Redding Electric Utility Wants To Raise Rates

The average Redding household will pay $6.95 more each month for electricity starting in January, should the City Council approve a proposed rate increase.

The council on Tuesday will set a hearing for Dec. 16 to consider what could be the largest Redding Electric Utility rate increase in at least 10 years.

REU had planned to seek annual 5.85 percent increases through 2012 to cover business costs, budget documents show.

But the drought and a slumping economy mean REU will ask for a 7.84 percent increase for 2009 and an identical increase for 2010, said Paul Hauser, utility director.

The council will be given rate increase options ranging from 6.35 percent to 11.57 percent, Hauser said. The 11.57 percent option would raise the average monthly household electric bill by $9.69.

“Hydro is the biggest driver,” Hauser said. “Anybody who has been out to Lake Shasta recognizes that.”

REU gets roughly 22 percent of its electricity from Shasta Dam and other federal hydroelectric projects in average rainfall years. At less than 3 cents per kilowatt hour, hydropower is by far Redding’s least-expensive electricity source.

But no one can predict how much rain will fall each year, Hauser said. That’s one reason why REU keeps a cash reserve, currently at $42 million. The utility would be seeking a much higher rate increase were that reserve not there, he said.

The hydropower supply looked decent when REU last looked at rates in February, after a couple of months of healthy rain and snowfall, Hauser said.

But this past spring was the driest on record in Northern California. REU has had to spend $8 million more than expected buying more expensive electricity to replace the lost hydropower.

The contracting economy has meant an additional $3 million hit for REU in unrealized wholesale and retail revenue it had expected, Hauser said. The utility’s customer base hasn’t grown as quickly as expected, and that means REU has to spread costs for power plants, debt service and other hard fixed expenses over a smaller base, he said.

“The council is extremely sympathetic to the current economy and the pressures people are facing,” Hauser said. “But there’s just no way around this, with the low lake level and the poor economy.”