Editor’s note: Since its original posting, this article has been modified to clarify the fact that the electric rate reductions in question have already gone into effect.
Amid passionate discussion at times last week about major budget adjustments and how to assist ratepayers amid the pandemic, the Independence City Council also moved forward with a longstanding subject: a new electric rate structure.
The council voted 6-1 to install the simplified rate structure for Independence Power & Light this year, approximately two years after consultants started a rate study. The new structure incorporates the 6 percent rate cut that the council ordered and all customers started seeing on their bills after August 2019, and it consolidates the number of rates from 22 down to 12, spread out among five classes.
A new municipal rate structure takes effect July 1. From Oct. 1 on, any new electric customers will be on the new schedule and existing customers can request to be transferred to the new schedule. Any remaining customers grandfathered from the current rate structure will be transitioned to the new rate structure in October 2023. City officials requested the new municipal rate start earlier for budget planning purposes.
"It’s a great reduction from what we’ve had. We really just added (rate schedules), but with the sunset everything will roll over," said Jim Nail, acting assistant general manager of IPL.
The city initially intended to just roll most accounts over naturally, since IPL gets about 16,000 new accounts per year, Nail said – mostly from tenant changes – but a council majority approved Council Member Scott Roberson’s amendment for a three-year sunset.
City leaders have long said the current structure, with 22 different rates, not only complicated billing but also trying to court new commercial customers, because it could be hard to gauge how much electric bills would be.
"For our customer service folks, it will be much easier for them to sign them up," Nail said.
The city asked Burns & McDonnell in 2018 to do an updated cost-of-service and rate study. The rates portion came much later in part because a council majority approved cuts of 2 percent in late 2018 and another 4 percent in May 2019.
According to the Burns & McDonnell calculations presented late last summer, the average IPL residential customer should be seeing 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.
As part of the simplifying rates, IPL is replacing the fuel-cost adjustment with a power-cost adjustment – the fluctuating cost of producing and transmitting energy – that will be reset to zero and built into the customer's per kilowatt-hour rate based on projected costs. Currently, that adjustment is made monthly. Now it will be annually, or perhaps every six months if necessary. By setting it every year, IPL officials said, it can spread out the difference instead of having large swings in bills. If customers get overcharged, they would then be credited in future months.
Besides simplifying and cutting rates, the council had also requested an across-the-board municipal rate rather than each municipal building being on different rates according to their usage. By totaling the city buildings’ total electric usage across 143 accounts, including street lights, the city qualifies as an industrial customer, at 8 cents per kilowatt/hour (residential customers range from 19 cents down 10 depending on how much power is used). Each building will still get a separate bill with a base monthly charge like any resident, but the uniform rate means simpler accounting and possibly some general fund savings.
City Manager Zach Walker said the city cannot receive a discount beyond any other electric consumer, but it’s allowed to be charged the same as a similar customer.
Roberson had moved to have the city simply be counted as an industrial customer rather than having a separate municipal rate, but no council member supported it. Mayor Eileen Weir said she wanted to have a separate municipal rate, even if it was the same as another rate class, for transparency purposes.