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UNUSUAL WEATHER CUTS DEEPLY INTO SEATTLE CITY LIGHT REVENUES; RATE SURCHARGE IS PROPOSED

 UNUSUAL WEATHER CUTS DEEPLY INTO SEATTLE CITY LIGHT REVENUES;
 RATE SURCHARGE IS PROPOSED
 SEATTLE, July 8 /PRNewswire/ -- The following was released today by Seattle City Light:
 An extremely light snowpack and higher-than-normal temperatures have led Seattle City Light to request a short-term rate surcharge, Mayor Norm Rice announced today.
 City Light is proposing a September-December rate surcharge of 10 percent, with a smaller, 5-percent surcharge for low-income customers. If approved by the City Council, the four-month surcharge would cost the average Seattle household $3.10 per month. The average customer on low-income rates would pay 84 cents per month.
 Seattle City Light, along with other Northwest electric utilities, is facing some of the most adverse conditions for hydropower production in its history. Stream flows and reservoir levels in the Northwest have been among the lowest ever recorded at this time of year. The utility has managed its resources to ensure an adequate power supply for its customers, but the financial impacts of the dry weather are severe.
 In response to these overall conditions, City Light has been directed to reduce near-term operating expenses by $13.1 million. These belt-tightening measures will include a hiring freeze, across- the-board cuts and deferral of expenditures.
 Even with these reductions, City Light now estimates a net loss of $20.8 million in 1992 -- the first year in history that City Light will have finished with a loss. Sales of nonfirm power to wholesale markets are projected to drop from an expected $27.4 million to negative $5.3 million. Also due to the mild winter and flat economic conditions, net revenue from customer sales is reduced by about $10.1 million.
 "Given these conditions, we are very concerned about our 1992 financial performance and how this performance will be viewed in the financial community," said John Saven, deputy superintendent for Corporate Services. "We have cut expenses across the board, but those cuts simply can't compensate for the economic and weather-driven revenue shortfalls we're experiencing."
 Of greatest concern to the city is the impact on a key indicator of financial performance: the utility's debt coverage ratio, which measures City Light's ability to make payments on its long-term debt. Without a surcharge, the utility's debt coverage ratio is projected at 1.32.
 Seattle Northwest Securities Corp., the city's official financial advisory, has strongly advised the city to "establish a goal of 1.50 debt service coverage for City Light in 1992. It would be very rare to find a Aa/AA utility that produced debt service coverage below this range in a given year."
 A second opinion from Smith Barney, Harris Upham & Co. Inc., corroborated Seattle-Northwest's opinion, and added: "In general, coverage levels in the 1.30 to 1.50 range are associated with utilities at a rating level of Baa1/BBB+," which could restrict the city's financing flexibility and increase the costs of borrowing.
 The proposed surcharge would generate about $10.2 million in additional revenues, and bolster City Light's debt coverage ratio to about 1.5, assuming weather patterns deteriorate no further. Even with a surcharge, City Light's debt coverage ratio will be below the planning target of 1.80 established by city policy. In addition, the utility would still finish 1992 with a projected net loss in excess of $10 million.
 However, a debt coverage of 1.5 "would show the city's willingness to take actions to maintain reasonable financial results," and would help ensure "that 1992 results would at least provide revenues to meet all current obligations," according to the Smith Barney report.
 The surcharge proposal was submitted to the Seattle City Council yesterday, along with a request for a City Council decision by early August.
 -0- 7/8/92
 /CONTACT: John Saven, 206-684-3445, or Scott Forslund, 206-386-4233, both of Seattle City Light/ CO: Seattle City Light ST: Washington IN: UTI SU:


LM-JH -- SE008 -- 7651 07/08/92 20:14 EDT
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Publication:PR Newswire
Date:Jul 8, 1992
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