An 11 percent electricity rate hike would burden households already short of money, several customers told the Modesto Irrigation District board Tuesday.
The board, which delayed a vote on the proposal until Jan. 26, also heard from financial experts who said the increase was vital to maintaining the MID's health.
About 80 people crowded into the boardroom to discuss a proposal that would raise the average residential bill from about $130 to $145 a month.
"I'm constantly looking at the bills increasing and getting very frustrated with it," customer Francine Richards of Modesto said.
Jolynn Wilder of Modesto said the hike would hit hard at people struggling to keep their homes. "This increase will surely put them one step closer to being on the streets," she said.
Critics urged the MID to cut expenses and pull out of places, such as Mountain House in western San Joaquin County, that are not in its core service area.
They also suggested the district dip into its reserves of about $125 million.
That last idea does not sit well with the experts who help the MID arrange financing for capital projects. They said the reserves should rise to $200 million by 2011, as stated in a 2006 board policy, to show that the district is a sound investment for people buying its bonds.
Financial reputation can suffer
"The impact (of not raising rates) is a loss of credibility, both with the rating agencies and with investors," said Jerry Gold, a senior vice president at First Southwest Co. in Santa Monica.
He said the district already is suffering from the rollback of rate increases last year. A 7 percent hike was imposed in January, but the board trimmed a June increase and canceled a September boost.
Gold said that because of those moves, the district faces an $8 million increase in interest costs for every $100 million in planned bond issues.
The MID could be forced into employee layoffs or furloughs if it has trouble borrowing money for small capital projects, said Lou Hampel, the district's assistant general manager for finance.
He said this could affect a proposed Lodi plant that would generate power from natural gas for the MID and several partners.
Critics of the rate proposal said the financial health of customers matters as much as the MID's.
"I don't get to increase my reserves," said customer Kurt Danziger of Escalon. "You're jumping into my reserves."
A tug of war
The board has wrestled before with this tension between the demands of high finance and the needs of customers.
"We're kind of in the middle of trying to see what the community can afford while keeping MID running well," board president John Kidd said.
Delaying the rate vote two weeks will allow the board to review the MID's financial performance in 2009, he said.
He suggested that it could be better than expected because the summer was relatively cool, reducing the need for expensive power to meet peak demand.
Bee staff writer John Holland can be reached at firstname.lastname@example.org or 578-2385.