Because of higher wholesale energy costs, transmission costs and other charges, the Marion City Council, at its meeting Nov. 24, could be looking at a rate increase.
The amount of that increase, from the retail side, is being recommended by the utility staff when the council meets Dec. 8, according to information presented by Roger Holter, city administrator.
Holter said information about the increase was presented at the annual Kansas Power Pool meeting, which Marion and Hillsboro are members.
?KPP at the meeting has announced we are going from an overall energy cost of $62.61 to $71.35 on wholesale at the beginning of the year,? he said.
?In essence that is a 14 percent increase over what we currently pay for our electric.?
The capacity demand, which is a means of insuring customers have enough energy available to them, is going down from 2014 to 2015, Holter said. The reason is because administrative charge are being moved.
?Administrative demand charges went from $46 to $106,? he said. ?A lot of our administrative costs for the pool were included in the capacity demand, so we paid for it in the rate.?
However, what the KPP board of directors asked for in 2015, Holter said, is for ?true and accurate reporting of all administrative charges,? such as staff, advertising, meals and other.
Another reason for the increase involves transmission rates, which is the infrastructure Westar Energy has in Kansas that all power providers have to move energy through, Holter explained.
?Westar was granted $6.9 billion in infrastructure improvements over the next 10 years, and the Kansas Trade Commission has agreed to allow them to start billing that in advance prior to construction,? he said.
The transmission rates will go from $5 to $6.87 in 2015 to pay for those future infrastructure improvements. As for the actual cost of energy, Holter said the price will go from $29.72 to $33.95.
?The projection right now is natural gas prices are expected to remain a little more level this winter season than last year,? he said.
?We are seeing propane is already starting to escalate.?
Although several factors are prompting the price increase, Holter is also optimistic about some of KPP?s changes after 2015. The federal government and Environmental Protection Agency is requiring coal-fired plants either be retrofitted and RICE upgrades made or be shut down.
Since the KPP has a contract with Nearman Creek Power Station, owned and operated by the city of Kansas City Board of Public Utilities, and is a coal-fired power station, the plan is to not renew its contract after 2015.
What that will mean for KPP and member cities, Holter said, is that instead of purchasing power from Nearman at $80 per megawatt hour, it will purchase more power from Dogwood Power Plant in Missouri.
?The trade-off,? he said, ?is that instead of $80 per megawatt hour, it would drop to more like $42 to $46.?
First electric bill increase
In May 2014, Marion customers saw higher electric rates, but Holter said the reason was the energy cost adjustment dealing with the Nearman Creek Power Station. ?That was an unknown amount that (the city) kept absorbing. It was the biggest portion of the rate increase for 2014.?
The reciprocating internal combustion engines charges have been a floating target because the final charges will be assessed on the final actual charges paid by the Kansas Power Pool and its member cities, Holter said in March.
For Marion, the cost was estimated at $72,865 with the original agreement, and $49,898 due this year.
The council needed to increase the electric prices so that it didn?t deplete the city?s utility reserves further, which are also used to fund items within the general fund.