Was Seattle City Light prepared for what transpired in the energy crisis of last year?
In most respects, the utility was well prepared and acted quite responsibly on behalf of its citizens and ratepayers. However, like virtually all of the other utilities on the West Coast, City Light was not prepared - and could not have been prepared - for power prices that exceeded by an outrageous margin anything else we had ever experienced. Our shortage in the first few months of 2001 was exacerbated by one of the worst droughts on record, which cut our hydroelectric resources in half. Yet even if market prices had been double their historic highs, City Light could have closed the shortage with relatively little impact on customers. Unfortunately, prices early in 2001 were 10 times normal levels, and the federal regulators with the legal responsibility to prevent price gouging chose not to act.

Is City Light still losing money?
No. City Light is on a path to realize net revenues of about $90 million by the end of 2002. This money will go toward paying off our short-term debt. We had hoped that our net revenues would have been stronger, paying back our debt earlier, but West Coast energy prices are quite low. These prices appear to us to be abnormally low, and forward markets show that prices may be coming back up to more rational levels. The more that happens, the quicker City Light will pay off its debt. The important thing is that City Light can sell power, and the debt burden is being paid off not just by the utility's own customers, but by others outside our service territory.

How much money has City Light borrowed and why?
City Light borrowed $182 million in short-term revenue anticipation notes to cover the cost of power the utility had to buy in 2000 and 2001. City Light also raised rates 56 percent, on average, with a portion of that increase coming from the pass-through of BPA surcharges. City Light is also accessing the city's cash pool this year and next to deal with short term cash needs. By paying back the money it has borrowed over three years, the utility is spreading out the effects of the combination drought/deregulation meltdown of 2000-2001. If the utility had chosen to generate all the money it needed from rates, the increase would have been much, much greater.

Why didn't City Light anticipate rising power costs?
Power costs rose so steeply and unexpectedly that no utility could have been prepared for them. Power suppliers were taking advantage of the California market, which forced prices up all over the West. In the past, the Federal Energy Regulatory Commission has intervened to limit unjust rates. But during this past crisis, the FERC refused to act for several months. By the time FERC did act, on June 19 of 2001, it was too late.

Why did City Light sell its interest in the Centralia steam plant and leave itself more exposed to the market?
The sale of Centralia had been in the works for several months and was completed a few weeks before prices began to rise. City Light and seven other utility partners wanted to sell the plant because of air pollution problems and the need for expensive scrubbers and millions of dollars in site restoration.

When energy prices began to rise, why didn't City Light enter long-term contracts to cover its market exposure?
City Light covered a portion of its exposure ahead of time, but was reluctant to enter into contracts that would cover all its exposure at such high prices. History indicated that the FERC would step in to cap prices. Also, no market event like this had ever happened in the history of the American electricity business. While the blow to City Light was a hard one, other utilities are now saddled with long-term contracts for wholesale power at prices far above the current market. City Light has plenty of resources in place at reasonable prices and will be well set to handle future loads.

Did energy policies enacted by the City Council worsen the effects of the energy crisis on City Light?
The City Council sets broad policies that affect City Light over the long term. Most energy policy decisions are long-term decisions. Some policy decisions made in the past may not look that good when set against the relatively short-term energy crisis, but those decisions should not be judged solely on that basis. Developing the utility's hydro and green power resources and choosing conservation over investment in nuclear power are decisions that have withstood the test of time. The outcome of the council's policies on renewable resources, responsible contributions to global warming, continued conservation investment should be judged over time and not against the mayhem in western markets last year.

Do the Mayor and City Council provide enough oversight, or is some other, more technically expert board a better way to govern a public utility.
The governance of a municipal utility by a directly-elected mayor and council has proven to be effective and responsive to customers. The city's elected officials have made good decisions about long-term investments that have kept Seattle's power reliable and affordable. Let's not let the anomaly of last year's energy crisis dictate a change we may regret.

Has City Light made any attempt to trim its own budget during the energy crisis?
From 1999 through 2001, City Light cut about $30 million from capital and operating programs. In 2002, the utility has targeted another $10 million worth of cuts in operating expenses. Over the last 10 years, City Light has reduced full-time-equivalent positions from 2,076 to 1,799.