Title
Rate Philosophy and Development of Rate Increase Policy
Recommended Action
Discussion Item Only, no action required.
Staff Recommendation
Discussion Item Only, no staff recommendation
Body
In considering past actions to restructure rates, the Board has discussed many aspects of rate philosophy. The last such action taken was adoption of a tiered water rate ordinance in 2014. Also in 2014, the Board discussed changes to the electric rate to incorporate a separate distribution service charge and an energy cost adjustment factor, neither of which was eventually adopted into the electric rate structure. We believe it is appropriate for the Board to discuss rate philosophy again now because that last action occurred before any current member of the Board began serving.
Since utilities are monopolies, their operations and particularly their rates are rightly subject to more public control, scrutiny and often passion than the operations of most other kinds of business. There are several notions and principles that could guide setting rates. The following sentences from Article V of the Los Alamos County Charter provide some guidance but do not dictate formulas:
The Department of Utilities shall be operated on a compensatory basis. The rates and charges shall be just, reasonable, and comparable to those in neighboring communities and shall be uniform for all consumers of the same class. Different rate schedules may be established for different classes of consumers. Charges for other services provided by the Department of Public Utilities shall be set by the Board of Public Utilities.
We should consider at least the following principles and notions in setting rates:
Safety and Reliability The DPU needs adequate income to deliver service safely and reliably.
Ordinary Costs For example: Operations and maintenance, capital, and cost of fuel. These appear in our budgets while the external values or costs in the next item do not.
External Values or Costs Uti...
Click here for full text