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Rate Increase Questions How does the price of natural gas affect the cost of electric energy?Natural gas is a common fuel type used in electricity generation facilities because it is relatively efficient and clean compared to other sources such as coal, fuel oils or nuclear. Approximately 35 percent of electricity used in California is produced using natural gas-fueled generators. The price of natural gas has doubled from a few years ago, and every utility in the state is being affected by this rapid increase in cost. Although SVP uses less natural gas in its power make-up than the state, we too are affected by the increased costs.Will rates come back down again?We do not expect rates to come down again. This series of increases (3 percent in January 2008 and another 3 percent in January 2009) will not completely cover the new costs we have experienced in today's market. We do not expect the cost of natural gas to revert back to pre-2004 levels or even drop significantly in the foreseeable future. SVP will have to draw from our Cost Reduction Fund—a special set-aside account for mitigating swings in our operating costs—to cover current and future shortfalls. Our utility debt service expenses (the amount we pay for borrowed money) will drop in 2011 when a major bond will be paid off. This will create a more sustainable financial situation for the utility and its customers, but further increases cannot be ruled out if the cost of natural gas continues to increase or if the cost of adding more renewable energy becomes a factor.Is financial assistance available?Yes. Silicon Valley Power offers a 25 percent discount off of the normal rate to residential customers who qualify for financial assistance under our program guidelines.Will my rate increase be the same as everyone else's?All rate classes will see the same rate increases as scheduled—a 3 percent increase in January 2008 and another 3 percent increase in January 2009.When will I see this rate increase on my bill?Look for changes on your February bills (covering January energy use) that not only reflect the new rates, but also spell out the cost per kilowatt-hour very clearly.What are the primary cost drivers behind these two rate increases?The primary drivers behind the need to increase rates are the natural gas we use in running our power plants and the higher cost of wholesale power we need to purchase when our customer's collective energy use exceeds our available resources.Will other utility costs be affected?SVP's other utility costs remain relatively stable with some adjustments for the cost of living.Will our electric costs be less than PG&E's? Less than other Bay Area cities?Yes, the cost for electricity in Santa Clara will remain substantially lower than other Bay Area cities. Residents in Santa Clara will pay about half of what a resident in San Jose, or any other PG&E-supplied area, will pay for electricity. Businesses benefit from a 25 - 35 percent lower bill as well.Are other electric utilities raising rates?Yes. Almost all electric utilities in California and many more across the nation are raising their rates due to the higher costs of natural gas. In our latest survey of system average electric rates for all California utilities, Santa Clara rates will remain the lowest in the state even after the two 3 percent increases are levied.Have the costs to build the new power plant and transmission line affected the cost of electric energy? How?Yes. Both the new power plant and the transmission lines work to help SVP avoid even greater impacts from the currently volatile and increasing energy prices. Having ownership of a significant generation resource provides a great deal of flexibility in making energy choices. If the price of power on the wholesale market is high, the plant runs to save money for our customers. If the price is low, we don't run the plant and buy wholesale power on the low market.In either case, we are doing better than we would without the new power plant and transmission line. Latest estimates suggest we are saving thousands of dollars the majority of days by operating the plant in this flexible manner. The transmission line project has significantly reduced the amount of money that SVP pays the California Independent System Operator for the delivery of energy to Santa Clara. What can I do to compensate for rate increases?Although our rates remain significantly below other Bay Area communities, it's a good time to take advantage of our many energy-saving appliance rebates, home energy audits, and financial assistance programs. You can also call 408-244-SAVE (7283) for more information.What about investing in renewable energy to get away from high fossil fuel costs?For more than thirty years, Silicon Valley Power has led the way in California by emphasizing renewable energy in its portfolio. In 2007, over 50 percent of SVP's power came from renewable sources such as geothermal, biomass and hydroelectric. And SVP has entered into contracts for a new wind resource supply and is currently negotiating for more to affirm our continued leadership in renewable energy.At SVP, we believe a diverse portfolio will provide better stability and lower costs in the long run. The large portion of renewable energy already in our mix led us to diversify and invest in our own natural gas power plant, the Donald Von Raesfeld power plant. Although our costs have risen modestly, our diverse portfolio will continue to protect our customers against volatile power costs and resource shortages. For individuals who want to invest in renewable energy, SVP has the highest residential solar electric rebate in California and we will even pay for the associated residential solar permit fees.
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1500 Warburton Avenue; Santa Clara, CA 95050
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