Rising costs in the generation of power and a weak energy market are among the reasons for the rate increase. With a weak energy market, the Cartersville Electric System is making less money selling power to other utilities. But the greatest portion of the increased costs come from an environmental charge said CES Director David Meyers.
CES is a partner in Plant Scherer, which is a coal fired plant south of Atlanta. Under new environmental regulations the plan is required to install “scrubbers” that remove additional pollutants from the plant’s exhaust. The costs for these improvements will be passed along to CES and its customers.
The various costs were determined in a cost of service study that lays out how much it costs a utility to generate power and serve each of the utility’s customer classes. In Cartersville those classes run from residential to commercial to large industry.
“Then what we do is we create our rates based on the cost to actually serve the customers in that class, and the costs are generation costs, transmission costs, then local distribution costs,” Meyers said. “There are professionals out there that what they do all day is figure out what these costs are and then you set your rates according to serve that particular class.”
The original increases based on the cost of service study were presented to the Cartersville City Council in December 2011. However, Meyers said a number of local manufacturers and other types of industrial business were concerned about the rate increases they would see under the cost of service numbers. The city council decided to delay a decision and allow the businesses to see the information CES was using to calculate the increase.
At the same time Grove entered into talks with the businesses to find numbers the city and the businesses would find acceptable. The new rate increases coming out of these talks were known as the settlement rates and resulted in smaller increases for industry customers and larger increases for residential and smaller businesses.
“It’s my recommendation … to ensure that the industrials are paying as low a cost as we can afford,” Grove said. “I think there is some debate as to whether or not they’re buying it cheaper elsewhere. I’ve seen in discussions with them where they’re showing that they pay anywhere from 10, 15, 20 percent less at other locations. So I’m sensitive to that. I’m also sensitive to the face that we need to keep the residential bills as low as possible.”
Grove said there are some businesses that pay roughly $500,000 a month for electricity alone. There also are franchise fees and other overhead fees the city collects from industrial businesses that are used in the general fund to finance other projects. If a larger business was to switch to a different utility company, Grove was not sure how the city would compensate for the lost funds.
Meyers said the rate increase was not a case of arbitrarily raising rates for one customer more than another. The electric utility must send a certain amount of money to the city every year and any cuts in one area must be made up with raises in another.
“The electric department still has to transfer a certain number of dollars to the city every year for city operations. So in order to keep that transfer dollar mount when you reduce one rate class something else has to go up. In this particular case, the large and extra large [power users] went down, so something else had to go up,” Meyers said.
Meyers added the lower increases for industry would be beneficial from an economic standpoint as it could possibly attract other businesses to the area with lower utility rates. However, he was not personally sure if that was what the utility should be doing.
“Our rates have always been lower than Georgia Power’s, to me that is the reason we are here. Because we can do it better, we can do it more efficiently, we can do it cheaper than the big corporate utility and I just don’t want to see us get above them. I think that’s bad business. But that’s my opinion,” Meyers said.
However, Meyers could not confirm that the rate increases will send Cartersville electric prices above Georgia Power. In January of next year, Georgia Power will release the amount of their fuel cost reduction. If that number matches 2012, Cartersville’s rates will be higher. If the cost reduction is less than this year, Cartersville will still be cheaper.
Grove said he had looked at the numbers and was confident Cartersville would continue to offer lower prices than corporate utilities.
“I know that’s subject to some debate … but we are still below those rates. I’ve checked them,” he said.
One aspect that had little bearing on the rate increases for businesses was the state’s recent decision to roll back its 6 percent sales tax on energy used for manufacturing and mining. Over the next four years the sales tax will be rolled back until it is nonexistent. That same bill also gave counties and municipalities the option to keep 2 percent of that tax so there is no loss of revenue.
Bartow County passed the sales tax, and the local municipalities have agreed to accept the revenue. While the county will continue to collect and disperse its 2 percent sales tax, manufacturers will still receive a 4 percent tax break as the state will not be collecting its share of the tax.
Although the excise tax was not discussed in great deal during the city’s talks with local businesses, Grove said, he saw a number of sheets listing which cities and counties had sales taxes on energy. He believed it will one day be similar to a Freeport Tax and companies will avoid areas that have an excise tax.
Grove hoped the city would be able to attract additional investments in the future, which could allow it to reduce the electric fees after another cost of service study in five years. It would be keeping with the city utilities’ role as a source of economic development.
“Certainly we’ve been fortunate to have had the visionary leadership back 50 and 100 years ago that started utilities and not only have they made services available to the residents, but they’ve allowed us to attract industry in here and done a pretty good job at maintaining the quality of life,” he said.