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Four Indiana Towns Cut Ties with Local Utility and Search for Lower Rates

June 7, 2016 By Cheryl Kaften

Four municipalities in northeast Indiana have pulled out of their agreements with Indiana Michigan Power in search of lower electrical rates, according to a news report posted on Wane.com/NewsChannel 15 on June 3.

A subsidiary of American Electric Power (AEP), Indiana Michigan Power (I&M) serves about 461,000 customers in the Hoosier State.

Avilla (population: 2,400), Bluffton (10,000), and Warren (1,200) ended their agreements June 1. Garrett (population: 6,200) terminated its agreement last year. All of the communities have four years from their respective termination dates to find a new electricity provider.

If they don’t find a better rate, I&M could potentially charge a higher rate under a new agreement. However, the utility also could continue to honor the current rate, if the communities choose to continue with I&M after the four-year period ends.

Avilla Town Manager Bill Ley told the news outlet that it’s all about finding a way to save everyone money.“We haven’t raised Avilla’s rates since 2002,” Ley said – but now a rate increase is being considered to cover city losses before a new electricity provider can be found. He estimates that a typical monthly bill for local residents is between $60 and $75.

Ley said the city spends about $100,000 per month buying electricity from I&M. That electricity is then distributed to residential, commercial and industrial customers who pay the city for their electrical use. But under a true-up agreement, Avilla also must pay estimated costs to I&M for the following year’s expected use.

That agreement goes up every year. In 2015, Ley recalled, Avilla paid I&M approximately $180,000; and during the first half of this year, Ley said the city has paid about $69,000.

Ley told Wane.com that he expected the true-up agreement to cost Avilla roughly $200,000 by the year-end 2016. Most of that cost will be carried over to customers, but the city is losing money on the current rate.

He estimates that the city can save 20 percent to 30 percent on its wholesale power costs, if it goes with one of half a dozen new providers that might be available to send power to the town. However, the new electricity would still be transmitted over I&M lines, so the power company won’t lose its entire business.

I&M officials issued a formal statement on the recent developments: “We value our relationship with these communities and are proud to have provided reliable energy for many year,” commented Brian Bergsman, director of Corporate Communications and Government Affairs for the utility, adding, “I&M will continue to be a low-cost provider of safe and reliable power as we have been for decades. We intend to continue to provide these communities with quality service during the remaining four years of the contract, and beyond if that turns out to be best for the communities and I&M.”

A request for proposals (RFP) is expected to go out soon from Avilla for a new provider. Ley said he still prefers to stay with I&M – which has provided electricity to Avilla for decades.”It’d be nice to stay,” he stated, “but it doesn’t mean we will.”

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