SMUD dropping 1.3% surcharge

SMUD will drop its hydroelectric rate surcharge on customer bills effective next month. The storms over the last week, combined with a wetter winter after years of drought, delivered enough precipitation to signal full reservoirs in SMUD’s hydroelectric generation system in the Sierra.

The current 1.3 percent surcharge went into effect automatically last April as a result of the 4-year drought. The surcharge is one of several mechanisms SMUD has adopted to reduce financial volatility from swings in precipitation and hydroelectric generation.

The impact of the surcharge was about $1.20 a month for residential customers using the average 750 kilowatt-hours. Business customers who tend to use more electricity may see more savings.

The surcharge was triggered last year after SMUD exhausted an account it maintains to pay for replacement power in years of tight water supplies and precipitation lagged far behind average. The Hydro Rate Stabilization Fund (HRSF) was drawn down about $40 million during the drought years since 2011.

This winter, though, precipitation and snowpack are much improved allowing for not only the surcharge to be lifted but also to start putting a small amount of funds back into the HRSF.  “The good news is that our reservoirs are filling, and with more storms on the horizon, we are hopeful we can even start transferring to the HRSF,” said Jennifer Davidson, SMUD budget director. “Our customers not only get some bill savings, the electric company they own might be able to begin rebuilding the account SMUD relies on in future dry years.”

The amount of the hydro surcharge and transfers to and from the HRSF is determined by a formula based on annual precipitation and wholesale energy prices. The exact amount of money that will be transferred is calculated on March 31.

SMUD uses precipitation records from an official weather station at Pacific House in El Dorado County to determine the hydro rate. Last weekend’s storms dumped 5.6 inches of rain at Pacific House, bringing the annual amount there to nearly 52 inches since April 1, 2015.