Understanding your commercial rates

In 2020, both Tacoma Power and Tacoma Water have rate adjustments that will impact commercial customers. Although Tacoma Public Utilities and its operating divisions, Tacoma Power, Tacoma Water, and Tacoma Rail, are part of the City of Tacoma’s government, we don’t receive tax revenue. Instead, we must cover the cost of operations by raising revenue on our own, through retail rates, fees, or selling excess power and water on the wholesale market.

Tacoma Water’s rate adjustment went into effect January 1 and supports the operation of our filtration facility, maintaining our wells and water main infrastructure, and protecting the lands around our water sources.

For Tacoma Power, whose rate adjustment goes into effect April 1, operations include generating or buying electricity, transmitting it at high voltage from our generators to our service area, and distributing power at lower voltages to individual customers. Various customers use our system differently; therefore, we allocate expenses for the system differently. For instance, we don’t charge large industrial customers that receive electricity at transmission-level voltage for our distribution-system costs, but we do charge them more proportionately for the price of the power we generate or buy.

Our rates professionals project utility spending for each biennium and allocate costs among the various rate classes according to the cause of the cost. The goal is to ensure that we distribute utility costs proportionately to each rate class according to what it costs to serve each group.

Sample Types of Costs Used to Design Tacoma Power Rates from April 2019 to March 2021

  1. Purchased Power
  2. Tacoma-owned Generation O&M (including fish and recreation)
  3. Conservation O&M
  4. Fish and Recreation Capital
  5. Tacoma-owned Generation Capital
  6. Revenue Cycle Services (metering and billing)
  7. Customer Service

Federal and State environmental and reliability statutes mandate some costs. We engage in proactive financial planning to provide the lowest-cost, risk-mitigated financing. Other objectives include assigning costs over time of use. For example, appropriate financing plans for large capital projects spread the effective cost across multiple biennia because the benefits of our investments will accrue for years.

Retail ratepayers don’t bear all of Tacoma Power’s costs. The overwhelming majority of our power supply comes from hydroelectric dams, so the quantity of electricity available varies from year to year depending on water conditions. To ensure reliability, we plan for sufficient power even during drought conditions. When average water conditions exist, we have extra power to sell on the wholesale market. We use that money to offset utility costs and lower our retail rates. The amount of wholesale revenue we can use to lower retail rates varies from year to year depending on market prices and available water.

Learn more about our rates.

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