East Ward Alderman Shawn Bolerjack at Monday’s aldermen meeting presented the Utility Committee’s recommendation to institute a 4.4% increase in rates.
Bolerjack suggested that the board table the discussion of the rate increase until the next meeting, Aug. 16. The board voted unanimously to table the discussion.
The following is the written statement that Bolerjack presented as chairman of the Utility Committee:
In February 2021, multiple states were hit with brutal low temperatures that created circumstances where record electric prices impacted utilities across the Southwest Power Pool region, which affected our area and our city. Our cost in February 2021 compared to the previous month increased 471.379%. According to a memo received from the MPUA (Missouri Public Utility Alliance) on March 5th, “During the weather event, the price of natural gas increased from around $3/dth (dekatherm) to around $1,000/dth and electric market prices increased from a typical price around $20-$30/MWh to over $4,000/MWh. Mid-Missouri Municipal Power Energy Pool (MMMPEP)’s diversified generation portfolio provided a substantial hedge against these record setting prices; however, the group did experience some market exposure due to high demand and unit derates and outages.”
Our energy pool utilized some available reserves to cover a portion of the additional amount due and the MPUA took the remaining balance towards a line of credit for 24 months at 1.55% interest rate. The City of Salem’s additional amount, which was estimated in March by the MPUA, was $1,296,655.63. The trued up amount was estimated to come out in June. The additional amount and how we were going to take care of it was discussed in our April 26th Utility Committee meeting. It was decided then that we needed more information and wanted actual totals for the February invoice from MPUA.
On the June invoice, MPUA had trued up numbers for the cost of electric for February, adding an additional $168,104.23 to the balance which made the final additional cost to be $1,464,769.86. Thankfully, Governor Parson passed legislation in May to establish the Municipal Utility Emergency Loan Program which allows us to stretch the remaining balance over 60 months at 0% interest. MPUA applied for that emergency loan program on the city’s behalf and it was approved. Since March, the city made payments toward the 24 month line of credit that we had with MPUA. Since then we have paid $189,744.44 in principal payments and $4,864.57 in interest payments, bringing our remaining balance to $1,275,025.42. This remaining balance can be stretched out over 60 months at 0% interest with the state’s emergency loan program.
At the July 20th Utility Committee meeting, City Administrator Walden provided rate increase scenarios with the wholesale rate change with the February 2021 weather event balance.
With the flat rate of $8 to all customers, the Utility Committee didn’t feel it was fair to have customers that consume more pay the same amount as those who use less. It was then proposed that we do it based on a percentage increase, that way the customer who used more pays more and the customer who used less pays less. This is how City Administrator Walden calculated step-by-step the percent increase in the meeting.
12 Month Wholesale Rate Change with February 2021 cold snap event assessed
All at once – 57.73%
As originally financed - 16.88%
With 0% interested financed over 60 months – 13.4%
Salem’s weather event balance is $1,275,025.42
The cold snap weather event balance divided by 2,654 active electric comes out to an average of $8.01 per month per account over the course of 60 months.
$1,275,025.42/60 months = $21,250.42/month
$21,250.42 x 12 months = $255,005.04/year
$255,005.4/$5,750,000(budgeted electric sales for FY21-22) = 0.0443487 (4.4%)
To give perspective on what they may look like on your monthly utility bill, I have reviewed electric consumption from 06/15 to 07/15 and if the new rate applied on that bill, residential customers would see an average increase of $4.39 and commercial customers would see an average increase of $9.41.The Utility Committee voted and it was approved to recommend the 4.4% rate increase to the Board of Aldermen.
Since then, social media blew up with frustration and confusion with some people saying that we should just have Ameren Missouri or Intercounty take over the electric operations of the city. I understand that there are a lot of frustrations and confusion over the proposed rate increase and the utility billing issue that we’ve had since November 2019. The utility billing issue is one of the reasons I decided to run for the alderman position, as I believe that I could help resolve this issue. Some rumors are out there that the rate increase is to cover the city’s mistakes over the utility billing issue. This couldn’t be further from the truth. The rate increase is a way to cover the additional cost of the $1.2 million from the weather event. In response to those that think we should let Ameren or Intercounty take over the city’s electric operations, let me share with you some benefits of having the city operate the electric operations that I have learned since serving as an alderman and these are some things that you may not have thought about. Some of the benefits include local control, greater reliability, efficient service, responsiveness to customers concerns, economic development and competitive rates. With us being part of the MMMPEP with other cities, which is part of the MPUA, we can collectively purchase power at wholesale costs to benefit the city and our customers.
Like you, I’m frustrated that we’re in this situation, but the city and our customers did receive a service during the weather event and unfortunately the costs in the market skyrocketed and we have a balance of $1.2 million that we need to figure out how to pay for.
