Council tweaks Seattle City Light strategic plan

Last Thursday the Council’s Select Committee on Seattle City Light Strategic Planning met for the third, and probably last, time to consider amendments to SCL’s biennial update to its master plan.

Four amendments were proposed. The first was a recognition that SCL’s retail load is slowly declining, and asks the utility to prepare for the financial impacts of that trends in time for its next Strategic Plan update in 2018 — as well as mitigation options. Specifically, the Council is asking SCL to:

  • pursue authority to electrify  both transportation and Port of Seattle operations. Currently state law forbids public utilities from pursuing strategies to convert consumers from one form of energy to another, even if it would reduce carbon emissions. So doing this would require city’s Office of Intergovernmental Relations to lobby the state Legislature to change that law.
  • change SCL’s approach to load forecasting; lately its retail forecast has been consistently high, which has led to revenue shortfalls.
  • various approaches to restructuring the retail rates that would buffer fluctuations in retail load.

SCL has already written a memo to the Council with some initial analysis on how it might deal with the issue. The retail load trend is clearly the biggest challenge that SCL is facing right now, and there are no clear solutions so it’s appropriate that the Council is asking the utility to do some homework on it.

The second amendment related to expanding SCL’s apprenticeship program.  The concern here is twofold: first, that 50% of SCL’s workforce is eligible to retire in the next five years, so it needs to be investing in its next generation of workers now. In the prior meeting, the Council asked SCL leadership to come back with thoughts on how much they could expand the apprenticeship program – as much as 50 additional apprentices per year up to a total increase of 200 . But Seattle City Light assumes a 3:1 ratio between apprentices and journey-level workers so that there is enough supervision and opportunity for on-the-job learning for each apprentice. According to SCL’s math they can’t sustain a 50-per-year increase up to 200, though if  many of those apprentices do get hired and increase the ranks of supervisors for apprentices, that does increase the SCL’s ability to hire more apprentices.  But a larger problem is the cost. A “fully burdened” apprentice costs SCL about $204,000 per year. Assuming those extra costs are covered by higher rates, it would result in a rate increase of 0.4% the first year, and up to 1.3% in the later years.  Several Council members, including Burgess, Harrell, Gonzalez and Juarez, all balked at the cost.

But what really put a stake into the heart of the plan to substantially increase the apprenticeship program is that it has a terrible record on racial equity.  In a recent year, the program began with 950 applicants. At the end of a tough process involving a working exam, a written exam, and an interview (with a panel of interviewers appointed by SCL), the utility ended up hiring 15 apprentices — 14 of whom were white men. This shocked many Council members, most notably Council President Harrell who said he was “disgusted” and that SCL should be outraged by the outcome of their process.. As Council member Gonzalez pointed out, in its current form the apprenticeship program if expanded would likely decrease diversity at SCL.

In the end, the committee broke up the amendment into two parts. The first, which addresses the need to address future hiring needs and increasing diversity, reads:

Section 7: Workforce Planning. Much of City Light’s workforce is eligible to retire, or will be eligible to retire in the near future. Historically, apprenticeships have been used to train and hire the next generation of skilled workers. The apprenticeship program should also provide opportunities for individuals who have historically not been included in the construction industry, including women and people of color, and expansion of the program will allow for greater inclusion of these populations. Council signals its intent to work with City Light to establish new strategies and approaches, including legislation that would encourage recruitment of apprentices from pre-apprenticeship programs identified in the City’s Project Hire Program, to ensure a diverse population is hired into City Light’s apprenticeship programs as these will be City Light’s future workforce.

This adopted unanimously.  The second part, which directed SCL to expand the apprenticeship program, reads:

City Light should amend the revenue requirements embodied in its Strategic Plan to reflect an increase in its apprenticeship program up to 80% of its possible capacity to support the program, and to adjust the rate path for the Plan as needed. The new rate path should be reflected in the rate ordinance the utility presents to the Council.

This had little support in its current form, and withdrawn. Committee chair Sawant said that her office would rework it, and we might see it in a new form when the Strategic Plan comes before the full Council for final approval next week.

Sawant’s office also proposed another amendment related to how retail rates are set for different classes of customers. SCL currently has seven classes of customers, including residential and various sizes of business (in terms of power usage).  The rate charged to each of these customers is different, based in part on the reliability of the service provided but mainly on the cost of delivering power to that customer. In fact, state law says that public utilities must establish rates based upon the cost to deliver to those customers and can’t arbitrarily charge one rate class more in order to make it cheaper for another class. what this means is that SCL’s largest customers, such as Boeing and Nucor, have lower rates because of their economies of scale — delivery is cheaper, particularly compared to residential customers. This bothers Sawant, who doesn’t want business customers to get a better deal than ordinary workers. she can’t violate the law, but she can work around it since SCL has complete control over defining its rate classes. So Sawant prosed that SCL switch to a single rate class that includes all of its customers: from a single-family home all the way up to Boeing. In that way, all SCL customers would pay the same per-kilowatt-hour rate. The amendment reads:

Section 8: Rates Classes. The rate ordinance that City Light presents the Council prior to the next budget cycle will contain a single rate class covering all customers, and replacing the exiting rates class structure, except that the Low Income discount should continue to apply to customer as it does now.

It’s a clever workaround, but she got no support from her colleagues on the Council. Even Council member O’Brien couldn’t back it, calling it a “too blunt an instrument.”  Sawant gave it her best argument, equating the current SCL rate structure to the state’s regressive tax structure (ignoring the fact that the cost of delivery is, in fact, lower for SCL to serve large companies) but to no avail. The amendment failed.

At the end of the day, the Council made no substantive changes to the proposed strategic plan, but signaled two areas it wants to see addressed in the future:  retail revenues in light of load decreases, and investments in the utility’s future workforce. With those two tweaks incorporated, they sent the amended ordinance adopting the Strategic Plan on to the Full Council for final approval.