Assembly to consider raising electric rates
An ordinance change passed on first reading at the June 10 assembly meeting could raise electric rates by as much as 10 percent by January 2015.
If approved as worded – judging only from preliminary discussion at the assembly meeting, that appears unlikely to happen – a five percent increase in electrical rates would take effect July 1. An additional five percent increase could be enacted Jan. 1, contingent on whether or not Wrangell Light & Power receives an annual rebate from the Southeast Alaska Power Agency (SEAPA).
Officials say the rate increase is necessary because the electric fund reserves are unacceptably low. The reserve fund balance currently sits at $933,359 and has showed three straight years of decline, according to budget figures. A large part of that decline comes from greater-than-expected reserve consumption in the face of declining SEAPA refunds from the 2011-12 amount of $326,189. Wrangell’s share of this year’s rebate is currently projected to be zero.
Discussion June 10 focused on how to structure the rate increase to cause the least amount of harm to area electric consumers. Assembly members appeared to favor a seven percent rate increase effective July 1, with a possible three percent increase effective Jan. 1, 2015.
The average residential customer pays about $110 per month before tax, according to figures provided by the electric department. A 10 percent increase could mean an additional $11 per month or $132 per year.
If the SEAPA rebate went ahead without being changed – abolishment of the rebate would require a vote by the SEAPA board – that increase would amount to $5.50 per month or $66 per year.
The average electric heat bill – which is governed by a separate rate under guidelines used to encourage the use of electric heat – is about $160 per month before tax, electric department figures show. A 10 percent increase would amount to an additional $16 per month, or $80 per year, assuming a five-month winter. A five percent increase would amount to $8 per month or $40 per year.
Most assembly members instead appeared to favor a seven percent increase up front, with a three percent increase contingent on SEAPA action regarding the rate increase.
A seven percent increase would mean an additional $7.70 monthly for the consumer
electric rate and $11.20 monthly for the heat rate. Annually, that would mean about $92.40 for consumer electric and $56 for heat.
A seven percent increase would give consumers more time to adjust, said assembly member Pam McCloskey.
“The five percent increase, and then another possible five percent increase Jan. 1, I think would be awfully hard on some people,” she said. “I think if we’re trying to even out the budget a little bit and do it right now, a seven percent increase, and then – if we need it – only a three percent increase on the first of January, because that’s when the electricity rates go up.”
“Right now, we’re not that high, and that’ll give everybody the general feeling that we might have to go up three
percent more,” she added. “You know, if we don’t need to go up three percent more, the seven percent will still help us build up our reserves.”
A seven percent increase may allow borough officials to proceed without additional rate increases, even in the absence of a SEAPA rebate, said
borough manager Jeff Jabusch.
“I think if you go five
percent, then you really need to look at something in January,” he said. “I think if we went seven percent then we certainly could get through to July 1 of the following year to re-look at it. If we did get (seven percent), it would put us in a positive direction in terms of building up revenues.”
SEAPA officials and board members are considering abolishing the rebate – originally conceived as a way to ensure operational stability for the Agency and rate consistency for constituent utilities in Petersburg, Wrangell and Ketchikan and their client businesses – because of a decrease in available funds at the state level for capital construction projects, including increased elevation for Ketchikan’s Swan Lake Dam, according to SEAPA board chair Bob Sivertsen.
“One of the ways to make sure that the communities aren’t over-paying is to send back a rebate,” he said. “They’re not a guarantee. That’s always a decision that’s got to be made by the board, usually around budget time.”
“As we move forward, as we look at bringing on a capital project, the next increment of hydro, whatever that’s gonna be, well, in order to do that we’d have to go out and sell bonds, and they may reduce the amount of rebate because we’ve taken on more debt,” Sivertsen added.
Despite some reservations, the ordinance passed the assembly 5-0. It now heads to a second reading at the June 24 meeting.
Proposed Electric Rate changes (pre-tax figures)
Consumer Electric Electric Heat
Current Avg. $110/mo $160/mo
5% Increase $115.50/mo $168/mo
7% Increase $117.70/mo $171.20/mo
10% Increase $121/mo $176/mo