Council rejects hike

Published 12:07 am Tuesday, January 27, 2009

By Staff
City will absorb 4 percent hike through June 30
Contributing Editor
Washington Electric Utilities customers are safe from an increase in their electric rates through the end of this fiscal year, June 30.
The Washington City Council voted 5-0 to not implement a 4 percent increase in WEU’s retail rates effective Feb. 1., although that’s when the city’s cost of buying power increases 4 percent. Council members said they want to avoid passing on the increase to WEU customers for as long as they can.
Councilman Gil Davis said that when it comes to implementing the 4-percent increase for the city’s power customers, the city must “put if off as long as we can.”
The council wants to review several areas in the electric fund, including existing retail-rate categories, before deciding what will happen to electric rates in the upcoming fiscal year, which begins July 1.
The city buys its power from the N.C. Eastern Municipal Power Agency. The agency, despite an effort by Washington and other municipalities that sell power to persuade the agency to delay the 4-percent increase in its wholesale power rate, is proceeding with its plan to bump that rate effective Feb. 1.
The city has a plan to delay passing that increase onto its power customers at least until July. The plan was developed by City Manager James C. Smith, Washington Electric Utilities Director Keith Hardt and Anita Radcliffe, the city’s acting finance director.
The plan, in part, calls for reducing expenses in the electric department by delaying equipment purchases and improvements to the electric system and a 40 percent reduction in the amount of money transferred from the city’s electric fund to its general fund.
That reduction will result in the city having to use $420,000 of the general fund’s $700,000 surplus from the fiscal year that ended June 30, 2008, according to Smith.
Although city staff has warned the council that the electric fund could face a $312,000 shortfall in revenue, Davis, Jennings and Mayor Pro Tem Doug Mercer said they are willing to take a chance a deficit that large won’t occur.
Mercer said it’s possible the electric fund could break even or make a small profit be the end of the fiscal year. Booth &Associates, a consultant hired by the city to review WEU’s fiscal health and rate policies, projects the shortfall could reach $396,000 by June 30.
If there is a deficit in the WEU budget at the end of this fiscal year, the city can dip into one of its fund balances, or reserve funds, to cover the shortfall, Jennings said. Mercer said his projections show there will not be a deficit, but he acknowledged the budget “could go negative.”
Radcliffe said there is enough money in either the general fund’s surplus or the electric fund’s surplus to cover a shortfall in the $300,000 to $400,000 range.
Mercer blamed the 4 percent increase in the city’s wholesale rate on “poor management” on the power agency’s part. Jennings echoed Mercer’s remarks, adding “and we’re being asked to pay the price for it.”