Proposed changes to the City of Cody’s residential and commercial electric rates intended to increase electrical fund revenue by 6 percent over three years is on track to take effect Oct. 1.
More revenue is needed for inflation, increased maintenance and operating costs and planned capital projects, said Phillip Bowman, public works director.
About 2,800 of Cody’s 3,751 residential customers, or 75 percent, can expect to see little change or an actual drop in their monthly bill totals, mainly due to a lower base rate, Bowman said.
Monthly bills have two components: a base rate, or flat fee charged to cover fixed costs related to providing the service, and kilowatt hours, which measure the amount of electricity used.
“The combination of the two is how we get to our revenue needs,” Bowman said.
The new model will lower residential base rates while increasing customer use rates. As a result, not all customers served by the city will pay more.
“Smaller residential users will see a decrease in their monthly bill,” Bowman said. “Typically, larger users will see an increase and average users will not be impacted much.”
All commercial users can expect to pay more, he said. Businesses will see on average a 2.9 percent increase each year over three years as base rates and usage rates go up.
Second vote Tuesday
The city amends its rate structure through the ordinance adoption process.
The council passed the proposed new rate plan on first reading Aug. 6. A second reading is part of Tuesday’s regular city council meeting that starts at 7 p.m. in City Hall. If passed, the third reading is scheduled for Sept. 3, one day after Labor Day.
If adopted, the city will phase in modified rates over three years starting Oct. 1. The model is designed to increase city electric fund revenue by roughly 2 percent per year.
After the initial phase-in period, cost increases are projected to climb at a lower rate.
“We certainly don’t anticipate a 2 percent increase every year,” Bowman said. “We anticipate it to be less – in the range of 1 percent and only if needed to address typical inflationary increases.”
People wondering how the proposed model will affect their monthly bills are encouraged to call City Hall, (307) 527-7511.
The new changes result from a retail electric rate study by Utility Financial Solutions, considered a nationally-recognized premiere rate-study consultant for public power utilities.
Overall, the intent is to “be as fair and equitable across all classifications” as possible, Bowman said.
If implemented, rates will return to a model similar to one used before the last restructure in 2015 that now charges all customers the same base rate of $31.16 regardless of the amount of electricity used.
“We’re going back to the old system,” Bowman said.
UFS first shared results with the city council in April.
Although the consultant recommends the city increase its electric revenue by 2 percent per year over three years, this does not mean every customer will see a 6 percent increase at the end of that period.
Whether residential customer bills go up or down will depend on monthly energy use.
Bowman said in general, low volume residential users – those who average 300 kWhs or less per month – could see their bills go down by about 5 percent each year, or about a 16 percent drop over the three-year phase-in period. That’s mainly because the new model lowers the residential base rate from $31.16 assessed now to $20.50 by October 2021.
High volume residential users – those consuming 2,000-3,000 kWhs – can expect a 3 percent increase each year.
Their overall bills will increase because residential electricity usage is a larger component to the monthly bills, Bowman explained.
Commercial customers’ base rate will remain about the same while their usage rate will increase.
While actual increases or decreases are more heavily dependent on actual kWh readings, on average commercial customers can expect a 2.9 percent annual jump in their total bill, meaning they will pay about $10.76 more per month on average by fall of 2021.
Averaging all 779 commercial accounts, a monthly bill of $120.49 today will increase by nearly 9 percent to $131.25 over the next three years.
Under the current model – based on a rate restructure implemented in 2015 – all users are charged the same base rate. Under the new proposal, base rates vary.
“The consultant felt the base rate was slightly elevated for the residential class,” Bowman said.
Mainly, UFS said the base rate isn’t directly tied to actual cost, he said.
“This (new model) is a more standard approach, with varied base charges for different customer classifications,” he said.
The city has about 779 commercial accounts, including 289 large commercial users. Large commercial-demand customers, including the City of Cody, will see the most significant jump in their demand-service base rate. The current $31.16 monthly rate will go up by $43.84 over three years, amounting to $75 by October 2021.
An additional demand fee is also applied to Cody’s largest businesses and industries. As proposed, the separate demand fee will drop slightly, going from $17.93 to $16.50 during the phase-in period.
Demand costs are assessed because more equipment is needed and city workers spend more time servicing those accounts, often going to the businesses to monitor and test services.
“There is a higher cost for us to service large customers,” Bowman said.
City utility finances are managed separately from general operations.
As self-funded enterprise accounts, they cannot run in the red and are not subsidized by the general account.
The new model will build a bigger reserve in the electrical fund, which has been slightly below its target, Bowman said.
Additional monies will go toward operations, which covers everything from labor, light poles and other supplies to substation and transformer upkeep. Over time the goal is to have enough savings to replace equipment when it reaches its design life.
“A substation is something we don’t want to let fail before you fully replace it,” he said. “Failure is a significant problem.”
He referenced the situation Powell experienced in July when a substation fire damaged equipment and parts needed to make full repairs were placed on order. The substation was able to maintain power to the city but not at full capacity, and air conditioning was putting a heavy demand on the injured 30-year-old substation.
According to news reports, some areas in Powell were running on an unregulated transformer.