City council approves electric fee increases
Reprinted with permission from the Claremore Progress. This article originally appeared on Jun 21, 2016. Support local journalism with a subscription or a day pass for $1.99 :)
The Claremore City Council on Monday approved a customer charge increase from $8.50 to $13 that residential electric customers will see on their utility bills beginning July 1. Small businesses will also see a customer charge increase, from $15 to $23, and industrial customers will see an increase from $30 to $45.
“In Jan. 1, 2016 GRDA (Grand River Dam Authority) has been in the process of building a new natural gas facility and they passed a four percent rate increase to Claremore, and we have been absorbing that,” Claremore City Manager Jim Thomas said. “I recommend we implement these new rates with the emphasis of covering these new GRDA rates.”
Thomas said there are 10,480 residential customers, 1,270 small business customers and 144 industrial customers. The increased customer charge approved Monday will bring in $710,196 in new revenue annually, but the four percent increase from GRDA costs the city about $640,000 annually, according to Thomas.
In March, the city council approved an amendment that allowed the city to keep negative Power Cost Adjustments (PCAs) — previously passed along to customers as a credit — but continue to pass along PCA increases to customers.
Thomas said in March the purpose of the amendment was to offset costs related to a four percent rate increase implemented by GRDA, which supplies power to the city.
The PCA changes monthly based on a rate provided by GRDA. Previously, the adjustment was passed on customers whether that meant a decrease or an increase.
For June, the PCA is -0.00724, according to GRDA board meeting minutes, which previously would have meant a $7.24 refund to residential customers consuming 1,000 kilowatt-hours. The March amendment allows the city to keep those refunds.
In March, Thomas said a negative PCA is an anomaly, the result of low gas prices. The city does not know when the PCA will be positive or negative. In an email, Justin Alberty, corporate communications director for GRDA, said the negative PCA should remain for, “12 months or so.”
Larry Hughes, deputy director of Claremore Public Works Authority, said in March the city would retain about $75,000 a month by not applying the negative adjustments to customer bills.
On Monday, the council did not reverse the March amendment to the PCA adjustments, allowing the city to keep the negative PCA refunds while also generating revenue from Monday’s customer charge increase.
During a conversation on Tuesday, Thomas said extra revenue from the customer charge increase — in addition to covering the four percent GRDA increase — would also be invested in capital. Thomas emphasized that the PCA adjustment is a temporary solution to the four percent increase, and the customer charge increase is a permanent solution.
In addition to electric, Thomas said, the customer fee also covers expenses related to sanitation, water and sewer.
During Monday’s meeting, council member Jeff Godwin asked Thomas why the city did not just increase the electric rate four percent instead of increasing the customer charge. A four percent increase of Claremore electric rates would raise the city’s rate per kilowatt-hour from .111 to .11544. A four percent increase would cost a Claremore customer who consumes 1,000 kilowatt hours $4.44.
“We looked at that and our kilowatt hours we are a little on the high end. We can look at Verdigris Valley (VVEC), because everyone likes to look at that, because they charge nine cents a kilowatt hour and we charge 11 cents a kilowatt hour, but they also have a customer charge of $25 a month, so we are still going to be half of that amount,” Thomas said.
VVEC has two classifications during summer months, when their rates are highest, residential and urban residential. Residential customers are charged $.082 per kilowatt-hour and a $30 consumer fee, and urban-residential customers are charged $.075 per kilowatt-hour with a $25.20 customer fee.
Residential customers on VVEC pay $112 for 1,000 kilowatt-hours, and urban residential customers pay $100.20. Comparatively, Claremore residents will pay $124 for the same amount of electricity, including fees.
Thomas said Tuesday it is inaccurate to compare Claremore electric and VVEC, because Claremore provides a variety of services outside of electricity.
Godwin said he always assumed the customer charge was established to cover fixed costs that are irrelevant to usage. He said he felt covering the increase through a customer charge made customers with smaller homes subsidize the four percent more than customers with larger homes.
“Because Oklahoma doesn’t allow city governments to have an ad valorem tax we are fortunate enough that the electric department is subsidizing the general operations of the city to the tune of about $9.4 million a year,” said Thomas.
The last time the customer charge was increased was in 2011, when it rose from $3.50 to $8.50.