Electricity rates upward trend
Electricity is an essential part of our daily lives, and its affordability and accessibility are critical to the well-being of Washington residents and businesses. In 2023, Washington State experienced an electricity rate hike that significantly impacted consumers and the energy landscape. In this blog, we’ll explore the factors leading to the electricity rate hikes for several utilities, affecting hundreds of thousands of Washingtonians.
Washington drought and hydroelectricity
Before diving into the specifics of the rate hike, let’s start with some context. Washington State is known for its abundant hydroelectric power generation and diverse energy resources. According to the Washington Department of Ecology, 12 watersheds declared a drought emergency in 12 counties. The drought experienced this year impacts our hydroelectric plants and plays a critical role in why utilities are increasing the rates for 2024.
Pressure from the Clean Energy Transformation Act
The Comprehensive Energy Transition Act (CETA) applies to all electric utilities in Washington, mandating a phased removal of coal-fired electricity by 2025. By 2030, utilities must achieve greenhouse gas emissions neutrality, allowing limited natural gas use offset by other actions. The final goal, set for 2045, requires utilities to supply Washington customers with 100% renewable or non-emitting electricity, emphasizing an uncompromising shift towards a sustainable energy future without any provision for offsets.
Washington utilities rate increases
Each Electric Utility has its own set of fixed transmission costs, energy mix, and serviceable area, which factors into how the fuel cost for electricity and environmental impacts affect the rate hikes. Let’s dive into the rate hike amounts for the big utilities of Western Washington.
Puget Sound Energy
Continuing their February 2022 filing of a three-year rate plan approved by the Utility and Transportation Commission, saw a rate increase of 12.9% this year! Another increase will be observed in 2024 of 2.68% and 1.23% in 2025. These rate increases equate to about $12 more on monthly power bills. The impetus behind these rate increases was accelerating efforts toward meeting ambitious clean energy goals and enhancing climate resiliency.
Seattle City Light
Expect an average $9 monthly bill increase, brought to you by Seattle City Light via a 9.5% increase in electricity rates beginning January 2024. This whopping rate hike stems from three factors: first, a 4% increase was approved by the city council. Second, a 4.5% rate increase is needed to replenish cash reserves used for rate stabilization due to the drought affecting SCL hydroelectric plants’ generation capacity. Lastly, there is a 1% increase from the Bonneville Power Station, where SCL gets a third of its power.
Rather than increasing the electricity rate, the base charge (fixed costs) will increase from $0.34 to $0.58 while the rate will decrease from 10.47 cents/kWh to 10.14 cents/kWh. The minimum daily base charge of $0.53 per day will be eliminated in 2024. Overall the average customer using 1,000 kWh per month will see about a dollar increase in their monthly power bill. The rate structure change addresses increasing fixed costs, funding critical infrastructure for safety and reliability increases, supporting clean energy projects, and ensuring stability for the utility. SnoPUD acknowledges as more customers go solar and electrify their homes, there will changes in customer demand and use patterns.
Although the 2024 Budget and Rates report is yet to be published, per the 2023 report, OPALCO has a recommended 4.5% rate increase. Suggested adjustments to the rate are advised, as this profile enables maintaining rate stability while concurrently stabilizing and enhancing equity in the forthcoming years. It is important to acknowledge that these rate reviews will be conducted annually.
The Tacoma City Council has approved the 2023-2024 biennial budget, highlighting updated rates for Tacoma Public Utilities customers. The budget prioritizes maintaining safe and reliable services, particularly focusing on residential assistance programs for income-constrained customers in the face of inflationary pressures. Tacoma Public Utilities, a not-for-profit, customer-owned utility, addresses rising costs due to inflation, including infrastructure construction, labor market wages, and other expenses. In 2023 and 2024, customers will see a 3.5 percent increase in power rates. These gradual increases aim to prevent future large spikes while ensuring ongoing service reliability.
Factors behind the rate hikes
Understanding why the electricity rates increased in 2024 is paramount. We’ll investigate various factors, such as:
From droughts reducing the available power from hydroelectric dams to wildfires burning down transmission lines. As the environment becomes more volatile, so will our ability to purchase fossil fuels to meet electricity demands.
Increased operational costs due to aging infrastructure and maintenance needs. The current centralized energy infrastructure is a big cost driver for utilities, exacerbated by growing demand. As we continue to electrify, more homes will need larger services to meet their needs.
Policy and Regulation
Regulatory changes that impacted pricing structures and allowed for environmental initiatives such as CETA. Each utility will promote and steward the renewable energy revolution according to their financial, regulatory, and geographic constraints.
As more homes and vehicles switch to electricity power, there will be a greater draw on the grid. For utilities that still utilize fossil fuels for generating electricity, this means there needs to be more fossil fuels purchased to meet demand, which is expensive and costly to the environment and customers.
How do we manage increasing electricity rates?
Besides using less electricity, a behavioral and demand response to rising electricity rates. You can generate electricity on your own via solar energy! That’s right, no matter how much electricity rates increase annually, generating and using your own electricity will always be free! Hedge against rising electricity rates by owning a solar PV system; don’t rent your electricity; own it by going solar with a trusted local company like Northwest Electric and Solar. Start your energy independence journey today with a free estimate for your home or business.