Electric rates in Marion likely to increase April 1

Residents and business owners in Marion will probably pay higher utility bills starting April 1 based on unforeseen electrical expenses reported at the March 3 meeting of the Marion City Council.

City Administrator Roger Holter proposed four methods of approaching the shortfall, but each of the options required an increase in the base rate from $6 to $8 for residents, and $7 to $10 for businesses.

The increase in the base rate will be used to fund the Reciprocating Internal Combustion Engine charges because those charges are not based on usage, he said.

Specifically, the EPA is requiring all RICE to be fitted with catalytic converters.

According to Kansas Power Pool information, member cities own several of these RICE units, which help establish required generating capacity to meet Southwest Power Pool standards.

Holter said KPP, of which Marion is a member, expects to complete all RICE upgrades by the end of 2014.

At that time, Holter said, the entire bill of $72,865 becomes due and payable.

Bill must be paid

?(Marion) entered into an agreement with KPP in 2011 for the federally mandated emission control improvements,? Holter said.

?The agreement was accepted at $72,865 with $49,898 due this year.?

Additionally, the $211,303 is the projected increase from KPP for this year, and it will cover operations, which were broken down based on rate increases.

Of the four options presented to the council, Holter said KPP recommended the third method, which funds 100 percent of the projected KPP increases and 50 percent of the RICE charges.

In the third scenario, electrical base rates for both residents and businesses would go up to address the RICE agreement requirements.

A rate increase would also go from .1070 kilowatts to .1175 kilowatts, Holter said.

Reasons for increase

The biggest reasons for added costs include increases in diesel fuel prices, making the diesel generators more costly to operate.

Consequently, KPP passes on the direct costs of fuel above its estimates.

Using a hypothetical example, Holter said if KPP planned for $20,000 in diesel fuel for a month and it cost $25,000, KPP would pass along the additional $5,000 to its members.

?They divide the $5,000 by the total kilowatts sold, and then bill the energy cost adjustment,? Holter said.

Based on 2013, he said, the city could have credits per an average monthly bill of $2.83 or $6.67, based on actual energy cost adjustments assessed by KPP.

The overall impact for last year, he said, was only 1.3 cents when taking the entire year and averaging it out. But for the last quarter it is averaging 5.5 cents.

Credits and charges

Holter said a Marion resident?s bill will show unit usage.

?Our average customer uses 805 units per month. (The city) bill is then multiplied by the 805 times .1175 for a total of $94.59,? he said.

?The next line on the bill would be either a plus or minus adjustment and then the net will be listed.?

Consequently, the $94.59 could become $91.76 or could become $101.26 plus the base charge of $8.

The average commercial account would be around $147, he said.

Councilor Jerry Dieter asked if the rates are going to vary from month to month.

Holter said, ?The rate is set at $11.75, but the cost of power would go up and down, and we would pass those charges directly to our customers based on kilowatt usage.?

Councilor Jerry Kline asked what Hillsboro is planning to do about the projected increases.

Holter said Hillsboro has gone up 10 percent on usage and increased its base rates.

?Westar took its commercial base rate from $10 for small businesses to $20,? Holter said, ?and went up 10 percent on utility costs.?

Westar is also now charging for connection on commercial basically to cover its infrastructure increases, he added.

?KPP rates are still very competitive,? Holter added. ?We won?t be the lowest, but we definitely are not the highest.?

Kline said these rate hikes have generated a lot of interest.

?Some people cannot afford to pay much. These are tough decisions,? he said. ?Would we gain anything by having a utility study done by the experts to find out what would be the best options??

Holter said there is a professional recommendation from KPP.

?I know,? Kline said, ?but that scares me a little bit, though, because (KPP) got us (as the city?s agent in buying wholesale power).?

The council plans to review the increases at its March 17 meeting. If it approves them, the rates will go into effect next month.

History

After getting its electricity from Westar Energy for 25 years, the council chose not to renew its contract with the company about two years ago, opting instead to sign a short-term agreement with KPP.

Formed in 2005 with only four member cities, KPP has grown to 42, including Hillsboro and Marion.

If the council chose to do nothing on utility rates, the projected increases would need to be paid from the city?s reserve.

?Last month it took our reserves down $22,000,? Holter said. ?This month, it will be $28,000 to $32,000.

?If we continue to absorb our cash reserves, we will be down to four weeks from a utility and we should have 12 weeks (in it).?

Plans for those reserve funds include eliminating the old substation by the Sports and Aquatic Center, buying a new utility truck, backhoe, dump truck, the Homestead sewer, water and electrical and the Ampride conversion. The city also wants to put line in to help water circulation.

Councilor Todd Heit?schmidt said they are not adopting an ordinance, but rather the direction with which one of the four philosophies applies to move forward.

?The next meeting is when we will present it,? he said.

In other business, the council:

? approved a draw request for Middle Creek on the Jex Addition sewer project.

? approved the Fair Housing Month proclamation.

? approved an ordinance allowing malt beverage sales in Central Park during Chingawassa Days from 6 p.m. to 11 p.m. Friday, June 6, and from 11 a.m. to 11 p.m. Saturday, June 7. The ordinance also stated the times would be subject to the conclusion of the concert.

? agreed to repeal Ordinance 908 establishing no-parking zones in certain areas along?Elm, North Locust, North Lincoln, North Cedar, South Roosevelt, South Freeborn, South Third and Hudson.

The former ordinance, which was approved March 15, 1976, was outdated.

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