's electricity - hydroelectric dams on the Snake River - now accounts for less than half the power the utility's customers use. Last year, a low-water year, the dams accounted for just 33 percent. Other power sources - mostly coal - cost more.
As a regulated monopoly, Idaho Power cannot simply raise its rates when its costs go up. It must get state permission.
That used to be a rare affair. Idaho Power filed only one general rate-increase request every 10 years from 1983 to 2003. Beginning in 2003, the company filed every other year.
And beginning this year, the utility is filing requests annually. The idea is to make small requests each year, not big ones every several years that could shock customers and damage the local economy. Idaho Power's thinking is that small, frequent requests are easier to absorb, though they still add up to the same big increases over time.
Yet the latest request is hardly small: a 9.9 percent increase overall, including 6.3 percent for homeowners, 10.3 percent for small businesses, 11.5 percent for big industries and 15 percent for irrigators.
The new annual increases come on top of the power-cost adjustments already made to customers' bills each year for fuel costs not included in the base rates.
There's no disputing that demand for power is rising. The Treasure Valley's population increases each year. Homes have expanded from an average of about 1,750 square feet in the 1970s to more than 2,300 square feet today, requiring more energy. The use of central air conditioning has grown, and so has the popularity of power-hungry plasma TVs and computers. Last summer, demand for electricity broke Idaho Power usage records five times. Usage set another record Monday.
Conservation is part of the answer. Idaho Power still makes money by selling power, not by encouraging customers to buy less of it. But the state now allows Idaho Power to adjust customers' bills slightly to make sure the company's fixed costs, like power lines and salaries, are still paid for when customers conserve. That's an innovative approach.
The state this year also approved a bigger energy-efficiency surcharge on customers' bills to pay for conservation programs, like the one that gives you a $7-a-month credit in July and August if you let Idaho Power shut off your air conditioner for a few minutes at a time on hot afternoons. Regulators believe the surcharge saves more than it costs by reducing Idaho Power's need to buy expensive power elsewhere, especially at peak-usage times in summer. This is a positive step, too.
But the future also requires more power-generating capacity. "I cannot count on my customers to conserve at all times," Idaho Power spokesman Dennis Lopez said. "I can hope they do. I can promote that. What I need are resources that can match whatever their demands are."
Thankfully, a plan for future resources is in place. The state requires Idaho Power to update its plan for future construction every two years. In response to fear of a possible federal carbon-pollution tax, the latest plan drops the 2006 plan's call for more power from out-of-state coal by 2013. In its place, the plan calls for a new natural gas-fired power plant in Southwest Idaho.
It appears power costs will rise for the next few years at least. By law, the Public Utilities Commission must allow Idaho Power to recover prudently incurred expenses from its customers. By law, the commission must provide the company a reasonable rate of return on its investment. And by law, Idaho Power must provide reliable service to every customer in its territory. It cannot say, "Sorry. No power for you. We've run out."
For the past few years, the commission has combed Idaho Power's rate requests line by line and reduced them. The commission should do the same with the latest request. Idaho Power must have the resources it needs to serve its customers and thrive. But rate-increase requests that dramatically outstrip the growth in local residents' income deserve close scrutiny to be sure they are justified.
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