Niles, Michigan, Floats Proposal for Higher Electric Rates

Electric rates soon will increase for residents and businesses in Niles Township Michigan – a municipality with a population of 14,000 – but the debate is just starting as to which class of electric customers should be charged the least, according to a December 28 report by the South Bend Tribune.

Niles City Administrator Ric Huff introduced plans for a 5.2 percent electric rate increase at a City Council meeting in late December. He said he plans to come back to the council with specifics about the proposed new rates this month or next month, the local news outlet said.

Huff said the rate hike is needed, not only because the cost of electricity the city purchases from incumbent utility American Electric Power has gone up; but also to cover ongoing infrastructure improvements and maintenance requirements, as well as to ensure the city’s electrical division does not operate at a loss.

The wholesale cost of buying electricity from AEP went up 4.5 percent on June 1 and the city has had to absorb over $1 million in other costs from AEP over the last three years, the Tribune reported.

Huff said the city’s rate consultant originally proposed a 4.9 percent rate hike, but that still would have left the township operating at a loss.

The city’s last rate hike was approved in 2015. That year, people had to deal with two rate increases: one, a surcharge to help pay for the removal of the Pucker Street dam; another, a 3.2 percent boost to cover annual operating cost increases.

Rates for C&I Customers

Huff told council members that he couldn’t predict exactly what the proposed new rates will look like for the city’s commercial, industrial and residential customers, the Tribune reported. But, he said the hikes will total 5.2 percent. The city has a total of 11 different rates for different customer classes and subcategories.

He noted that the city’s longtime policy has been to put the smallest rate increases on industrial customers with commercial and residential customers being charged a higher percentage increase. He said the city’s 20 industrial customers currently purchase 30 percent of the city’s power and provide 21 percent of the city’s electric revenue.

He told the newspaper that it would be harder to compete for new businesses if the city asked industrial customers to absorb more of a hike. “I don’t know if it would cause existing companies to move, but it would be more difficult to recruit new industry,” Huff said.

Council Member Dan VandenHeede questioned the practice of charging commercial customers more. “Maybe it’s time to say that we’re not going to subsidize industry so much,” he said. “Commercial businesses now pay more … Maybe it’s time to look at whether we want to attract more commercial businesses, including restaurants and retail stores.”

VandenHeede also suggested that the council take another look at how the rates are determined. “Should the rate consultants be deciding?” he asked. “We should have input, not just the rate consultants.”

Huff noted that the rate consultants make their recommendations after consulting with city staff and looking at the historical pattern the city has followed in setting rates over time.

Natural Gas Facility

Niles also made energy news last October, when the South Bend Tribune reported that the township planned to build a natural gas facility that could generate up to $10 million in annual tax revenues in partnership with a Chicago-based company named Indeck.

City Administrator Ric Huff said at the time that Indeck had come to the city with plans about a year beforehand and had gone public with those intentions at a recent city planning commission meeting. He said he expected that the only city approval the company would need would be approval of site plans.


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