More power

As electricity rates climb, Columbia looks for more power
Friday, July 16, 2004 | 12:00 a.m. CDT; updated 2:58 a.m. CDT, Sunday, July 20, 2008

For the first time in more than two decades, Columbia residents and businesses face rising electric rates as a result of unbalanced energy supply and demand in mid-Missouri.

In early June, the Water and Light Advisory Board recommended the consulting firm R.W. Beck review Columbia’s electricity needs. This study, completed July 1, estimated Columbia will need an additional 75 to 150 megawatts of capacity between 2008 and 2020 as the city’s peak energy load increases.

“The study looked at two things: what we need to buy and what options we have,” Water and Light Director Dan Dasho said. “Our best option is to buy base-load energy, the 24-hour load that is on all the time and run by nuclear sources or coal.”

Now the city must determine where to get the extra energy capacity in a region that has built no new power plants in decades.

The advisory board is considering four options: buying energy capacity in new power plant projects in either Illinois or Arkansas, reassessing the energy-producing capabilities of the Municipal Power Plant, and signing an additional long-term contract with Ameren UE. Dasho said the city may decide to “mix and match” these options to find the least cost.

Columbia’s old contract with Ameren UE ended June 1. It provided Columbia with up to 80 megawatts of electricity per month, but allowed for fluctuations in seasonal electricity use. A new three-year Ameren UE contract now in place requires the city to take 50 megawatts per month. This contract is more expensive, but Dasho said it was the best cost option.

“With the old contract we could adjust to our power schedule throughout the day. We could take zero megawatts or 80 megawatts,” said Mike Willingham, assistant superintendent of operations at the Municipal Power Plant. “Under the new contract, we must take 50 megawatts, so we lost a lot of flexibility.”

This limited flexibility led to a short-term correction in electricity prices implemented on July 1 that raised rates by 9.5 percent. On Oct. 1, this “fuel-adjustment allowance” will be eliminated and replaced by a permanent change in rates.

The allowance raised energy prices for residential customers as well as industrial and small and large general service customers. Big electricity users such as 3M and Columbia Foods Co. (Kraft Foods) saw bills increase by thousands of dollars.

“We’re trying to work out an arrangement for these big companies to pay bills affected by the fuel-adjustment allowance over six months instead of three,” Dasho said. “It’s similar to the budget billing available to residential customers who can pay their average from last year every month.”

John Strotbeck, Columbia Foods plant manager, said the allowance will raise total costs. He said he has heard a little bit about an arrangement with the city to adjust payments, but there has been no formal communication.

At a work session Monday night, Jim Windsor, Water and Light’s manager of rates and fiscal planning, presented his cost-of-service study to the Columbia City Council. He said the city’s “purchase power cost” will rise by $7.4 million in the next year under the new Ameren UE contract.

As a result, Windsor anticipates an average 9 percent increase in the city’s energy revenue beginning Oct. 1. Residents and small commercial customers will pay an average of 11 percent more on monthly electric bills, while large commercial users will pay about 10 percent more and industrial customers about 2 percent more. Those figures are based on each service group’s need for energy during summer peak months.

“While 11 percent is the expected average rate increase for residential services, the actual rate change will depend on each individual customer’s use of energy,” Windsor said. “One home could see an increase of 9 percent, while another could see an increase of 12 percent.”

Windsor said the base charge for electricity will rise from $4.50 to $5 and the charge per kilowatt hour will be 8.6 percent higher. The average energy usage per customer is 750 kilowatt hours per month. During summer peak months, the charge per kilowatt hour will rise another 10 percent when users surpass the 750-kilowatt hour average. He hopes that will keep bills as low as possible for minimum energy users.

“Usage in the summer is really what matters. For summer usage above 750 kilowatt hours, rates could be 19.4 percent higher,” Windsor said. “We want this to be equitable but make it as simple as possible.”

Columbia’s energy load peaks in August at 253 megawatts. That means the city must buy 253 megawatts of energy capacity all year, plus an additional 15 percent required by the region for emergencies, even though the energy load remains below 200 megawatts most of the year.

In the early 1970s, electric rates rose about 15 percent on several occasions. Since 1983, rates have not risen, but the need for more capacity is forcing the cycle to repeat itself.

“It’s a situation of supply and demand,” Dasho said. “Supply will decrease until new capacity is added. It’s about a 20- to 25-year cycle.”

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