Citing a 60% rise in its wholesale natural gas costs over the past five years, the Sacramento Municipal Utility District (SMUD) announced Tuesday it will seek a 7% retail rate increase for its 585,000 residential and business customers, effective Jan. 1, 2008. A public hearing and decision on the proposal by the seven-member elected SMUD oversight board is expected to take place in early June.

SMUD General Manager Jan Schori said she is seeking an increase averaging 7% to cover the cost of aging equipment and the public power utility's extensive renewable energy programs in addition to meeting what she called "rising power costs." Even with the proposed increase, SMUD rates on average would be 25% lower than those of neighboring private-sector utility Pacific Gas and Electric.

In a ballot measure, SMUD customers last November rejected a utility-proposed annexation of PG&E electric customers in three neighboring cities and an unincorporated area in adjacent Yolo County west of SMUD's territory in Sacramento County. PG&E spent millions of dollars in a high-profile political advertising campaign to beat back the annexation, which received favorable votes in areas proposed to be added to SMUD.

"As consumers have experienced high prices at the gas pump and in home-heating bills, SMUD [similarly] has faced sharply higher prices for the natural gas it buys to fuel power plants," Schori said."In addition, natural gas prices have driven up the cost of wholesale electricity SMUD buys to supplement its own power generation."

SMUD's last rate increase -- 6% -- came in April 2005. That was only the second rate hike in 17 years, a SMUD spokesperson said. SMUD's current average monthly residential bill ($73) is among the lowest in California, slightly lower than those of other public power entities and $35 to $45/month lower than those of PG&E and Southern California Edison Co., respectively.

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