House Approves Costa Bill to Protect Consumers from Utility Hike

Washington, D.C.-  With an overwhelming bipartisan vote, Congressmen Jim Costa and Doug LaMalfa’s legislation that would protect consumers from utility fee hikes was approved by the House of Representatives by a vote of 423 to 0. The Public Power Risk Management Act of 2013 removes barriers that place municipal utilities, including irrigation districts such as Merced, Modesto, and Turlock Irrigation Districts, under restrictions that prevent them from taking responsible actions to hedge against price volatility in the energy market. The legislation now awaits consideration by the U.S. Senate.

 “Families who are struggling to make ends meet cannot afford more uncertainty in their monthly budget ,” said Costa. “Financial reform was meant to protect the middle class from volatility in the markets, but an unintended consequence has put them at risk of a spike in their electric bill.  I hope the Senate follows the House’s lead and quickly adopts this common sense measure.”

The over 2,000 municipal, state and locally-owned, not-for-profit electric utilities throughout the United States deliver electricity to one in every seven electricity customers in the United States or over 47 million people. The vast majority of utilities serve communities with populations of 10,000 people or less.

Merced Irrigation District’s Deputy General Manager of Energy Resources Don Ouchley added, “More than 7,000 customers throughout Merced County benefit from the affordable electricity we provide every day. Rep. Costa’s work on this issue represents a critical component of our ongoing efforts to maintain the most affordable rates possible.  We appreciate Rep. Costa’s diligence and hope this legislation will continue to advance in the Senate.”

June 12, 2013

The legislation would increase the investment limit for non-financial entities that are affiliated with state or local governments to a level that would allow them to hedge against market volatility. The current limit is so low that it makes it virtually impossible for government-owned utilities to take routine actions to hedge against fuel and power price fluctuations.  

As not-for-profit entities, these utilities are forced to pass along price increases due to market volatility directly to consumers. Costa’s bill would reverse an unintended consequence of the Dodd-Frank Wall Street Reform and Consumer Protection Act that has put small, municipal utilities at a competitive disadvantage by forcing them from the swaps market.