Storm costs force EPB rate increase

Storm costs force EPB rate increase

May 21st, 2011 by Ellis Smith in News

Electric bills are going to go up throughout the Chattanooga area if a rate increase proposed Friday by EPB is approved in June.

The 5 percent increase, set to take effect July 1, will refill the utility's coffers following more than $30 million in losses from the tornadoes that lashed the region in February and April. The year so far has been 15 times more expensive than the average $2 million budget for storm damage in a typical year, EPB President and CEO Harold DePriest said.

A customer with a $100 monthly power bill will see a $4.58 rate hike.

"Little things like $30 million storms have a way of taking away any spare cash," he said. "Without the rate increase, we're in trouble pretty quickly."

The utility's previous rate increase four years ago was planned to last three to five years, and this new increase should last five to eight years, DePriest said, provided there are no more record-setting storms.

The original plan was to enact a 4 percent increase, but the cost of cleaning up the April 27 storms changed everything.

To restore power to the 129,515 customers, DePriest called in about 1,500 linemen from 18 states, roused two dozen retirees and even enlisted office staff. The sheer number of people working overtime to restore power cost a significant amount of cash, but the work was done by May 13 after a two-week effort, he said.

"In the end, we had a very big machine that was working rather well," DePriest said. "If we can get twice as many workers, you can get the job done in a third of the time."

Quick action helped companies and residents save millions of dollars, such as a Mayfield Ice Cream storage facility with $3 million in inventory that needed to be kept cold, he said.

"We got the power back on, and we were not only able to save the ice cream for them, they gave our construction guys a freezer full of ice cream," DePriest said.

EPB would have asked for a larger rate increase a year earlier had it not been for increased revenues from the utility's fiber-optic division, he added.

"We'd be looking at another 3 to 4 percent and we'd need it last year," he said. The utility's fiber-optic gambles "are proving to be very prudent investments that are already paying dividends," he said.

Some of the storm's cost eventually will be reimbursed by the Federal Emergency Management Agency, which typically repays 75 percent of cleanup expenses resulting from a declared disaster, said Joe Ferguson, chairman of EPB's board.

But that payback could take up to two years, which "tells us how important it is to get our reserves back up to an acceptable level," he added.

Any increase must be approved by the EPB board of directors as well as its supplier, TVA. Unlike a water rate increase, there will be no public hearings.

David Wade, EPB executive vice president and chief operating officer, said the utility is now conducting a full inspection of the grid and cleanup effort, which could take another week.

EPB's fiber network required the least repair work, he said, with 95 percent of customers' fiber connections coming online when power was restored.

"There were places where the fiber laid on the ground for days with cars running over it and trees lying on it, and it still transmitted light," he said.

About 80 percent of EPB revenues are paid directly to TVA, which supplies EPB with electricity. TVA rate increases are passed on directly to residents and businesses.