Immediately upon proposing an increase in power rates, the Modesto Irrigation District (MID) reignited an ongoing debate about inequities in power and water rates for its customers. A closer look at the rate structures suggests that the alleged inequities have actually benefitted the entire area.
Critics of the electric rates complain that fifteen area companies pay lower rates than other customers. The big question is whether any of those companies would move operations or close if rates were higher.
If the rate subsidy keeps businesses local, the entire area benefits through jobs and tax revenue. Low electric rates for business can be used to bring new business into the area as well as to retain existing businesses.
Conservation and Promotion of Alternative Energy Sources
Higher electric rates promote conservation. The higher the rates, the more people conserve. Has the current rate structure resulted in less wasteful use of electricity, a higher reserve in electricity, and less need to expand infrastructure? If the answer is yes, then the current rate structure is economically desirable.
Higher electric rates promote use of alternative energy sources. Solar energy companies have increased sales in Stanislaus County. As solar energy systems gain in popularity, less demand on the remaining grid reduces use during peak times. In turn, this reduces pressure for higher rates in the future as new infrastructure outlays are reduced.
As an added benefit, the carrying capacity for the entire system is incrementally increased with each new home solar energy system, making economic growth less costly for the entire grid. More houses and businesses can be built within the capacity of MID’s existing delivery system.
MID has used the high rates to expand renewable energy sources to meet state mandates. This has resulted in more sources of clean energy while expanding the utility’s electric supply.
Are Electric Rates Hurting the Poor?
One of the main criticisms of the current electric rate structure is that economically disadvantaged citizens are victimized. However, MID has a special program for low income customers (MID Cares). Such programs help address inequities in the rate structure.
MID can further reduce the adverse impact of electric rates by increasing the use of free energy- saving audits for low income households. Auditors can inspect households and make recommendations that will enable customers to save money. The promotion of energy efficient appliances is a significant opportunity.
Anyone who has watched a Modesto Irrigation District lineman do his job knows he is paid what he is worth. The high value of the hardware within the MID system, as well as the hazard of the job, require the retention of the best personnel.
The MID would be unwise to cut labor costs to avoid a rate increase. Reliability of the entire system should continue to be the top priority. MID has established an excellent record of reliable service. Loss of power can result in substantial economic loss to the area. Trying to save a few dollars in salaries could result in a much greater economic loss to the community.
Dipping Into Reserves
A cash reserve exists for the purpose of handling emergencies such as damage from fire, earthquake, or infrastructure failure. Selling electricity below cost of delivery is not a desirable business practice.
Political considerations can cause governing bodies to engage in undesirable business practices. However, political problems can be avoided through a sustained effort to educate the public about policy decisions.
Over the years, the public has learned very little about how rates are set. Each time a rate increase is proposed, the volume of complaints rises. This enables critics to make seemingly credible allegations with little basis in fact. More than anything, MID customers need a better understanding of the reasoning behind power and water rates.