Ferdinand electric rates to increaseOctober 16, 2019
By LEANN BURKE
FERDINAND — Customers of Ferdinand’s municipal electric utility will soon see an increase in their monthly bills.
At its meeting Tuesday night, the town council approved an electric rate increase following a rate study by Alpha Engineering of Indianapolis that began in July. Councilmen Ken Sicard and Ron Weyer approved the rate increase; Councilwoman Debbie Johnson was absent.
The electric rate increase will vary by customer based on how much electricity is used, but Clerk-Treasurer Tammy Miller figures average residential customers will see a 12.5% — about $9 — increase in their bills. The average commercial customer will see a 19.5% increase, or about $25. The average industrial customer will see a 16.8% increase, or about $153. Large industrial customers will see an 11.9% increase.
During the public hearing on the rate increase that preceded the vote, Greg Rickelman spoke against the rate increase. He asked how much the electric department currently has in reserves — about $300,000, Miller said — and how expenses compare to income for the department.
Miller said the department just about breaks even with the current rates. To Rickelman, it sounded like the nonprofit utility was doing fine.
“I think the money is better served in ratepayers’ pockets than in a reserve fund for an entity that should break even,” he said.
Building up a reserve fund for the electric department is a major reason the town decided to pursue a rate increase, and Weyer pointed out that, while the department is a nonprofit, public utility, it still needs money in reserves to respond to emergency repairs and maintain the infrastructure. Alpha Engineering advised the town to have at least 15 months of operating costs built up in reserve in case of emergency, Miller said.
The town had a reserve built up in the electric department’s budget, but the $1.5 million substation upgrade depleted those funds, and town officials know there is more maintenance work coming down the line.
Another factor in the increase is the cost the town pays to acquire the power. Although the purchase cost the town pays NextEra Energy Resources has remained mostly equal over the years, costs of acquiring power that are outside the contract between NextEra and the town have increased significantly. Those costs include the Midwest Independent System Operator charge, ancillary charges and true-up costs, all of which are outside the town’s control. Sicard noted that those charges increased about $600,000 in 2018, but the town was able to absorb that increase rather than immediately pass it onto ratepayers. That practice is not sustainable, he pointed out.
Going forward, the town plans to charge a pass-through that will cover the MISO. That charge will appear on ratepayers’ bills and will vary each month, depending on what the town is charged. That billing change is separate from the rate increase.
Once the rate increase goes into effect, it will be the first electric rate increase the town has made in about a decade.
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