The City of Salem Utility Committee held a meeting Wednesday, Dec. 11, during which committee members discussed the utility management system, Hometown Grid, and heard a presentation on a cost-of-service study from Utility Financial Solutions, LLC (UFS). In attendance included chairwoman and alderwoman Catherine Dent, and mayor and ex-officio Greg Parker, along with committee members Trina Pot, David Weiss, Kyle Williams, and Harold Hamilton. Also attending were aldermen John Whelan, Rick Letchworth, and Shawn Bolerjack.
Attending via Zoom for a presentation on Hometown Grid was John Pettit. Due to an outage of one of the communication systems, part of the demo for Hometown Grid was unable to be shown to the committee, such as what the live chat assistance would look like for customers.
Pettit has been programming for the past 18 to 20 years, living in western Kentucky. Within the past year or so, he began Hometown Grid as a family business, said Pettit. The management system has been spreading across Kentucky, Tennessee, and now Missouri. In August, Greg Beavers out of Farmington invited Pettit to the MoPEP meeting to present Hometown Grid. According to Pettit, the system is spreading rapidly and helping communities all across Missouri, including nearby Rolla, Waynesville, and St. Robert. Pettit further shared that Rolla was one of the first cities in Missouri to utilize Hometown Grid and are more than willing to advocate on its behalf. Waynesville and St. Robert are also beginning to utilize the program and saw a change almost overnight in their system, said Pettit.
The overall goal of Hometown Grid is to handle as many customers reports as possible during an outage—in an example provided by Pettit, in a hypothetical power outage across the city, customers utilizing Hometown Grid would still be able to communicate through the system and report the outage, allowing it to display on the Hometown Grid interface to utility staff members and other customers.
In a real-life example shared by Petit, in Russellville, Kentucky, containing 4,500 customers, the city signed up for the system two weeks before the biggest outage they’ve had in 25 years. Without time to send mailers to customers informing them about Hometown Grid, city staff were able to redirect customer phone calls to a line that would automatically generate a report within the Hometown Grid system. Pettit proclaimed that the outage might be the most well-documented outage in Kentucky history, as he scrolled through and showed the committee the thousands of reports generated by customers regarding the outage, including texts, voicemail, and photos.
City administrator Sally Burbridge shared that her and city staff tested the communication abilities of the system prior to the meeting. Burbridge further shared the system will be utilized primarily for power outages, to see if staff and utility members like the system before utilizing it for both power and water, which would introduce further costs to the city. Burbridge attested that the ability to compile customer generated reports, including texts, voicemail, and photos, would enhance the city’s ability to report destructive events to FEMA, such as the flooding event of early November. The compilation of data would be able to be sent straight to FEMA from the city and accelerate disaster relief efforts.
Hamilton inquired what the current procedure is for reporting outages. If you have an outage after hours, informed Burbridge, customers must call the police department’s non-emergency line. Reports will be directed to police dispatch, who would then contact the city’s on-call electric crew member. The downside to the current procedure is that with a larger power outage, it’s more difficult to capture all reports due to the phone line getting a busy signal from multiple calls. Through Hometown Grid, all reports would be captured and compiled. No report would go unheard.
Through the phone number given to customers, utility staff are able to figure out the exact cause behind an outage through customer communication. By utilizing Hometown Grid’s interface, utility staff are able to inform customers of the exact cause of the outage, if known, and whether crew members have been dispatched to address any issues; furthermore, by messaging the line, customers will receive updates on their outage as updates become available.
Hamilton questioned whether the program is needed, currently.
“Is it something that’s worth spending the money on for the city?” asked Hamilton.
“I guess my question back to you, and other members of the committee, would be—we talk a lot about communication avenues. This is a communication avenue to get information back to our customers in a timely fashion,” answered Burbridge. “In a way that we don’t have to have multiple staff up in the middle of the night every time we’ve got an outage.”
Chief Joe Chase, requested for his opinion by Pot, asserted that the system would be “absolutely” beneficial to the police department. In instances where half the town is suddenly without power, which has occurred previously, Chase shared that all four phone lines would ring for 30 minutes straight and require officers to be pulled off the road to assist in answering.
“Nobody has power, so if you have people with medical emergencies that are on oxygen and require life-saving measures in their home—they can’t get through,” shared Chase.
