City to see an increase in electric utility rates

Kimball residents will soon be dealing with the effects of a six percent increase in electric utility rates.

According to Kimball City Administrator Daniel Ortiz, the city of Kimball has recently decided to increase the electric rates, which will go into effect April, 1, 2014, in response to changes to the Municipal Energy Agency of Nebraska (MEAN) due to increased federal regulations.

The increase, which will be the second six percent rate increase since October, also comes on the heels of an added $63,000 the city will have to pay over the next five years as part of a settlement that MEAN, which provides two-thirds of Kimball’s electricity, entered into with Southwest Power Pool over a pricing dispute leading to MEAN increasing its electricity rates by 12.8 percent.

“MEAN’s 12.8 percent rate increase and their $63,000 settlement that initially…when that came down the pipeline we figured we would probably be able to absorb because it amounts to about maybe $12,000, a little over $13,000 per year. But then you factor MEAN’s rate increase which is going into effect mid-year for us as well as the Pool Energy Adjustments (PEAs) that they’ve been imposing. It was the overall rate increase was closer to 19 percent, not 12.8 of what we’re looking at,” Ortiz said.

The recent stringent federal regulations which MEAN faces have caused the agency to have to discontinue generating revenue by selling excess power to non-members on the retail market at a premium, revenues that were used to keep members’, such as the city of Kimball’s, rates low.

According to Ortiz, the city had been aware that there may be a rate increase coming down the pipeline in November of 2013. However, it wasn’t until December that city officials were told the actual overall increase that the city would have to adjust to.

“That’s when they came out that their initial projections were off so they were looking at a 12.8 percent increase. Immediately, when I saw that, I knew that was going to be above and beyond what we could absorb given all the other projects and maintenance issues that we’re having. I sat down with the mayor to kind of come up with what can we do and what type of rate increase are we really going to have,” Ortiz said.

Another aspect to the financial impact that MEAN’s changes will have on the city is the fact that MEAN and the city of Kimball do not work within the same fiscal time frame. MEAN’s fiscal year runs from April 1 to March 31 while the city’s fiscal year runs from October 1 through September 30. This difference has impacted the situation with the increases coming in the middle of the city’s fiscal year without the city to have been able to budget for it in any way.

“That’s why it’s been so hard and why we’ve kind of gotten as much information out there as we can, because it is in the middle of the fiscal year. There was no way for us to absorb such a dramatic increase in our electric rates, especially given all the other things that have gone on,” Ortiz said.

The city has also encountered some frustration due to the way that MEAN operates and the way that they have set up their budget.

“The one thing that’s somewhat frustrating is, because of MEAN’S operating budget or the way they operate and budget. It’s a break-even budget. Any fluctuations give or take are felt, and if they’re as dramatic as they have been, they’re felt hard. Which is why we’ve seen the $45,000 in PEAs, and our fiscal year isn’t over,” Ortiz said.

However, Kimball is not alone with dealing with the effects of federal regulations on the electric markets with many areas being affected by the change, especially the Four Corners Power Plant in Arizona.

“The Four Corners Power Plant, a good friend of mine who works for the Arizona Public Service Company, which is one of the two major providers in Arizona for electricity, they’re being hit hard by this. So it’s being felt across the country, and it’s unfortunate that things are being driven down without much consideration of the dramatic impact they have on residents and local communities,” Ortiz said.

The changes with MEAN, however, are not the only circumstances that have pushed the city to increase the electric rates. There are also maintenance issues concerning the south substation that need to be addressed in the near future based on a report by the Exponential Engineering Company, which serve as the engineering consultants to the city.

“We did testing on most of our critical components, and when they saw the reports back, they saw some of the items and said, ‘Your breaker is 30 years old and some of the components are just starting to show their wear and tear, and it’s only going to be a matter of time before that breaker is gone,” Ortiz said.

In order to address the maintenance issues at the south substation, the city is putting together a plan in order to cut down on the amount of time that the power plant, which is only used for emergencies and during times of maintenance repairs to substations, would have to put in action in order to make sure that resident’s access to electric power is not interrupted.

“We’re trying to work on a plan for the project that allows us to run just during the day if possible. When we did that testing and all that repair work in the south substation, that’s what happened. We ran for three days, just usually during the normal day hours. And when they were done with their work, they just brought everything back online, and we switched off the power plant,” Ortiz said.

The city has also been given very little time to think of a solution to the problem as they have been informed that maintenance on the breaker will not be able to be put off for much longer.

“We asked EEC point blank how long they think we’ll last, and they said we’d be lucky if we had another year on that breaker. At that point, you can’t put it off any longer,” Ortiz said.

Maintenance issues with the Western Area Power Administration (WAPA) line, which is Kimball’s primary source of electricity that comes in from a WAPA substation near Clean Harbors and connects to Kimball’s south substation on County Road 32, are also a factor.

“What we’ve seen with the WAPA line is that they have what’s called insulators which hold and secure the power lines on the higher voltage lines. One the lines are higher, and two, the insulators that hold them and secure them are much larger. Because they’re larger and higher up on the poles, what’s happened is the wind over the past 30 years that they’ve been there has started twisting the poles which caused some of that knuckle to wear out. That needs to be addressed,” Ortiz said.

According to Ortiz, the recent increases will also have an effect on the landfill, which has recently seen a three dollar increase in rates.

“The big reason for that is certainly operational costs have gone up for there. We’ve had over a $600,000 landfill expansion project to construct a solid waste cell as well as a new C and D cell. When we went out to try to finance that project. our financial company that we work with came back to us and said we’re not generating enough revenue at the landfill to substantiate having a bond solely for that project. In fact, we did what’s called a combined utility bond so that electric rates can subsidize the landfill,” Ortiz said.

However, even the landfill project has had unforeseen increases added to its overall cost due to a storm late last year that caused $30,000 damage.

“In the middle of that project, we had a storm that, I think, we had two inches of rain within an hour and a half. There was some damage that had to be repaired and replaced. Because it’s considered ‘an act of god’, you couldn’t submit for insurance for all of that. It was something we just had to bite. I think that was about a $30,000 we had to absorb on that. Overall, the project itself was over a half a million dollar project when all is said and done,” Ortiz said.

Though it is unclear exactly what impact the increase will have on residents’ monthly utility bill from a monetary standpoint, when considering all the components effecting the city and forcing city officials to find ways to adjust to them, Ortiz states that making the increases in electric utility rates was not a decision made lightly.

“All the council and Board of Public Works have been informed day one since I found out about these rate increases going into effect and these issues,” Ortiz said. “It’s a tough position to be in as a city and as a council member or board member, but certainly I think the council and the Board of Public Works and hopefully the public knows that it’s something that can’t be overlooked with the maintenance issues as well as to the rate increases, that it’s out of our hands.”