Residential and business customers in Marion will see higher electric rates when they get their bills May 1, based on action taken March 24 by the Marion City Council.
City Administrator Roger Holter said the rate increase ties to consumer consumption.
?We track from March 15 to April 15 with the amount used during that period sent out on May 1 bills,? he said.
This is because of the time required to process and mail bills after meters are read.
It may appear to be a retroactive increase, Holter said, but it had to be anchored to the billing cycle.
The council?s decision will mean the monthly base rate is bumped up from $6 to $8 for residents and $7 to $10 for businesses; the price per kilowatt-hour will increase from $0.1070 to $1.1175.
?Our average customer uses 805 units per month. (The city) bill would then be 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 would be listed.?
Consequently, $94.59 could become $91.76 or could become $101.26 plus the base charge of $8 added.
Kansas Power Pool, of which Marion is a member for purchasing power, suggested this option based on 2013.
?We could have credits per average bill of $2.83 or monthly $6.67 additional (based off actual energy costs adjustments assessed off 2013 by KPP),? he said.
The average commercial account would be at $147, he said.
As for the base rate going up $2 for residents and $3 for businesses, the reason is Reciprocating Internal Combustion Engines, also known as RICE.
Holter said this is a federally mandated emission control improvement necessary because of certain power plants that were purchased by the KPP.
?The RICE 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,? he said.
For Marion, the cost is estimated at $72,865. The original agreement accepted by the city was $72,865, with $49,898 due this year.
?In talking with the operations manager last Friday,? Holter said, ?they are anticipating the completion of all RICE upgrades, and the entire bill due and payable this year for our city.?
Given the unforeseen increases from the time the budget was set last August, Holter proposed four methods of approaching the shortfall. He said the overall business perspective is volatile given the commodities market.
?In January and February, we absorbed $55,111 out of the (city) operating budget,? he said.
However, KPP projects that once the city is into the summer months there will be enough capacity that customers will see credits on energy costs.
Councilor Chris Meierhoff was absent from the meeting, but the other four members voted in favor of the rate increase.
Burden to consumers
Holter said he understands how this can be a burden on the consumer.
?I also understand this is a business, and we are trying to keep this business fluid,? he said. ?If we do not pass this, we won?t have reserves.
?We will only have 33 days of unencumbered cash to be used for utility reserves, and we are supposed to have 90 to 120 days,? he added.
By delaying the increase, the city would be down to 22 days of unencumbered cash by the end of April.
The cash in reserve from the utilities fund goes from the electrical department to the general fund and from there to other funds, he said.
? $263,977 in transfers from utilities to cover debt services;
? $120,000 to go into equipment reserve;
? $122,000 budgeted to come out of utilities and go into a special highway fund;
? and additionally from utilities, $304,365 for capital outlay capital improvement projects.
?In the budget adopted, it gave us budget authority for $405,000,? he said. ?I will be forced to amend the budget to the end of this year to cover our debt services payments based on the obligations that have been incurred.?
Councilor Todd Heit?schmidt said: ?I am not the biggest fan of this whole process, but since we are in the electrical business, this is about the best thing we can do.?
In other business, the council:
? approved the mayoral proclamation declaring March as Meals Month;
? heard and accepted a presentation of a Vogel water well lease;
? accepted the ordinance designating a portion of Elm Street as a no-parking zone.
The next council meeting will be at 4:30 p.m. Monday, March 31, in council chambers.