The City Council approved a 3 percent rate hike. Rates have increased annually for six years running.

COURTESY OF THE CITY OF FOREST GROVE - A chart compares the residential rates for electricity from Forest Grove Light & Power to two other regional power agencies: Portland General Electric (PGE) and McMinnville Water & Light.The cost of power is on the rise again in Forest Grove.

The Forest Grove City Council approved a 3 percent increase to electric rates on Monday, Jan. 8, marking the sixth consecutive year of rate increases in the city.

City staff justified the increase by pointing to three major factors.

Last October, the Bonneville Power Administration, which sells power generated by hydroelectric dams on the Columbia River, raised its wholesale rates, increasing the amount Forest Grove Light & Power has to pay to purchase power from the BPA. Those costs are generally passed on to the customers of agencies like Forest Grove Light & Power that buy electricity from the BPA.

The BPA's rules around the purchase of power are also a contributing factor to the rate hike in Forest Grove. Forest Grove Light & Power was required to sell power at a loss this fiscal year, because it purchased a portion at an increased rate in anticipation of high demand (above the BPA's defined "rate period high water mark").

The city also has internal costs to cope with. Salaries and benefits for city staff, including those at Forest Grove Light & Power, are expected to continue increasing, providing another reason for the increase. One-quarter of one percent out of the 3 percent rate increase is specifically earmarked to help pay for Forest Grove Light & Power's share of increasing defined benefit costs for employees.

Forest Grove Mayor Pete Truax said the major driver of the city's rate hike is the BPA's own rate increase.

"In good conscience and with appropriate thinking, we cannot justify not passing that on," Truax said. "The people that use the power have an obligation to pay for that power. We do understand, and that's why we have the money that is in the (energy assistance) fund to help people that truly, truly need the help to make ends meet on their electric utility bill, but … if anyone wants to think that we are not concerned about that, they are, frankly, being misled. The City Council takes this action, but it does not take it lightly."

Paul Downey, Forest Grove's administrative services director, noted that Forest Grove's power rates are still well below those of Portland General Electric, which provides electricity for much of the Portland area's residential and commercial customers.

City Councilor Timothy Rippe said that because the City of Forest Grove operates its own power agency rather than contracting with a power company, turning a profit is not a goal.

"What we're doing is covering costs only," Rippe said. "We're not trying to make any sort of profit. And that's one reason, and a major reason, why we're able to keep our rates where they are, to the benefit of our residents, and not increasing them as any other publicly traded power utility would do. So it is a tremendous benefit to our residents, and it is a city-owned utility, and we are just covering costs. We're not doing anything beyond that."

This year's rate increase is the smallest in years.

After raising rates the previous fall and again earlier that year, the Forest Grove City Council received a report from staff in late 2014 recommending 6 percent increases in each of the following four fiscal years. However, while the council approved a 6 percent rate increase that took effect in January 2015, it later approved smaller rate hikes of 4.5 percent in 2016 and 4.75 percent in 2017.

According to staff, the smaller amounts in 2016, 2017 and now 2018 are what is needed to meet Forest Grove Light & Power's financial goals. That is because the city agency's fund balance is "stronger than the financial model predicted it would be" in the 2014 rate study, according to a presentation given to the City Council late last year.

"Fund balance is stronger than we thought it would be, so we were able to lower the increase from the 6 to the 3 percent," said Downey, crediting a slowdown in capital projects and staffing vacancies for the better-than-anticipated finances.

Downey said staff will recommend another cost-of-service study in the next fiscal year, which could set out a proposed schedule of increases in the years to come.

Monday's vote came after a scheduled public hearing, which was advertised in the News-Times. No one signed up to speak for or against the rate increase.

The rate increase will take effect Monday, Feb. 20. Customers will begin to see it reflected on their April utility bills.

The city calculates that the average residential customer will see an increase of about $2.35 per month from the rate increase.

By Mark Miller
Editor, Forest Grove News-Times
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