Wednesday, July 15, 2015

There’s been a lot of concern shared with me over the past few days regarding the utility bills for the June billing cycle, which many of you recently received. Summer is traditionally a time for higher electric bills, but there are other factors at play this month that impact your bill. Let’s have a discussion about the cost of electricity.


I’m really upset by my utility bill this month. The cost of power has gone up and there is a new sewer charge. We can’t take much more of this.

I’m not happy with it either. In fact, no one here at City Hall is happy about it. The first thing to remember is that if your power bill went up, so did the power bill for every member of city council, for me, your city manager, for many members of our leadership team, and for many of our employees. No one likes higher power bills.

City Council, and the city staff that comprise the leadership team, hate seeing increased utility bills because that means that we are taking more money out of your pocket to fund city services. We’d much rather see you use that money to buy dinner in a local restaurant or spend that money in any number of ways that would have a positive impact on the local economy.

However I, and City Council, have a fiduciary responsibility to ensure that the city is solvent, meaning that the city doesn’t operate in a deficit budget or go bankrupt. We have to be able to pay the city’s bills and provide the services you expect or ask for. Balancing the need to provide expected services at the lowest cost possible, and dealing with some unique situations in Clinton that impact your utility bill, while trying to leave as much of your money in your pocket as possible is a difficult balance for us to achieve in this economy.

As a customer in a public power utility, you are a part owner. As a part owner, you have a right to access information about your utility. I’m going to try to answer many of the common questions about this month’s utility bills here this afternoon.

I’m not going to promise that we will all like the answers, but I will promise you that I will answer your questions honestly. We are all in this together.  

So why is my power bill higher this month?

You power bill is higher this month for two reasons. First, the June billing cycle was unusually hot. There were many days with the temperature above 90 degrees. The hotter it is outside, the harder your air conditioning system and other appliances that keep things cool have to work.

Let’s say you are like me, and you are trying to keep your energy costs low by keeping your air conditioner set on 78 degrees. On an average June day in most years the high is around 86 degrees. That means that the air conditioner has to work to cool the air in the house by eight degrees.

This June was different. This June the average daily high in Clinton was 90, with nine days higher than 95 degrees. What does that mean? It means your air conditioner had to work harder to lower you indoor temperature by 12 to 17 degrees.

That doesn’t sound like much, but even an energy efficient heat pump or air conditioner can impact your electric bill by an additional 1% to 3% for each degree it has to cool the interior air as compared to the outside temperature. So in the example above, the impact on your electric bill could have been between 4% and 27%. It could have been even more depending on your cooling habits, age of your air conditioner, and energy use. And if you use a window unit these costs will be much higher.

But the heat wasn’t the only reason that your bill went up. Another reason is the city’s PPCA charge, which added an additional $0.029 per kwH to the bill.

What is the PPCA?

PPCA stands for Purchase Power Cost Adjustment. The city purchases power from Piedmont Municipal Power Agency. The power bill the city receives consists of several components, and is based on usage charges and demand charges. We don’t pass demand charges on to residential customers, but because of the way the bill the city receives is structured, what the city pays for power each month is slightly higher or lower than the previous month based on the amount of energy our customers used, when they used it, and where the energy came from. Because we were charging our customers a flat rate, this means that in some months we were not collecting enough from our customers to pay the power bill from PMPA, and some months were were collecting more than we needed to pay the power bill. This created financial instability, a bad thing, in our budget. Sometimes it meant that other departments didn’t get the equipment they needed because we had to make sure that the money was in the bank to pay the power bill.

The PPCA sounds awful! Isn’t that just another way to take my money?

Not really. The purpose of the PPCA is twofold. First, it makes sure that the city collects enough money each month to pay the power bill we receive from our power supplier. In months were we haven’t collected enough to fully cover our cost to provide the power to you, the PPCA kicks in and adjusts the bill up slightly to generate additional revenue for the city to pay the bill our power supplier sends us.

The second purpose of the PPCA is to help you. If the city collects more than is needed to cover the cost of purchasing the power for resale, the PPCA kicks in and returns that money to you in the form of a rate reduction for the month. In essence, you get your power at a discount for that month.

