City to see 12.8 percent wholesale electric increase
March 9, 2014
GLENWOOD SPRINGS — A 12.8 percent wholesale electric rate increase from the city of Glenwood's power provider that is set to hit in April will most likely have a ripple effect when it comes time for the city to consider customer rate adjustments this summer.
"It's an important piece of information to put out there now, but the reality is we don't know yet exactly how that impacts the customer," Glenwood Springs City Manager Jeff Hecksel said Friday. "It's often not a percentage-to-percentage pass-through, but we are assessing that right now."
The city operates its own electric utility separate from the other main providers in the area, Xcel Energy and Holy Cross Energy. The city purchases its power through a wholesale electric pool, the Municipal Energy Agency of Nebraska (MEAN), which has several Colorado municipal members including the cities of Aspen, Delta and Gunnison on the Western Slope.
While the city receives word on its wholesale electric rates effective April 1 of each year, residential and commercial customer rates are not adjusted until July 1, Hecksel explained.
A wholesale cost increase of that magnitude is something city staff will need to weigh compared to other costs and revenues, as it prepares a rate recommendation to bring to City Council this spring, he said.
Glenwood electric customers have seen regular rate increases ranging from 2 percent in 2012 to 9.5 percent last year, the largest rate increase in recent memory for the city's electric utility, according to Glenwood Public Works Director Robin Millyard.
"Even with that increase, we only fell from the fourth lowest municipal electric rate in the state to seventh," Millyard noted. "I certainly haven't read any stories lately where utility rates were going down."
The need for continuing large rate increases has been hinted at, but the 12.8 percent wholesale rate increase for this year was unexpected, Hecksel said.
"My understanding is that it had to do with a variety of things, including an increase in general, overall operating costs [for MEAN]," Hecksel said.
Glenwood Springs and several other MEAN members did vote against the increase, he noted.
Hecksel said the city will absorb the extra cost in the meantime until customer rates can be adjusted.
"We were already short in our wholesale power budget for 2013, and had some cost increases that we didn't project," he said.
Two years ago, Glenwood Springs renegotiated its wholesale contract with MEAN, and settled for a shorter-term, 10-year contract rather than a 30-year contract that would have had a lower base rate for the city.
However, City Council was concerned with language in the long-term contract that would have prevented or at least limited the city in developing its own local power projects, such as solar or using the city's geothermal resources, in the future.
Hecksel said the rate of increase from year to year would have been the same under either contract, although the base rate with a long-term contract is lower.
City officials were advised by MEAN at the time the new contract was agreed to in 2012 that it could consider switching to a long-term contract at any time in the next 10 years.
The city is also preparing to do another comprehensive electric rate analysis, which it does about every five to 10 years, Hecksel said.