Electricity customers of the Modesto Irrigation District will get a 7 percent increase next week, less than the 11 percent hike that was on the table.
But the district board's 3-2 vote in favor of the increase Tuesday left a couple of issues unsettled.
First, the board will consider creating monthly surcharges that would go up or down to reflect certain costs, such as wholesale power from elsewhere.
Second, the MID could have to pull out of a partnership planning a power plant fueled by natural gas in Lodi. The district had counted on the full 11 percent increase to stay in that project.
The 7 percent increase, effective Monday, will raise the average residential bill from $130 to $139 a month.
"I know that it's difficult for all of us," Director Tom Van Groningen said. "No one likes to increase rates."
He and Directors Paul Warda and Glen Wild voted for the increase.
Director Cecil Hensley said the increase is too much in a time of high unemployment. Director John Kidd favored delaying the vote so the board could further discuss the district's finances.
Several ratepayers said the district should trim its spending. Dave Thomas, president of the Stanislaus Taxpayers Association, said MID employees make an average of $125,160 in salary and benefits a year.
"The ratepayer is supporting $125,000 and change for the average MID employee," Thomas said. "That's a good gig."
District spokeswoman Melissa Williams said the pay and benefits "are in line with the marketplace of the electric utility business."
District officials said they have reduced the MID work force by 10 percent, to 422 employees, by leaving nearly 50 vacancies unfilled.
They said they have trimmed small capital projects but need to boost reserves so they can issue bonds for major projects at low interest rates.
This includes the 255-megawatt Lodi plant. The MID has a one-quarter share and has contributed about $10 million for planning and design.
MID General Manager Allen Short said the 7 percent rate increase will leave the district short of the reserves that bond-rating agencies demand. High reserves are considered a sign of financial health and usually translate into low interest rates on bond issues.
Short said the district's financial adviser is recommending the MID pull out of the Lodi project. He said the $10 million spent so far could be recouped if another agency takes the MID's place.
The Lodi plant is intended to help meet peak summer demand, which can approach 700 megawatts. Short said it also would fill in when wind and solar plants are not producing.
The MID will continue with construction of a 50-megawatt addition to its gas-fired power plant on Woodland Avenue.
The district is expanding its generation capacity to reduce reliance on power purchases from outside parties, which can be especially costly on hot summer days.
But these purchases will still be needed to some degree, and that's one reason the board is considering surcharges on customer bills.
When costs rise, as happened with gas in 2008, the surcharges would go up. When costs drop, customers would get a break.
Surcharges could rise and fall with the availability of cheap hydroelectric power. And they could cover the higher cost of wind and solar power compared with conventional sources, or the cost of rules aimed at curbing climate-changing emissions from fossil fuels.
The Turlock Irrigation District enacted a surcharge tied to wholesale power costs in 2005.
The MID board plans to discuss surcharges, including possible amounts and purposes, at an informal workshop before voting at another meeting.
This extra income would not come in time to keep the MID in the Lodi project, which is moving quickly, district officials said.
Kurt Danziger, a customer in Escalon, urged the district to forgo that project.
"We have to live within our means," he said. "That's going to mean some hard choices."
Bee staff writer John Holland can be reached at firstname.lastname@example.org or 578-2385.