The map for Salem on Hometown Grid can be viewed at https://hometowngrid.com/salem. The number for reporting outages is currently live for residents and can be reached by texting or calling 833-703-4811.
Pricing of Hometown Grid
Over the course of five years, Hometown Grid’s licensing would add up to a total cost of $38,000—or $7,600 per year. The cost does not include messaging fees, which would cost the city $0.045 per message. According to Pettit, he estimated the cost for messaging per month would be just under $50. There are three different pricing plans for the program—flex, balanced, and strategic, which vary only by upfront costs to give lower or higher monthly fees to the city. Flex would cost $3,000 upfront and $610 per month; balanced, $6,600 and $550 per month; and strategic, $20,400 and $320 per month. These costs include a 20% Missouri Electric Commission (MEC) member discount.
Cost-of-service study
Burbridge shared that the cost-of-service study is one of the first steps to a rate study. This has been in the works for the past several months between staff and Utility Financial Solutions, LLC (UFS). This is a rate study paid for by the city’s membership through MPUA and MoPEP and will help determine what the city’s rates should be. In the past, the city has done a calculation each year but have not had a study at a larger scale completed for quite some time, said Burbridge.
Bob Blank and Dan Kasbohm with UFS gave the presentation on the cost-of-service study, describing that the first objective for the utility should be to equitably allocate revenue requirements among customer classes and identify potential cross-subsidization, while objective two is to define an optimal rate structure.
Blank summarized that from looking at the utility’s current finances, including cash reserves and optimal operating income, it was not found to need a rate increase to meet key financial targets. The minimum recommended cash reserve is 1.6 million; the projected cash reserve for the utility is approximately 4 million. Blank further summarized that the operating income is currently very healthy.
For 2026, UFS recommended a revenue neutral adjustment, where there is a less than 1.0% increase or decrease to ensure a gradual implementation of rate changes to customers. The current rates for commercial and residential customers are identical, the same kilowatt hour rate, with the only difference being when the customer is a “demand” user, such as big-box stores. UFS asked the committee if it would be willing to consider rate differences for commercial and residential customers. Board members informed Blank and Kasbohm that it has had lengthy discussions in the past on the topic but have not made any decisions.
For the residential class, projected revenues are $3.3 million, while the cost to serve them is $2.7 million, indicating a surplus. For the commercial class, revenues are $1.2 million, while costs are $1.3 million, indicating a rate increase would align revenues with costs. A bandwidth of ±1% is proposed, ensuring no class sees more than a 1% increase or decrease. Adjustments (e.g., a small decrease for residential and demand rates, a slight increase for commercial) would redistribute rates to move closer to cost-of-service while maintaining total revenue.
The purpose of an availability fee in utility rate structures was discussed by Blank. He explained that the fees are designed to recover fixed costs of the utility, such as meter installation, meter reading, billing, and maintaining the distribution system. A fixed charge provides consistent revenue to cover fixed costs, independent of weather fluctuations or usage patterns; furthermore, fixed fees ensure all customers contribute fairly to maintaining the system, suggested Blank.
The average usage for residential customers is 981 kWh per month. The proposal from UFS, what would be considered option A, is to institute a change of -0.2% to the kWh rate, which would result in an average of $0.40 decrease in customers’ monthly bills, with that average usage in mind. An availability fee of $8 would be instituted along with the decrease. For commercial customers, meanwhile, the availability fee would be $12.
Williams noted that the availability fee had just recently been sunset from customer’s bills in July of this year, after long being promised, and that instituting the availability fee again may prove difficult and receive pushback—although a reduction in the kWh rate may ease the sting. It was further discussed by committee members that the difference between Salem’s utility costs and other cities of comparable size is that there is no availability charge for utility services—which it makes up for, to ensure fixed cost recovery, with a higher kWh charge. When instituting the change, Kasbohm suggested being considerate of timing to ensure the cost doesn’t catch customers off guard, such as at the end of summer when usage is going down.
Burbridge reminded committee members, after further discussion, that UFS is not intending to propose the changes for immediate effect—but to help the committee consider the changes for the future, in the next budget year. In the meantime, after lengthy discussion from the committee, UFS discussed putting together further rate options for future consideration from the committee. The committee approved the decision to seek further options.
