Chattanooga's electricity provider is poised to raise rates for the first time in four years.
Storm damage costs and peak demand charges that EPB pays the Tennessee Valley Authority are prompting the city-owned utility to propose a 3.5 percent increase.
"A lot of what we do with rates is driven by storms," said Harold DePriest, president and CEO of EPB.
EPB's five-year annual average for storm damage repair has been $6 million, but the utility budgets just $2 million. That was the case in 2011, when it had to deal with $30 million in storm damage, mostly from April tornadoes. The same year, it increased electricity rates 5 percent. It had planned to raise them 4 percent.
"Frankly, I probably didn't raise rates enough," DePriest said.
If EPB's board of directors approves, the increase will take effect when the new fiscal year begins July 1. A typical residential customer who uses 1,640 kilowatthours of electricity a month will pay an extra $5.70 a month. Directors have until their June 19 meeting to mull it over, along with the rest of staff's proposed budget, which they received Friday.
The added revenue is expected to go toward operating and improving the electric system. Higher revenue from EPB's fiber-optics division has helped moderate power rate increases, EPB officials said.
"If we didn't have fiber optics, the rate increase would be substantially higher," DePriest said. He said the same thing in 2011.
EPB officials said TVA's peak demand charges have made the utility's finances rougher.
In April 2011, TVA started charging EPB a "maximum monthly demand" for residential and small commercial customers. Demand charges are based on customers' highest hour of usage for the month. That means a temperate month with just a day of unseasonably hot weather can skew that charge. For example, from 2008 to 2014, EPB's purchased power charge for the month of July ranged from $32 million to almost $50 million.
The proposed budget for next fiscal year assumes EPB's electric customer base will barely grow, to 176,483 from 176,318. The average number of customers EPB serves each year has increased steadily since 2008.
The budget also assumes 71,600 residential customers for EPB's Internet and video (cable), up from 66,300 projected for the end of this fiscal year. Next fiscal year will be the first the telecommunications division operates completely debt free.
EPB provides service to most of Hamilton County, including Chattanooga, and part of eight other counties in Tennessee and Georgia.
Contact staff writer Mitra Malek at mmalek@timesfreepress.com or 423-757-6406. Follow her on Twitter @MitraMalek.