Seattle City Light

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Seattle City Light

700 5th Avenue, Suite 3300
Seattle, Washington 98104-5031
U.S.A.
Telephone: (206) 684-3000
Toll Free: (800) 862-1181
Fax: (206) 625-3709
Web site: http://www.ci.seattle.wa.us/light

Municipally Owned Company
Established: 1910
Employees: 1,700 (2002)
Sales: $396.1 million (2000)
NAIC: 221111 Hydroelectric Power Generation; 234920 Power and Communication Transmission Line Construction; 221119 Other Electric Power Generation

Seattle City Light has been providing Seattle with electricity since 1910. One of the largest municipally owned power companies, Seattle City Light serves more than 345,000 customers in their 131.3-square-mile service area. Seattle City Light owns or contracts the majority of its generating needs. The remainder of its energy is obtained from Bonneville Power Administration. The company is dedicated to producing environmentally responsible electricity.

Early 1900’s: Seattle Supplies its Own Electricity

Before 1910, when Seattle City Light was founded, the City of Seattle’s electricity came from a variety of neighborhood electric companies. The electricity was supplied by a hydroelectric facility that the residents of Seattle voted to finance in 1902. The hydroelectric facility was developed on the Cedar River, and it generated so much electricity that once it began generating power in 1905 the Seattle City Council decided to create a separate lighting department, on April 1, 1910, the separate lighting department was officially created and it was called Seattle City Light.

The large amount of electricity that the Cedar River facility produced gave rise to an increasing demand for power. Seattle City Light’s second superintendent, J.D. Ross, hired into the position in 1911, approached his work with a clear goal in mind. Mr. Ross believed that the Skagit River was the river with the most potential for supplying Seattle City Light with hydroelec-tricity. He worked tirelessly toward the realization of his goal to dam the Skagit. In 1918, after a prior claim to develop the Skagit River expired, Mr. Ross received the federal government’s go ahead to begin dam construction on the river. In 1924, Seattle City Light dedicated its first dam (the Gorge Dam) and it quickly began to supply Seattle with electricity. It took 30 more years, due partially to the interference of the Great Depression, for Ross’s vision of two additional dams to be completed. The second dam, the Diablo Dam had been completed in 1930, but was waylaid by the Depression until 1936. The third dam, the Ross Dam, was finally completed and on line in 1951.

Mid-1900’s: A Unified Power System Is Born

With their three dams in place, Seattle City Light in the mid-1900s was shaped by modernization and expansion. Seattle City Light focused on generating more electricity at existing facilities, building new substations, and an improved power distribution system. Another dam, the Boundary Dam located in Northeastern Washington, began generating electricity in 1967. Seattle City Light was extremely productive and successful during this time. Trouble was on the horizon, however. Just as in 1905, when increased availability of electricity spurred increased demand, Seattle City Light fell victim to unprecedented demand in the mid-1900s. High demand for electricity, combined with the regional draught of 1977 caused Seattle City Light to think increasingly more about conservation policy.

The company developed programs that educated and “in-centivized” consumers to conserve energy. Seattle City Light also began to explore alternative energy resources. Streetlights were turned out in the interest of conservation, and a large thermometer was placed on one of Seattle City Light’s buildings to motivate and track customers’ conservation levels.

In order to comfortably supply the demanded electricity, and to keep electricity rates down to the low rate that Seattle customers were accustomed to, Seattle City Light contracted power from external sources like Canada, the Columbia Basin Irrigation Districts, Idaho’s Lucky Peak hydro project, and the Olympic Peninsula. Scarcity of water continued; the years between 1987 and 1989 were particularly bad, as were the years between 1992 and 1995. Throughout this period, it was common for Seattle City Light to raise electricity rates and surcharges and then reduce them as rainfall levels returned to normal. With the increased pressure of drought, Seattle City Light’s dedication to conservation continued to grow.

1990s: Joining the Electronic Age

In the late 1980s and early 1990s, Seattle City Light in conjunction with five other major utilities, finalized a plan to automate the base map date for its 131-square-mile service area. The maps depicted the distribution system that served all of the company’s customers. This system provided Seattle City Light with the ability to align their information with information supplied by other city departments, to improve management of the company’s facilities, and to make production of detailed modeling applications and maps a much simpler prospect. The production of these models, and the capability to map the flow of electricity through the proposed distribution routes, allowed Seattle City Light to save money and make more informed decisions.

