Hermiston Energy Services is likely headed for a rate increase in 2021 after the Hermiston City Council discussed options for one during a Monday, Oct. 12, workshop.
Councilors asked HES General Manager Nate Rivera to bring back detailed proposals for a few different rate increase options, but most said they were leaning toward a two-step increase next spring and fall rather than raising rates the entire amount all at once at the beginning of the year.
Rivera said that he understood that more members of the community are struggling to pay their utility bills since the pandemic. Right now 20% of HES customers are behind on payments, compared to a three-year average of 15% before the pandemic started.
But Rivera also stated that if HES stays its current course, it will have a revenue deficit of just over $1 million next year.
“This is a horrible time in our community to have this discussion, but at the same time you guys need to understand where we’re at financially,” he said.
He said other than the 5% of its budget that is taken up with capital projects, the utility’s costs are mostly fixed “in and out” costs such as wholesale power purchases from the Bonneville Power Administration and its labor contract with Umatilla Electric Cooperative.
City Manager Byron Smith said the council should have been discussing a rate increase in March or April, but in light of the pandemic HES had been dipping into its reserves to put it off for as long as possible.
Rivera said in order to fill the anticipated $1 million budget gap, HES would need to raise rates by 12.9% overall. That could be done through flat, across-the-board increases or a restructure of rates for various classes of customers.
He said a general 12.9% increase would raise the average residential customer using 1,400 kilowatt hours from a bill of $111 to $121 a month. According to a rate comparison Rivera put together, that would move HES above Umatilla Electric Cooperative ($118 a month) but below Pacific Power ($159) and the state average ($176).
The 12.9% estimate, he said, did not leave any room for extra increases to HES’s expenses that may crop up, such as a BPA rate increase or added regulations from the state.
Mayor David Drotzmann said while he understood the need to not burden taxpayers unduly, he has also appreciated the increased reliability HES has provided in recent years through capital improvement projects. He said as HES tries to tighten its belt, he hopes the city-owned utility doesn’t sacrifice reliability in the process.
Councilor Roy Barron brought up some of the programs that HES, UEC and some local agencies offer to help people with their utility bills, and he said he hoped those programs were being promoted, and that any rate increase is publicized well in advance. The programs got a major boost recently with donations from Amazon Web Services and CARES Act money from the city designated for helping residents in need.