CWLP rate plan on fast track
Critics warn it rewards waste
UTILITIES | Bruce Rushton
A City Water, Light and Power plan to restructure electrical rates is a recipe for wastefulness, critics say.
The utility has proposed raising fixed meter charges while lowering usage rates as a means of stabilizing finances that can swing significantly with the weather. Residential meter charges would zoom from $5.76 per month to $12.87 per month in 2019. Meanwhile, the cost of electricity would go down so that CWLP would still collect the same amount of money each year but in a more predictable, even fashion.
Customers who use little electricity would pay more under the plan set for city council vote next week. Doug Brown, chief utility engineer, told the council this week that a residential customer who uses 500 kilowatts per month would see a monthly increase of 37 cents. Commercial customers who consume large amounts of electricity would pay less, Brown said.
CWLP says that the change is needed to stabilize the utility’s finances so that more than $500 million in bond debt can be refinanced, which officials figure will save $5 million a year. But critics say that lowering the cost of electricity discourages conservation and isn’t fair to those who have spent money to save energy.
Peter Lazare, a retired senior rate analyst who worked for the Illinois Commerce Commission, says that the city should keep the monthly fixed charge low and raise electric rates.
“The advantage there is, you’re at least sending a signal to every customer: Please do everything possible to conserve this very dirty and expensive resource,” Lazare said.
If revenue isn’t sufficient to meet debt obligations, CWLP on a monthly basis could collect a surcharge from its customer base to satisfy bondholders, Lazare said. Such a practice, called “true up,” is similar to what natural gas companies do periodically to ensure that customers who pay a fixed amount each month ultimately pay the true cost of the energy they consume.
Clark Bullard, a retired University of Illinois engineering professor who once headed the U.S. Department of Energy’s Conservation and Renewable Energy Policy Office, agreed that lowering kilowatt charges isn’t a good idea.
“The people who are coming out on the short end are people who bought energy efficient appliances or put solar collectors on their roofs,” Bullard said. “Now, those investments aren’t going to pay off nearly as much. … Utilities want more control over their revenue stream. They get that control by taking the control away from their customers. The utility is penalizing people who have taken control of their electric bill and rewarding people who continue to waste energy and use large amounts of energy.”
Brown told the city council that CWLP promotes conservation, but raising use charges while not raising fixed meter charges won’t generate sufficient revenue to cover the utility’s costs. High usage charges encourage conservation, which pushes consumption down, which results in less money for CWLP, he said. It also sticks customers with big bills during hot summers and cold winters, he added.
“Things have to change,” Brown said.
“We can’t continue down this road of having low fixed charges and a higher energy charge. That hasn’t worked.”
CWLP’s energy sales climbed between the 1980s and mid-2000’s, then leveled off before going into decline, Brown told the council. That’s true of utilities nationwide, Bullard said. Power use peaked in 2007 after doubling every 10 years, he said, and utilities were caught by surprise.
“Utilities built for extra demand,” Bullard said. “Now, they’re trapped with extra capacity. They felt that if their own demand didn’t materialize, they would be able to sell to the grid. Now, the grid doesn’t need it.”
Eventually, Bullard predicted, it won’t make economic sense to run coal-fired power plants, and so CWLP will buy power from the grid rather than run its own generator. When that happens, CWLP customers will be hit hard because they had no incentive to install insulation and otherwise spend money to save power, he said.
“I’m not sure that the debate in Springfield has taken a long-term view on how to position CWLP for the future, when it’s just basically going to own the wires,” Bullard said.
Brown said the council needs to move fast so that bond debt can be refinanced before Thanksgiving, while interest rates are low. The council this week signaled that it will approve the plan by putting it on the consent portion of Oct. 6 council meeting, which is reserved for items not deemed worthy of debate. However, corporation counsel Jim Zerkle said that a public hearing is required and will be held the same night the council is scheduled to approve the plan. Ward 7 Ald. Joe McMenamin said that he will move for the plan to be placed on the debate portion of the council meeting.
In an interview, McMenamin said that the proposed increase in meter charges is “extreme and unfair.” He said that there has been insufficient analysis and public comment about the plan that the council hadn’t discussed until this week.
“I don’t see any calculation from the utility showing any revenue neutrality from this,” McMenamin said. “I’m also upset by the way this has unfolded without public input.”
Contact Bruce Rushton at [email protected].