When Seattle City Light and Seattle Public Utilities agreed to consolidate services in July 1998, the utilities did so with an eye toward creating a technology-based future together. Their consolidation of services streamlined many of their customer-service based practices (they combined their databases, call centers, billings systems, and outreach efforts). The two companies also agreed to work together to add value to their customer offerings. John Gregg, the vice president of marketing for SCT Systems, the company that supplied Seattle City Light and Seattle Public Utilities with customer management, customer information software, and direct marketing programs, said, “Utilities are shifting away from being asset-based—that is, investing in transmission lines and power plants. The utility of the future may provide energy and gas, but if it has a good reputation and offers good value, it may provide cable TV service, or Web access, or home security.”

Continuing with their trend toward investing in and exploring new technologies, in 1999, Seattle City Light partnered with Public Utility District (PUD) to develop a fiber optics communication system in Pend Oreille, Washington, in order to allow for improved communications between Pend Oreille and Spokane, Washington.

2000: Energy Crisis Calls for Conservation

Faced with the reality of a seemingly constant energy crisis, Seattle City Light tirelessly urged customers to conserve. The utility company also sought out new ideas for generating renewable-energy. In September 2000, in response to the utility company’s call for propositions, the company received 62 offers from 30 different companies that proposed generating power from renewable sources like wind, sun, and the burning of landfill gases. Seattle City Light’s goal was that, by 2010, their company’s power portfolio would include approximately 5 percent non-hydro, renewable sources. As reported in the Puget Sounds Business Journal, “The utility received 23 proposals for wind projects, among them three from existing wind farms in Wyoming and California.” The utility expected that the majority of its non-hydroelectric energy sources would be wind-generated.

The demand for energy was quickly exceeding Seattle City Light’s capabilities to supply at the low rates that their customers were accustomed to. Not only was electricity production down due to poor weather but demand continued to rise. Partially because of the Northwest’s legendary low electricity rates, data centers had begun to be moved into Seattle City Light’s service area. Data centers were server farms, offices (or warehouses) that house the servers, routers, and switches that keep the Internet aloft. Data centers demand an extraordinary amount of energy for operation, and with the threat of more data centers moving to the Seattle-area, Seattle City Light feared that their infrastructure couldn’t keep up with rising demand. In October 2000, the City of Seattle came to Seattle City Light’s rescue and passed an ordinance that insisted that “large-load” customers (customers who demanded a certain amount of electricity) would have to pay for the cost upgrading the electrical infrastructure. The large-load customers were given the choice between a variety of pay-plans, but the underlying ordinance insisted that these customers would have to pay to upgrade Seattle’s electrical infrastructure in order to operate within it. Heidi Wills, a Seattle City Council member told the Puget Sound Business Journal, “We left the language of the ordinance as flexible as possible to help in the contract negotiations. … It will depend on the customer if they want to pay more for the infrastructure costs upfront or pay more over time.”

2001: The Energy Crisis

With the cost of electricity spiking on the wholesale market, Seattle City Light was forced to look for ways to raise their rates and continue to actively campaign and urge customers to conserve. In April 2001, Seattle City Light refinanced more than $100 million of its bonded debt in order to save several million dollars. Seattle City light spent $256 million buying outside power in the first three months of 2001, which is remarkable when compared with the fact that the utility spend $90 million for outside electricity for all of 1999. During 2001, Seattle City Light increased rates three times.

Company Perspectives:

Seattle City Light is in business to sustain and enhance the community’s quality of life by providing excellent energy services to our customers and to be the most customer-focused, competitive, efficient, innovative, environmentally responsible utility in the United States.

