Storms may whip EPB bills higher

Storms may whip EPB bills higher

April 16th, 2011 by Ellis Smith in Business Around the Region

EPB officials said Friday they may raise electric rates in coming months to make up for a cash shortfall following severe storms and tornadoes in February that knocked out power for 60,000 customers.

EPB directors will see a budget proposal in May and will likely vote in June on a yet-to-be-determined increase, said Greg Eaves, chief financial offer and executive vice president.

EPB raised its rates in 2007 by 4 percent, with plans to raise them again in three to five years, Eaves said.

The Feb. 28 storm, which cost $4.5 million, was the costliest in recorded history for Chattanooga's electric utility. The price to EPB of all storms in 2011 is expected to be about $6.5 million, and combined with about $4 million in 2010 costs, the utility is about $6.5 million over budget for the past two years on storm costs, Eaves said.

Typically, officials set aside about $2 million to pay for an entire year's worth of storms, but EPB saw "a loss of over $4 million in three days," in the latest round of outages, said Harold DePriest, president and CEO of EPB.

"We do not have a cash problem, but we do not have a surplus of cash," he said. "We are nearing the point where we may have to consider a rate increase."

Any increase in EPB rates will come on the heels of higher wholesale electric rates from EPB's power supplier, the Tennessee Valley Authority. EPB is one of 158 municipalities and cooperatives in the Tennessee Valley that distribute electricity generated by TVA to individual homes and businesses in their service territory.

Over the past year, higher fuel cost adjustments by TVA have boosted electricity rates by more than 10 percent, which EPB automatically passes along to consumers under its power contract with TVA.

Tennessee American Water Co., which supplies water in the Chattanooga area, is raising its rates by 14.76 percent this month - the largest in its history.

Eaves said higher labor, health care and energy costs have pushed up expenses for EPB over the past four years.

"When we did a rate increase in 2007, we anticipated that it would last three to five years, so we're right in the middle of the range we thought we were going to be in," he said. "It's just normal inflationary increases that are anticipated."

When a car hits a telephone pole, it now costs the utility roughly $2,500 to replace the pole, Eaves said.

Although EPB would eventually be reimbursed most of the storm's costs by the Federal Emergency Management Agency, Eaves said it would be "over the next couple years."

The success of EPB's fiber-optic telecommunications business will play a factor in the size of the increase.

The expected $17 million in access fees from the company's new Internet, TV and phone venture could cancel out a rate increase as large as 3.5 percent, DePriest told EPB's board.

"Fiber optics hold down electric costs," he said. "It's holding the rates down because we're bringing in more money."

The company has brought in about $9.5 million year-to-date, Eaves said.

"We would have needed a rate increase last year had we not had this benefit," he said.

The utility currently has about 26,000 customers connected to it's video and Internet service, Eaves said, a number that has surpassed expectations of about 24,000

In addition, EPB expects to draw more businesses toward over a million square feet of unused downtown office space, where it can leverage it's gigibit Internet speed to attract high-tech customers.