Winter Weather and Effects of Inflation
This winter has provided a series of much-needed rain and snowstorms. The National Weather Service reports the California snowpack is now at 243% of normal for this time of year, with 76 stations reporting.
This is a departure from prior years of drought conditions. The report indicates increased water flow will be available at reservoirs, dams and hydropower generation facilities, which we hope will benefit power generation in the West and California, specifically.
As I indicated in prior messages, inflation has affected prices for many of us, including Lassen Municipal Utility District (LMUD).
The rate of inflation for energy in the West from October 2021 to October 2022 is 17.6%. Due to the cold weather across the nation in November and December 2022, we have seen natural gas prices increase significantly.
The energy and electricity markets in California are affected by natural gas prices, which affect the cost of electricity produced by natural gas-fueled power plants. This is reflected in LMUD’s cost of purchased power, which has increased from $13.6 million in 2021 to $15.6 million in 2022.
As you can see on pages 28 and 29, energy is not the only thing hit by inflation. The cost of everyday goods has increased, and we are all feeling the crunch. We are doing our best to source goods and services at the lowest possible price without sacrificing quality and timeliness.
We continue to work with Western Area Power Administration, and they continue to manage power procurement to control costs using the tools at their disposal, which include primarily forward or future electricity purchases. Although Western Area Power Administration (WAPA) buys a portion of our power in advance to help shield us from market extremes, we are still subject to power market fluctuations which, in turn, affect our retail power rates.
As we face this uncertain power market—where wholesale rates can swing widely depending on conditions—we do our best to protect our customers from its effects. The reality of the situation is that when the price of the product we buy increases, those costs are ultimately paid by the consumer. The same is true for any commodity, from fuel to food.
One of the benefits of public power is that LMUD is a publicly owned, not-for-profit utility, meaning we collect only what is necessary to keep the utility running. Unlike for-profit organizations, we do not pay dividends to shareholders. Our mission is to provide reliable service at the most reasonable cost.
It is an unfortunate fact that as wholesale power prices rise, so do retail rates. The future of purchased power may be uncertain; however, what is certain is our commitment to the community we serve. That’s one thing that will never change.
Pat Holley
General Manager