Wholesale supply costs rose 22 percent through the Wyoming Municipal Power Agency, the electric provider for Powell and seven other member towns.
Passing along a 15 percent increase to users is “the minimum we could do,” City Administrator Zane Logan told councilmen.
The average Powell resident uses roughly 620 kilowatt hours per month. For an average customer, the increase will amount to $8.13 more each month, Logan said. The base meter charge of $18 per month stays the same.
Logan attributes the wholesale rate increase to a combination of factors — a steep decline in the market for surplus electricity, low rates of return on investments and the agency’s partnership in a new electric plant.
For the past decade, the power agency has anticipated an additional power source coming on line with the Dry Fork Station. Located just outside Gillette, the coal-based electric plant began producing commercial power in November.
The agency sells surplus electricity from the plant and other power sources, but the problem is, hardly anyone is buying.
“The wholesale market has plummeted. The bottom has just fallen out,” Logan said.
During the planning stages for Dry Fork Station, officials with the agency and independent analysts expected a far greater revenue from surplus electricity — then everything changed.
“Well, you know what happened to the market in 2007-08,” Logan said.
“No one predicted wholesale electric rates would go as low as they have,” he added. “It’s not a fraction of the revenue they thought we would have.”
If the economy turns around and the market for surplus power rebounds, Logan said it’s possible the Wyoming Municipal Power Agency could lower its wholesale rates in the future. If that happens, the city would look at lowering local rates for electricity.
“If there’s a way to reduce it, we certainly would,” Logan said.
He noted that the city lowered electric rates in the 1990s.
Wholesale cost increases through the Wyoming Municipal Power Agency have prompted local rate hikes since 2008. Before then, Powell’s general electric rates hadn’t increased since July 2004.
Increases since 2008 include:
• 15 percent in July 2008
• 5 percent in July 2009
• 11 percent in July 2010
• 10 percent in April 2011
• 15 percent in January 2012
In the years when rates increased in July or April, the city absorbed costs from January until the new rates took effect, amounting to hundreds of thousands of dollars.
This month’s increase coincides with the wholesale rate hike.
“The city wasn’t in a position to delay it,” Logan said.
The agency sets its wholesale rates based on expenses and income, Logan said.
“There’s no profit in it,” he said.
Rather than buying electricity on the open market — with its ups and downs — the Dry Fork Station and other power resources allow the Wyoming Municipal Agency to have all the capacity its eight member municipalities need for decades to come.
For an average residential consumer using 750 kilowatt-hours per month, rates range among the eight member towns of the Wyoming Municipal Power Agency from $71.20 in Lusk to $112.50 in Fort Laramie. (See related story.) By comparison, Powell’s rate is $93.23 for a resident using 750 kwh. Prior to the increase in 2008, the average bill for the same kilowatt usage in Powell was $52.25 (including the monthly base charge).
Logan said that while Powell’s electric rates may be higher, Powell also has a better electric distribution system than other cities in Wyoming and the region. In the 1990s, the city-owned system was rebuilt — a “massive undertaking” that took more than 10 years, Logan said.
“Everything, all the little details, was designed to be the best there is,” Logan said. “This system is designed to have a 40- to 60-year lifespan.”
He noted that Powell didn’t have to borrow money for the project, but paid for it through reserves. The hope is that in the future, the system’s upgrades also can be paid for through reserve funding, he said.
Logan said the city is trying to keep a reasonable amount in the electric enterprise’s reserves, as required by state statute, while also keeping local rates reasonable.
Meanwhile, Rocky Mountain Power also is seeking a electrical rate increase.
Currently, the average resident using 750 kwh per month pays $67.70 through Rocky Mountain Power (including a $20 monthly charge).
The proposed rate increase would be 10.4 percent overall, ranging from an average 8.8 percent for residential customers to 12.5 percent for some large industrial users, according to the Associated Press. Rocky Mountain Power is Wyoming’s largest electricity provider with about 134,000 customers, including some rural residences in the Big Horn Basin.
For an average Wyoming residential customer, the utility’s increase would mean a $6-per-month increase.
Even with the rate increases, Wyoming’s average price per kilowatt-hour remains below the 2010 national average of 11.6 cents per kilowatt hour, according to the U.S. Energy Information Administration.