Sikeston customers to see electricity bills rise

Friday, May 11, 2012

SIKESTON, Mo. -- After a quarter-century without an electricity rate increase, Sikeston Board of Municipal Utilities customers are slated to see an increase of about 17 percent on their August bill.

Members of the Sikeston City Council met Wednesday with BMU board members and Ed Throop, BMU's executive director, to discuss the proposed rate increase.

"We have not raised our rates in 25 years," Throop said. "It is time."

BMU's officials recommended rate increases for residential, commercial and industrial customers averaging 17.4 percent to be effective in June.

"That's going to hit a lot of people in our community very, very hard," Councilman Bob Depro said.

"Ed's been holding the line forever to save the citizens some money," said Steve Taylor, chairman of BMU's board. "All good things come to an end. You just have to face reality: that prices have gone up."

Mayor Jerry Pullen said he knows Throop has held off raising rates until there was no other reasonable choice.

"The time has come that we absolutely have to," Pullen said.

Rates for Sikeston customers are set based on the cost of producing power, Throop said, but that cost is now going up.

BMU has been enjoying a "sweetheart deal" on coal thanks to a 10-year contract. "That contract comes to an end in 2012," Throop said.

The combined cost for coal and transportation is expected to increase by 75 percent, according to Throop. The Sikeston Power Station uses an average of 1.1 million tons per, he said.

He said it would only take a rate increase of about 8 percent to keep up with those costs, however.

Pending new regulations from the U.S. Environmental Protection Agency are what is driving the rate increase beyond that, according to Throop.

"In 2013, we're going to have to turn our scrubber back on," Throop said. A scrubber is a device that removes some of the sulfur oxides from a coal-fired plant's smoke stack.

Rumors that BMU is spending $20 million for a new scrubber are false, Throop said, adding that a new scrubber would actually cost about $100 million.

The cost to get the scrubber up and running again will be between $18 million and $22 million, he estimated. Running the scrubber will increase costs about $3 million to $4 million annually as well.

The total cost to bring the power plant into compliance with the new requirements could be as high as $35 million, Throop said. Covering that cost to produce power then would mean a rate increase of 26-30 percent, he said.

Throop said BMU officials are not asking for a higher rate increase yet because they have no way of knowing at this point what the actual cost of EPA compliance will be.

For example, if the EPA decides to classify fly ash as a toxic waste material, BMU would have to spend $14 million on a landfill. If it is declared by the EPA to be a solid waste, BMU would only have to build a new holding pond at a cost of $5 million.

Accordingly, this 17 percent will be the "first phase" in increasing rates with a second increase likely in another year or two, according to Throop.

He said they expect that within a year to 18 months, BMU officials will know how much of an additional increase in rates will be needed to account for costs.

Alan Keenan, BMU board member, said it is "miraculous" that BMU has been able to put off a rate increase for as long as it has and that he doesn't think there is any other power company in the world that has been able to do that.

"We have currently the lowest rates in the state of Missouri," Throop said. And even after the rate increase, BMU will "still be very, very competitive with surrounding towns."

Sikeston customers now pay about 5 cents per kilowatt-hour. The average statewide is over 9 cents per kwh.

"Our prices are still cheaper than anybody else," Taylor said. "We're the cheapest and we will still be the cheapest."

The rising costs of producing power will be offset somewhat by an expected $10 million to $12 million saved on interest beginning in 2016 from refinancing the debt on the power plant, Throop said.

Customers will also benefit from BMU's ability to fund complying with EPA regulations using reserves instead of borrowed money, Throop noted.

Depro said citizens are making comments indicating they believe the rate increase wouldn't be necessary if BMU hadn't have built a new office building.

Throop said BMU would have spent about half of the building's $3.5 million cost on repairs and expansions to the old building. The additional $1.7 million spent to get a new building "would have probably delayed the rate increase three months," he said. "We had to have more space.

And being a planned expenditure, a building fund was established years in advance.

Taylor credited Throop with having "the foresight to set that aside."

Jeff Sutton, BMU board member, noted the building has been paid off already -- and without borrowing money.

The Sikeston Power Station's four wholesale accounts, the cities of Columbia, Carthage, West Plains and Fulton, will share in the increased production costs and the cost of complying with the EPA requirements, according to BMU officials.

Throop noted there is only a decade of payments left on the Sikeston Power Station.

"In 10 years, that power plant will be ours," he said.

City officials indicated they will approve the rate increase as recommended but need to have an ordinance written up and publicly read twice before approving it.

Also, they noted, regular city ordinances don't go into effect until 30 days after their approval.

BMU officials said it is not necessary to push the rate increase forward as an emergency ordinance and that the new rate going into effect in July and appearing on the bill received in August would be fine.

"The process is the process," Throop said.

In other city business Wednesday, City Manager Doug Friend presented additional information on the proposed Fiscal Year 2013 budget and advised Council members the public hearing for the budget required by the City Charter will be Tuesday.

A first reading for the ordinance approving the budget will be on the agenda for a noon meeting May 23 and a second reading and consideration at the Council's next regular monthly meeting June 4.

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