Has the PPCA ever lowered my bill?

Yes, it has. For the December 2014 billing cycle, the PPCA resulted in a 4% discount on your power bill. In the February billing cycle there was an 11% reduction, and in the May billing cycle it saved you 5%. In August the PPCA is still going to be positive but it should result in a 9% reduction compared to your current bill.  

Listen, I get the higher than average temperatures, and I can understand the PPCA, but surely there is more to it than that. I bet my meter is broken.

Maybe it is. Many of our meters are older technology. However, when an electric or water meter gets old and starts to break down, the wear and tear on the components actually slow the meter down. This means that a broken meter usually records that less energy and water are being used than a customer is actually using, resulting in a lower bill due to the broken meter and not a higher one. If you meter has a digital display, then it is a newer meter.

Ok. Maybe I did use more energy. And I understand the need for the PPCA, but our rates are higher than other utilities. Why?

Here’s where it gets complicated. In the late 1970s the City of Clinton and other cities in South Carolina were buying energy from a different provider. Electric rates were getting very high, very quickly. In some instances there were 16% rate increases, and forecasts for even higher rate increases in the future. Ten cities, including Clinton, banded together to combat this and formed PMPA. PMPA purchased an ownership share in a nuclear power station that was being built in York County.

Each city assumed responsibility for a percentage of the ownership of the nuclear reactor in exchange for getting power from that reactor. Each city signed a 50 year contract to get all of their power through PMPA. This looked like a great solution at the time to the people that were making the decision.

And then the world changed. Nuclear regulation and energy regulation changed; driving up the cost of owning a nuclear power plant. Other energy markets got better, so the projected rate increases from other sources didn’t happen. Also, Clinton didn’t grow as fast as people thought it would in the 1970s when our economy was booming. Even worse, no one foresaw the failure of the economy in the late 1990s and early 2000s. The more customers a community has using more energy means that the fixed costs of providing energy can be spread out. Our fixed costs do not get spread out as much.

The energy made at the nuclear power plant, that is the majority of the energy we sell to you, is cheap. The cost of the debt of building the plant and the cost of maintaining the plant is expensive, and that is one of many factors that are moving rates up.

Well, let’s get out of PMPA.

That’s not so easy. We have an all requirements contract with PMPA. The contract requires us to pay down the debt owed on the plant and fund the decommissioning. It also requires us to give PMPA ten years notice if we want to get out. Right now, based on energy markets, if we got out of PMPA the rates would still be high because we must pay off the debt and then buy energy on the open market.

Remember the energy is cheap; it is the debt that is painful. Even if we got out of PMPA, we would still have to pay down our portion of the debt. Getting out means keeping the painful part and having to negotiate a purchase power agreement that would most likely be more than what we are paying for energy now.

Was PMPA a good decision? I have a personal opinion, and I am sure we all do, but I was a little kid when the decision was made and I also have the benefit of hindsight over the past thirty years. Hindsight is something that the decision makers just didn’t have access to. What I do know is that no one working for the City of Clinton in a leadership role now and none of your current City Council members were around when we executed the contract. We are working hard to make things better, but there are strict limits on what we can do. Limits put in place years ago.

Duke Power customers pay less for power. I have their rate sheet. Why can’t we?

First of all, other utility rate sheets don’t always show the whole story. One Duke rate sheet I have seen shows rates in the $0.10 to $ 0.12 range for residential customers. Then there is a statement about a fuel charge. The fuel charge is not the cost to put gas in the utility owned trucks; instead it refers to the fuel cost to power a power plant. It’s an investor owned utility (a private utility company) way to have a PPCA. Therefore, those customers may be paying slightly more or less than the rate sheet indicates.

But you are right. They are paying less than we are. We have a binding contract to purchase our power through PMPA, and until that contract expires, there is not much we can do.

What about Laurens Electric Customers?

The same applies to LEC customers. They are paying less for electricity than we are because of where they purchase their electricity from. We have a binding contract with PMPA that prevents us from changing power providers until the contract expires.

What about City of Laurens Customers? They get their power from the same place we do and they pay less.

That’s true. While City of Laurens customers are billed the same way our customers are, and their bills include their own PPCA, and they are PMPA members as well, their rates are lower for several reasons.

