Consultant Burns & McDonnell says its proposed new electric rate structure for Independence Power & Light would make residential rates and bills the lower than other utilities in the Kansas City area.
The new rate structure incorporates the 6 percent in across-the-board cuts, which the council approved earlier this year, into the projected rate revenues and consolidates IPL rates from 22 classes to 12. Residential customers alone will go from five classes to two. Burns & McDonnell representative Adam Young presented an outline Monday to the City Council.
Among the other proposed changes are switching from a minimum bill to a customer charge, rolling the fuel cost adjustment into existing rates, getting rid of most declining block structures for greater energy use in favor of flat rates and creating a new manufacturing rate that is “competitive.”
“This is consistent with what utilities in nearby areas are doing, and across the nation,” Young said of getting away from block structures.
According to the Burns & McDonnell calculations, the average residential customer would see monthly bills lowered by $7.92 – about $4.35 in the winter months and $12.84 in the summer. For the average residential space heat customers, monthly bills would go down $9.08.
Compared with Kansas Power & Light's Greater Missouri Operations area, which covers large portions of western Missouri outside Kansas City and which Young said has the metro area's lowest residential rates, IPL's average residential customer would pay $5.55 less per month ($2.96 in winter, $12.66 in summer). The average residential space heat customer would pay $12.86 less than GMO customers.
Young acknowledged that because the across-the-board rate cut came with the current rates and some rate classes would be merged, a fraction of customers, particularly some non-residential classes that had just a few customers, might not realize a full 6 percent reduction.
With the changes, IPL would maintain healthy enough operating reserves – 63 days worth – and debt service coverage for five years.
Robert Stillwell, acting IPL finance manager, said fixed customer charges instead of minimum bills are simpler for billing systems, and he would recommend the city give itself time to test previous data with a new rate structure to make sure the billing system runs smoothly before going live with new rates.
“(Let's) not rush and do this in two months,” he said.
IPL would still have to develop the manufacturing rate, and Stillwell said IPL will look at ways to expand and better advertise its ratepayers assistance program. The proposed rate structure will be presented to the Public Utilities Advisory Board before going back to the council for approval.