One of the major contributors to the Northwest’s lack of energy was the California energy crisis. The Northwest had been involved in a share/trade plan with California which allowed for California to supply energy to Washington during the winter when Washington demanded large amounts of electricity to stay warm and Washington would supply energy to California during the summer when that state required additional energy to keep cool. Seattle City Light found themselves getting the short end of the stick at the end of 2000 and into 2001 when, as Tony Kilduff, a strategic advisor for Seattle City Light, told Janet Wood (writing for International Water Power & Dam Construction) that, “Problems began in May 2000 when major generators in California figure out the possibilities. Supply contracted as they headed into the cooling season [that is, the summer season with increased use of air conditioning]. People can’t adjust demand that quickly, and their utilities have an obligation to serve them. Generators, on the other hand, could choose to operate or not based on price and profit.” Seattle City Light strained to locate enough energy to fulfill their customer’s needs, but “By September we could see that these wildly high prices were not coming back down. We knew then we wouldn’t meet our financial targets for the year and went to our City Council. We told them we had a US$60M hole—about 15% of our operating costs—and they agreed to a 10% rate adjustment.” The situation worsened as the year progressed, and “We issued about US$700 million in debt. … Then everything changed on 19 June. That was when FERC finally decided to act. It imposed a west-wide price cap and issued a ‘must offer’ order for generators if they can generate. The bottom fell out of the market and our surplus is no longer the savior we thought it would be. We got hammered when prices shot up, and now we’re being hammered as they go back to normal.… There are no fancy fixes for this. In the end the ratepayer will carry the cost.” Seattle City Light was pushed almost to bankruptcy as a result of this energy crisis.

Seattle City Light attempted to fight some of the energy deficiency on the conservation front. Although Seattle City Light, by 2001, had already succeeded in imposing the toughest energy-efficiency standards in Washington State, the utility proposed even stricter standard for new buildings. Some of the standards included: more energy-efficient lighting in offices, medical centers, and schools; continuous sensors that adjust or turn off lights according to the amount of daylight in the room; a penalty for using electric heat; and energy-efficient windows.

When the electricity crises had begun to ease in August 2001, Ed Mosey, a spokesman for the Bonneville Power Administration, said that he believed that the lower rates reflected lower demand due to conservation measures, cooler-thanexpected weather, and the temporary closure of the state’s aluminum smelters (as reported in the Puget Sound Business Journal). However, many big electricity users were cautioned against expecting lower rates, in fact, Seattle City Light still found it necessary to raise rates, although not as high as they had expected.

2001: Fighting Global Warming

Seattle City Light’s dedication to conservation received national attention when they announced, in light of President George Bush’s decision to not support the Kyoto Protocol, that they promised to reach zer: net greenhouse gas (GHG) emissions, to achieve the equivalent of adding an average of 100 megawatts of capacity through conservation efforts, and 100 megawatts of non-hydro renewable energy within 10 years. Doug Howell, strategic advisor for Seattle City Light, told Business and the Environment, “The first part of the message is that while it is called global climate change, we very much understand the impacts here locally. We were a local cause of the problem [of GHG emissions]. We have very clear local effects. And we are going to be part of the solution.” In July 2001, the city council announced its support for the Kyoto Protocol, and announced that they wanted to see a proposal on how Seattle could best achieve GHG reduction on par with the Kyoto Protocol’s goal. Following this announcement, in November 2001, the city council unanimously approved a proposal to empower Seattle City Light to begin purchasing power from the State Line Wind Generating Plant in Walla Walla County. This movement by the city council made Seattle City Light the largest public power purchaser of wind power in the United States.

2002: More Trouble Ahead?

Despite all of Seattle City Light’s conservation practices, the utility remains saddled with a projected $160 million budget deficit from the past years’ energy crisis. In 2002, the average homeowner’s electricity bill was $324 more per year than it was in 1999. Although electricity prices on the wholesale market dropped in late 2001, Seattle City Light was stuck with their own bills to pay. The utility company was forced to look toward the Seattle city council for help once more, and to continue charging high rates until the city would come to their rescue once again.

Principal Competitors

Avista Corporation; PacifiCorp; Puget Energy, Inc.

Key Dates:

1910:: City of Seattle establishes Seattle City Light.
1924:: Seattle City Light’s first dam begins electricity generation.
1951:: Seattle residents vote to buy-out privately owned Seattle City Light competitors, creating a unified power system.
1977:: A drought hits Washington State and drastically effects electricity production.
2000:: Seattle City Light announces a goal to have non-hydroelectric, renewable resources contribute approximately five percent of the company’s power portfolio within ten years.
2001:: Seattle City Light receives permission from the Seattle City Council to raise electricity rates by ten percent.
2002:: Seattle City Light faces a $160 million budget deficit.