Independence looks for utility price-spike answers
While state and federal agencies look into the energy prices during February’s cold snap, some Independence City Council members warn about sticker shock if the city’s electric utility has to recover some costs.
The municipal utility had told customers a few weeks ago that they would see slightly higher bills into the summer due to the cold snap. To recover some of those costs, IPL said customers would see an increase of about $9 to $10 in the fuel-cost-adjustment portion of their bill for several months. Department director Jim Nail said he chose that method rather than a single, higher add-on to bills.
The City Council last week voted to suspend that add-on for 30 days – after all customers had received one bill with it – allowing some time to explore possible legal options for the fuel cost spike.
The fuel-cost adjustment is a normal industrywide practice and has been part of Independence’s rate schedules since the 1970s. Base electric rates get set including assumed fuel costs based on industry projections. The adjustment applies to any cost (or, in some cases, savings) compared with the projected cost and is part of the regular bill. Because of the cold spell, IPL’s $6.5 million fuel bill for February from wholesale power broker Southwest Power Pool was significantly higher than normal – as many other entities experienced for that month
Mayor Eileen Weir, acknowledging that her household used more than the average 600 kilowatt-hours, said that portion of her bill went from $30 to $70 for February, and Council Member Mike Huff said some citizens have told him their fuel-cost adjustment went from $12 to $32.
The mayor said she doesn’t fault IPL’s methodology, and noted the utility has already absorbed much of the higher fuel bill but wanted citizens to know the recovery might not be just a few extra dollars in a month.
“It sounds like not very much,” Weir said of the calculation, “but it’s sort of surprising how much of an increase it is. That little bit of money adds up, and the high-usage months are coming.”
Tom Robbins of Strategic Capitol Consulting, from one of the city’s lobbying firms, told the council Monday that utility cost spike is “certainly (on) the governor’s radar” and that Gov. Mike Parson’s administration has offered budget amendment of $50 million to the state’s municipal utility emergency loan program through the Department of Natural Resources. The General Assembly would need to approve that amendment by May 7, Robbins said.
“So that’s one opportunity for relief,” he said.
Robbins also noted the state’s Low Income Home Energy Assistance Program (LIHEAP) and State Assistance For Housing Resources), which can provide utility assistance for both renters and landlords, and another proposed budget amendment could use federal CARES Act funds from 2020 for utility assistance.
The Missouri Public Services Commission is also investigating if any price gouging took place in February and expects to release a report Friday, Robbins said.
Weir added that when she spoke with the governor’s office, she learned that Federal Energy Regulatory Commission is looking at possible price gouging.
City Manager Zach Walker said the city contracted with Washington, D.C., firm Spiegel & McDiarmid, which specializes in public-sector utilities, to see if IPL’s billed costs where kosher, and he expected to hear back by the end of next week.
“This is a tough thing to really have an answer for,” Weir said. “If you stretch it out longer that would lessen the blow, but then you have to recalculate, and we can’t suspend shut-offs forever."
“I’m pleased to know there’s agencies in our state and across our nation who are looking at this. There’s a lot happening to help with utility assistance. But there’s no relief for the $6.5 million of our ratepayers’ money we’re putting into this.”
In a memo to share with the council, Nail said IPL’s membership in the Southwest Power Pool market actually mitigated against even more astronomical prices in February. The city’s coal plant contracts didn’t net higher-than-normal bills in February, staff found, and the gas-powered Dogwood plant, which the city partly owns, still experienced some record gas prices before it shut down for a few days in February.
Council Member Mike Steinmeyer said he also hoped to learn what IPL did right or could do better in the future, as stretches like February’s cold spell might not be as rare in the future.
“This is just not going to be a one-time event,” he said. “I don’t want this to all be about SPP, because it’s just a power pool. They don’t have IPL’s best interest at heart. IPL’s best interest are our ratepayers, and we’re the buffer.”