Rates have to go up: that’s the conclusion from a rate consultant after a look at Nome Joint Utility’s electric, water, and wastewater operations.
The results were delivered via phone conference to the Nome City Council and the Utility Board by the rate consultant Wednesday, Feb. 18. Just how much those rates will jump, and exactly how that increase will be charged to customers, will be up for the board and ultimately the city council to decide.
“The numbers clearly show that an increase is necessary on both the electric and the water and sewer,” said City Council member Gerald Brown. “It’s really necessary on water and sewer. The charges have been subsidized [by electricity] for as long as anybody can remember.”
When it comes to electric rates, rate consultant Mike Hubbard with the Financial Engineering Company told the council and the utility board during the Wednesday work session that rates would have to increase just for the utility to break even.
“The existing rate would recover about $5-plus million per year, and we need $5.7 million to break even,” Hubbard told the assembled officials. “So we’d have to raise rates by about 13 percent.”
For water and sewer, the recommended rate increase was even larger, with Hubbard suggesting a nearly 17 percent boost. That’s because the utility’s water and sewer operates at a nearly $500,000 loss, and if the costs of replacing aging facilities (or depreciation) is added in, that loss jumps to over $2.8 million.
There are options, Hubbard stressed, including eliminating the city’s current three-tier rate structure for electricity and charging a universal rate for all customers. That would mean large users of the city’s electric system, including the Norton Sound Regional Hospital, would pay the same rate as individual households per kilowatt-hour. Other options include increasing the basic facility fee, currently at $5 per electric hookup, to anywhere from $15 to $25 dollars, regardless of how much electricity is used.
The utility board meets to discuss what to do next with the rate consultant’s suggestions at their next meeting on Tuesday, Feb. 24.
