Covington has been over-charging some of its commercial customers for electricity and under-charging some residential customers — a situation it plans to correct.
Utility Director Bill Meecham said the city should restructure its rates to spread the costs around more equitably.
The city’s rate consultant Charlie Parmelee, from Parmelee & Associates, recommended the changes based on a March 2009 study.
According to the study, Parmelee said residents, on the whole, are actually paying less than the electricity costs the city to deliver. On the other hand, commercial customers are paying 28 to 36 percent more than the cost of service.
On average, the city collects an 11 percent profit on its electricity sales. The 11 percent margin is used mainly to reinvest in the electrical system, particularly in expensive infrastructure additions and upgrades.
Parmelee said residential rates should be increased 3.91 percent, commercial rates brought down by 5.36 percent and industrial rates increased slightly. This change will make Covington more competitive with companies like Georgia Power and Snapping Shoals EMC across the board, he said.
The goal is not collect more money. In fact, the city would only expect to collect an additional $477 per year.
Parmelee said for most residential customers the rate increase won’t be noticeable, perhaps a few dollars per month. However, lower commercial rates will ease the utility burden and could promote additional growth, he said. In particular, businesses that use lights 24 hours a day, like some grocery stores, could see significant savings.The residential customers who would notice the changes the most are the ones who use the least electricity. Previously, the city would charge a low rate for the first 300 kWh a resident used, a higher rate for the next 700 kWh a resident used, and an even higher rate for any additional kWh.
If the change is approved, the city would charge a medium rate for the first 650 kWh and a higher rate for additional kWh. Parmelee said this is fairer because every customer who uses electricity costs the system a certain amount. Therefore, the lowest level of use should be a little higher.
In addition, the base monthly charge will be increased from $8.45 to $9.50 for similar reasons.
However, by the same token, the winter electricity rate changes will actually decrease for some customers. Therefore, the overall increase in costs won’t be as significant.
One of the other big changes will be to adjust the calendar. Customers are charged more for electricity during summer months because overall demand is higher. Parmelee proposed changing the summer month period from June through September to May through October. These two additional months will also help cover some of the difference of decreasing commercial rates.
The city’s rates haven’t changed since 2000. The reason electricity costs have fluctuated so much over the years is because in the past the city was forced to buy electricity off the market. The power cost adjustment (PCA) charge on a utility bill reflects this cost.
The city focused on buying more base power in 2009 from the Municipal Electric Cities of Georgia and excess power from the city of Marietta.
While residents have long complained about high utility rates, the city prices are considerably lower than they were even two years ago.
Out of all electricity providers, cities and private providers, Covington routinely ranked as one of the most expensive in the state as of 2007, for summer residential electricity rates.
However, with the increased base power, Covington improved to the middle of the pack in 2009 for summer residential rates. They routinely shaved more than a cent off their per kWh rates, and in some usage categories were cheaper than Georgia Power and Snapping Shoals.
On Monday, the council heard the first reading of the rate changes. It will vote on the changes at the Feb. 15 council meeting.
Check covnews.com to see full lists of all of the changes.