City of Glenwood Springs electric customers will see a 12 percent increase in their monthly utility bills effective Aug. 1 and should brace for another 6 percent hike early next year.
Additional annual rate adjustments are also anticipated for the next several years.
The planned rate hikes, approved Thursday by Glenwood City Council, are because of continuing increases in the wholesale electric cost to the city through its power purchase agreement with the Municipal Energy Agency of Nebraska (MEAN), explained John Krajewski of JK Energy Consulting.
Krajewski and city Public Works Director Robin Millyard recommended the customer rate hikes so the Glenwood Electric Department can keep pace with costs.
The resulting increase in the average monthly electric bill for residential customers will be about $7.18, they said.
“The reason for the rate increase is almost entirely as a result of the increase in your wholesale costs,” Krajewski said of a 12.8 percent wholesale rate hike passed along by MEAN in April.
“You will need to collect enough with your rates to pay the city’s bills,” he said.
At the current rate, without an increase, deficits in the electric utility can be expected to increase from $440,000 by the end of this year to $3.8 million by 2019, he said.
MEAN is already projecting another wholesale rate increase in the range of 12 percent for next year, Krajewski said.
To keep pace, the city will likely have to increase rates by at least 4 percent each year for the next several years.
Even with the rate increases planned for this year and next, Millyard said the city’s residential and small commercial rates remain competitive with the two non-municipal electric utilities that serve the region, Xcel and Holy Cross Energy.
Glenwood Springs Electric also ranks favorably in a recent rate survey looking at 29 municipal electric systems, 26 electric cooperatives and two investor-owned utilities.
“Glenwood Springs ranked the fourth lowest in the state for municipal-owned systems for residential rates, the eighth lowest in the state for small commercial rates, and the 10th lowest for large commercial rates,” Millyard wrote in a memo to City Council.
Other area municipalities that purchase power through MEAN, including Aspen, Gunnison and Delta, are also being hit with the wholesale rate increases, he said.
This is the largest single electric rate increase the city has had to pass along in recent years. Rates increased 2 percent in 2012 and went up 9.5 percent last year.
In 2012, Glenwood Springs renegotiated its wholesale contract with MEAN, settling on a shorter-term, 10-year contract rather than a 30-year contract that would have had a lower base rate for the city.
Council was concerned at the time with language in the long-term deal that would have prevented or limited the city in developing its own local power projects in the future, such as a solar farm or using the city’s geothermal resources.
The wholesale rate increase from year to year would have been the same under either contract, although the base rate with a long-term contract is about 5 percent lower, Millyard said.