Lower electric rates could be ahead

By LISA SIMPSON STRANGE

GLASGOW — Customers of the Glasgow Electric Plant Board may see slightly lower electric bills beginning in April.

The Tennessee Valley Authority has announced a 7 percent wholesale decrease in the quarterly fuel cost adjustment (FCA), which will take effect April 1. One component of that cost will be lowered from $1.30 per Kwh to .81 cents per Kwh.

The total fuel cost adjustment amount represents the variable cost of coal, natural gas, enriched uranium and the power TVA buys from the open market, according to William Ray, EPB superintendent.

The decrease will not translate into a full 7 percent cost reduction in electric rates to customers, said Ray. The actual retail rate will probably decrease between 4 to 5 percent because of the TVA’s 7 percent wholesale reduction.

One reason for the difference is to cover the normal cost of the utility doing business, he said. The rest of the retained revenue may be utilized to help ensure the EPB be able to continue its substation project to provide redundant service to its customers in case of natural disasters such as the recent ice storm.

“I am recommending to you that we cannot pass along the whole decrease,” Ray told board members during their meeting Tuesday night. “That we’re going to have to retain some of it in retail rates if we are going continue to try to provide a redundant feed.”

Other TVA customers in the state are dealing with the cost of repairing damage to infrastructure caused by the recent storms.

“I feel more strongly about the need for the redundancy than ever after the ice storm and seeing how these cities (in Kentucky) our size … went for a week with no energy in there at all,” Ray said. “Paducah is looking at spending as much on repairs as we will spend on redundancy project.”

Ray and the board have been grappling with the problem of shrinking revenues brought on primarily by the downturn in the economy versus the need for backup power generation for the city.

“How badly do we want to have a second delivery point and achieve the redundancy we’ve been pursuing all these years?” Ray asked.

Electric power usage was down approximately 5 million Kwh in January, along with similar decreases in August and October, he told the board. The No. 1 reason was because of decreased industrial demands, he said. Residential and commercial usage was comparable to last year, but with the downturn in the economy and specifically in the automotive sector, local plant slowdowns have affected the amount of power the utility sells.

January electric revenue for the EPB was off $28,000 compared to last year, he said.

TVA recently completed an analysis of EPB’s financial needs and recommended an increase of $420,000 in revenue be collected annually by the utility, Ray reported. The difference in the wholesale and retail rate adjustment percentage should cover that discrepancy and allow the board to move forward with plans to construct the new substation on the east side of Glasgow.

“Reduced retail sales in Glasgow combined with the costs for a new delivery point yield the need for the additional revenue,” Ray said.

TVA is predicting the April FCA will be the lowest rate for any quarter now through the end of 2010, according to Ray. He told the board there would be no better time on the horizon to make the rate change.

“That’s without more bad news,” he said.

Another local plant, SKF, is slated to close in April, said board member Don Doty, who is also interim executive director of Glasgow-Barren County Industrial Development & Economic Authority. But he said he didn’t think there would be much more downturn with the automotive plants in the area and on the positive side, the non-automotive sector had not been affected that much.

Because the rate change EPB put in place in January 2008 was based on an assumption, which turned out to be poor, that sales would continue to stay level or actually increase a little bit about 1 percent, Ray said, revenues are below expected levels.

“I wasn’t good enough with my crystal ball to see what was going to happen to our economy,” he added.

Ray and the board agreed in principle to make the adjustment.

“The $420,000 that we could get April 1 … may give us enough rate room to get the redundancy,” Ray said. “At the March meeting, you will see detailed rates to put in place to implement a rate reduction. If you approve it, those rates will take place almost immediately,” he said.

“We really need to examine our position in Glasgow. ... With reduced retail sales and trend of collapsed industrial sales, combined with the anticipated $7 million new delivery point project ... it just doesn’t go together,” Ray said.

“I don’t think we’ve got any choice,” Doty added.

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