Spreading out the fuel cost for IPL customers?
While Independence Power & Light had proposed spreading out the extra fuel cost from February’s cold snap over several months in the spring and summer, the city’s mayor is offering a more drawn-out approach.
Eileen Weir asked the City Council Monday night to consider spreading out payment for IPL’s fuel charge add-on over three years. After the council offered no objections, the matter will go to the Public Utilities Advisory Board for consideration before it goes to the council for a vote.
City officials did not specify when customers might see the added fee on their bills again.
Late in the winter, IPL had told customers they would see slightly higher bills into the summer due to the 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 current average residential usage. Department director Jim Nail said he chose that method rather than a single, higher add-on.
However, the council last month voted to suspend the add-on after a month 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, and Weir and some other council members wondered how that would play out in during peak usage in the summer.
Weir acknowledged that repayment, when it starts again, ultimately might be spread out over or one or two years rather than three, but her hope is 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 earlier. “The council seems to want some clarity on what to tell citizens, not just that we’re monitoring it and we’ll adjust as needed.”
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, and has already been paid.
In a normal month, IPL said in its message to customers, the utility spends about $2 million to $3 million on power and fuel. After February’s cold spell, the bill for that month was $11 million. Some utilities have passed along that cost in one bill, while IPL is mirroring the approach of some others and is spreading it out over several bills.
Over the past year, Nail said earlier, the IPL’s fuel-adjustment charge has averaged about 2.5 cents per kilowatt hour, varying a few tenths of a cent from month to month. For an average customer bill using 600 kwh, that means about $15 per month.
“The extraordinary costs of the winter storm would result in a much higher adjustment,” he said, and IPL chose to limit the adjustment to about 1.5 cents higher than average. For the average customer bill, that equates to $9 to $10 per month.
IPL sent out the first month’s worth of bills with the add-on before the pause.
Weir said she fully understands IPL’s plan to recover some of the fuel costs. The utility had planned to absorb about $6.5 million worth of the above-normal costs, and extra payment from customers ultimately would cover far less than that. IPL reserves have dipped over the past year as the city suspended late fees and shut-offs during the pandemic, and the council also voted to use about $11 million in surplus funds to issue an across-the-board credit of nearly $200 and spend $10.6 million to pay some bonds early, saving millions in interest down the road.
“We’re working ourselves out of a pretty substantial hole by this council’s desire to keep people housed during this pandemic, to keep their heat on, keep their air conditioning on, keep their water on,” Weir said.
“I want to put together a repayment plan. We definitely have had to go into our reserves for a variety of reasons, and we need to start recovering some that.”