Power rates are going up in October for Columbus Light and Water customers.
Exactly how much is still up in the air.
At minimum, power usage rates will rise 2.9 percent, according to information presented Thursday at the CLW board’s monthly meeting at the utility’s downtown offices. But the rate hike could be as high as 3.5 percent.
That would include a local rate bump of between 1.1 and 1.7 percent to shore up CLW’s flagging revenue, as well as an up to 1.8 percent increase to what the Tennessee Valley Authority will charge CLW to purchase power next fiscal year (which begins Oct. 1) that the utility will most likely pass on to its customers.
The increases would apply to all CLW customers — residential and commercial.
Consultant Chris Mitchell recommended board members consider the rate hike Thursday, pointing to declining sales and lack of community growth. Without building its residential and commercial customer base, he said, CLW will continue to need regular rate increases to recapture declining sales.
“The stress here is that you’re not growing,” said Mitchell, a former TVA employee who began privately consulting utilities after he retired. “You’re not alone. This is happening across the whole valley. We’re seeing pockets of growth (namely Starkville and Oxford) but most are declining. … It’s likely you will have rate increases in future years until you see growth.”
Likewise, Mitchell said TVA is looking at charging utilities more for power due to its own declining sales — both from population loss and more energy efficiency among its customers — as well as a need to raise more funds to pay off debt owed on its assets.
TVA is a federally operated entity that sells power to most providers in north Mississippi.
CLW’s board tabled voting on the local increase Thursday, deciding instead to defer the matter to May meeting.
The last two CLW energy use rate increases came in 2011 and 2015, respectively.
For each of the last three years, CLW has added $1.77 to its residential base customer charge, which now sits at $13.75 per month and is not tied to usage. CLW Executive Director Todd Gale said if the board passed the across-the-board usage rate hike, it would not raise the residential customer charge again next year.
More than 12,000 customers use CLW power, Gale said. Of those, roughly 8,500 are residential.
Breaking down the numbers
According to Mitchell’s report he gave the board Thursday, CLW needs to raise an additional $399,428 in revenue next fiscal year to make up for its declining sales, which would require a minimum 1.1 percent increase.
However, TVA will allow the CLW to raise up to $650,958 in additional revenue through rate hikes next year, which would amount to a roughly 1.7 percent local increase. Gale said a rate bump beyond that would require CLW to conduct a cost-of-service study to submit to TVA.
In contrast, the residential customer charge increase brought between $180,000 and $200,000 in new revenue each year, Gale said.
Board members Thursday all seemed to favor an increase beyond the minimum 1.1 percent needed. Gale, speaking to The Dispatch after the meeting, said he also recommends planning ahead.
“We’re going to be looking at the (1.7 percent) threshold,” he said. “We may over-collect, but I’ve already told the board we’re looking to buy a new transformer in 2020 that’s going to cost $1 million. If we do over-collect, that’s what we’ll use the money for.”
TVA will vote this summer on a 1.5 percent rate increase on power it sells to utilities starting in October. It also is looking to implement a 0.3 percent access fee to utilities — which Gale said would be the first time TVA added a fixed surcharge for utilities purchasing its power. In Columbus, that surcharge would amount to roughly $86,000.
Gale said TVA would base that surcharge on the average of a utility’s last five years of sales and fix the amount, meaning if sales continue to decline the surcharge would remain the same, effectively becoming a greater percentage of the power purchase each year.
“TVA is putting the risk in that rate, and we’re basically taking on their risk,” Gale said. “TVA is going to get their money at the end of the day.”
Technically, CLW’s board could vote not to pay the surcharge or delay paying it until October 2019.
Both Gale and Mitchell said these were not “practical options.”
If CLW waits, Gale said, TVA may not allow the utility to pass the surcharge on to customers, which will ultimately cut the $86,000 from its bottom line. If CLW opts not to pay it, both Gale and Mitchell said TVA would then set electric customer retail rates within the utility, effectively taking that role from the local power board.
If TVA sets the rates, Gale said, they will likely be higher than they would be if the local board maintains that authority.
“Honestly, I think that’s an overreach,” Gale said of the latter option. “When TVA starts defining our retail rates on power, they might as well just come run the place.”
Zack Plair is the managing editor for The Dispatch.
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