LMUD raises all rates by 2.5 cents — residential rate rises to 19 cents per kWh

“This is the last thing we want to do is have to raise rates,” said LMUD General Manager Pat Holley (pictured here at a Lassen County Board of Supervisors meeting). “It’s uncomfortable. It is unpleasant. We don’t want it, but the forces that drive these prices are beyond our control. They truly are, and we’re doing everything that we can to contain our costs, and in our upcoming budget we’re going to scrub everything we can to get every bit of cost savings that we can.”

The Lassen Municipal Utility District’s Board of Directors held a public hearing and then unanimously approved a 2.5 cent per kWh rate increase across all rate classes at its Tuesday, March 28 meeting. That means ratepayers have been hit with a nearly 36 percent rate increase since General Manager Pat Holley bragged in his November 2022 manager’s message that the district’s 14 cents per kWh rate was “the same today as it was in 2008 — a great accomplishment in today’s economy.”

LMUD’s rates have risen and soared since Holley delivered that message — the district increased its rates by .5 cent effective December 2022 to 14.5 cents per kWh, another 1.5 cents to 16 cents per kWh effective January 2023, another .5 cent to 16.5 cents per kWh effective March 1, 2023 and now another 2.5 cents per kWh to 19 cents per kWh (effective in April’s billing).

According to the minutes of the Nov. 22 board meeting, former LMUD director candidate Curtis Bortle, who was defeated by incumbent Bud Bowden in last November’s LMUD election, expressed his concern regarding a rate increase coming so closely on the heels of the election. According to the minutes reporting Bortle’s concern, “This could appear unethical since previous discussions prior to the election talked about how competitive LMUD is.”

The current facilities charge for residential customers remains $30 per month — a charge borne by ratepayers just for being connected to the LMUD system before they consume even a single electron of electricity.

Last night’s public hearing, according to chair Fred Nagel, “is an opportunity for the board of directors to receive public input on specific issues and is a formal communication process from which this board will draw information in order to make a fair, informed and just decision.”

Holley offered the staff report to the board. He said unfortunately the district’s purchased power cost — the district’s largest expense — has not only increased, it has gone up and then been sustained at these unprecedented high rates. He said with all the rain and snow this winter, there may be some light at the end of the tunnel as more hydropower comes on line.

“They have doubled and stayed at that level for the past three months, and perhaps another month,” Holley informed the board. “This continues to be driven by extremely high, unprecedented natural gas rates which led to higher electricity prices because with all the power generation in California, and all of the renewables that you would think are producing power — actually natural gas produces about 50 percent of our power during these peak consumption periods.”

According to Holley, the district’s normal monthly billing from the Western Area Power Administration would be less than $1 million during these winter months, but the January bill was $2.3 million, $2 million in February and the district expects another high bill for March that hasn’t arrived yet.

“So, we’re on a path to maintain these very high levels, which is very detrimental to our cash position,” Holley said. He said he’s spoken with other regional utility managers and many of them say they are facing the same problem.

Nagel said he has property served by Plumas Sierra, and their rate is 19 cents per kWh, their facility charge is $50 per month, and those rates are expected to increase.

Holley added while LMUD’s normal budget is $21 or $22 million per year, these costs will require a budget of more than $30 million per year. And according to the district’s Power Delivery Cost Analysis Worksheet calculations, LMUD currently is under collecting by 2.5 cents per kWh — the amount of the rate hike approved yesterday.

“This is the last thing we want to do is have to raise rates,” Holley said. “It’s uncomfortable. It is unpleasant. We don’t want it, but the forces that drive these prices are beyond our control. They truly are, and we’re doing everything that we can to contain our costs, and in our upcoming budget we’re going to scrub everything we can to get every bit of cost savings that we can.”

Looking to the future, while LMUD staff hopes the price of purchased power will drop, they’re projecting the cost will remain high during the next five years. In the fiscal year 2025-2026, the district expects to see savings once the Skedaddle Project comes on-line, but the first year of real saving won’t be realized until fiscal year 2026-2027.

LMUD took on a $20 million bond obligation in October 2021 to fund the Skedaddle project, and Holley said the rate increase also is necessary to meet the bond covenants.

According to LMUD’s figures, the bond covenant ratio must be at least 1.25. In the fiscal year 2022-2023, it’s projected to be 1.3864. In fiscal year 2023-2024, it drops to a projected .9199 before rising to 1.2871 in 2024-2025, 3.1849 in 2025-2026 and 4.8949 in 2026-2027.

According to LMUD’s figures, the district plans to withdraw $1.5 million from the rate stabilization fund this year, but will budget $1 million to replenish that fund, if needed.

During public comment, Elaine Jacobs asked the board what cutbacks it had internally made to reduce costs. She asked about the board’s recent $600,000 purchase of the former Bank of America building in Uptown Susanville and the $400,000 budgeted for its remodeling. She also asked about the status of the proposed electrical vehicle charging station that was supposed to increase tourism and help boost the city’s economy. She said that $1 million could have been used to help spare the ratepayers the burden of these higher rates, and she said buying the building was “stupid” because everyone knew the cost of natural gas was going up last year.

“What have you guys done so it’s not just a hit on us?” she asked. “I want to know as board members if you guys are even questioning what you’re being told regarding the budget? Are you asking questions of what can we do to cut our budget so it’s not all on the consumer? Have you guys even been educated as to really what a budget is and how it affects your company? I don’t believe so. I’m not even hearing that. I understand under-collection has been going on for a long time, and you’re just now addressing the problem. So, we’re getting all these big hits … I want to know what you’ve done … I haven’t seen one board member object to anything or say, you know what, maybe we need to look at what we need to cut, and that is your job. You represent us, and I’m not seeing that from you.”

She also complained about the district’s service charge, which she said makes up half of some people’s monthly bill.

Jim Chapman suggested the district could implement a surcharge rather than a rate increase that could remain in place “as long as the need is there.”

“I’m not against it. I’m not necessarily for it,” Chapman said. “But I’d like to ask the board to consider — in my experience with government, even with the private sector, is rate increases go into effect and everything keep ratcheting up and never comes back. The highwater gets there, but it never comes back down.”

Holley responded to the public comments. He said the new building project is on hold. He said the district was taking on the deconstruction of the Hayden Hill line and was cutting costs in the Shaffer Mountain project. He said the Skedaddle Project is not part of this issue, not part of why the rates are going up — in fact, that project is the long-term solution to rising rates.

“We’re working on it, I assure you,” Holley said. “We are not resting on our laurels. “Everything that we’re looking at on the budget coming up this year will be scrubbed thoroughly. We’re looking for every cost advantage.”

He said due to the recent change in interest rates, the district’s investments are generating as much as $400,000 per year. He added the bond funds will make even more than that over time, and that will help with the increasing costs of the Skedaddle Project.

“I assure you the board asked me very tough questions about the budget,” Holley said. “Staff worked hard on the budget. We are not sitting back wasting money, I promise.”

Director Jess Urionaguena reminded the public the board members are ratepayers, too, and they are charged the same rates as any other customer.

LMUD offers assistance to seniors, low-income customers or those who can’t afford to pay their bills. Call Theresa Phillips, LMUD’s energy services manager, at 257-4174 for more information or to see if you qualify.

The board’s next meeting will be held at 5:30 p.m. Tuesday, April 25.