January 2011 likely will bring a wholesale rate increase and the search for a new electric supplier for the City of Troy, but city officials don’t yet know how those changes will affect customers.

Troy Mayor Jimmy Lunsford said the city’s current contract with Southern Wholesale Energy, the parent company of Alabama Power, expires Jan. 1, 2011. At that time, he expects the company to give a two-year notice of plans to stop selling power at FERC-controlled rates, opting instead to sell power at market rates.

“And when they do, we’ll immediately begin searching for a new supplier,” Lunsford said.

The Federal Energy Regulatory Commission-controlled rate contracts have proven beneficial to Troy, which is one of only three municipalities that purchases power from Alabama Power under the FERC rate.

“Our wholesale cost is considerably less” than others who don’t have this rate, Lunsford said, explaining that some 20 years ago Troy participated in a regional effort to explore options for purchasing or generating electricity. Options included everything from damming a local river to buying power from a nuclear plant in the Midwest. Finally, Alabama Power offered to issue bonds to allow participants to pre-purchase electricity, repaying the bonds over time. It was then Troy opted out, choosing the FERC-regulated rate structure instead.

“It has worked well for us, and now our rates are considerably lower,” Lunsford said.

However, Troy will be faced with a new round of negotiations come January. “And we’ll get some competition going for the delivery of power to the city of Troy,” the mayor said. “It’s a position we haven’t been in for years.”

One position that is more familiar for the city is dealing with annual utility rate increases. Lunsford said he expects the wholesale supplier to increase rates to the city 4.5 percent this year, another 4.5 percent next year.

“Our rates are favorable now, and these increases are still extremely favorable, compared to others out there,” Lunsford said.

As for how much of that increase will be passed on to the nearly 9,000 utility customers, among those 7,000 residential and nearly 2,000 commercial and industrial meters, no one knows yet. “We have our engineering consultants looking at the impact on our system and the impact of the wholesale rate increase,” he said. “We’re working to determine what amount of actual rate increase will be passed on to the customer.”