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Originally published Monday, May 7, 2012 at 7:08 PM

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Mayor, business groups disagree on effect of higher electrical rates

Business leaders and Seattle Mayor Mike McGinn disagreed Monday about whether a proposed series of City Light rate increases over the next six years would be good for business.

Seattle Times staff reporter

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Mayor Mike McGinn maintained Monday that a new six-year City Light proposal for 4.7 percent annual rate increases is good for businesses, despite criticism from some business groups and companies in Seattle.

If approved by the City Council, the plan would provide predictability, McGinn said, about rates that have fluctuated dramatically in recent years.

The mayor also said his proposal was proactive. "Politics-as-usual would be to kick the can down the road and let some future generation deal with it," he said.

Business leaders responded by saying City Light needed to better control its costs before seeking such increases. Raising rates "is contradictory to economic development and job growth," according to the Manufacturing Industrial Council of Seattle.

The mayor's proposal sets the stage for what could be contentious debate this summer at the council; the council is also scheduled to reconfirm City Light Superintendent Jorge Carrasco as the utility's leader for another four-year stint.

Unveiled at a news conference Monday, City Light's strategic plan calls for average annual electricity rate increases of 4.7 percent, a compounded total of about 31 percent over six years.

For the average home, the increase would amount to roughly $35 a year, according to City Light. For a hotel it would translate to an extra $109,000 annually; and for a large customer, such as a steel mill, the proposed increase would amount to $632,000 more per year.

The first two years of increases could be approved this year as part of the city's budgeting.

Some of the utility's biggest customers, including Boeing, have lobbied against such rate increases, saying the city-owned utility needs to attain savings through efficiencies before it jacks up rates.

Last year, consultants hired by City Light identified $35 million in potential savings, based on comparing City Light's staffing and other spending with peer power companies.

City Light is committed to saving $18 million a year through efficiencies by the third year of the plan. Some proposed efficiencies require changes in staffing practices, which means negotiating changes in union contracts.

City Light says it needs 4.1 percent increases just to maintain its current level of service, including completing projects already under way. It needs more to invest in new equipment, including a new metering system and a substation north of downtown to keep up with construction and growth in the area.

The Seattle Metropolitan Chamber of Commerce sent the City Council a letter stressing that any rate increases "must be connected with an equal focus" on controlling costs.

The manufacturing council's letter said "too many issues remain unresolved to move forward with such an aggressive plan." The group wanted more details about City Light's finances, and it questioned the costs and benefits of new meter technology.

City Light's six-year plan was developed through a citizen review panel that met 32 times in two years.

The eight-member panel endorsed the plan, praising the transparency and integrity of the process. But one member representing industrial customers objected to the rate increases. Matt Lyons, general manager at Nucor Steel, believes the increases will hit businesses "very hard," according to a letter from the panel to McGinn.

"The rate increases do not mean Nucor would move," Lyons said in a separate statement. "They do however diminish opportunities for the kind of investment that helps the mill stay competitive in the global market over the long term or grow as the economy picks up."

McGinn acknowledged that big customers, such as Boeing and Nucor Steel, would feel the increases. Nucor paid the city $19 million for electricity in 2010; Boeing, $14 million. Because the companies create good-paying jobs, the mayor said, the city might want to consider a different rate structure for them.

As for the council review to come, McGinn said: "We invite the critics to come in, take a look, and say what they'd do differently."

Bob Young: 206-464-2174 or byoung@seattletimes.com

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