(Publisher’s note: I took a little time off to celebrate my 60th birthday last week and this is the first of several stories from last week’s Chelsea City Council meeting.)
The Feb. 20 Chelsea City Council meeting began with the annual utility rate review presentation by City Manager John Hanifan.
He told the City Council that an increase in electric rates will be proposed by staff for the next several years, and called the fund the city’s “most challenging.”
“At this time, power supply costs and operating costs equal current revenues,” he said, adding “it hovers at the break-even point,” while the Michigan Public Power Agency recommends that there be at least three months of operating revenue available in what is an about $8.5 million fund.
The city has spent about $750,000 as part of state-mandated energy optimization programs, which have in turn lowered overall electrical sales and depleted operating reserve margins.
“In essence, we are incentivizing our customers to buy less of the products (electricity),” he said.
Meanwhile supply costs continue to trend upward and state mandates for energy optimization incentives continue through 2020. Plus, new energy legislation mandates renewal energy programs. Also, coal fired plants are retiring which will have an impact on power supply costs in the region.
Staff recommended the following to the City Council:
Effective April 1, a $2 per month ready to serve charge for electric.
Also on April 1, a 10-percent increase in both commercial and industrial rates.
On July 1, a 5-percent overall residential rate increase.
No increases for water or wastewater for FY 2018-19.
Hanifan told the City Council that Chelsea has the lowest electric rates in the state at 8.1 Rev/kwh, and currently has five full-time employees in the electrical department.
“We have excellent staff,” Hanifan said.
No increases are proposed for either the water or wastewater funds, which last had increases in 2013.
Hanifan said that no rate increases have been recommended since 2014 and “cash balances are healthy.”
He expects that rates should hold steady for “some time due to available capacity as well as debt service reductions in the next few years as various bond issues are paid in full.”
“We are managing our resources,” Hanifan said.
The City Council will hold a public hearing on the proposed utility rate adjustments on March 19.
The full presentation can be seen here.
