Utility rate changes coming

Published 6:12 pm Wednesday, December 22, 2010

Even with a base rate increase in utility rates looming, Troy residents are not likely to see a significant increase in their January or February bills.

That’s because of “a timing issue,” said Mayor Jimmy Lunsford.

The 4.5 percent increase, which goes before the city council on Tuesday for final approval, coincides with a decrease in the cost of the natural resources that drive utility rates. The local increase, which will be reflected in the bills under the E.C.A. charge, is basically the cost of the city’s refinancing of existing utility bonds to generate $8.4 million for improvements to the sewer, water and electric systems.

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However, the cost of fuel has dropped significantly since the same period in 2009, Lunsford said, and that drop should counter-balance the increase in the ECA charge.

“There’s a possibility some utility bills could even be less than they were two years ago for the same period,” he said. “That’s a factor of what has taken place in the whole industry. The rate of natural gas has come down a good bit, so electricity created by gas combines is considerably less expensive than it was.”

The city of Troy purchases its power from Alabama Power and supplies/resells that power to utility customers within city limits. Because of purchasing agreements entered into years ago, the city has been able to provide utilities at a considerably lower rate than surrounding communities, Lunsford has said.

“And I had one conversation in which someone thanked me for keeping our rates so much lower than the surrounding communities, even though we’re having an increase,” he said.

Council members began the two-part process of implementing the rate increase Dec. 14 with the reading of an ordinance amendment allowing the city to increase the rate per kilowatt hour by 4.5 percent effective Jan. 1, 2011, and again by another 4.5 percent Jan. 1, 2012. Also, the city would increase the base charge for residential service by $1 per month each year: to $8 per month for 2011 and $9 per month in 2012.

The utility bills customers receive reflect four charges: a base rate; a fuel charge, which is passed along at cost from the fuel provider; an ECA charge; and the usage charges, which are billed per kilowatt hour and are based on market rates for electricity.

The city will remain under a federally regulated rate structure with Alabama Power until 2012, at which time the city will have to contract with a new provider or negotiate a new rate with Alabama Power. The mayor already has begun the process of preparing for that change. “We’re exploring all our options right now,” he said.