City braces for shocking 10.9% rate hike

While other cities in Georgia are raising electric rates in advance of a double-digit increase in estimated fuel cost  next year, the Cairo City Council Monday night voted to spend approximately $766,129 to offset increased costs rather than charge local ratepayers higher electric rates.
The Municipal Electric Authority of Georgia, of which Cairo is a member city, is projecting the city’s cost for electric power to increase 10.9 percent, $1,306,448, next year.
Increasing budgeted power costs for MEAG cities varies according to the individual city’s mix of ownership in the power generation plants. Increases range from as high as 37.8 for Sandersville to a 13.3 percent reduction for the city of Sylvania.
Cairo City Manager Chris Addleton says the cost of power will increase next year due to seven scheduled unit outages at three nuclear plants, three coal plants and one natural gas powered plants.
According to Addleton, the plants are going off-line in 2011 for scheduled routine maintenance or other federally mandated environmental upgrades. MEAG is in partnership with other utilities in the plants, including Georgia Power and the Southern Company.
“Neither we, the city, nor MEAG schedules when work is done to these plants. This is kind of like a perfect storm with six of them going down in one year. It is really unheard of,” Addleton said.
Other factors driving the increased projected costs is the depressed hourly market for electricity, city officials say.
The MEAG budget for the city’s cost for electric power generally goes up with inflation, but Addleton says the 10.7 percent projected increase is “very unusual.”
Cairo’s city manager also says that MEAG’s annual budget is very conservative and, typically, the city’s actual cost of power comes in anywhere between $200,000 and $400,000 less than projected.
At the end of the operating year, MEAG rebates the city for the difference in the budgeted cost of power and the actual expense in the form of a year-end settlement.
City officials feel confident that the 10.7 percent budgeted increase is a conservative figure and that by using $766,129 of money that was set to be invested in an account for new generation of power, the city can offset the increased costs without having to raise electrical rates locally.
Addleton says the costs will be monitored closely each month and the city will do an in-depth study six months into the year to avoid any end of the year surprises.
“I think we can cover any increases with the money we had set aside for new generation. If we can’t, the ratepayers will pay for it through an increase in the power cost adjustment that appears on their monthly bill,” Addleton said.
Much of the reason for the anticipated increased costs is due to federal mandates, which Addleton notes are not federally funded.
The city manager anticipates the six plants being back on-line in 2012, and he is hopeful that the MEAG budget will return to a near normal level.
“This is just another example of the city council’s willingness to mitigate these power cost increases by using money from our Municipal Competitive Trust Fund. We all realize the economy is not where it should be. Hopefully, we can offset all of the increases and the 2012 budget will come back and be more reasonable,” Addleton said.
The city of Whigham is facing a 25.7 percent increase in its anticipated cost of power.
City Clerk Lisa Calhoun said city officials in Whigham learned of the projected increase just days after the city adopted its annual operating budget.
“The council has discussed it a couple of times since it was brought to our attention. We are hoping to adjust the power cost adjustment to relieve some of increased cost,” the Whigham clerk said.
The Whigham council was to meet Tuesday night and Calhoun said the issue would likely be discussed again.
Whigham officials have not ruled out raising electric rates, but no decision to hike the electric rates has been made.
The projected increase to Whigham is $139,099 in 2011.
Increases expected to be experienced by other area cities include: Thomasville – 6.1 percent; Moultrie – 15.4 percent; Camilla – 4.0 percent; Blakely – 11.0 percent; and Albany – 11.5 percent.