City spreads out higher fuel cost
The extra fuel cost from February’s cold snap will be spread out on Independence Power & Light customers’ bills for three years, rather than just a handful of months.
The Independence City Council voted this month to recover more than $1 million in excessive fuel costs over 36 months after the Public Utilities Advisory Board gave a thumbs up to the idea.
Customers will start to see the added fee on their bills again when the next round of bills begins in late July, IPL director Jim Nail said.
After a week in February in which some experienced rolling blackouts to avoid overstraining the power grid across the Central Plains, IPL had told customers they would see slightly higher bills into the summer because the cold snap led to a giant fuel bill – about $8 million above normal. The utility planned to absorb about $6.5 million of that, but it said customers would see an increase of about $9 to $10 a month in the fuel-cost-adjustment portion of their bill for several months, based on average residential usage. Nail said he chose that method rather than a single, higher add-on.
In April, though, the council voted to suspend the add-on to explore legal options related to high fuel prices. Also, some utility customers had noted fuel-cost adjustments far beyond the $10 range because their usage was beyond average. Mayor Eileen Weir and some other council members wondered how that would play out in during peak usage in the summer. The additional cost on a monthly bill should now be less than that.
Weir proposed the three-year approach in May, acknowledging that it could be shorter but she was hoping to give customers “some long-term certainty.”
“It’s very difficult for people to plan if they don’t know how long this will go on,” the mayor said at the time, and the council would rather give ratepayers some clarity.
The cost recovery comes as the council mulls whether to spend up to $1.9 million to repair a combustion turbine that’s necessary for IPL’s capacity requirements with electric power broker Southwest Power Pool. The council and city staff have started looking at options to replace the city’s aging half-dozen turbines permanently within the next few years.
Earlier council decisions – a one-time customer rebate amid the pandemic and paying off bonds ahead of schedule to save millions in interest down the road – used about $20 million worth of IPL’s reserves. The city also had suspended late payment fees for several months during the pandemic, and an attempted ransomware attack caused billing delays.
The fuel-cost adjustment is an industrywide practice and has been part of Independence’s rate schedules since the 1970s. Base electric rates are set including assumed fuel costs based on industry projections. The adjustment applies to any cost compared with the projected cost and is part of the regular bill. In a normal month, IPL spends about $2 million to $3 million on power and fuel. The February bill was about $12 million, compared with $4 million for February 2020.