W&L manager reports on ‘pressure’ from Bonneville Power proposed hikes

This week, McMinnville Water & Light implemented minor increases to water and electric rates, but utility officials are already taking steps to avoid a larger increase next year due to planned hikes from provider Bonneville Power Administration.

Water & Light General Manager John Dietz provided a quarterly update to City Council last week, sharing that the utility is looking to avoid an up to 10% increase next year to maintain its comparatively low rates to nearby cities.

“Currently the national average in 2023 was 16 cents per kilowatt hour, California averages 30 cents per kilowatt hour, Water & Light’s rate is 6 cents per kilowatt hour,” Dietz said. “Just a little perspective on rates.”

The utility approved a 2.75% increase to electric rates and 5% increase to water rates that both went into effect Oct. 1, but that is a far cry from recent hikes by nearby Portland General Electric.

“They just came out with a 6.3% rate increase, on top of the 12% and the 18% they had the previous years,” Dietz said.

Ever rising material costs and plans to increase capital funding by BPA are putting the squeeze on MW&L future costs, Dietz said.

“We are definitely seeing pressure on rates from a number of areas,” he said.

BPA is proposing “essentially doubling” capital spending to rehab generators at hydropower plants and increase funding for transmission construction projects in the next three-year contract period starting October 1, 2025, Dietz said.

Those plans would mean approximately 9% increases for Water & Light electric costs and up to 32% in transmission costs, he said.

“So if you add that to the current rates we’re looking at somewhere between $3 and $4 million of increased cost, just in our power costs and our transmission costs from Bonneville,” he said.

The utility is objecting to those plans, recommending a phased-in approach to the higher rates to reduce initial costs.

“We’re pushing back on them because we believe that they cannot execute that in the first year of the rate period, we think that’s not realistic,” Dietz said. “What they’re looking at doing is collecting 100% of those rate increases in year one and this is a three year rate period.”

Water & Light will have a chance to comment on the BPA plans in November before a finalized rate is decided next July, Dietz said.

Councilor Adam Garvin asked what local customers should expect come next October and Dietz said it is too early to know for sure but the utility will do a rate study with consultants next year to determine potential hikes.

“We’ll go through and we’ll look at what the cost of materials and infrastructure costs are doing to see what we’re going to have to add to rates to cover those costs,” he said. “So I suspect if we can’t get the Bonneville rate down, it could be upwards of 10%.

“I think the commission has been very clear they want to keep increases somewhere 5% or less, so they may mitigate that in some way.”

The utility could mitigate rate increases by using cash reserves to offset them until it aligns with cost of service or could delay infrastructure projects, although Dietz is leery of that option.

“We could do less infrastructure work, but I have concerns about that because that just means you’re going to pay that down the road,” he said.

Councilor Sal Peralta asked if it would help if council submitted a letter to BPA regarding the planned increases.

“It doesn’t hurt. More is better,” Dietz replied.