GREENFIELD — Greenfield residents could see their electric bills increase by about $10 a month in 2018 if the city council approves a rate hike.
Greenfield city officials are mulling electric rate increases for 2018, marking the second utility rate hike in as many years after Greenfield customers’ water rates rose in 2016 to offset water department budget shortfalls.
The city, which provides power to about 11,000 customers in Greenfield daily, hasn’t adjusted electricity rates since September 2010 and is due for an increase, Greenfield utilities director Mike Fruth said during a recent presentation before the city council.
There are no plans to fund a major project, but city leaders say the expenses associated with supplying power to residents — such as administration and distribution costs — have risen, and the utility needs to increase rates to keep up.
The rate hike would increase the utility’s revenue by about 4 percent — or $1.32 million — over 2017, Fruth said.
He proposed increasing the residential base charge from $10 a month to $15 and increasing the usage fee by about 0.4 cents per kilowatt hour consumed.
The average Greenfield home consumes about 800 kilowatt hours a month; that bill will increase from about $78 to $87 a month, reports show.
Business and industrial customers will also see increases, though the formula for estimating their bills is more complicated, officials said. A small restaurant, O’Charley’s, for example, would pay about $1,500 more, while one of Greenfield’s large manufacturers, like Elanco, would be billed an additional $8,200, reports show.
The city council preliminarily approved the rate increase Wednesday evening. A public hearing on the matter is scheduled for 7 p.m. Nov. 22, after which council members can make changes to the ordinance based on residents’ feedback.
The city purchases wholesale power from the Indiana Municipal Power Agency, a cost that accounts for about $2.5 million a month, or 80 percent of the department’s expenses, Fruth said. The department is responsible for maintaining the equipment that delivers electricity to homes and businesses and employing the people who keep the systems running.
In addition, funding from the utilities should be reserved for a program implemented in 2010 called PILOT (payment in lieu of taxes) that allows the city council to shore up the city’s general fund with cash reserves saved by the city-owned utilities. Up to 3 percent of the revenue raised by the utilities — about $1 million a year — can be moved to the city’s general fund to cover shortfalls, but historically, the utilities haven’t budgeted for such a payment.
The current electrical rate structure can’t support that payment if the city council called for it, Fruth said. The program was implemented when governing boards across the country were facing budget shortfalls that resulted in layoffs and other cuts. While the city’s finances are in better shape now, leaders should have that funding available in case it’s needed, he said.
With the rate increases proposed, the utilities can set that funding aside for an emergency.
Fruth said even with the rate increase, Greenfield bills will average about 15 to 30 percent lower than other area providers and remain among the lowest of IMPA customers. He cited Duke Energy as an example; the monthly bill for the average home is about $99, still higher than the city’s proposed $87.32.
Council president Gary McDaniel said nobody likes to see their bills increase, but the hike is necessary to continue providing electricity services in Greenfield. When deciding what to charge residents, city leaders have to weigh what that service costs Greenfield to provide, he said.
“We want to keep rates low, but we have to be able to sustain the system,” he said.
A public hearing on the matter is scheduled for 7 p.m. XXXXX, after which council members can make changes to the ordinance based on residents’ feedback.