By allowing ads to appear on this site, you support the local businesses who, in turn, support great journalism.
Covington to absorb electric cost hikes
Placeholder Image

Covington is going to be paying 6.9 percent more to buy electricity in calendar year 2011, but it’s not going to pass that cost on to its customers, who could actually see a decrease in prices.

Covington will pay its various electricity providers $31.1 million during 2011, $2.62 million more than last year, but City Manager Steve Horton recommended that the city take around $2.3 million from another electricity based fund to cover the increase. The council approved the reallocation Monday night.

Buying electricity accounts for nearly 83 percent of the cost to run a system, alongside system maintenance, equipment and city employee salaries. Utility Director Bill Meecham said previously the other costs are expected to remain more stable, so the cost to customers would have only been a 4.7 percent increase.

Therefore, Horton said the $2.3 million reallocation could reduce the cost for customers.

The city’s base electricity rate has not changed since 2000, but the cost to purchase power has historically been passed on to customers through the Power Cost Adjustment, or PCA.

For example during the winter and spring, the city’s has a base charge of $8.45 that is not based on usage, and then charges 5.83 cents per kilowatt-hour for the first 300 kilowatt-hours, a measurement of electricity use. In 2011, the city is going to be paying 7.16 cents per kilowatt hour. The PCA would seek to recoup the difference.

The PCA is calculated to remain constant every month and is set at 1.97 cents per kilowatt-hour for the current budget year. However, Horton said the city’s investment could reduce the PCA to 1.33 cents per kilowatt-hour, a lower rate than has been seen in recent years. The city uses the PCA, because it’s a more flexible way to account for changes, as opposed to constantly changing electric rates.

The city purchases the majority of its power from the Municipal Electric Authority of Georgia, a non-profit public utility composed of 49 member cities and counties. The $2.3 million will be money originally destined for the authority’s New Generation Fund, which is kept to pay for future energy sources. The city invests in the fund every year. In a related move, the council approved moving a lesser amount of money from a short-term fund into the New Generation Fund.

Horton said the city could possibly sell excess power to other cities and it could receive an end-of-the-year reimbursement if it overpays the electric authority for electricity. Horton said he will recommend devoting these monies to power costs to further help residents during the down economy.

The increase in power costs is being caused by extended outages of six power plant units in 2011. The electric authority and Georgia Power are seeing increased costs because they will have to continue to pay for their investment in the plant, will have to pay for the maintenance and will have to buy additional power from the market, said Scott Jones, vice president of corporate affairs for MEAG, previously.

The shutdowns that occur at the coal-fired plants Scherer, two units, and Wansley, one unit, are because of environmental upgrades required by the law. The outages at nuclear plants Hatch, one unit, and Vogtle, two units, are for regularly scheduled nuclear refueling.

In related news, Oxford, who is also an municipal electric authority member, will also absorb its increased costs, instead of passing them onto customers.

Georgia Power is requesting a $1 billion rate hike, which would add $15 to a family’s monthly bill, according to various media outlets. Georgia Power is more heavily invested in coal plants which are becoming more costly to operate, electric authority members said. A final decision on the rate hike is expected next weekend.