Draft City Budget Raises Utility Rates

Posted on: October 16, 2009 | musiclover | 8 Comments | Print Article | Rate Post:

(By Heidi Zemach for Seward City News)

 

The Seward City Council and Mayor propose to raise electric, water and sewer rates next year, and in subsequent years. If the two-year budget being crafted is adopted, your electric rates would go up by five percent in 2010 and increases in Chugach Electric rates also would be passed along to consumers. Meanwhile, water and sewer rates would increase by approximately 4.8 percent.

 Chugach Electric, which generates power for Seward’s electrical system, was recently approved for a permanent five-percent rate increase by the Regulatory Commission of Alaska, RCA. Based on Seward’s 2008 electricity usage, that would mean an additional $100,000 charge to the City of Seward. This additional cost also would be passed along to customers, reflecting a change in council policy. If these rates are approved by the council, on average, Seward residents living inside city limits will be charged $9.44 more per month for their combined utility bill, (including electric, water and sewer,) according to Finance Director Kristin Erchinger. That’s an overall increase of 5.19 percent. Those who live outside city limits, and only use city electric will see their utility bill increase by an average of $6.71 per month, or

5.82 percent. City customers average about 625 kilowatt hours, while residents living out of town use 747 kilowatts per month, Erchinger said. (Of course those who use less electricity will have lower bills on average than those who use more.) The increased bills will be calculated in January, 2010, with the increase likely to be reflected on February statements.

 Understanding ones electric bill, and its price fluctuations is a complicated business involving understanding several different charges,explains Seward Utility Manager, John Foutz: The Fuel Charge portion of the bill is purely market driven, and is based on the current market price for diesel and natural gas. Neither the City nor Chugach Electric has any control over this price, which fluctuates widely, just as the price of gas does. It has actually gone down quite a bit in the last couple of months, but it is anyone’s guess which direction it will go next, Erchinger said. This month, the Fuel Charge was .057298, or about five cents per kWh. It has been as low as 2 cents, and as high as 8 cents per kWh, Foutz said.

 The Energy Charge is based on customer’s kilowatt hours, or their actual usage the month prior, plus the Chugach Electric rate. The city utility has not passed on Chugach Electric’s rate increases to its customers since 1993, instead the city has absorbed those increases. Under the proposed budget, the utility will start passing these increases along to customers, after dividing the total by the amount of local customers. (As stated above, the increase of Chugach rates this year will be 5-percent)

 The Customer Charge portion of the bill, known as the Operations and Infrastructure Fee, has remained constant at $15 per customer for many years. That would increase in 2010 to $15.75 under the council’s proposed budget. The Demand Charge, based on kilowatt usage applies to large and industrial customers. While it has not yet been decided, the Industrial Rate category, which has traditionally subsidized the big power users including the Alaska Railroad, Alaska SeaLife Center, and Seafood Processing, probably will be eliminated, according to Oates. Not wanting to ruin these financially-strapped businesses, or drive them away, however, there might be special contracts made between the city utilities and these individual companies, based on their situation, as authorized in City Code.

 Why an increase now? For at least 16 years, maintenance needs have been deferred, and insufficient fees collected to replace aging power lines and equipment. City Manager Phillip Oates dates this trend back to 1993 when the city-commissioned R.W. Beck Rate Study recommended a 9.7-percent energy rate increase for all electrical services except industrial, (which would be reduced), in order to provide adequate revenues to support operations and maintenance of the utility through 1997. (Ironically, the study’s recommendation that the Customer Charge be reduced four cents to $15.00—the current level, was the only item approved. By not adopting the recommended increases at that time, or for the past 16 years, the city has incurred a substantial revenue reduction in the electric enterprise fund, Oates said. According to the city utility experts, if infrastructure needs aren’t addressed soon, residents can expect multiple failures, longer power outages, and will have to pay the higher fuel costs when the city needs to run their new diesel backup generators during emergencies.

 They say the following electric assets will likely fail within the one to five years unless they are fixed or replaced: Lowell Point Underground, the underground by the Lagoon, Transmission Pole TN67, Right of Way Clearing, Broken Guy Wire TN64, Transmission to Fort Raymond, Jesse Lee Underground, Paint/Maintenance Transformers Spring Creek, Camelot Underground, Broken Bells (miles 10-14), Distribution Line to McDonald yard, Right of Way Maintain, Recloser Maintenance, Loadtap Changer at Spring Creek. The cost would be $4.3 million. Another $1.2 million in “High Risk” systems are likely to fail within 5-10 years, and $1.9 million “Moderate Risk” systems are those systems that are becoming increasingly uneconomic to maintain. In addition, the electric utility has an outstanding debt of $7.3 million to pay for the 1995 Transmission Line Bond and the 2008 Generator Project.

 It’s a similar story for the Water and Wastewater lines: The city owns more than 20 miles of underground water mains, most of which were installed 45 years ago. According to city officials, critical needs include refurbishing the #4 production well for $85,000, replacing the pressure station for $625,000. The water lines along Third Avenue also require an extensive replacement job. The largest project, which the city says it needs, is a new $4 million water storage tank. That tank will allow the Department to take an existing water tank out of service for essential major maintenance and repairs. It will also provide emergency backup in case of loss or damage of an existing tank and will help the city meet excessive high demands—such as in the summer when cruise ships are docked at Seward and seafood processing is occurring. A total of $1.6 million is owed on an existing tank.Critical needs listed by the city for the Wastewater Systems include Forest Acres L.S. Generator $205,000; Double Wall Fuel Tanks $100,000; SMIC Bypass Valving $155,000; and #1 Stand-by Generator $195,000.

(For story ideas or comments, Heidi can be reached at 224-6473 or heidizemach@yahoo.com)

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