Franklin electric may run deficit to save customers money

Published 10:17 am Wednesday, June 3, 2015

Franklin City management had conservatively estimated a wholesale rate increase of 4.9 percent from Dominion, with hopes that the power company would come in with a lower number.

“It did not come down as we hoped,” mentioned City Manager Randy Martin begrudgingly.

Worse than that, it went up, but management is not recommending an increase to customers beyond the 4 percent hike proposed at the May 11 council meeting.

At the end of May, Power and Light Director Mark Bly received the final Dominion rate increase of 5.6 percent, which he estimates will cost the city an additional $66,000 on top of the 4.9 percent projection. In total, the city projects to spend just under $10 million for electricity during the 2015-16 fiscal year.

Martin admitted that sticking with the 4 percent increase creates a chance that the city will run a deficit in the electric department, particularly if the upcoming winter is as bad as this past one.

Bly said you can’t predict the weather, but he’s worked to make cuts to his budget and feels confident that the department will be OK sticking with the 4 percent increase.

The wholesale rate from Dominion is what the Franklin Power and Light Department buys to pass on to customers. If the rate customers pay does not keep up with what the city pays for the power, Franklin is in effect subsidizing residents.

While it may eat into the city’s electric capital or cash replenishment reserves, Bly didn’t think that it would create the devastation to the fund that occurred four years ago. That’s when the reserves were brought well below the minimum set by council, and the city is still working to replenish the fund.

“We are gambling to one extent,” Martin said. “If we have a bad winter like a few years ago and this last year, and it is prolonged, then you can see how the dynamic might work against you. It is hard to project, though, except based on historical data.

“At this point, we don’t want to overdo it. We feel it is the appropriate thing to remain with the original recommendation of 4 percent.”

In the future, Bly said there are pieces of equipment that can be purchased to help offset increases, such as upgrades to help more efficiently flow electricity into the grid system. It could help save the city 2-3 cents per kilowatt hour.

The electric rate for Franklin customers started to decrease by an average of $8.80 in May for the use of 1,300 kWhs. That’s because the fuel adjustment charge from Dominion went down.

Come the July billing cycle, should Council approve the 4 percent increase, those savings will be eaten into. A decrease per month will still be there — an average of $3.78 per month based on a customer using 1,300 kWhs.