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Heat, deregulation push Springville power rates up

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SPRINGVILLE — Blame it on the hot summer and the deregulation of the electricity market, but power rates in Springville are going up.

It could be a little or it could be a lot. It might only be for a couple months, but it could be longer. One thing is for sure, however, the rate increase will be immediate.

The City Council on Tuesday voted to add a power cost adjustment to utility bills to cover the city's expense of buying and producing power — which have skyrocketed the past few months. Last year, the city's cost of power during the summer months was about 4 cents per kilowatt hour. The projected cost to purchase power for August is about 15 cents per kilowatt hour.

The city also generates some of its own power, but those costs have also increased because of rising natural gas prices.

Residents will see the adjusted rate on the electricity bills they receive next week — meaning the increase will be effective on power used during July.

"I don't know of any other way to cover the city's costs," electric department director Cal Baxter told council members.

The adjustment will reflect the city's actual increase in power costs. If costs continue to stay high, then the adjustment will be high. If costs go down, the adjustment will go down.

"When the cost of power goes down, I want to make sure we are able to reflect that back," Mayor Hal Wing said.

Officials say it is hard to predict what the increase will be for residents. If the adjustment had been in place during May and June, however, rates would have increased about 2 cents per kilowatt hour, or $12 to $20 a month for most residents. The increase for July and August will likely be at least that amount.

"We have to be able to recover our costs," Councilwoman Dianne Carr said.

Without passing the added cost on to consumers, city officials would have needed to cut city staff and make drastic budget cuts. Officials made about $600,000 in budget cuts last month to cover a deficit caused by the increased power costs for May and June.

"I don't see how the city can handle that. I don't think it can handle it another month," Baxter said.

Without a power cost adjustment for July, utility bills the city would have seen another $500,000 deficit and likely a larger deficit for August.

"We've been able to recover from what has leaked through the dike, but now it's time we put a finger in that dike," Wing said.

Some officials wanted to put a cap on the rate adjustment so residents would know "a worst-case scenario" on how much rates would increase. However, should costs be above that cap then the city would have to make up the deficit with additional budget cuts that could include employee reductions.

Baxter reminded council members that the city has no control over the costs of power on the open market.

"I don't know if it is wise to put a cap on it if we can't control it," he said.

Even though officials decided against a cap, they acknowledged it would have helped large users in the city's industrial parks budget for expenses. A slight increase in rates will cost some companies, such as Nestls, hundreds of thousands of dollars each month.

"These fluctuations in power costs are going to affect them greatly," Wing said.

According to history, power costs have decreased substantially after September. City officials hope the same happens this year so the power rates to customers will return to normal by fall.

Springville, unlike many neighboring cities, has to buy about 25 percent of its power on the open market during the heavy use summer months. A project is under way to expand the city's Whitehead Power Plant from three generators to seven. Baxter is pushing to have that completed by June so the city will not need to buy power on the open market next summer.

At one council meeting each month, city financial officials will give a report showing the city's actual costs of buying and producing power so residents can see the figures used to calculate the power cost adjustment for that month.

E-mail: jimr@desnews.com