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Rate hikes underway for municipal electric utilities

By Saodat Asanova-Taylor
Capital News Service

LANSING — Detroit is among the municipal electric utilities that plan gradual rate increases this winter. Some have already implemented them to comply with federal environmental regulations and to keep local jobs.

For example, Marquette Board of Light and Power will increase electric rates by 3.5 percent for customers by 2014. It will be the second rate hike for the company in 25 years.

The company serves 16,300 customers in the city of Marquette and nine townships in Marquette County.

It is one of 41 municipally owned utilities in the state, including ones in Sturgis, Petoskey, Traverse City, Negaunee, Holland, Zeeland, Detroit, Lansing and Harbor Springs.

Kirby Juntila, executive director of the company, said the move is necessary to comply with the federal Renewable Energy Plan.

The plan requires utilities to provide at least 10 percent of their electric generation from renewable energy sources such as natural gas, wind and solar power by 2015.

“Raising costs will reflect the implementation of new environmental protection technology and maintain energy efficiency in our region,” Juntila said.

To comply with the regulations, some companies are required to retrofit their plants from coal to other means of power generation. But it can be costly for small utilities, Juntila added.

“It will be difficult for us to build new plant generating power on wind and natural gas, so we have to purchase it elsewhere,” he said.

Municipal and publicly owned utilities’ rates, however, remain 11 to 20 percent below those charged by commercial energy suppliers, according to the Michigan Municipal Energy Association.

Jim Weeks, executive director of the association, said higher transmission costs of renewable energy sources spur the rate hikes.

States such as Ohio, Pennsylvania and Wisconsin have better wind capacity than Michigan, and wind generating farms are located in remote areas, he said.

“Companies have to build transmission lines to bring that energy to their areas. It can be very expensive,” he said.

Both municipal and commercial utilities will probably see rates go up for a little bit because of the pollution control equipment installation, he added.

When the retrofit is operating, some rates may eventually go down in five to eight years, Weeks said.

For Grand Haven Board of Light and Power, it is less difficult to comply with the EPA regulation. The company made significant capital investments by installing environmental equipment to reduce emissions when the plant was built in 1983.

Annette Allen, general manager of the company, said it added advanced equipment in 2004 and 2009 to reduce emissions.

However, the recession and several years of budget reductions forced the utility to raise its rates in July to ensure reliability of the system, Allen said.

“The fact is that the economy was going down and there was less demand from commercial industry. We had to go back and have our retail customers pick up some costs,” she said.

In addition, Allen said chemicals used for operation of the environmental protection equipment also cost a lot of money.

The rate increase of 4.79 percent added approximately $3.13 per month to the average residential customer’s electric bill.

The Wyandotte Municipal Services Commission, which provides power to 26,000 residents, increased rates by $4 per month in October.

Melanie McCoy, general manager of the commission, said commercial and industrial customers historically subsidized some residential costs but in the current economic climate that’s no longer feasible.

The rates were challenging industrial and commercial customers, which led the municipal utility to decrease their rates and help their businesses remain in Wyandotte.

“Our goal is to keep local jobs. It is either we get in line and help local businesses, or they move their business to some other areas,” McCoy said.

In January 2011, the Lansing Board of Water & Light Board of Commissioners approved new electric and steam rates to support the company’s new electric and steam generation facility in REO Town.

Stephen Serkaian, communication director for the company said, starting in October 2012, residential and commercial electric rates increased 3.75 percent and steam rates increased by 2 percent.

“The rates will increase by the same percentage amounts in 2013. A typical residential electric customer will see an average $2.67 more in their bill,” he said.

That increase is intended to pay back the money used by the utility to build a natural gas-fired plant, he added.

The utility has 96,000 electric customers and more than 200 steam customers.

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