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City council explains electric rates

Thursday, July 12, 2012

Details on the increases in electric rates to Monett customers were provided at Tuesday's meeting of the Monett City Council. Utilities Superintendent Pete Rauch said the rate adjustment was expected, in light of expenses incurred by Empire District Electric.

The formula approved by the Federal Energy Regulatory Commission (FERC) for Monett's wholesale purchase of electricity from Empire calls for an annual adjustment in rates. In the second year of the contract, Empire passed along the bulk of the capital improvements expenses for building its Plum Point and Iatan 2 coal-powered plants.

Rauch told The Times that the city absorbed rate increases for the first year of the contract. Consequently, the electric department, which largely funds city activities, ended the year with a deficit of $300,000.

Increases proposed for the second year would have run a deficit of as much as $1 million, Rauch estimated.

"We cannot be in the red on our electric department," Rauch said. "There's too much in this community that depends on that."

Electricity revenues provide most of the annual city income to pay for police, fire, street, park and general city services as well as city personnel.

Empire's rate increase was analyzed by Paul Reising, an engineer with Reising and Reising in Indianapolis, Ind. Reising reported the proposal was fair, representing Monett's portion of the investment made by Empire. The city did not file an appeal for a rate adjustment. The engineering firm of Allgeier, Martin and Associates conducted a cost of service analysis and proposed the new rates to distribute the costs.

The new rates went into effect on June 1. The city absorbed the increase for the first month and sent higher rates to customers with the July billing.

Monett commercial and residential customers had not seen an electric rate increase since 2006. Industrial customers saw their last rate increase in 2008.

The new rates represented a 12.54 percent rise for residential customers, a 10.65 percent increase for small commercial customers, a 12.45 percent increase for large commercial customers and a 7.08 percent increase for industrial customers.

The city now receives five different bills for electricity, while the old contract with Empire came in three bills. This "unbundling" of bills down to its components creates more transparency in the charges.

"We've talked to Empire, and we fell like we've seen the large increases for a while," Rauch told The Times. "There may be a little difference in fuel next year."

Other major increases in transmission charges may be pending. Monett presently pays around $83,600 a month for transmission, plus another $21,000 a month for distribution. Rauch said major increases being proposed would be appealed to FERC.

Rate comparisons

The latest increases represent part of increases going into effect across the area. Even with the rate hikes, Monett still has some of the lowest rates in the area.

The average residential customer using 983 kilowatt hours of electricity a month. With the new rates and those officially posted in nearby towns, a Monett customer would pay a bill of $84.53, compared to $85.69 in Mt. Vernon, $92.95 in Carthage, $95.89 for a Barry Electric Coop customer, $107.49 for an Ozarks Electric customer, and $115.70 for a retail customer of Empire in Pierce City, Purdy, Freistatt or Verona. The numbers do not include the fuel adjustment charge.

Commercial and industrial rates vary similarly. Use of 1,500 kilowatt hours in Monett would cost $123.73, compared to $171.02 to an Empire retail customer.

"We still have some of the lowest rates in the country," Rauch said.

Ordinances reviewed on Tuesday included an increase in the minimum residential utility bill from $5.50 to $12.30.

An additional ordinance will enable the city to prosecute individuals for placing fraudulent information on utilities applications. Previously prosecution was not possible without an ordinance, despite a policy by the utilities department.

All four ordinances were scheduled for final passage at the July 20 council meeting.

Only one person attended the meeting asking the council to consider a lower increase. Rauch explained how the city had already absorbed the last round of rate hikes and had to pass the higher rates along to sustain city services.

Other action

Council members approved an agreement with Allgeier, Martin and Associates for engineering services on the construction phase of the water treatment plant. City administrator Dennis Pyle said approval will help with the city's financing agreement for its bonds through the State Revolving Fund.

A contract for demolition of the house at 200 W. Sycamore was awarded to Olen Morris for $3,390, the lowest of three relatively close bids. The price did not include the dumpster or landfill dumping costs.

Building inspector Wade Ennes said Morris would likely begin work immediately. Commissioner Jerry Dierker said the house had a basement to fill, but otherwise work would likely take about a week.

Pyle reported the deadline had passed for redemption of the Olympia Foundry property for unpaid back taxes. The city had won the bid for three of the four lots and is waiting for resolution of the remaining back taxes.

Purchase of the property will provide a key piece to the city's flood control plans for downtown. Phase one of the environmental site assessment had been completed, lessening the city's obligation in case of future problems arising. Pyle said the remaining lot on the far southeast corner of the Olympia property would likely be placed for sale in August 2013.

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