Connection fee draws questions

A group wonders who will pay for hook-ups to the city power grid.
Tuesday, August 1, 2006 | 12:00 a.m. CDT; updated 12:15 a.m. CDT, Monday, July 21, 2008

A proposed one-time $250 connection fee for new electricity customers has some community activists wanting to know who will pay the bill.

Karl Skala of Timely and Responsible Road Infrastructure Financing, or TARRIF, which argues that “new growth ought to pay for itself,” said he and other TARRIF members discussed the issue and are seeking answers about whether developers or homeowners would incur the $250 fee.

“That isn’t entirely clear to us,” he said. “We’ve sent out a questionnaire to Water and Light to try to find the answer. No one is quite sure who is going to pay these fees.”

City officials say the cost of installing new service and increases in material costs prompted the city to propose the hookup fee, which would apply when service is initially requested for newly built houses and duplexes. The fee would cover the connection of the power line from the transformer to the meter case.

“Sewer and water already have hook-up fees,” said Water and Light Director Dan Dasho. “We are just bringing the electric utility in line with the others.”

Skala said developers should be charged at the beginning of service.

“I think it ought to be front-loaded, that when these properties are developed, (the developers) can decide to pass on these fees, or maybe they’ll decide to absorb some of this cost,” he said.

Jim Windsor, head of fiscal planning for Water and Light, said,“It will probably be the developers charged when the service is requested,” Windsor said. “If there is no developer, the fee will be incurred by the homeowner.”

Windsor, however, said developers “undoubtedly” will pass the cost to homeowners if the fee is approved by the City Council as part of the overall budget forthe 2007 fiscal year. It would take effect in October.

“For residential, we haven’t charged anything for development, and we’ve done everything underground, so it’s very expensive,” Windsor said. “We looked at what kind of return you get from a homeowner paying rates, and we decided that we needed to more evenly distribute the cost.”

Windsor said the city would charge homeowners only in rare cases. One example, he said, would be someone who built on an empty lot in an already developed area.

“What we’re looking for is a contribution from the homeowner, developer or whoever to defray some of those costs associated with the electric connection,” Dasho said.

TARRIF member Traci Wilson-Kleekamp said that the market will determine what homeowners are willing to pay.

“Developers will only pass on what the market will bear, and considering the vacancy rate of new construction across the city.,”she said, “I doubt they will be passing on much in the way of costs to sell their places. If anything, they will be taking a loss.”

Wilson-Kleekamp wrote that the debate is similar to one concerning the $60 million electricity bond issue on the Aug. 8 ballot. While she supports the measure, she wishes the city would clarify how much of the proceeds would be spent to accommodate new construction as opposed to updating existing infrastructure.

If approved, the bond issue would provide $2.65 million over five years to cover the cost of basic electric connections for new customers. City officials anticipate 1,300 to 1,400 new connections each year. Also included in the bond issue is $5.2 million for residential infrastructure improvements. Water and Light expects the connection fees to raise about $350,000 per year, or $1.75 million in the next five years.

“If the ($250) fee goes into place, we’ll be able to collect some additional money with these projects, and that may affect our rate increases in the future by making them lower,” Dasho said.

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