New rate structure for Mt. Pleasant Utilities becomes effective Jan. 1

BY BROOKS TAYLOR

Mt. Pleasant News

Eighteen months of study, analyzing and preparing will come to fruition on Jan. 1, 2016, when Mt. Pleasant Municipal Utilities implements its new residential, commercial and industrial electric rate structure.

?In June 2014, we recognized the need for a change (in our rate structure),? said Jack Hedgecock, general manager of Mt. Pleasant Municipal Utilities (MPMU). ?We haven?t changed the rate structure since the 1990s.?

The new rate structure will be reflected on customers? billing effective with billings after Jan. 1.

Hedgecock said the revision was not a subtle attempt to raise rates. He said that people will see minor changes ? some will see slight increases, others slight decreases ? on their bills. The new pricing, Hedgecock said, is catered to character of service.

The general manager sprinkles the phrase ?revenue neutral? into conversation frequently when discussing the new rate structure. ?We wanted to come up with a rate structure that was fair to everyone and maintain our revenue-neutral financial model. This was not an attempt to generate additional revenue for Mt. Pleasant Municipal Utilities?We did a complete analysis of fixed costs and researched current rate structures within the industry.?

?Our intent was to come up with a simplistic structure that aligned with our actual costs on providing service,? he added.

The MPMU general manager also noted that the utility?s board of trustees was an active participant in developing the new rate structure. ?We engaged the board because we wanted to make sure the rate structure was good for the community.?

Comparing the existing and new rate cards, there are not wholesale changes. Rather, some categories have been consolidated and some added, such as industrial. Prior to now, MPMU did not have an industrial classification on the rate card.

For example, the current rate card has six steps for residential electric, beginning with 15 kilowatt-hours of usage. The new card has two steps ? the first 500-kilowatt hours of usage and over 500-kilowatt hours. The charge for the first 500 kilowatts is $0.12 per kilowatt-hour while over 500 kilowatt hours will be billed at $0.095 per kilowatt-hour.

Residential base fee will be $1 per day accumulating to a maximum of $13 monthly. The base fee, MPMU officials say, reflects the actual fixed facility costs.

That compares with a declining block scale on the current card, which includes a $5.20 monthly minimum charge and is also the charge for the first 15-kilowatt hours of usage. Five steps of usage and the respective fee follow that. Those charges range all the way from $0.25 per kilowatt hour for the next 35 kilowatt hours after the first 15 hours to $0.093 per hour for usage over 800 kilowatt hours.

Electric residential heat will cost $0.085 per kilowatt-hour (for two meter service) under the new rate structure as compared with $0.0838 on the former rate card. One-meter service for electric heat will be priced at $0.12 per kilowatt hour for the first 500 kilowatt hours, $0.095 per kilowatt hour for the next 700 kilowatt hours and $0.085 for usage over 1200 kilowatt hours.

The difference between one- and two-meter services for residential heat is that in the case of one-meter service, all of the energy, both heating and domestic needs, is delivered through a singular electric meter. With two-meter service, energy used for heating purposes only is routed through a dedicated meter and the balance of the domestic energy needs for the residence is routed through a second meter.

Randy Neff, MPMU accounting supervisor, said that energy industry is undergoing changes with the utilization of renewable energy, such as solar panels and wind turbines. ?That has resulted in MPMU selling fewer kilowatt hours. The old rate structure encouraged people to use more energy?We are aligning our (rate) structure to reflect the changes in the current energy industry.?

Hedgecock said MPMU sought the help and expertise of the Iowa Association of Municipal Utilities in developing the new structure. ?We wanted some background and what similar-size utilities were doing with rates,? he stated.

Neff said the utility belongs to an electricity-purchasing cooperative, which saves local residents money. ?We are members of a group of 25 utilities who buy power together,? explained Neff. ?We can buy energy at a price much better together than we could on our own. We are locked in on energy pricing through 2020, so we do not anticipate spikes in prices at this time.?

The lock-in, however, does not include transmission costs, which Neff said ?go up year to year, so we have to allow for that.?

As mentioned previously, the old utility card did not include an industrial rate. The new structure includes industrial at $0.048 per kilowatt-hour. The industrial demand base fee is a minimum of $1,500 monthly, or $1.00 per kVA (kilovolt-amperes) of transformation requirement, whichever is greater. The new demand charge per kilowatt-hour is $12.24.

The term ?demand,? as defined by MPMU, is the sum of the highest integrated kilowatt demand during any 15 consecutive minute period occurring in the billing month, but not less than 50 percent of the highest 15 consecutive minute integrated kilowatt demand, which has occurred in the preceding 11 months, whichever is greater.

Hedgecock said the industrial rate was added as an aid to economic development. ?To encourage businesses to come to Mt. Pleasant, they must think there is a good energy value,? he explained. ?We haven?t had an active industrial rate since the 1980s. We feel we now have an extremely attractive industrial rate and we need that to encourage future economic development in the community. We didn?t want to deter progress.?

Commercial rates also have undergone significant change. There were seven rate steps on the former card, and the new structure now divides commercial into small and large with two rate steps for each rate class.

MPMU?s old rate card lists seven usage steps for commercial electric. The new rate card divides commercial into classes ? small commercial electric (CE); large commercial electric (CE); small commercial electric combined (CC); and large commercial electric combined (CC).

The difference between commercial electric and commercial electric combined is based on the method of heating. In the commercial combined rate structures (CC), the primary heating source must be electric energy supplied by MPMU. In the commercial electric rate schedules (CE), the primary heating source can be something other than electric energy.

Formerly, there was a $5.20 minimum charge for 15-kilowatt hours for commercial electric (CE) and a $0.23 per kilowatt-hour charge for the next 36-kilowatt hours. Over 6,000 kilowatt-hours were billed at $0.097 per kilowatt-hour.

That compares with the new charge of $0.147 for 2,000 kilowatt hours in the small commercial electric class (CE), and $0.135 for over 2,000 kilowatt hours.

In the large commercial electric classification, MPMU charges $0.147 per kilowatt hour for the first 1,000 kilowatt hours and $0.095 per kilowatt hour for over 6,000 kilowatt hours.

Cost for the first 1,000-kilowatt hours on the new rate card for both small commercial and large commercial electric combined (CC) is $0.1475 per kilowatt-hour for the first 1,000 used. The top category in the small and large commercial electric combined is 2,000 and 6,000 kilowatt-hours and above, respectively, both billed at a cost of $0.085 cents per kilowatt-hour.

Non-demand small commercial meters are assessed $1 per day, accumulating to a maximum of $25 per month. Non-demand large commercial meters are assessed $2 per day, accumulating to a maximum of $50 per month.

Hedgecock said the difference between small and large commercial users is determined by the amount of kilowatt demand in any given billing period and the amount of kilowatt-hours used in a given billing period.

The MPMU general manager said MPMU?s revenue was down 4.4 percent last year. Expenses, however, also were down ? by 8.7 percent. He also said the utility is putting $2 million annually back into the community with infrastructure updates.

?We also learned some things as went through this,? admitted Neff. ?It simplified things for us, too.?

?I think we have done our due diligence on this as best we can,? added Hedgecock.

The new rate structure will be the subject of a January ?lunch and learn? targeted at the business community. The lunch and learn will be at noon, Wednesday, Jan. 6, at the Union Block.