Muni Prices May Converge with Utilities' Rates

Municipal utilities will maintain cheaper electricity rates than investor-owned utilities, but the difference will narrow over the next decade, especially for residential customers, according to a report presented at the California Energy Commission's 2005 Integrated Energy Policy Report workshop on the state?s electricity supply outlook held on July 26. Today's average residential price advantage for munis over investor-owned utilities will narrow from 17 percent to just 5 percent by 2016, according to the CEC. The CEC collected and aggregated electricity price projections from investor-owned utilities, munis, and electricity service providers in California. The data showed the price difference narrowing for residential electricity service. One factor is that the state Department of Water Resources bond charge will be phased out for investor-owned utilities' customers. Another factor is that munis have experienced higher fuel costs of late with rising natural gas prices, said Chris Capra, Sacramento Municipal Utility District spokesperson. Muni prices will slightly creep up as investor-owned utility prices remain level or slightly fall, the CEC staff report said. For instance, the average investor-owned utility residential price in nominal terms will fall from 12.9 cents/kWh to 12.2 cents/kWh. Commercial rates will remain almost level, dropping from 14.2 to 14.1 cents/ kWh. Investor-owned utilities' industrial rates will be flat too, barely budging from 10.7 to 10.6 cents/kWh. The utilities' price forecast is based on current and projected California Public Utilities Commission regulations but could change as the regulations and market conditions evolve, the CEC noted in its report. Muni prices, on the other hand, will creep up between 2005 and 2016 from 10.9 to 11.6 cents/kWh for residential customers, from 9.5 to 10.3 cents/kWh for commercial customers, and from 7.8 to 7.9 cents/kWh for industries.

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Muni Prices May Converge with Utilities’ Rates

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