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June 24, 2010

Planning for a Steady and Sustainable Future

An editorial column by Girish Balachandran, General Manager of Alameda Municipal Power

It’s been a busy year so far. At its Annual Planning Workshop the City’s Public Utilities Board discussed major initiatives, priorities, critical issues, risks and opportunities facing our electric utility. Subsequent efforts included development of a ten-year financial plan to identify and reduce potential financial risks. The plan seeks to balance revenues with expenses, reserve requirements, and bond coverage covenants over a ten-year planning period. Additionally, in order to meet the expectations of the agencies that rate AMP’s bonds, we are expected to maintain our revenue collections at a level that assures the rating agencies of our fiscal stability.

The financial assessment identified an increase in revenues is needed to pay for higher power and transmission costs that are not controlled by AMP. We need to replace a very inexpensive power contract in a few years. The cost to replace this power, with either “brown” or renewable electricity, has doubled or tripled respectively. Statewide electric transmission costs are expected to almost double in the next ten years due to the large capital outlays necessary to replace and build crucial transmission infrastructure all over California. By 2020, the increase in power and transmission costs will represent 70% of AMP’s total cost increase over the decade. This would result in large rate spikes that could be as high as twelve percent in a few years. The Board directed AMP to steer clear of such large and sharp increases during these tough economic times and instead favored a plan that would result in lower rate increases spread over further years. Therefore, we will propose a plan that results in recurring rate adjustments under 5%, since we believe that our customers would find it less difficult to deal with gradual rate increases. A typical household using 400 kilowatt-hours per month would see an increase of about $1.51 in their monthly bill in the coming year. There are steps all customers can take to control their energy costs, and we encourage our customers to take advantage of the wide array of energy-management programs and services AMP offers.

For the past five years, AMP has not raised residential electric rates; rates for the average residential customer have actually decreased since the year 2000. Also, we continue to take all feasible steps to control costs. For example, AMP has reduced its employee count to pre-1993 levels. Even with the proposed increase, AMP customers will continue to pay substantially less than surrounding communities. Residential customers will be approximately 27% below, and commercial customers will be 14% to 20% below surrounding communities. Additionally, AMP continues to provide customers with a reliability record within the top quartile of U.S. utilities. We are the Number 1 renewable utility in all of California, with over 60% renewable electricity. We continue our commitment to be service driven, and a direct contributor to our community’s economic well-being and unique quality of life.

AMP’s proposed budget and rate recommendations will be presented for approval by the Public Utilities Board at its meeting on June 28. If approved, the rate adjustments would be effective July 1. All Board materials have been posted to the AMP web site. We invite your review of these materials and your participation in the budget and rate processes.