City Commissioner Nick Fish says he will ask for an independent review of the Portland Water Bureau's use of a reserve fund that could lower utility rates.

WW reported Wednesday morning how that "rate stabilization fund" grew to $32 million over the past five years, even though Water Bureau sales to customers were in decline. (Such funds are often used to lower rates when water sales don't meet projections.)

Fish stands by the city's decision to build up the fund, which the Water Bureau will begin using this year to offset the cost of upcoming capital projects, including a new water main under the Willamette River.

But in a letter sent to Mayor Charlie Hales and other commissioners on Wednesday, Fish says he'll ask an independent ratepayer advocate, the Citizens' Utility Board, to take another look at the fund and compare Portland's policy to best practices.

"While I believe our policy is a responsible way to provide rate stability for our customers," Fish writes, "I told Willamette Week that I am open to taking a fresh look at the issue."

The CUB has briefly addressed the use of the fund already this year.

In May, Janice Thompson of the CUB wrote that the Water Bureau's saving up its rate stabilization fund to avoid rate spikes was "standard practice" among utilities. But she also advised that "effective use of these funds in Portland has also been missing from recent discussions."

The full text of Fish's letter is below.

From: Commissioner Fish 
Sent: Wednesday, September 17, 2014 1:37 PM
To: Fritz, Amanda; Commissioner Saltzman; Novick, Steve; Hales, Mayor
Cc: Finn, Brendan; Warner, Chris; Shibley, Gail; Bizeau, Tom; Kuhn, Hannah
Subject: Rate Stabilization Fund Colleagues, In my first year as Commissioner in charge of the Water Bureau and Bureau of Environmental Services, I made rate stabilization a key priority. For the second year in a row, I have asked my bureaus to target a combined water/sewer/stormwater rate increase below 5%. This is a substantial reduction from forecasted rate increases. In today’s Willamette Week, there is a story about the Water Bureau’s use of its “Rate Stabilization Fund.” It raises questions about the prior policy decision to establish this fund in order to smooth rate increases caused by major capital investments. The article suggests that we could instead use the fund to achieve a significant one-time reduction in rates. While I believe our policy is a responsible way to provide rate stability for our customers, I told Willamette Week that I am open to taking a fresh look at the issue. Accordingly, I will ask the PWB Budget Advisory Committee, as well as the Citizens’ Utility Board (CUB) – an outside, independent ratepayer advocate we brought in earlier this year – to review this policy as part of the upcoming budget process. In particular, I will ask them to (1) review PWB’s policy of using the account to smooth rate increases, (2) compare PWB’s policy to any established best practices, and (3) evaluate the costs and benefits of using the account to achieve a deeper one-time rate reduction. I am committed to transparency in the operations and budgeting of both my bureaus. And I look forward to working with both our in-house experts and outside watchdogs to explore these questions. Nick