The Independence City Council faces a question not so much whether to lower electric rates but how to go about it.
A proposed 10 percent rate reduction over the course of three years lacked enough support from the council at Monday, as council members split 3-3 on the vote – to the consternation of many citizens in attendance.
Council Members John Perkins and Tom Van Camp voted in favor with Mike Huff, who had proposed the resolution directing the city manager to implement a three-year, across-the-board reduction – 4 percent the first year, 3 percent each of the next two years – beginning Aug. 1.
Mayor Eileen Weir and Council Members Curt Dougherty and Scott Roberson voted no, citing lack of further plans at the moment on how to manage that rate reduction. Council Member Karen DeLuccie was out of town for family business and unable to join in the meeting due to technical difficulties with the video feed.
Weir, Huff and Van Camp are part of a utility rate council subcommittee.
“We've been meeting on a regular basis to gain information and dig into how we are – will be able – to lower the rate,” Weir said, offering to amend the resolution to ask for a plan to the council by Aug. 1
The mayor said the long-awaited cost-of-service study for Independence Power and Light would be presented next week, and the council has already directed the city manager to work with the council on a plan to lower rates. In addition to many citizen complaints about rates, city and civic leaders say IPL's commercial and industrial rates hinder business growth and that the rate structure overall is far too complex.
“Our rate is too high, but I am not going to support this resolution to do it in this manner,” Weir said.
Huff said he was trying to push along a recommendation tabled from a 2015 rate study and return surplus Power & Light funds to the ratepayers, as called for in the City Charter. In November, the council unanimously voted for a 2 percent across-the-board reduction that went into effect this year, and Huff said at the time he hoped to push for another 10 percent cut.
“Are we going to sit on this another four years,” Huff said. “(The charter) says we give this back in a rate reduction. These citizens are demanding their money.”
Dougherty said the matter should go to the Public Utilities Advisory Board first, and wondered how he came up with those particular numbers. Huff said reduction would bring Independence more in line with cities such as Springfield, Blue Springs and Columbia, and the PUAB could still consider it and issue a recommendation before the reduction went into effect.
“I highly doubt they'd go against it,” Huff said, insisting the IPL's cash reserves – roughly $40 million, City Manager Zach Walker estimated – could handle the lower rates.
The section of the charter Huff referred to states, in part, that “After providing for depreciation accruals and amortization of bonds, and for reasonable accumulation of surplus, the electric utility shall apply all annual profits to rate reductions.”
When the council approved the 2 percent cut, the city estimated $2.7 million less annual revenue for the IPL.
“We've talked about this,” Van Camp said, referring to the subcommittee, “and I think it's very workable. If the million dollars is the difference from what the 2 percent was, this is a good deal.”
Dougherty noted the lack of specifics to counter the rate reduction. The council has not yet finalized when the city will close the Blue Valley power plant and start to realize savings from that.
“You don't just arbitrarily cut a budget unless you determine where it comes from, how you arrive at that,” he said.
Roberson questioned if the reserve funds could indeed handle a revenue squeeze. Otherwise, that would mean deficit spending. He also noted the city must continue to make payments on bonds taken out several years ago to pay for some IPL capital projects.
“If we don't make the bond payments, that's going to affect our ownership of Dogwood,” Roberson said, referring to a plant in Pleasant Hill that the city partially owns. “Our bond rating will be lowered and could affect our ability to borrow in the future.
“This is not a business plan, to just say across-the-board a 10 percent reduction,” he said, adding that the commercial rates are more out-of-line with comparable cities than residential rates.
“Every single one of us on the council would like to lower rates for the city of Independence,” Roberson said. “We're all heading in that direction.”
In addition to less IPL revenue, a rate reduction also means money to the city's general fund through IPL's payments in lieu of taxes. Over a three-year period, Walker estimated, that would amount to $1.4 million.
“I would not make a recommendation that would alter our public safety,” he said about potentially compensating for that dip. “We'll do our best to make sure we don't impact service delivery or something of that nature. That would probably be the last place we would look.”
When the council last voted to raise rates in 2012, Van Camp said, it did so to make necessary improvements.
“We have a sufficient fund at IPL to cover this,” he said. “I admire the council that did that, and we've become profitable. Now it's time to reduce that, and this by all accounts will not affect horrendously, or in a haphazard way, the general fund. It's logical and somewhat overdue to give back to the people of the city.”