SMUD customers have seen 15% electricity rate increase in three years. Here’s why
Sacramento Municipal Utility District customers have seen an overall rate increase of 14.5% over the past past three years.
The increase in electricity rates for residential and commercial customers since Jan. 1, 2020 comes after smaller hikes between 2017 and 2019. Rate increases only totaled 3.5% in that combined three year period.
A variety of factors have led to the rate increase over the past three years, SMUD spokeswoman Lindsay VanLaningham said.
“SMUD is not immune to inflation and the rising costs impacting people and businesses across the country,” she said in a statement. “Key drivers of the necessary rate increases have included fuel and energy costs, sharp increases in wildfire insurance, renewable energy mandates and increased material and labor costs.”
VanLaningham said the company is committed to keeping rate increases below the rate of inflation, which cumulatively reached 20.29% in the three-year period between 2020 and 2022.
The latest January electricity rate increase of 2% followed another increase nine months earlier of 1.5%. However, those hikes have been smaller than the ones SMUD customers saw in 2020 and 2021. Those increases were:
▪ 3.75% in January 2020
▪ 3% in October 2020
▪ 2.5% in January 2021
▪ 2% in October 2021
VanLaningham said SMUD’s rates are, on average, lower than neighboring Pacific Gas & Electrics rates by 47%.
SMUD operates as a nonprofit owned by its customers in Sacramento and surrounding communities but it’s the elected seven-member board approves rate increases based on recommendations of the utility’s management.
That’s different than PG&E,which as an investor-owned utility, needs new rates approved by California utility regulators.
SMUD’s average residential bill was $131 a month compared to $282 a month for PG&E, the local utility’s data as of March 1 shows.
Zero emissions goal factors in rate increases
While SMUD rates are lower than most other California utilities, they are more expensive than many other large municipally-owned utilities in other states. Municipal owned utilities aim to keep rates lower than investor-owned utilities because they don’t have a mandate to return profit to investors.
For example, CPS Energy in San Antonio’s Texas, the 5th largest municipally owned electric power company in the US, charges an average electricity rate of $0.1256 per kWh.
A big difference between CPS and SMUD, which has the sixth largest number of electric customers in the U.S. for a municipally-owned utility, is that CPS utility has a less ambitious plan than SMUD to rid itself of less expensive to operate but polluting natural gas power plants.
CPS Energy has given itself to 2050 to reach zero emissions in its power generation. On the other hand, SMUD officials say they plan to reach zero emissions in their power generation by 2030, but that means the more aggressive plan will result in higher costs for the energy company and potentially continuing rate hikes.
SMUD officials noted in 2021 regulatory filings that some of its renewable energy contracts for wind and solar can be more costly than natural gas plants that it is phasing out of its energy portfolio.
Another key difference between CPS and SMUD is that CPS rates have to be approved by Texas utility regulators.
SMUD operates with no independent oversight. The utility hold public hearings on its rate increases but decisions by its seven member board are final.
Unlike PG&E and other investor-owned utilities, SMUD’s rates are not regulated by the California Public Utility Commission.
The SMUD board approved the 2022 and 2023 rate increases back in August 2021.
Future of electricity rates
More rate increases could be announced later this year for 2024 and beyond.
“A formal rate process will likely begin this summer with the release of the CEO & GM’s report that will include a specific proposal,” VanLaningham said.
SMUD charges a peak rate from June through September of $0.3279 per kilowatt-hour. During non-summer months, the rate goes down $0.1547 per kWh.
