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Second reading of electric rate hike OK’d

City Council hears comments from citizens wanting cost rate analysis

October 16, 2012
Anne Blankenship (editor@freemanjournal.net) , The Daily Freeman Journal

The City Council of Webster City spent much of its meeting Monday night discussing proposed electric rate increases and hearing suggestions from community members on ways to determine what those rates should be.

The evening brought the second reading of the proposed ordinance that would raise the base rate by 20 percent, or about $3.80 for residential customers.

"Over the last two years, we've gotten increases from Corn Belt Power Cooperative that we've chosen not to pass along. We absorbed about a 5 percent rate increase about a year ago; this year we tried to absorb another 5 percent through budget cuts," said Ed Sadler, city manager.

"But we told everyone up front, that if it was a hot miserable summer, that the demand charges were not going to be recouped through rates we were charging. It counted on having what I considered to be a normal year. And we did not," he said.

Sadler brought the City Council three options - raise just the base charge by 20 percent to come up with the same 5 percent overall; raise the kilowatt hour charge by 6.75 percent or both the base and kilowatt hour charges could be increased by 5 percent.

"It's 5 percent of our total revenues, which is $475,000. That's what we need. Our total revenue is just under $10 million," Sadler told the council members at the Oct. 1 meeting.

On the first reading, the City Council voted to increase just the base rate, with Councilwoman Linda Conaway voting no. Monday night, the council voted to approve the second reading, with Conaway again voting no.

Gaylord Victora, a Webster City resident, said he had a concern about the high cost of living in Webster City with increases in sewer, water, electric and trash rates increasing in recent times.

"We're seeing funds now required for a new well and now the council is considering another electric rate increase," Victora said.

He said he felt it was imperative that the council have a cost rate analysis of any utility before a rate increase is considered.

"We have an option to employ any number of reputable firms to accomplish this," said Victora, using Stanley and Associates as an example of such a firm.

"They bring experience, knowledge, qualified training, established history in electrical engineering and analysis.

"With no disrespect, this contrasts greatly with our so called Webster City Utility Board, composed of the council," he said. Victora suggested that the city bring in a reliable, independent consulting firm before any rates are raised.

Sadler reminded the council that a rate study was done in 2007.

"They gave us their rate analysis. Each time we have a change, we can load budgets in, we load rate increases, we load usage, we can change our customer base," Sadler said. He explained that currently, the cost for the line department operation is recovered through the base rates and the kilowatt hour rate is meant to cover the electric cost.

"If the time comes that the council wants to change that philosophy, then yes, a rate study would be completely in order to develop rates that reflect that policy statement," Sadler said. A study would likely not be necessary if the council chose to stay with the current policy.

"What we would stand to gain by pulling in another consulting firm?" asked Conaway.

"A reaffirmation of your existing policy, if that's what you want to keep," Sadler said.

"What could we change it to?" Conaway asked.

Sadler pointed to a yearly report done on the rates of municipal electric cooperatives across the state of Iowa and across the nation. He said there are other communities that offer "better deals" to business and industry as incentives.

"The council here decided that we weren't going to do that - or at least move away from that as much as we could," he said. "What that resulted in was industry rates going up and commercial coming down. Commercial is just now approaching the kilowatt hour charge they were paying five years ago.

"If there was anybody subsidizing anybody at that point, it was commercial subsidizing industrial," according to Sadler.

The rates were phased in over three years rather than making the change in one move. But at the end of 2009, the rates were fairly equalized, Sadler said.

"I was on the council when this philosophy was changed. It was a three to two vote and I never cared for it," said former Councilman Mark Gillette.

"In 2005, we commissioned to have Stanley do a study - $24,000 - and picked a few numbers out of it to get the rates we started with. It was put in to make it simple and they rejected Stanley altogether. We are short now because there was at one time power cost adjustments in the summer," he said.

"They added that on for the demand to the light bill in the summer to cover the shortages that we had," Gillette said. "When we switched to the other philosophy, that went away. It's still on your power bill, but in the summer, the cost adjustment isn't there. That's why we're short, I believe."

Gillette said he talked with a firm that could take the 2005 study with updated numbers and pull numbers out to change back to the old rate philosophy.

"I talked to one business owner today that has a three-phase," he said. "Their bill went from $100 to $120. I've talked to a lot of business owners and they're not doing that well."

Gillette suggested that city hire someone to come in and explain about the two different philosophies.

"Hire a professional firm to set the rates," he said. "Use the power cost adjustment and perhaps don't use the electric reserves so much."

"Well, our ultimate goal is to cover costs," Conaway said. "So, I guess I don't see what the value is to bring in someone to tell us what to charge when we know what are costs are and we know that they've got to be covered."

The council will have a third and final reading of the ordinance at the next meeting, Nov. 5.

In other matters, Nick Hassebrock, Webster City, asked the council to waive the $100 fee charged for not being in compliance with the sump pump ordinance or those not having an inspection to ensure homes are not cycling rain water from downspouts and sump pumps into the sanitary sewer.

Hassebrock said he did not have a sump pump and had not had an inspection.

"I didn't want to allow some stranger into my house to tell me what I already knew," he said.

Mayor Janet Adams asked if he would like to have a different inspector a certified plumber approved by the city. Hassebrock said he was unaware that that would be possible but agreed he would be willing to have a plumber he knew to do the inspection at his own cost.

In public comments, Paul Dahl presented the council with a multi-page document listing reasons he believed Sadler should not be retained as city manager. Adams thanked him for the written comments and said the council would review it.

 
 

 

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