September 8, 2005

Rising Fuel Prices Costing Local Utility Customers

The recent tragedy created by Hurricane Katrina is being blamed for gas prices that have continued to rocket higher and higher. But local utility customers are learning that out-of-control fuel costs were already impacting this community.

At the September 1 Memphis City Council meeting, the board of aldermen approved a request for a 50-cent increase for residential trash collection services.

Bill Kiddoo addressed the council on behalf of Onyx Waste Services Midwest, Inc. He presented the proposal for a residential price hike as well as a 4.8-percent across the board raise for commercial rates.

A letter from Onyx reported the company is $142,000 over budget on fuel company-wide this fiscal year.

Kiddoo stated the original three-year contract with the city was created when diesel fuel was roughly $1.40 a gallon. With prices in the $2.60 range prior to the hurricane, the company was using its contractual right to ask for the price increase.

He stated that a $1 per gallon fuel increase locally cost the trash company approximately $650 a month. The proposed rate increase is expected to generate roughly $800 a month more revenue for the company.

Kiddoo also pointed out that the proposal was made in advance of the current conditions. The letter was received by the city on August 3rd, well before the recent wave of escalating prices drove the fuel rates above $3 a gallon.

The council indicated the rate change was acceptable as long as the company would agree to lower the rates back to the contract level if price rates returned to an acceptable level.

They provide a good service and I dont have any complaints. I dont think this is too much to ask, said Mayor Mike Stone regarding the proposed increase.

The council voted 4-0 to accept the rate increase.

The price hike means senior citizens will now pay $7.50 for residential service with other homes paying $8.50 a month.

Rising fuel prices are also being blamed for escalating electricity costs.

The council unanimously approved the 2005-2006 city budget, at the same time passing an ordinance to amend the previous budget.

Part of the amendments for the 2004-05 budget included an additional $134,500 that was spent by the city to purchase power.

From May through July, the city saw the average price it paid to the MoPEP consortium rise from 4.5 cents per kilowatt to 6.5 cents.

The price hike coincided with greater demands as summer arrived. In July the city paid $140,095 to purchase 2.144 million kilowatt hours of power from MoPEP. Overall, the city has estimated fiscal year-end spending on power purchases to exceed $948,000, well above 2004 expenditures of $818,666.57 and 2003s level of $773,915.73.

Whats all that mean to the average resident?

On the current electric bill for the end of July and the first half of August, residents will see a roughly three-cent per kWh price adjustment. For the average household, which uses 2,000 kWH, that means the electric bill was $60 more this month.

The rate adjustment is calculated by averaging the power costs from the previous three months. That rate is calculated against the base rate of 4.37 cents as established by ordinance. The difference between the energy cost and the base rate is the energy cost adjustment, which this month was an increase of 2.95 cents per kWh.

The charge is nothing new, as it has been in place since the new rate ordinance was passed by the city council back in October of 2001 as an assurance that the city could recoup costs of buying power. It simply is having a bigger impact now because of rapidly rising costs.

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