Power rates, sources explained
The rate paid by Boulder City for power purchased on the open market rose from 3.945 cents per kWh in 2018 to 23.859 cents per kWh in 2023, an eye-popping increase of 500% or six times the 2018 cost. But what exactly does “open market” mean?
Every form of media known to the world makes decisions on content based to some degree on the same thing: the way the people who consume that media respond.
TV stations use rating services, websites count clicks, social media services are driven by “likes” and “shares” and newspaper reporters get phone calls, emails and sometimes old-school letters in the mail.
A topic that has garnered a lot of community attention is the city’s utility rates and the need to increase them. A $1.65 per kilowatt hour (kWh) figure that was published in the May 11 issue of the Boulder City Review, which came from the Utilities Department and was used in a City Council meeting, was incorrect. The actual figure is 23.859 cents per kilowatt hour.
The rate paid by Boulder City for power purchased on the open market rose from 3.945 cents per kWh in 2018 to 23.859 cents per kWh in 2023, an eye-popping increase of 500% or six times the 2018 cost.
But what exactly does “open market” mean?
Where Boulder City electricity comes from
When you plug into a wall socket in Boulder City, the electricity that comes out to power your lights or washing machine or cell phone charger comes from a blend of four sources:
• Hoover Dam
• SLCAIP (Salt Lake City Area Integrated Projects, a group of hydroelectric sources that includes Glen Canyon Dam and eight other smaller facilities in the Upper Colorado River Basin)
• Solar, specifically, the Townsite facility southwest of the city
• Silver State Energy Association. This is a group that combines employees of the Colorado River Commission and the Southern Nevada Water Authority that work as a kind of trading center to manage electricity generated from a number of facilities in Southern Nevada that mostly generate electricity by burning natural gas. This is the part of the equation that is referred to as the “open market.”Boulder City is unique in terms of its relationship to Hoover Dam and not just via history and location. It is the only municipality in Nevada with a direct contract with the Bureau of Reclamation for power from Hoover Dam. The city gets about 1.7% of the electricity generated by the dam. About 19% of the power goes to Arizona and more than 53% goes to California. About 23% goes to various agencies in Nevada but only Boulder City has a direct contract.Since the Townsite solar facility came online, the cost for electricity from a combo of solar and hydroelectric sources has been pretty stable at about three cents per kWh. But the supply has not been stable.When the water level in Lake Mead drops, so does the ability to produce power and it is not a simple case of the dam producing electricity at 100% until the water drops below 950 feet when power generation would go to zero. According the Bureau of Reclamation, in 2022 the power generated by Lake Mead was off by more than a third from the peak potential when the lake is full.So, less water means less electricity which means that the 1.7% that goes to Boulder City — about 27% of the total power used by residents and businesses — is also down by some 33%.All of that means that the city utility has to buy an increasing amount of power from Silver State and that price per kWh is not stable. As the cost of natural gas has increased, the cost per kWh (as noted earlier in this article) has gone up with it from about four cents per kWh in 2018 to almost 24 cents in 2023 and costs for natural gas are not projected to start falling in 2024.In 2018, the city utility spent $5.9 million on electricity. In 2023, that figure is north of $12 million.
Cushioning the blow
Just in the 2023 fiscal year, the difference between what was budgeted for electricity versus the actual cost was $3 million.
“We don’t have to pay that $3 million back right now,” City Manager Taylour Tedder said this week. “But we will have to pay it back over the next few years.”“Not including the recovery of the shortfall from 2023, in order to be even we would have to raise rates 10% right now,” said Utilities Director Joseph Stubitz. Tedder added that the 10% would have to be a ‘year over year’ increase. In other words, 10% per year for the next five years.Enter the American Rescue Plan Act (ARPA), the $1.9 trillion economic stimulus plan passed into law in 2021.“The city utilities are not separate,” explained Stubitz. “Water and wastewater and electric are all basically one fund. So when money budgeted for one utility is no longer needed, it can be applied to one of the other utilities.”ARPA money was specifically meant to fund physical infrastructure or “capitol improvements in city-government speak.” The FY 2023 budget included money to pay for some infrastructure in Boulder City related to water and wastewater and when ARPA funds became available, that money was used for the utility projects which freed it up to be used to keep electricity rates as low as possible.Per the recent city council action, rates will go up between two and four percent for a typical residence based on usage. To put it into perspective, a three percent raise over the course of the five years that was approved will come to just shy of 16% at the end of the five years. The 10% that is actually needed to cover current costs would result in an increase of 61% over the same period.“ARPA funds can only be used for water or wastewater capitol projects,” Tedder said. “So we are using that money for planned water and wastewater projects.” He went on to say that the shift in already budgeted funds over to the electric utility was done to minimize the effect of utility rate increases on residents of Boulder City.