The Covington City Council will vote on amending provisions of the electric system and water system ordinances during Monday’s council meeting, possibly reducing city revenue by approximately $700,000.
The reason for the amendments will be to help lure more industries to Covington by making the City of Covington utilities more competitive with other utilities companies. The city council met Wednesday in a work session in order to discuss the prospects of these amendments. The city also discussed amending the natural gas utility ordinance, which will come in front of the council at a later public meeting.
“We need to think about ways that we can increase that use that we have already committed ourselves to — we need a complete package approach,” Covington City Manager Leigh Anne Knight said. “All of those things boil down to nothing but position us to be in the best place we can be in order to have those businesses looking at us as a viable place to come and plant their business.”
The changes to the water, electric and gas utilities will not affect residential users’ bills, but are aimed at larger industries. The major change will come to the city’s revenue stream. At least if there is no changes to industry.
“We’re taking a little bit of a risk and a haircut, but it is to put us in a position to grow our grid, and it enhances us in future consideration,” Johnston said. “We’re not in the game right now when it comes down to utilities, and it’s almost embarrassing. This is why I believe it is well worth it.
“We’ve got two hats here: a government and utilities company. If we don’t keep the utilities going, everything gets hurt.
Water Utilities
Covington’s current water utility is structured with increases to help users conserve water. During the city’s work session Wednesday Knight made the point that most industries already work to conserve water and keep costs down.
“They really don’t have a lot of ways of decreasing (their usage),” Knight said. “We began to think from a realistic standpoint, and we’re punishing the people who really don’t have an opportunity to decrease their usage.”
The new water rate schedule would be for customers who use in excess of over 50,000 gallons per day. Customers using more than 50,000 gallons, which includes six businesses in Covington, will see their rate reduced from $5.70 to $5.45, if the amendment to the water ordinance is passed.
Electric Utilities
Covington is also looking to increase its grid, by bringing in more electric customers. One way the city is looking to do that is by lowering its large industrial rate.
“We want to position ourselves on the electric rate to target large industries,” Covington Utilities Director Tim Morris said. (Thirteen months ago) we went to an industrial rate, but we don’t have a large industrial rate to get us in the ballpark (with other electric companies) because we are way, way too high.”
Adding tiers to the current rate structure in order to help entice new business is one way Covington hopes it can better position its utilities company and drive more industries to add to the current grid.
Natural Gas Utilities
The city of Covington recently corrected a lot of meters in the last five or six months, and offset some of the revenue electric burden, putting it in what Morris said was a pretty good situation, as far as natural gas goes.
To further entice customers to purchase natural gas from Covington, the city is adjusting its customer classes, and eliminating wording on the bill. Within the cost of gas on Covington customers’ bills is a product cost adjustment (PCA), which the city identifies on the bill.
Morris said that part of the bill will be removed, so the bill will no longer be added up by base charge + fixed unit price + city distribution fee + PCA but instead will be closer to the industry practice structure of base charge + cost of gas + distribution fee.
Possible reductions of revenue
Water revenue: approximately $50,000
Gas revenue: approximately $250,000
Electric revenue: approximately $400,000 (does not include any changes of utility)
Total revenue reduction: $700,000
Rounded to whole numbers courtesy City Manager Leigh Anne Knight
Proposed changes in fee structures and billing
Water
Current rate structure
First 3,000 gallons or less - $16.60
3,001-50,000 - $5.45
More than 50,000 - $5.70
Proposed rate structure
First 3,000 gallons or less - $16.60
More than 3,001 gallons - $5.45
Electric
Current rate structure
6-10 megawatt area for 70-75 percent load factor –
average of 7.6 cents per kilowatt hour
Proposed rate structure
A tier structure bringing bigger industries to around 6.8 cents per kilowatt hour
Natural Gas
Current rate structure
Billing is base charge + fixed unit price + city distribution fee +PCA
(product cost adjustment)
Medium commercial $3.45
Large commercial $3.45
Interruptible customer $1.95
Proposed rate structure
Billing is base charge + cost of gas +distribution fee
Medium commercial $3.20
Large commercial $2.95
Interruptible $1.85
