IPL bill add-on suspended, city mulls legal options

By Mike Genet

Independence Power & Light will suspend its add-on to electric bills that had been scheduled for the next few months. 

The municipal utility had told customers a couple weeks ago that they would see slightly higher bills into the summer due to the February’s cold snap that led to a giant fuel bill. 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, based on average residential usage now. Department director Jim Nail said he chose that method rather than a single, higher add-on to bills.

A City Council majority voted Monday to suspend that add-on for 30 days, 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. The base electric rates are 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. In a normal month, IPL spends about $2 million to $3 million on power and fuel. The February 2021 bill was about $12 million, compared with $4 million for February 2020, and has already been paid.

IPL had sent out about half of the first month’s worth of bills with the add-on, and will finish that month before the pause.

Mayor Eileen Weir said she doesn’t question IPL’s methodology, and acknowledged it’s quite likely the fuel bill for IPL (and some other utilities around the Midwest that got socked) are legit, but she would feel better if the city simply took a little more time. The mayor said conversations 

“I’m not suggesting that we don’t continue to recover this cost,” Weir said. “I would feel more comfortable telling our citizens we asked questions that we needed to ask. It’s still ratepayers’ money, and we’re just taking a little more time to make sure we get our questions answered, making sure the cost is justified.”

Council Members Karen DeLuccie and Dan Hobart voted against the resolution to suspend collection, saying it would further harm IPL’s reserves for no good reason and that legal action could still be taken a long time from now.

Nail said IPL is nearly $19 million below its target cash balance as recently set by council policy (about $67 million). The utility had planned to absorb about $6.5 million worth of the additional fuel costs, but the final amount has not been finalized. The 30-day pause, Nail said, simply means more of the deficit will be recovered in the next fiscal year (which begins July 1) as opposed to the current one.

DeLuccie with the bill already paid, and the fuel-cost adjustment being a longstanding practice, it doesn’t make sense to further harm IPL’s reserves with potential bond refinancing in the near future.

“We’re giving our citizens false hope,” she said.

Hobart said if fraud ultimately gets uncovered with the natural gas prices in February, that certainly won’t happen in 30 days, and the city could simply sign-on to a class action lawsuit to recover costs. 

“The statute of limitations doesn’t start running until the fraud is discovered,” he said. “If we discovered fraud in 30 days, that would be the biggest Christmas gift in the United States. It would also bankrupt every natural gas company, or whatever the source was. I don’t know that 30 days does much for us; I don’t think anything’s going to change for us.”

Council Member Mike Huff said IPL’s main power source that uses natural gas – the Dogwood plant in Pleasant Hill – shut down for a few days in February because of the high costs, so he wondered why the fuel bill was so high when a large portion of IPL’s power still comes from coal-fired plants. 

Council Member Mike Steinmeyer said he didn’t believe it would be a potential fraud issue as much as a price-gouging issue. If nothing else, getting answers could help IPL in the future with similar spikes, rather than simply accepting the cost passed down from the Southwest Power Pool, IPL’s wholesale power broker.

“If that’s the case,” Steinmeyer said, and IPL and others got taken advantage of, “and there’s a way to claw back, then we should’ve had the ability to do this. There are plenty of places to potentially have lawsuits.”

“That market volatility is not going away,” he said. “I’m not sold that we’ve done everything at this point, and I think we owe (ratepayers) more. At least we’re preparing and we’re ready for the next one.”