The Hermiston City Council postponed voting on a rate increase for Hermiston Energy Services Monday in order to gather more information about the utility’s costs.
The council plans to vote on the proposed $2 per month increase during their Dec. 10 meeting instead, but City Manager Byron Smith said staff would likely still recommend a Jan. 1 implementation date for the increase.
Hermiston Energy Services general manager Nate Rivera told the council that about 52 percent of HES’s expenses go toward purchasing wholesale power from Bonneville Power Administration, while about 17 percent of their costs come from their contract for services with Umatilla Electric Cooperative, 12 percent goes toward the utility’s debts and 11 percent goes toward system maintenance. HES provides power to about 63 percent of Hermiston.
Since 2009, Rivera said, BPA’s rates for wholesale power have gone up almost 39 percent, and another five percent increase is expected in 2019. Increasing wholesale power costs, along with maintenance needs as HES infrastructure ages, have put HES on the path for a projected $157,151 deficit during the 2018-2019 fiscal year.
With that in mind, Rivera is recommending that the city increase residential base rates from $14 a month to $16 a month, while keeping the charge for kilowatts-per-hour on top of that base rate the same. He also recommended an increased base rate from $35 to $37 for small commercial users, a slight increase in demand charges for large commercial users and an industrial base rate increase from $200 to $250. Rivera said HES does not currently have any industrial users, and “those rates fully represent what it would cost to bring them into our system.”
HES began in 2001 and first raised rates in 2005. The next rate increase was 10.95 percent in 2015 and 2.5 percent in 2016. The increase proposed for Jan. 1 would represent a 2.56 percent increase.
Rivera said the increase would have been higher, but HES saved a combined $3 million on a refinance of its bond debt and savings on construction costs compared to what had been originally budgeted. However, he also said the increase before the council Monday did not factor in whatever amount BPA increases its wholesale power rates by in 2019, or what costs might be added to HES by a capital improvement plan in the works — meaning he would likely be in front of the council a year from now asking for another increase.
Mayor David Drotzmann said he didn’t like the idea of continuing to go back to customers with more rate changes each year, and city councilors pointed out that it was unfortunate timing with the recent rate increase for water and sewer that will kick in March 2019.
Smith said staff thought it was better to raise rates only as needed.
“The council had previously said they didn’t want to wait, and see those 11 percent increases,” he said.
Councilor John Kirwan said he wanted to see a more specific breakdown of how the customer’s bill was divided between different costs such as wholesale power and construction. He asked that the council postpone a vote on the increase until their next meeting so that Rivera could come back with that breakdown and a better explanation of how the savings from construction and the bond refinance were being used.
The council voted 6-1 to table the resolution. Councilor Manuel Gutierrez was the dissenting vote, after pointing out that a Dec. 10 vote for a Jan. 1 increase would not give customers much time to prepare.
Included in the resolution was a new program that, if passed, would allow customers to pre-pay their electric bill with HES. Rivera said customers who prepaid at least $25 of their first bill would be able to avoid the $250 deposit that new customers are usually required to provide.