First, each city has a different share or stake in the PMPA owned nuclear power plant, which makes each city responsible for a portion of the debt and other costs that is different for each member utility. That difference impacts rates. Secondly, Laurens has a larger customer base. More customers mean that some of the fixed costs of providing power can be spread out among more people, making everybody’s share slightly lower.

Lastly, it has to do with taxes. The City of Clinton tax rate is 107.5 mils. In the City of Laurens it is 123 mils. Many years ago, our city made the decision to keep tax rates low and use some of the electric revenue to offset our tax rates. So in essence, every time you flip the light switch on, you are contributing to a lower tax rate. How much lower? The City of Clinton has some of the lowest property tax rates in the State of South Carolina.

Your property tax bill reflects taxes from the county, school district and the city. A safe bet is to figure for every dollar you are paying property taxes, only about nineteen cents is the city’s portion. So if you have an $800 tax bill, your city taxes are only $150.

I’m on a fixed income. What do I do?

First, don’t panic. Will you have to pay the bill? Yes you will, because you did use the energy. Will we work with you and your financial situation? Of course we will. We know June was different and painful. We are happy to set up a plan with you to spread the cost out over the next few months. This is your utility, and while we cannot and will not just make the June bill disappear, we will work with you to help you spread out the payments so it is more manageable for you and your family. Just stop by the office and see one of our customer service representatives.

What’s the city doing to reduce rates?

Over the past four years, the City has received annual rate increases from PMPA. Previously, we passed these entire increases on to the customer. We don’t do that anymore. In fact, we didn’t raise the base rates at all this year. This means that we are cutting operations in other areas rather than passing these rate increases on to you.

We implemented the PPCA to put some money back in your pocket when we can rather than retaining it.

We are converting street lights to LED. These use less energy and will save all of us money in the long run.

We are replacing all of the current meter technology with new technology that will allow you to review your energy use on line. You can then use the information to help determine what you can do to reduce consumption.

We are replacing our 30 year old billing system with a system that will allow you to go on the internet and review your energy use and pay your bill.

We are creating a new residential rate that will be lower than the current rate. This rate will be available to customers who participate in the demand side management program. If you are willing to help us reduce energy consumption and save the entire utility a little money by doing so, then we are going to give the money back to you.

We are continuing to look for ways to tackle the cost of power.

I hear a lot about taking pride in public power, but I don’t feel very proud.

We are becoming a better electric company and you should be proud of that.

Our reliability (the amount of time we stay on) and our restoration times (the time it takes us to get your power back on) are among the best in the southeast. I recently heard of a customer on another utility who had to wait four hours to get the power restored to her neighborhood. Our average restoration time last year was 30 minutes.

You have some great electric line workers who are working hard for you. You also have four APPA Certified Public Power Managers on staff now because we know we need to make sure we have the best and brightest minds working on this problem. We’ve made great strides in the areas of safety, reliability, planning, and emergency response. Such great strides in fact that we were recently awarded the highest level of certification possible from the American Public Power Association.

But accolades and awards don’t make you very proud when you look at your bill do they? That’s ok. I’m really proud of your employees who worked hard to get us here, and I know they are now going to turn their energy towards the other challenges affecting our utility, which are the challenges that are causing your concern, and I’m excited and hopeful for the future.

What can I do?

Here are five things you can do:

1.)    Move your thermostat up. The less work your air conditioner does the lower your bill will be.

2.)    Reconsider using window units. Many of these units are energy hogs, and in some cases using your whole house system will actually cost you less.

3.)    Let’s keep talking. As a community, we’ve got some tough decisions ahead of us. But your City Council is made up of some great people who are ready to set the course for our community. When the time comes and they ask you for your thoughts on the future direction of our community, please share your concerns, suggestions, and dreams for the city that our children will inherit.

4.)    Ask for help. Our customer service personnel have been briefed on this issue and they are ready to help you work out a plan that fits in your budget. Consider signing up for the budget billing program this winter so that your electric bills are equal each month.

5.)    Remember we are all in this together. No one is thrilled about the cost of energy, but we must find solutions that work in our unique situation.