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Electric utility cost savings benefit Glenwood customers

GLENWOOD SPRINGS, Colorado – Projected savings in Glenwood Springs electric utility costs next year will translate to a much smaller rate increase for electric customers than the city expects to see in its wholesale power rate.

Glenwood Springs City Council last week approved a 2 percent increase in residential and commercial electric rates. The new rate takes effect in July.

At the same time, the city is bracing for an estimated 20 to 25 percent increase in its wholesale electric power costs starting in 2013.



The city’s existing contract with the Municipal Energy Agency of Nebraska (MEAN) expires at the end of this year. A new 10-year deal starting in January 2013 will result in an estimated 25 percent increase in the city’s wholesale power rate.

The city is still exploring a possible 30-year contract with MEAN that would instead result in a wholesale rate increase of about 20 percent.



However, terms related to the city’s ability to use locally generated power need to be negotiated before the city could switch to the longer-term deal.

One reason electric customers won’t have to pay a comparable rate increase is that costs to run the city’s electric utility have been less than expected in recent years, Glenwood Springs City Manager Jeff Hecksel said.

“Because we have saved money and are projected to continue to save money, that savings is being passed along,” Hecksel said.

“How likely it is that we will be able to maintain those kinds of savings is a concern,” he admitted. “It is something we look at every year, to see where our rates should be compared to expenses.”

Each year, the city has a consultant review its 2007 cost-of-service study, which included revenue and expense projections extending out several years.

According to this year’s review, prepared by JK Energy Consulting of Lincoln, Neb., the city should expect operation and maintenance costs in the electric department to be about $665,000 less in 2013 than originally projected.

The same report includes a comparison of the 2007 projections to actual revenues and expenditures for 2011. Expenses for the city’s electric utility came in about $1.6 million less for 2011.

Roughly $650,000 of that difference was related to savings in operation and maintenance costs associated with running the electric department, according to the analysis.

The remainder was a result of the fact that the city didn’t sell or use nearly as much electric power in 2011 as had been projected in the 2007.

“Use is down, which has been a result of the economy,” Hecksel said. “As the economy continues to improve, we will likely see an increase in use.”

Hecksel pointed to several new commercial electric customers, including three new car dealerships, that are expected to open within the next year.

Valley View Hospital is also preparing to open its new cancer center this fall, and the city’s new wastewater treatment plant and lift station will combine to increase the power load demand in the city, he noted.

While that will result in an increase in revenue, it also means the city’s cost to run the electric utility and distribute power to users will also likely go up, Hecksel said.

“They could offset each other, but I do remain concerned that we won’t be able to maintain the cost savings we have seen the last few years,” he said.

Additional customer rate increases may still be needed next year in order for the city to absorb the increased wholesale power supply cost.

The JK Consulting analysis recommended an electric rate increase of 1.4 percent for this year. The 2 percent increase agreed to last week accounted for ongoing debt payments, plus construction costs associated with a new electric department office/warehouse that the city plans to build on Devereux Road.

The same utility rate analysis determined that costs associated with running the city’s water and wastewater utilities were slightly more than projected last year.

Earlier this spring, city council approved a 4 percent hike in water rates. Water customers saw a 7 percent increase last year.

However, wastewater (sewer) rates, which have gone up significantly in recent years to cover costs for the new wastewater treatment plant, were not increased this year.

The city did transfer $800,000 from its capital reserve fund to the wastewater fund to cover ongoing construction costs.

jstroud@postindependent.com


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