CLEVELAND, Tenn. - Cleveland Utilities has proposed to implement an electric billing rate adjustment of 0.37 percent to correct a "disconnect" between wholesale and retail power rates.
In a recent meeting, the utilities board voted 5-0 to approve the proposed measure, which will be included in Cleveland Utilities' 2014-15 budget presentation to the Cleveland City Council in late April.
"We've identified a problem within the rate structure itself, and we'd like to fix it this year," said Ken Webb, president and CEO of Cleveland Utilities.
Not making the rate adjustment in the coming fiscal year will only mean that it will have to be addressed later, he said.
A utility consultant has advised the electric division that it is healthy, but the rate adjustment will be needed for it to remain so, said Bart Borden, the division's vice president.
Utility officials voiced concerns that if the rate adjustment is not implemented, the situation will deteriorate reserves.
A major catastrophe could leave Cleveland Utilities vulnerable if its reserves are not at higher levels, said Webb.
Cleveland Utilities had to rely on its reserves to make extensive repairs to its power system in the wake of the April 2011 storms, but the Federal Emergency Management Agency has not completely reimbursed all the qualifying expenses yet, he said.
In addition to this, Cleveland Utilities has also been engaged in a number of capital-intensive projects in recent years, said officials.
The rate adjustment will benefit both Cleveland Utilities and its customers, said controller Marshall Stinnett of the utilities' financial division.
"What this does is that it allows the utility to keep a margin flat across the year and allow that cash to smoothly roll in rather than in big hunks," said Stinnett.
Customers will see a flatter trend line in their bills, he said.
"To say we should never have rate increases is a little ludicrous," said Aubrey Ector, chairman of the utilities board.
The electric division is projected to spend $99 million in 2014-15 and to generate $99.6 million in revenues, according the proposed budget.
Most of the electric division's revenue - about 82.4 percent - goes toward the purchase of power, said Stinnett. This amount is a slight increase over last year, he said.
Paul Leach is based in Cleveland. Email him at email@example.com.