Juneau seeks electric rate increase

MADISON -- Juneau Utilities is seeking its first increase in electric rates since 2003.

The rate request filed Tuesday with the Public Service Commission would add $4.35 to the $74.75 average monthly residential electric bill, said Nick Gahlman, electric superintendent.

It's rare for an electric utility to go 16 years without a rate increase but Juneau tries hard to keep expenses down and may have been a little lucky, he said.

"We just stay very reasonable with our rates compared to surrounding municipal and investor-owned utilities. We're probably still lower than many in the area," Gahlman said.

The last rate case the utility filed resulted in a rate decrease.

According to a July 2010 PSC order, rates for three customer categories, small power, large power and industrial power classes were lowered from the 2003 rate order. The PSC found that it could trim annual revenue by $29,829 and the utility would still generate an adequate rate of return.

However, this rate request would end with a 5.1% rate increase if the PSC approves the application as it was submitted.

An electric utility can pass to its customers increases in the cost of the power it purchases wholesale, and the cost of purchased power typically amounts to about 75% of a utility's total expenses. Managing the operational costs is the trick to keeping customer bills from increasing. However, after 16 years, inflation, maintenance costs and other factors finally show up on the balance sheet.

This year, the utility projects $38,983 negative net income on estimated revenue of $4.339 million and expenses of $4.378 million. Next year, the income shortfall increases to $85,456 on estimated revenue of $4.309 million and expenses of $4.395 million, according to the rate application.

"Ideally, rate studies should be done every two to three years. WPPI, our power supplier, does our rate studies and they brought (the income shortfall) to our attention.

The PSC will review the rate application, recommend an amount of revenue it deems the utility needs to stay viable in the future, and hold a public hearing on their recommendation in Juneau and Madison. They'll authorize new rates which the Juneau Utility Commission can accept or reject, Gahlman said.

The process is expected to take at least six month, Gahlman said.

The city's water rates haven't increased since 2001, said Tim Gassner, water and wastewater superintendent, which is also an extraordinary long time between increases.

The water and sewer utilities are looking at their finances and may need to seek higher rates, too, Gassner said.

"Not only have our operational costs gone up over time, the (Department of Natural Resources) has lowered the limits on phosphorous and (suspended solids). We can't put anything in the creek anymore and the chemical costs and other expenses just go up," he said.

"We've been trying to hold expenses down for a long time and may not have a good thing in the sense that it eventually catches up with you. We just can't do it anymore," he said.

Gassner expects the water and wastewater rate studies to be completed by the end of the year and then see if higher rate are necessary.

The PSC set water rates but wastewater rates are set by the Juneau Utilities Commission.

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