Average families buying electricity from the Merced Irrigation District pay a little less than customers of public utilities in Stanislaus County.
Typical MID customers paid more than those in the neighboring Turlock Irrigation District from 2002 to 2012. But rates for the MID’s relatively few ratepayers have remained flat for four years, the district said, and the TID’s prices edged higher this year.
Both pay far less than the average Modesto Irrigation District homeowner. Rates in that district shot up 135 percent in the past 17 years compared with 79 percent in Merced and 58 percent in Turlock, according to an extensive rates review by The Modesto Bee and the Merced Sun-Star.
Rates for the MID’s 1,300 business customers and 6,000 families remain lower than those of competitor Pacific Gas & Electric Co., the district’s website claims. The private, investor-owned utility refused to provide figures allowing side-by-side comparisons, but calculations published by a Sacramento public utility appear to confirm the MID’s claims.
Board chairman Tim Pellissier said the MID has no plan to raise electricity rates in 2014. “It’s not necessary because we’re operating in the black,” he said.
Merced is one of the few spots in California where some families can choose between public and private providers. The MID was gaining more customers than PG&E from new subdivisions in the early 2000s before the economy tanked and building stopped, Pellissier said.
While private utilities such as PG&E seek approval from state power officials for rate increases, the irrigation districts decide for themselves.
“They’re controlled by the electorate,” said Mark Toney, executive director of the Utility Reform Network, a consumer group focused on electricity issues. “The incentive is to keep rates as low as they possibly can because if people get too upset, they can get voted out.”
Merced families getting power from PG&E – a majority in the city – eventually could get some rate relief thanks to legislation signed in October by Gov. Jerry Brown. Assembly Bill 327 by Henry Perea, D-Fresno, authorizes the state Public Utilities Commission to come up with a new rates formula that should lower bills for people who rely on air conditioning in hot zones such as the Central Valley while raising them for those in cooler coastal areas.
Toney’s group is waiting to see what the commission comes up with before celebrating. The goal is to have interim rates by summer. Public hearings should be staged throughout the valley and people should let their opinions be heard, Toney said.
Although the area’s three public utilities posted less income from home customers than the statewide average as late as 2000, things have changed dramatically since. In that time, the MID’s income from residential customers rose 86 percent, compared to the statewide increase of 36 percent for public utilities. In Modesto and Turlock, income jumped 130 percent and 72 percent, respectively.
California rates are among the highest in the United States. The statewide average income from home power sales in August, the latest period for which figures are available, was 16.5 cents per kilowatt hour, compared with the national average of 12.5 cents, the U.S. Energy Information Administration reported.
Income comparisons are common in the industry, said Paul Zummo, policy research and analysis manager for the American Public Power Association.
Using that measuring stick, The Bee and Sun-Star found that the three districts in this area have raised industrial rates more rapidly in the past 16 years than other public utilities throughout California.
Public and private utilities commonly offer volume discounts to industrial customers. Many are further rewarded for ramping up electricity use during nonpeak hours such as morning and nighttime in the summer, avoiding hot afternoons when demand for air conditioning is high.
“If we’re not competitive, we’re not delivering power; it’s that simple,” Pellissier said.
Modesto’s Tom Van Groningen echoed that stratagem. “Those are the job creators,” said Van Groningen, who also is a board member for the Stanislaus Economic and Workforce Alliance. Part of its mission is luring companies.
Steven Ames, the alliance’s senior vice president and director of economic development, agreed that companies shop for competitive rates when deciding where to locate. “But that wouldn’t be the sole factor,” he said. Depending on the business, potential employees’ skill level and wage demands are considered more important, as well as proximity to goods such as nuts or tomatoes.
Utility directors listed several other considerations when raising rates, whether residential, commercial or industrial. For example, state mandates that they generate more power from renewable sources such as wind and solar and less from pollution emitters such as burning coal or natural gas have cost districts many millions of dollars. Other factors include equipment upgrades, meeting debt payments and building reserve accounts in case of emergency.
The MID buys wind energy from a Solano County company and hydropower from a federal project called the Western Area Power Administration. The rest of its electricity is purchased from the TID.
The MID will take over the New Exchequer Dam and its revenue from PG&E in July. Under a contract signed in 1960, PG&E agreed to build the project in exchange for controlling 50 years of its power generation.
Pellissier said the district does not regret entering the residential market in 1996, although the California power crisis that ended Gov. Gray Davis’ political career forced the MID to raise rates higher than those in Modesto and Turlock from 2002 to 2007.
“That was tough,” he said, “but we managed to survive and we came out a little stronger for it.”