Electric rates could go up 5 percent

Published 10:59 am Wednesday, April 16, 2014

FRANKLIN—City Manager Randy Martin said at the city’s latest council meeting that no one wanted to hear this, but with Dominion going up on wholesale rates to the city, Franklin might have to raise its rates too.

The city is projecting an 8.9 percent wholesale rate increase from Dominion as of March 31. Based on that figure, which Martin said is fluid, the electricity department would recommend a 5 percent increase to pass through the rate to the customers.

As an example, if a customer were to use 1,000 kilowatts per hour, the utility cost now would be $114.41. In July, should council vote this through, that same 1,000 kilowatts per hour would cost residents $119.14, or a difference of $4.73.

Martin said that due to the operating efficiency in the electric department, the cost would not have to go up beyond whatever rate Dominion passes on to the city. He said there have been several numbers sent to them so far, and the latest is the 8.9 percent, which is also the highest. Martin also said the number could go up or down before the new fiscal year starts in July, when the city would start paying the new wholesale rate.

A few years ago, the city had taken a major hit to its electric fund, which is used in emergencies or for buying new equipment outright rather than borrowing to buy. This was due in large part to not passing wholesale power charges and fuel adjustments on to customers in a timely manner.

The low point for the electric fund was approximately $365,000 in June 2012, which was about $1 million shy of the minimum council set for it.

Even after the rough winter, the fund is at approximately $827,000 as of March 31, which is up from $559,000 at the end of February.

Assuming no major storms or breakdowns, Martin projected the fund will be at $1 million by June 30, which would still be shy of the 10 percent minimum by about $300,000.

However, the city had projected that it would take four to five years to get the fund back to the minimum when it started this process back in 2012.

By this time next year, Martin said, he felt confident that unless there are major storm events this year, that the electric cash balance will be at the minimum by June 2015.

“I applaud the efforts of the staff for staying on top of this and doing an excellent job of being efficient in keeping us from having to make any additional increases,” he said. “It’s a credit to the citizens too, as we’ve had improved collections on bills.

“We have not had to raise rates beyond those that we cannot control by Dominion.”

If the city were to not act on the wholesale rate, the electric department would be subsidized by the electric fund. Martin said this would have worse long-term effects than passing the Dominion rates on to the public.

If a major storm were to hit while the cash were low, or some major equipment had to be replaced, the city would have to borrow to pay for it.

“That’s not just poor business management, that would have an adverse effect on the interest rate,” he said. “It can become a vicious cycle.”

In a related matter:

The solid waste collection fee is projected to remain at $39.74 per month for residents, according to Martin’s recommendation.

As of March 31, the cash balance is $392,000, or 28 percent of the budget. Martin said he’d like to see that number continue to grow, as having to purchase multiple garbage trucks at the same could kill that.

He projects the fund to be at $450,000 by June 30. From there, if they stick to the replacement schedule, that fund would be good.

The water and sewer fund is also healthy. He added that the rate has not been increased for several years, and he would not recommend that it go up.