The new rate schedule was formally introduced at Tuesday’s commission meeting and is expected to be on the agenda for final approval June 25. If adopted, the reduced rates would take effect in July, meaning RPS customers would first see the impact on bills received in early August.
The rate reduction is planned as a means to “appropriately reduce everyone’s electric bill” in light of a new power-provider contract that RPS signed in 2011 with Denver-based Enserco Energy and that kicked in earlier this year. The contract has a fixed power price for its 10-year life, creating savings to RPS that the utility is passing on to its customers. RPS had previously purchased its power from the Lamar, Colo.-based Arkansas River Power Authority.
According to RPS, residential customers with average electricity use (700-kilowatt hours per month) will see a reduction in their bills by $6.39 a month if in the urban-residential category and $10.20 a month if in the rural-residential category.
RPS also says monthly bill decreases in other categories for customers with average power use will be $15.66 for small commercial, $93.49 for large commercial, and $1,810.39 for large light and power.
One category, security lighting, will see an increase in its rate because the previous rate failed to adequately cover the costs involved with the lighting, according to RPS General Manager David Mitchell. That rate will increase by $1.20 per month for the average-use customer.
The introduction of the new rate schedule came at the same meeting this week at which the city commission approved attaching a $6 charge to RPS bills to collect additional revenue that will come to the city to bolster a struggling budget, with one of the first priorities for the money being the hiring of two more police officers, city officials have said. Mayor Bobby Ledoux pointed out that with the electricity-cost decrease, RPS customers will see a reduction in the overall amount on their bills even with the city government’s $6 addition, which is not connected to RPS rates.
The RPS rate reduction comes following a cost-of-service study completed for RPS by Kentucky-based consulting firm Prime Group. The ordinance containing the new rate schedule says the revised schedule was developed “on the basis of need” as determined by the study. The ordinance also says the new rate schedule allows RPS its desired 7-percent rate of return, or rate of profit, which “is well in line with other utilities.”
Mitchell has said the Enserco contract should offer local business owners some “certainty” and “confidence” about their long-term electric costs being stable. According to the contract, the only thing that would trigger a rate adjustment to RPS would be if federal regulators instituted any new taxes or fees on Enserco, such as a carbon tax that has been discussed. Enserco would pass on the new costs to RPS, which would likely pass those costs on to its customers.
Enserco is a subsidiary of Black Hills Corporation, a 130-year-old Rapid City, S.D.-based company that, along with selling wholesale power to other utilities, operates its own electric and natural gas utilities in Colorado, Wyoming, Montana, South Dakota, Kansas, Iowa, and Nebraska. The company also produces oil and natural gas in New Mexico, Colorado and Wyoming and is involved in a coal mine in Wyoming.