The cost-of-service study was performed by Electric Cities of Georgia, of which LaFayette is a member, and utilized city utility service data from 2011 and 2012. LaFayette has not performed a cost-of-service study on its utilities since 2004, said city manager Frank Etheridge.
“It’s a process of trying to put together numbers that’s provided by the city in order to get a good gauge of how much it costs to provide the service of electric or water or gas,” said Derrick Craig, principal analyst for Electric Cities of Georgia and who assisted in the study and its presentation to the council Monday evening. “It provides a lot of information as far as what you want to do going forward. It gives you a good basis to help you make decisions.”
In short, though each utility — electricity, gas, water and sewer — varies in its individual costs of service to the city of LaFayette, none of them are entirely cost-effective as of right now, and the city’s utility services as a whole are leaking funds away from city coffers. That trend, said Craig and Katrina Bond, senior analyst for Electric Cities of Georgia, will only continue in the years to come.
In 2011, the city of LaFayette took in $7.3 million in revenue from its electric department and paid approximately $6.7 million in expenses. Had the electric department not needed to transfer $1.1 million to the city’s general fund, it would have enjoyed approximately $600,000 in profits; unfortunately, it lost half a million dollars instead.
“Of course, that’s for that year, that’s a policy decision that’s made annually,” said Craig, “but in that year, $1.1 million was required of the electric fund. All the departments are required to do some kind of transfer. You’ll see the same thing out of water. You’ll see the same thing out of gas.”
Where LaFayette is losing most of its money in electricity is through the large amounts of power used by its industrial customers. Electric Cities of Georgia identified this as a potentially even greater problem in the future should the city continue to charge its residential and industrial customers the same amount. ECG suggested that usage block rates be implemented in order to place the greatest burden of cost on the greatest power users. Average residential customers would not be affected.
Over the next year, ECG estimated that the city would incur a $1.5 million shortfall on its electric service alone, due to increased costs to the city to purchase electricity and state-mandated environmental regulations to power plants, many of which are passing the costs of upgrade projects down onto their municipal customers
“You have to account for that increase in cost. It has no fault for anything to do with what you guys have done. Power costs have gone up,” said Craig. “If we’re going to address this, we’re going to have to consider, at least, a rate increase.”
Electric Cities of Georgia proposed a potential rate increase and restructure for the city’s consideration. The council took no action Monday evening and does not look to increase rates at this time.
Under the suggested new rate schedule, an average LaFayette customer who paid $115 for summertime electric use (excluding other utilities) would see an increase of approximately $23 for that month’s billing cycle.
“Winter months, shoulder months are going to be less than that increase,” said Craig. “But that’s just to address the $1.5 million shortfall just with a rate increase.”
The forthcoming shortfall includes adding rate blocks or changing the structure in some other way.
In addition to the electric shortfall, costs of service for gas, water and sewer utilities in the city of LaFayette are similarly less than 100 percent. LaFayette’s water utilities were operating at a seven percent loss for the 2012 test year. On the sewer and wastewater side, “the system as a whole is losing about 19 percent,” said Bond. The gas service, however is only operating at an ability to meet 71 percent of its costs, netting a 29 percent loss. ECG recommended that the city consider raising rates for those utilities in the coming years as well, and that rates perhaps be scaled to its customers depending upon their volume of usage.
“Your current natural gas bill on average for a monthly bill would be $22.86 for residential,” said Bond. “It would go to $24.44” under the rate changes prescribed by ECG.
No action to change or increase rates was taken by the city council during the meeting. Instead, the results of the study were presented for the council to take under advisement for the future.
Also during Monday night’s meeting, an account totaling $64,000 left over after the completion of the North Walker water project was closed out; $40,000 was transferred to the water and sewer department to help offset the water compliance fees, while the remaining $24,000 was returned to the city’s general fund.
Furthermore, the council approved a motion to move forward with a grant application to the Appalachian Regional Commission for up to $300,000 to upgrade and enlarge one of the city’s main water storage tanks. The city has had that particular project on its radar for some time and has promised the Environmental Protection Division that it would be completed; it is now scheduled to be done in 2014. Should the grant be awarded, whatever amount up to $300,000 that the city uses of the grant must be equally matched by funds from the city’s general fund; alternatively, the city could elect to not use the grant money at all, should its own resources be too tight at the time to match the grant.
For the first time this year, the city council requested that its submitted bids for recreation sports uniforms be presented by the company in person, so that city representatives could assess the quality of the materials.
“I really like the way that we did it,” said councilman Ben Bradford. “We got to touch and hold in our hands the uniforms instead of just looking on paper.”
Based on what had been seen, the council voted to approve the recommendations of recreation director Patti Smith regarding the upcoming baseball and softball uniforms.
The city council chose to table two expenditure items: a pump repair for the golf course irrigation system, which would cost upwards of $9,000, and the yearly $5,000 contract with Atlanta Pyrotechnics International Inc. to coordinate and provide the fireworks for this year’s Freedom Festival. Both items will be discussed at the March city council meeting instead.