Study: Electric rates low

Published 8:09 am Wednesday, November 4, 2009

FRANKLIN—Despite complaints of overly expensive electric service in Franklin, a study of electric rates commissioned by the city found that its rates are competitive with other providers and even suggests that rates be increased.

“In general, I think it’s safe to say that our rates are competitive with (Dominion) Virginia Power and Community Cooperative,” said Steve Shurbutt, executive vice president of GDS Associates, the Marietta, Ga.-based company that conducted the rate study. While rates are competitive, they aren’t adequate in terms of providing revenue, he said.

“The income from the rates just isn’t really doing what it needs to do to meet the operating expenses,” Shurbutt said.

Shurbutt presented the results of the rate study during a work session with City Council last week.

In analyzing historical data from past years, Shurbutt said operating income for the electric department has been falling and it is not adequately able to cover operating expenses and transfers to the city’s general fund.

The city’s electric fund had a deficit of $426,735 last fiscal year and a 3.5 percent increase from the current rate revenue from would be required to meet the deficit.

Except for fuel adjustments, the city’s electric rates have remained unchanged for nearly nine years.

“The last rate study was done in 2000 and rates haven’t changed since Jan. 15, 2001,” said Michael Stoneham, director of Franklin Power & Light.

A new agreement between the city and the Virginia Municipal Electric Association will go into effect in January 2011. The VMEA is made up of municipalities that, like Franklin, own their own electric utilities. The VMEA recently signed a new contract with Dominion and buys electricity at a lower rate than communities could get by themselves.

Shurbutt said the new agreement makes a rate adjustment an even more immediate need.

“We’re going to be hit with an increase when that contract goes into effect,” he said. “Estimates are it could be as much as 10, 12 or 15 percent on wholesale rates.”

He suggested “reasonable small increases” in rates to avoid a big increase down the road.

“You have all these upward cost pressures and you’re not budgeting growth in sales or business to accommodate that growth,” Shurbutt said. “This is no time to get further in the hole.”

The City Council is considering the recommendations of the rate study analysis and will make decisions regarding rates at a later date.