SMUD Approves $1.5B Budget

11 Dec 2014

The Sacramento Municipal Utility District Board unanimously approved a $1.47 billion budget for the 2015 calendar year, a slight increase from the muni’s $1.4 billion this year.

The Dec. 4 approval marks the third straight year the Sacramento muni’s budget has risen. It is a reversal of a three-year trend of increasingly smaller budgets that began in 2009 during the midst of the most recent recession.

“We have a lean budget that recognizes that we have to operate well to maintain a good credit rating so we can fund the capital expenditures, because it’s a capital-intensive business,” board member Bill Slaton said. “At the same time, we have to keep rates moderate so that our customers can afford to have this electricity.”

Major components of the 2013 budget include: • An operations and maintenance budget of about $1 billion;

• A debt service budget of $186.4 million; and • A capital budget of $264.8 million.

The capital budget covers additions and improvements to buildings, property and equipment.

The commodities portion of the budget—covering the cost of natural gas to fuel power plants, wholesale power purchases and transmission— is $526.6 million for next year, about half of the total operations and maintenance budget and a moderate increase from 2013’s $506.8 million.

Energy-supply commodity costs—the cost of natural gas to fuel power plants, wholesale power purchases and transmission—make up about half of SMUD’s total operations and maintenance budget.

The muni has locked in fixed prices for most expected energy requirements for 2015 to ensure cost and rate stability, and only a very small percentage of budgeted purchases are exposed to short-term market price fluctuations, according to the muni.

The utility’s projected net income for 2015 is $73 million.

“We operate a wind farm, we have industrial solar, we have rooftop solar, landfill gas, poles, lines, wires above ground, underground,” said board president Genevieve Shiroma. “This budget goes into assuring that all of that is operating smoothly, and that we’ve got the clean energy, we’ve got the reliability for our customers.”

SMUD has over 600,000 residential and commercial customers.

The 2015 budget anticipates a small increase in the number of customers the muni serves, but kWh sales volume is expected to be slightly lower than in 2014 due to increases in energy efficiency and customer solar, which reduce average electricity consumption per customer.

Also, the number of low-income customers receiving a discounted rate is relatively flat, according to SMUD data, even though a new census indicates the number of customers eligible continues to grow.

Also detailed in the budget is the effect on SMUD of a change in the state Public Good Charge. As a result of decreased funding for low-income assistance programs, research and development, the Public Good Charge is decreasing from 19.22 percent to 18.18 percent of 1994 revenues.

The public good charge allocation will change from 6.45 percent to 6.28 percent for energy efficiency, from 8.04 percent to 7.81 percent for low income assistance,

from 1.62 percent to 1.86 percent for research and development, and from 3.11 percent to 2.23 percent for new renewable generation.

A 2.5 percent rate increase is scheduled to go into effect for SMUD customers in January 2015.

No rate increase is projected for 2016, but staff could eventually propose a 4.5 percent increase to the board next year, according to Jim Tracy, the muni’s chief financial officer.

Tracy warned the board in November that a temporary, unplanned rate increase could occur in 2015, depending on the current seasonal weather. After three very dry years recently, the muni’s $27 million hydro rate stabilization fund is at about zero. If 2015 is another dry year, rates would be automatically adjusted between zero to 4 percent for 12 months to make up for the lost hydro generation and cost of the replacement power.

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