Council prefers staggered approach for Aspen electricity rate increases
September 7, 2011
ASPEN – The Aspen City Council is leaning toward a plan to raise electricity rates involving differing percentage increases depending on the category of the user.
During a work session on Tuesday, the council queried utilities director David Hornbacher and utilities operations manager Lee Ledesma about details of the plan that Mayor Mick Ireland and most council members seemed to favor. Councilman Steve Skadron was not present.
The plan, one of two options city staff presented, would involve restructuring the rates over four to six years to bring all four of its customer categories – residential, small commercial, large commercial and city facilities – in line with the cost of delivering power. The city is seeking to close the difference between the predicted amount of electricity revenues to be collected during 2012 and future years, and the higher cost of providing the service. Denver-based Red Oak Consulting has forecast that discrepancy to be about $300,000.
Residential customers would see a 16.1 percent increase on average, but like other types of users would not feel the entire rate hike all at once. Other increases outlined by the department would affect small commercial users (4.4 percent), large commercial users (7.9 percent) and city facilities (13.6 percent). The changes could go into effect in late November.
Council members spent little time discussing the second option: an across-the-board increase of 8.6 percent for every customer. Each plan would raise about the same amount of money, according to City Manager Steve Barwick, who said during the meeting that he wasn’t recommending one alternative over the other.
“I don’t think the differences between these [alternatives] are really substantial,” he said.
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Hornbacher said the percentage increases for each category came from a study Red Oak conducted that determined how much the city was subsidizing the four types of users.
Red Oak calculated “the percentage that each of those classes are paying as compared to the cost of providing the service,” he said. “It was identified that the residential customers are paying less than what it costs to serve them, and the small commercial customers are paying slightly more than the costs to serve them.”
Because of rising wholesale costs of power, even the customers who pay an amount equal to or above the city’s service costs will see an increase in the future, officials said.
Ireland said he would like to see a program included within the rate-increase ordinance that seeks to educate consumers about energy conservation. He also voiced concern that some downtown retailers are leaving bright lights on overnight in their display windows and inside their stores.
The ordinance could provide some type of incentive for retailers to turn the lights off after midnight, Ireland suggested. But Councilman Derek Johnson noted that the lights probably function as a theft deterrent.
The mayor said he’s not seeking a downtown blackout between midnight and sunrise – he just wants the lights toned down.
“I’m not talking about creating a black hole,” Ireland said.
Councilman Torre said he worries that some businesses won’t be able to manage the increase. He noted that one restaurant’s proposed increase over four years, singled out in a city chart, could be a whopping 57 percent.
Torre said he recently favored the second alternative of an across-the-board increase, but added that he could support the staggered approach calling for different percentage hikes in each category. He asked Hornbacher to provide more information about the plan before it comes up for a public hearing and an official vote.
Ireland said the decision to raise power rates would be harder if it weren’t for the fact that Aspen already provides one of the lowest electricity rates in the state and is subsidizing power costs for many residents and businesses. Even with the increase, the rates will still be on par with those Holy Cross Energy charges, officials said.
Because of the recession, the city has not raised power rates since 2009.
“This is not a revenue-generating scheme,” Ireland said. “This is a break-even scheme.”
The city’s electricity operation serves about 2,865 residential, commercial, hotel and condominium properties in the commercial core and West End neighborhoods as well as city-operated facilities. Other areas of Aspen receive power through Holy Cross Energy.