The Berea City Council voted 5-2 on Tuesday night to approve a budget that was adjusted to cover the 8.2-percent cost increase of purchasing power from Kentucky Utilities for the city.
Jerry Little and Ronnie Terrill voted against the measure, while Richard Bellando was absent.
However, customers will face additional costs to cover Berea Municipal Utilities’ operational expenses, on top of the KU rate increase.
This means an overall 12 to 13 percent increase to residential customers’ electricity charges when the change goes into effect September.
“A lot of people live on fixed incomes and it’s been difficult for everyone economically,” said city council member Diane Kerby, “but it is our duty to cover operations and keep our utilities in shape. It’s unfortunate, but the cost of everything goes up.”
Residential customers make up more than 85 percent of BMU’s business, said City Administrator Randy Stone.
Of BMU’s 5,200 customers, 4,200 are residential customers.
Every year since 2007 (except for last year), the utility company has had to pass along the KU transmission increases to its customers, but it never asked citizens to pay more for operational costs.
Last year, a revenue neutral adjustment took place when BMU increased the service charge from $12 to $14.30, but reduced the volumetric charge. Customers saw no changes to the amount charged on their bill.
However, “the rate structure that is currently in place has not covered the cost of doing business, leaving BMU some $600,000 short in covering expenses,” Stone said. “But we were able to cover those loses by deferring spending in the city’s budget.”
About 80 percent of BMU’s budget goes to purchasing energy from KU, Stone said.
The rising cost of benefits and insurance for BMU’s personnel also is a factor in the increase.
“Like with everybody else, our cost of staffing continues to rise,” said Kerby. “These are things that are beyond our control.”
The 5 percent additional increase also will recover $200,000 in each of the next three year to cover the $600,000 deficit.
Paul Garcia of Norbourn Associates LLC was contracted to conduct a cost of services analysis, the results of which were presented to council members at a meeting Monday night.
Garcia has been working with the city since the acquisition of the company from Berea College in January 2005.
When an analysis was conducted in 2007, the service charge was not increased to the recommended amount, Stone said.
“If we did not raise rates going into the next fiscal year, we would have a revenue shortfall of over $1.1 million,” he said. Residential services would make up almost $700,000 of the revenue short fall.
Stone said the rate increase will provide a “firm footing” to support the city’s utilities in the future.
“We’re trying to avoid having such a large increase ever again,” he said.
Crystal Wylie can be reached at firstname.lastname@example.org or 623-1669, Ext. 6696.
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