Roseville seeks largest electricity rate bump in its history. Here’s how much and why

The Roseville City Council is likely to approve next month the highest electric utility rate increase yet amid the risk of financial insolvency for its municipal electricity service.

Earlier this month, council members unanimously approved the first reading of an ordinance seeking to increase rates 9% beginning June 1 and then by 9% again on Jan. 1, said Roseville Electric Utility spokesman David Bradford. The increases would bring in $178.3 million in new revenue through the end of its 2027-28 fiscal year.

The higher rates also come as the 112-year-old utility seeks to incorporate a temporary 8% surcharge, effective for one year until 2024, into the permanent rate by Jan. 1, 2025.

Dan Beans, the director of Roseville Electric, said during an April 3 City Council meeting that the request to amend city codes comes because natural gas prices ballooned by 200% to 300% over the last three years. It’s a cost the utility doesn’t foresee dropping as the proposed pay hikes would only help the utility “maintain a balance between its revenues and expenses with the current rates in place,” according to numbers provided to the City Council.

Without the hikes, the utility cannot bridge a projected shortfall of $78.5 million by June 2026, officials told the council.

“Rate increases are the hardest thing ... sometimes to vote on because it hits all of us as well,” said Councilman Scott Alvord during the City Council meeting. “I mean, we are definitely going to feel this one.”

Rates not keeping up with cost of generation

Rates increased in 2021 for the first time in seven years when council members approved a 3% increase. In 2022, the utility was allowed a temporary 8% surcharge to offset natural gas prices doubling and tripling over just a few months, Beans said.

But natural gas prices continued to rise along with other cost pressures — including the loss of about $4.5 million when a lease with the state Department of Water Resources expired — and higher equipment costs.

Projected costs to supply power to the utility’s 68,000 customers are expected to rise by 27% by the middle of 2028 — an expense projected to make up 55% of the utility’s budget, said Joanna Cucchi, Roseville Electric’s financial administrator. Without higher rates — said Eric Campbell, the assistant electric utility director — the utility could face revenue shortfalls, which could hurt its very strong bond ratings and trigger more strain.

“They would essentially drain all of our cash reserves and our rates go up,” he said. “And it becomes much more difficult to procure energy and gas in the future.”

Why is the utility increasing rates?

U.S. exports of natural gas exponentially ramped up after the Ukrainian and Russian war erupted, resulting in a 30% increase in outputs in the last two years, Cucchi said, putting pressure on domestic utilities. Prices for natural gas are expected to double by 2028, she said.

“So kind of for the time first, a lot of our natural gas supply in the United States is subject to some global market forces,” Cucchi said.

Machinery prices — such as transformers and distribution equipment — also increased between 50% to 300%, she said, due to inflation and tighter supply chains.

And the utility spends nearly $44 million a year — or 22% of its budget — on payroll and labor costs.

“No one is making money on the back end,” Bradford said.

How much will you pay?

In its pitch to the council, utility officials said the rate increases would be noticeable for most ratepayers.

For example, a current monthly bill of $130 would see a June 1 bill of $142. By the new year, that bill would rise $24 to $154 per month, according to figures the utility highlighted.

Larger power users, like a big commercial customer, would see rates jump by nearly $7,000 a month in the same period.

The Roseville Electric Utility provided cost estimates different categories of ratepayers would face if an ordinance is approved by Roseville City Councilmembers. City of Roseville
The Roseville Electric Utility provided cost estimates different categories of ratepayers would face if an ordinance is approved by Roseville City Councilmembers. City of Roseville

Bradford, the utility’s spokesman, said the city held several events this year to gauge residents’ concerns about the hikes. Many were worried about low-income residents burdened by higher rates, which prompted the power provider to amend the final plan, he said.

“To address this concern, the rate proposal increases the current low-income program, offering a 20% discount on all electric charges,” utility officials told the council. “Additionally, it introduces a new permanent $15 per month reduction to the base charge for all customers enrolled in the low-income and medical support programs.”

The $800,000 it would cost to cover those discounts would come from a state-funded program.

The rate increase is expected to be approved after the ordinance receives its second reading next month.