City of Milford Lowers Electric Rates

May 16 2017 /

By Terry Rogers

On Monday, May 8, Milford City Council voted unanimously to accept a recommendation by Utility Financial Services (UFS) to lower electric rates by three percent starting this year. The recommendation came after the City hired UFS to review their rates to determine if they were adequate to cover costs and fair to consumers in each of the rate categories.

“Council gave guidance as to how we could adjust rates so that they were closer to the cost of service,” Mark Beauchamp, President of UFS, said during the workshop held prior to the meeting. “We reviewed how the City’s electric funds looked and found that you were 34 percent leveraged in debt, a number that is quite low, so you are doing well at managing your electric costs. What we found is that your customer charge, which covers the fixed costs of the service, like meter installation, maintenance, etc., was $4, but it should be over $16. Therefore, we propose an increase to that amount, slowly over the next few years, but balance that increase with a decrease in the actual kilowatt costs to customers.”

Mr. Beauchamp explained that the average customer would see a three percent decrease in their total electric costs starting in 2017. He explained that the average residential customer in Milford uses about 950 kilowatts of power each month. Effective June 1, 2017, a customer using that amount of electric would see a reduction of $5.31 in their monthly bill, a savings of over $60 per year. Residents who use twice that amount, an average of 1850 per month, would see a savings of $14.76 per month, a savings of over $177 per year.

The rate would also be reduced slightly for residential customers in 2018 with an average household seeing just under a $1 reduction. Mr. Beauchamp explained that there may be a slight increase in average household electric rates in 2019, but at the end of three years, the rates would still be lower than they are today. In 2019, the average resident would see the overall reduction of $3.62 per month, almost $50 per year while larger residential users would still see a decrease of $19.04 per month or just over $228 per year. Commercial customers will also see a reduction in their rates. Small businesses could see rates drop by 1.2 percent in 2018 while large businesses will see a reduction of 4.4 percent.

The Monthly Facilities Charge, a base monthly charge that is intended to cover the fixed cost of supplying power to customers, will increase over the next three years. City officials state that the fixed costs include the personnel, equipment and parts to do regular maintenance on the electric distribution system and to provide an adequate reserve fund to pay for system improvements or emergencies. The recent UFS study found that the revenue from the Monthly Facilities Charge was not covering these fixed costs of operating the electric utility. To make up the difference in the past, City officials say that some of the revenue needed for electric utility operations was collected through the variable rate charged for the power consumed. The Facilities Charge will increase over the next three years and there will be a corresponding reduction rate charged per kilowatt hour. For residential customers, the Monthly Facilities Charge will increase from the current $4, to $8 on June 1, 2017, to $12 on June 1, 2018 and to $16 on June 1, 2019. According to City officials, even with this change, residential customers will still enjoy lower bills this year. In fact, even when taking into account the increase in the Facilities Charge and other minor adjustments in the next two years, “most residential customers will be paying less three years from now than they did this past year.”

After the presentation by UFS, City Council heard a presentation from Patrick McCullar, President and CEO of DEMEC and Dave Cawley of Efficiency Smart, regarding a program offered to Milford as a member of DEMEC that would provide incentives to electric customers to implement energy saving measures in their home or business.

“The program offers rebates to customers who install energy-efficient appliances or lighting products in an effort to reduce their energy bills,” Mr. McCullar said. “This helps customers retain more money in their pocket that they can use elsewhere in the community”

Councilman Christopher Mergner expressed concerns about how the program would be implemented. He said that one of the struggles people have is who would install the energy efficient products. “How will this be rolled out to residents? To small business?” Councilman Mergner said. “If we don’t have a way to execute this, it is useless.”

Mr. McCullar said that DEMEC and Efficiency Smart would provide assistance to anyone who needs assistance and could even help them discover ways to have some of the energy saving items funded. Councilwoman Katrina Wilson said that she felt it was a way for the City to perform some outreach in the community through a partnership with DEMEC. She said she feels this was a great solution for middle class residents who did not qualify for grant programs.

“This program gives them an opportunity to get a rebate for that new refrigerator that might not have been in the budget,” Councilwoman Wilson said. “We all know how expensive those LED lights are. If we can help get the cost down, it can do nothing but benefit our customers.”

Councilman Doug Morrow agreed, saying that he had been on council a long time and that since the City was already paying for it through the DEMEC membership, it was worth “giving it a shot.”

Council approved the rate changes and energy efficiency program unanimously.

 

 

 

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