The Ashland Electric Department projects it will spend more than $13 million in the coming fiscal year, even though revenues are estimated at just over $12 million.
The Ashland Electric Department projects it will spend $13.14 million in the coming fiscal year, even though revenues are estimated at only $12.41 million.
Like many city departments, the Electric Department will eat into its reserve funds to make up for the shortfall in revenues.
Conservation and mild weather could dampen electricity sales for the fiscal year that starts July 1, according to city officials.
Electricity customers will probably see a rate increase in the fall, although the amount isn't known yet.
The Bonneville Power Administration, which wholesales electricity to Ashland, is warning it may raise its wholesale rates by 9 to 15 percent.
The city of Ashland could pass on a 3 to 7 percent rate increase to help cover the cost increase as well as higher personnel and material costs, Electric Department Director Dick Wanderscheid told Ashland Citizens' Budget Committee members last week.
A 5 percent rate increase would push a typical customer's monthly bill up from $75.90 to $79.70, a $3.80 increase, he said.
Still, Ashlanders would be paying competitive rates for electricity.
Pacific Power, which serves surrounding communities that don't have their own municipal electric service, is proposing a 6.3 percent rate increase that would push a typical customer's monthly bill up to $80.84, according to figures from the city of Ashland.
As an added benefit, having its own Electric Department means the city of Ashland has been able to generate extra money to help fund other city departments.
"The Electric Department contributes $3.7 million in support of the General Fund, while keeping rates competitive with Pacific Power," Wanderscheid said.
Those millions of dollars from the Electric Department help support General Fund expenses like Ashland Police Department operations.
The city of Ashland — sometimes known as "The Republic of Ashland" by critics — has a propensity to operate services itself while other cities rely on the private sector or pool services with other communities.
Operating its own Electric Department generates money for other city operations, while some other city of Ashland services have proven costly. The Ashland Fiber Network, for example, built up a $15.5 million debt after its launch in the late 1990s.
Under the proposed budget for the coming fiscal year, AFN's $1.43 million debt payment for the year would be paid using funds from AFN, other city departments and a BPA court settlement.
Meanwhile, the city is proposing to cut $1 million worth of jobs, including positions in departments that are helping to shoulder the AFN debt.
Rate increase too small?
Although residents will likely see an electricity rate increase this fall, some Citizens' Budget Committee members questioned whether the rate increase will be enough, given that the Electric Department is eating into its reserve funds.
The Budget Committee is made up of residents, the Ashland City Council and Mayor John Stromberg.
Resident Budget Committee member Lynn Thompson said the city is not coming to grips with the fact that costs are outpacing revenues. She urged Electric Department staff to scrutinize their operational costs.
City Councilor Kate Jackson said the council has been extremely careful about raising rates on residents, and the city is now seeing the effects.
"We need to start covering operational costs so we're not mortgaging the future," she said.
City Finance Director Lee Tuneberg said that, looking back, the city should probably not have lowered electric rates and property taxes as it has done in some years, but instead should have been building reserves.
Unfortunately, tackling the issue of diminishing reserves now would mean raising rates while many people are out of work, Stromberg said.
The impact of conservation
The city of Ashland's strong electricity conservation programs will cost the Electric Department a projected $504,498 to operate in the coming fiscal year, plus lost revenues from electricity sales.
But controlling electricity use will become even more important from a financial perspective in the near future.
So far, BPA has been charging its customers, including the city of Ashland, the same rates on electricity. But in 2011, BPA will start charging a premium for communities that use extra electricity.
"As the load grows, that amount will come at a higher rate," Wanderscheid said.
The city's conservation programs have proven so effective that Ashland has held per capita electricity use flat since 1982. Per capita electricity use in America has nearly doubled in that time, according to BPA and the Energy Information Agency.
The Citizens' Budget Committee will continue to meet for the next three weeks as it scrutinizes the proposed city budget department by department. The overall proposed budget for the coming fiscal year is $80.9 million, down from the current fiscal year's adopted budget of $95.2 million.
For the schedule of upcoming Citizens Budget Committee and City Council meetings about the budget, visit www.ashland.or.us/News.asp?NewsID=1831.
Staff writer Vickie Aldous can be reached at 479-8199 or firstname.lastname@example.org.