Huntsville Utilities, TVA propose rate changes

HUNTSVILLE, Ala. – Huntsville Utilities hosted a public meeting in the City Council chambers Wednesday concerning potential upcoming TVA and HU rate changes.

TVA Rate Change

TVA implements a fixed grid access charge for local power companies on their monthly bill. Rate structure changes are passed on by TVA for minor cost based changes such as hydro credit re-alignment and fuel cost changes. Huntsville Utilities has asked TVA for the rate change to be deferred until October 1, 2019. Huntsville Utilities, TVA, and the city council must all agree on a retail rate action before then to avoid default rates.

In addition to the rate change, TVA is going to increase rates by 1.5%, starting October 1, 2018.

Huntsville Utilities Rate Change

Huntsville Utilities has proposed a rate increase of their own because of the increasing costs of supplies and materials. The cost of a bucket truck was $167,000 in 2010 and rose to $240,000 by 2018. That is a 43% change in cost.

HU says more electric system maintenance and improvements are required to meet the needs of the growing community. They also plan to undertake capital improvement projects that will implement technological advances to better serve their customers including new construction projects, fiber, and advanced metering infrastructure.

Proposed Rate Action

Huntsville Utilities will bring three options to the city council meeting on Thursday, September 27 for an electric rate action that would go into effect January 1, 2019.

  • Option 1: A 2.5% increase in FY19 that would increase availability for residential and commercial customers along with demand increases to medium and large commercial customers and an energy increase to outdoor lighting. A 2.0% increase would follow in FY21 that follows a similar format.
  • Option 2: This would see five consecutive annual increases beginning in FY19 to residential and commercial availability and would keep the demand and energy increases to commercial and outdoor lighting customers as detailed in option 1. This increase equals a 0.8% increase for residential customers each year. Large commercial and industrial customers have higher increases in FY19 and FY20 in a similar fashion as option 1.
  • Option 3: This approach combines the rate tiers for residential usage to eliminate availability increases in FY19 and FY20 for those rate classes. Smaller residential availability increases occur in FY21 through FY23. Commercial and industrial customers and outdoor lighting customers would see increases similar to the other two options. This increases revenue from residential customers by 1.3% in FY19 and FY20 and 0.6% for FY21-23. Impacts on customers would vary based on usage.

What if a Rate Increase is Not Approved?

If TVA, Huntsville Utilities, and the city council can’t agree on some form of rate modification by October 1, 2019, then  the default TVA rates go into effect.

Bond ratings on debt issued by Huntsville Utilities and potentially the City of Huntsville would possibly face negative rate actions for failure to meet financial projections.

Without additional funding, Huntsville Utilities says the current five-year capital improvement plan and operating budgets are not sustainable. Specific projects are at risk that would directly impact reliability.

Projects at Risk

Six substation upgrades and two transmission tie circuits are in jeopardy without proper funding. Without financial stability, HU will not be able to partner with Huntsville’s growth. The technological upgrades that HU has implemented over the years require ongoing investment in resources, training, and support. The advanced metering infrastructure or AMI would lose costs already given to the project along with contractual penalties. Work on the project may have to be re-bid at a potentially higher cost. Like the AMI network, much of the work on the fiber network has already been done but there are contractual timeline requirements with Google that must be met.

HU says after introducing the options to the city council, the TVA approval process will begin on September 30. The city council will vote on the rate changes on October 11.