Council poised to OK 1.2 percent power rate hike
By Jon Hawley
Wednesday, March 13, 2019
Elizabeth City City Council is poised to raise electrical rates next month, passing down a rate hike from its wholesale electricity supplier, the N.C. Eastern Municipal Power Agency.
Council voted Monday to hold a public hearing on March 25 to discuss increasing electrical rates by 1.2 percent, effective in April. The city estimates the average utility customer pays $116 a month, so the increase would add a little over $1 to that bill.
Councilors voted 7-1 to advance the increases, with Councilor Anita Hummer casting the lone “no” vote.
The rate increase, along with another 3-percent hike NCEMPA is planning for next year, has been in motion for months. In December, NCEMPA and its management firm, ElectriCities, announced plans to raise electrical rates by just over 4 percent in the next two years. Earlier this year, the NCEMPA Board of Commissioners approved a 1.2-percent increase for this year, and a 3-percent increase next year.
After first announcing the increases, an ElectriCities spokeswoman explained that the agency had, in 2017, approved a 4.5-percent rate reduction that put rates below its projected costs. That allowed it to draw down some of its “working capital”; in effect, the agency was returning money to customers it didn't need.
City Manager Rich Olson, who serves as a member of the NCEMPA Board of Commissioners, detailed and defended the 1.2 percent rate increase to city customers during Monday's City Council meeting. NCEMPA's working capital — with which it buys power from Duke Energy Progress for all 32 of its member municipalities — was $142 million at the end of fiscal year 2018, and is slated to dip below $100 million in 2019. Olson explained the agency's target working capital is about $80 million, which provides a cushion as power purchases and sales make the fund fluctuate by tens of millions of dollars monthly.
City council could choose not to pass the 1.2-percent on to customers, but Olson said that would cost the city’s electrical fund $276,000.
Olson said in a followup phone conversation Tuesday that the electrical fund fluctuates by several million dollars every month as the city buys power and gradually recoups what it spends through customers' payments. The fund dropped to $4.32 million last week, not counting $2.12 million in investments, which is too low for a utility the city's size, Olson said.
Because the electric department is still preparing its budget request for 2019-20, Olson said it’s unclear whether losing $276,000 would result in the electrical department having to cancel or delay system upgrades.
During Monday's meeting, Olson also acknowledged City Council did not pass on the entire 16-percent rate reduction it could have in 2015. That reduction was thanks to a landmark deal that sold off NCEMPA's shares in power plants to Duke EP.
The city passed along a 13-percent reduction and kept 3 percent, which Olson said the city put to use in “aggressive” improvements to the electrical utility. Olson provided to council a list of $4.25 million in projects completed since 2015. More than a fourth of that spending went toward installing utilities for Tanglewood-area businesses and residences along Halstead Boulevard Extended. Notably, the city has also spent about half of the nearly $1 million expected to install streetlights along Halstead Extended, Olson reported later.
The city does charge impact fees for installing utilities, but Olson said the electrical impact fees only recover a fraction of the city’s costs.