Dive Brief:
- Lodi City Council is considering a rate increase, the first in almost a decade for the town's electric utility.
- The utility is forecasting an approximate $2.5 million annual shortfall for the next decade.
- The rate proposal precedes a September meeting when the city will sit down with a ratings agency to discuss its borrowing power.
Dive Insight:
Municipal utilities must maintain capital improvements or face sending the wrong signal to lenders — in turn, potentially jeopardizing access to cheaper power.
Lodi City residents last faced an electric rate increase almost 10 years ago, when the city council raised rates by 17% to make up for a looming shortfall. The new increase will be much more modest, the Lodi News-Sentinel reports, probably closer to 5% according to Lodi City Manager Steve Schwabauer.
According to Schwabauer, the city will meet in September with a rating agency to discuss credit and borrowing power. Currently, Lodi City has an A- rating allowing it to purchase cheaper power from the Northern California Power Agency.
But the newspaper warned that rating could drop if the electric utility continues to defer capital maintenance. As Schwabauer explained, pushing back system maintenance could be a signal the utility lacks the funding to purchase power for its customers. And that, in turn, could push rates up even more.
“We think it’s important to move with some briskness to indicate to other agencies that we won’t ignore capital maintenance and that we’re making sure we have the funds needed to operate our system,” Schwabauer told the Sentinel-News.