As anticipated, Independence Power & Light has offered a reduced electric rate for Unilever, part of an incentive that spurred the company’s recent announcement that it plans to expand its 35th Street plant and increase its workforce.
Under an ordinance given its first reading at Monday’s City Council meeting, IPL’s current rate schedule will have an economic development rider (EDR-5) to be available for eligible customers within Independence beginning Sept. 1.
The EDR is designed to provide incentive to new industrial customers as well as existing customers willing to expand or invest in Independence. Eventually, IPL Director Leon Daggett explains, the individual customer can benefit from not having rates increase as much.
The key concept is “load factor” – a measure of how much of the electrical system is used. With more large industrial customers using the supply IPL already has on hand, IPL can further stabilize future electric costs.
According to information provided at the meeting, IPL’s current annual load factor is approximately 41 percent. Daggett said of the power that IPL is federally mandated to have generated and available for use, 100 percent usage has happened just twice in the last 10 years.
“Anytime we do this, it will eventually lower the rates for everyone,” Daggett said. “Anytime you can encourage your industrial base, it’s beneficial.”
According to provided information, the last EDR (4) was adopted by the City Council in March 2007 and expired for any new applications at the end of that year. This EDR is eligible only for industrial customers – not those involved in retail trades. To qualify, new customers must have a peak load of at least 200 kilowatts and an annual load factor of 50 percent. Qualifiers would receive a 35 percent discount the first year, then 30, 25, 20 and 10 percent discounts, and the discounts would cease after five years.
Existing customers have two means of qualifying:
1. Expand their electrical load by at least 20 percent, but no less than 200 kilowatts, bringing the annual load factor to at least 50 percent. If metered separately, the expanded load would receive the new customer discount. If metered together with the existing load, the combined load would be discounted by 14, 12, 10, 8 and 4 percent for the five-year period.
2. Make a capital investment that equates to 10 times their annual electrical charges and meets the 200-kilowatt peak and 50-percent load requirements. The new customer discount would be applied in such cases.
Daggett said IPL takes a small financial hit with the EDR, in that industrial customers otherwise would be spending more for electricity. But the alternative is businesses making investments in other cities.
“We want them to spend money here,” he said. “We give up some money, but that increases the load factor. It goes to the customer when we do our rate schedule.”
The Unilever plant is one of just five industrial customers for IPL and is its largest customer. In a one-year span in 2010 and 2011, according to city documents, Unilever used 20.27 million kilowatt-hours, far ahead of No. 2 Centerpoint Medical Center. For that one-year period, Unilever accounted for 1.8 percent of IPL’s sales, or $1.6 million.
The Public Utilities Advisory Board endorsed the EDR at its June 26 meeting.