Electricity customers of the Modesto Irrigation District might get a break from the large rate increase set for Sept. 1.
The district board Tuesday discussed reducing or canceling the hike, which would average 16 percent if it went through.
A vote could come next Tuesday.
Board members said they are considering the change because wholesale power costs have dropped and customers are hurting from the recession.
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"Under the current economic conditions, I can't see an increase at this time," Director Cecil Hensley said.
The board in November approved a three-phase rate increase for 2009. For residential customers, rates rose 7 percent in January and 2 percent in June, the latter reduced from a planned 6.5 percent.
The third phase in September was to be 5.4 percent, but it would have to be 16 percent to make up for the smaller June increase and achieve the annual income spelled out in the November vote, MID officials said.
The June rate break meant not only less money collected from that point on, but a smaller base on which to apply the September increase.
Commercial and industrial customers also have seen increases this year.
Director Mike Serpa suggested canceling most or all of the hikes throughout 2009.
The board also is considering reducing the target for the amount of money MID has in reserve. The goal is $200 million by 2011, compared with the $121.6 million projected for the end of this year.
A smaller reserve would reduce the immediate need for rate increases but likely would bring a downgrade in the district's bond rating, General Manager Allen Short said. This in turn would mean higher interest payments on bonds sold to finance capital projects, he said.
The rate issue has come up in the midst of campaigns for three board seats. Serpa and fellow directors Paul Warda and Tom Van Groningen all have drawn challengers.
Warda said he will look out for the long-term good of ratepayers, regardless of the Nov. 3 election.
"We could cut rates back now, but they would suffer all the more for it next year," he said.
Van Groningen said he might support canceling the Sept. 1 hike but not erasing all of the 2009 increases.
"That would cause gyrations in rates that our customers certainly wouldn't understand," he said.
MID's expenses have declined because of a drop in the price of natural gas, the main fuel for its power plants, and in the price of gas and hydroelectric generation it purchases. Operating expenses totaled $128.6 million in the first half of 2009, compared with a budgeted $153.8 million, district staff reported Tuesday.
The $25.2 million in savings more than made up for a $21.4 million shortfall in expected income in the same six months. The MID has seen reduced power demand during the recession.
Short suggested that rates at least rise enough to cover inflation. He noted that the district had no increases from 1995 to 2001 and still is catching up.
Bee staff writer John Holland can be reached at firstname.lastname@example.org or 578-2385.