Utilities: Despite hike, bills to level off

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Martin Drake Power Plant’s fate could affect the future of electric rates, if City Council decides to phase out the plant sooner than its expected lifespan and switch to more gas.

Martin Drake Power Plant’s fate could affect the future of electric rates, if City Council decides to phase out the plant sooner than its expected lifespan and switch to more gas.

Colorado Springs Utilities customers might see their monthly bills jump nearly 5 percent in January, but local experts and officials say that residents should soon see rates start to level off.

“Utility budgets are always a balance between expenditures to ensure safe, reliable utility services and keeping rates as low as possible,” Utilities CEO Jerry Forte said in a news release. “We are reducing costs wherever we can and only doing the most critical projects.”

To pay for those projects, Utilities announced earlier this month its proposal to increase residential utility rates in 2014 by an average of 4.7 percent, adding an estimated $9.38 to customers’ monthly bills. The plan proposes a rate increase of 3.5 percent for electricity and 2.7 percent for natural gas, adding about $3.38 atop an 11.7 percent water hike that added $5.99 after its approval by Colorado Springs City Council last year.

Area businesses using Utilities might also see changes to their monthly bills if Council approves the bigger budget next month. Commercial customers, which Utilities spokesman Dave Grossman said accounts for a very small amount of Utilities’ users, would only see an increase of 0.23 percent while industrial customers would see a rise of 5 percent.

Grossman explained that this variation is caused by supply and demand, and that the difference in rates between the different classifications is determined by conducting usage studies.

“Rates depend on delivery costs to a particular class,” Grossman said. “For those commercial customers, our cost changed in proportion a little bit so that changed the rates a little bit for that group.”

Budget issues

Next year’s proposed Utilities budget is $1.15 billion, which is $94.9 million more than the current budget, according to the agency’s 2014 Annual Operating Plan. The increase is driven by capital investments in EPA-required air quality controls for the Martin Drake and Ray Nixon power plants and continued construction of the Southern Delivery System, the 53-mile pipeline designed to bring Arkansas River water from Pueblo Reservoir to the Pikes Peak region.

“That project is on time and under budget,” Grossman said. “It is a critical project for our community because it will provide a safe and reliable water source for the next 40 to 50 years.”

After a smaller rate increase in 2015, Utilities officials predict that overall utility costs should begin to flatten as these capital projects draw to a close.

“We expect that these new rates will be the last of the large rate increases to pay for the Southern Delivery System,” Grossman said. “We also expect a similar increase over the next couple of years to continue to fund the emissions controls with expected leveling out in 2017.”

It is unlikely that residents will see their rates drop any time soon. Because bonds were issued to help finance 2014 expenditures — including $178.1 million for Southern Delivery System construction and $51.6 million in emissions controls for the coal-fired power plants — customers will continue to pay slightly elevated rates to eliminate those debts.

Tom Zwirlein, UCCS professor and faculty director of the Southern Colorado Economic Forum, said that the pressure to rely more heavily on alternative energies might also deter rate decreases in the near future.

“Electric rates are only going to go up with the pressure to close the Drake and Nixon power plants,” Zwirlein said. “At some point Utilities will probably have to make the switch and either decommission those plants or switch to burning natural gas, which is more expensive.”

But Grossman said the charge to improve emissions controls is unrelated to the introduction of carbon emission standards under President Barack Obama’s Climate Action Plan, which targets newly constructed facilities.

“These increases are a result of the emission controls on power plants for sulfur dioxide and nitrogen oxides,” he said. “That is an EPA-mandated regulation that has been in the works since the 1990s. These are a part of the emissions controls we have been actively planning for the last few years.”

Those improvements are scheduled to be completed in 2016 for EPA compliance by 2017.

Looking ahead

Colorado Springs City Council has scheduled a public rate hearing at City Hall on Nov. 12, after which Council is expected to decide on the proposal by Nov. 26, according to the release. If approved by Council, which also serves as the Utilities Board, the changes will take effect Jan. 1.

“We haven’t seen a lot of feedback on it yet, but we’re early in the process,” Grossman said. “We get a lot of feedback around the time of that public hearing, and we always encourage customers to come and share their thoughts and opinions.”

Rate increases of any kind are often unwelcome, but Zwirlein said that some people seem to understand the you-get-what-you-pay-for principle.

“I think they’re working as hard as they can to come up with the right balance with infrastructure needs and keeping rates low,” he said. “When you see a rate increase, it generally hits low-income families the hardest, and that generally means that it will hit older people and people on fixed incomes — and that’s hard. But I think most citizens understand that it costs money to receive good, clean energy.”