Edinburgh’s electric rates could soon increase by up to 13% across the board.
Stephen Clark, Edinburgh’s electric utility superintendent, presented information Monday from two studies outlining the need for an electric rate increase. The studies arrived at different recommended increases, so it is up to the town council what amount the increase should be.
Clark and council members have talked about the increase for the past several meetings. A first reading of an ordinance establishing the rates was held Monday and a decision on the increase could come at council’s Feb. 26 meeting.
Why an increase
The increase is needed because the utility has not increased rates for five years and is no longer capturing enough money to fund the utility, Clark said. About $1.5 million in additional annual revenue is needed, studies from Baker Tilly and Alpha Electric Inc. concluded.
“These rates that got placed in 2019 are way out of date, so we are not capturing the revenue we need to,” he said.
In the last five years, the industrial electricity demand has increased nearly 12%, while the number of kilowatt hours used has gone up 72% — a “big jump,” Clark said.
Upcoming maintenance projects and a new substation are expected to cost around $19 million. The new substation is needed because the department is nearing its maximum demand, he said.
“We are a not-for-profit utility, meaning that we are not looking to make a bunch of money, but we need to not lose a bunch of money,” Clark said. “All of the routine maintenance that we need to do to our infrastructure, all the expansion, the substation we are getting ready to build, all of the additional circuits; we need to fund that somehow.”
What you’ll pay
The rate increase would impact both residential and business customers, with industrial customers facing the largest increase. The across-the-board increase would be greater depending on electric demand of each customer, as the ultimate cost of an electric bill reflects how many kilowatt hours were used by the customer, Clark said.
“The logic behind the rates that they are proposing is that everybody pays their adequate portion,” Clark said. “We need to achieve about a $1.5 million per year increase in total.”
The two studies recommended increasing rates 10-13% and the Edinburgh Town Council will decide which increase to go with.
“Baker Tilly did a study based on our financial needs, so they look at our incomes and expenses and the projects coming up, and they suggested almost a 13% increase across the board,” Clark said. “Alpha digs deeper into the usages and our industrial customers and came up with only raising the rate about 10% per kilowatt hour.”
The current rate for an average household using 1,500 kilowatt hours per month is nine cents per kilowatt hour, which would make their bill $135. The proposed increase would elevate the rate to just under ten cents per kilowatt hour, which would add $10-$12 to a home using 1,500 kilowatt hours, Clark said.
While residential customers are billed solely based on their individual energy consumption, Clark said industrial clients are subject to both consumption and demand charges due to their heavier impact on the department’s output.
“Billing is done with two different methods,” Clark said. “Kilowatt hours, which is basically how much energy you consume; the second one is the demand, and that is basically how much energy is consumed over a time frame.”
Large industrial customers’ bills are measured by their demand for electricity because they put a “heavy tax” on the electrical grid, Clark said. These customers have fluctuations in energy consumption as well as demand throughout each day and month. It is important to accurately assess demand to ensure the department is capable of supporting an industrial customer, he said.
For industrial customers, the department analyzes their maximum amount of demand every 30 minutes, and that is what they are billed on, he said.
Council discussion
Clark mentioned that some utilities do annual rate studies, which prompted town council discussion on the frequency of the study.
Council member Michael Bryant asked why the electric department didn’t do an annual rate study and adjustment.
Historically the span between rate studies had been even further than five years apart, before there had been a 10-year gap, Clark said.
“Unfortunately with legislation focusing on ‘green power,’ costs are going way up,” he said. “We could do one of these every year, the problem is that people don’t like to hear the phrase ‘rate increase.’”
Bryant said that a smaller, more frequent rate increase may be received better than a larger one.
The council will continue discussion of the rate increase and likely hold a second reading vote at their Feb. 26 meeting.
