Electric rates won’t skyrocket due to plant closure — Bailey
Posted: Tuesday, March 22, 2011 9:03 pm
Electric rates in Union City will not skyrocket amid rumors of large electric rate increases due to Goodyear’s announcement of the closure of its Union City plant.
“The plant closure won’t cause rates to skyrocket,” Union City Electric System manager Jerry Bailey said. “Although the plant was a very large portion of our revenues, our overall margin from the plant won’t cause a significant rate increase.
“Of course, what happens in the area due to the closure could cause other rate issues. Our rates are still among the lowest in the area and we do not intend for that to change.”
He said he knows there are a lot of people and organizations working hard to pull industry into our area.
“I know there are a lot of local people, including the Chamber of Commerce and the Industrial Development Corp., working with other organizations including the State of Tennessee, the West Tennessee Industrial Association and the Tennessee Valley Authority to help increase our industrial base,” he said. “The funding from the state and federal government to complete the work at Cates Landing will also be a big plus for our area.”
The planned plant closure also comes at a time when electric rates are changing. Bailey said beginning April 1, electric rates will be based on the season used.
“Rates in the summer months will be higher, and the fall and spring months will be lower,” he said. “Winter months will have rates slightly less than the summer rate.”
He said the Tennessee Valley Authority is trying to get customers to use less electricity during peak periods and shift that usage to off-peak periods.
“Right now, everyone pays an average rate, so there is no incentive to use power off peak,” he said. “This seasonal rate will give customers a price incentive to move usage to off-peak periods, thus allowing TVA to reduce the need for new, expensive generation.”
Because the April 1 rate change is so close to the higher summer rates, TVA is giving a break this summer to the higher seasonal rates.
“After this summer, you will see fall and spring rates drop and this winter and next year’s summer rates increase,” Bailey said. “Overall, this is not a rate increase for TVA, but the rates have been designed to make this overall rate change revenue neutral to TVA, our system and our customers.
“Each individual’s yearly electric cost will vary according to when that customer actually uses the power and how they are able to move their usage to off-peak times.”
Also during this rate change, Union City Electric has to make slight adjustments between the classes of residential, commercial and industrial rates.
“Over time, the rates charged to some classes of customers must be adjusted to make sure all classes are paying their fair share and are not subsidizing other classes,” Bailey said.
He noted residential customers will see an increase of about $1.64 per month due to the reallocation.
“The overall margin change due to the reallocation on Union City Electric System is zero,” he said.
Union City Electric is also beginning the implementation of an “automated metering” system to help prepare the system for a future rate change. This will allow for rates to change during certain times of the day. This future rate will allow customers to save money by using devices during off-peak times.
“If you usually run your electric dryer during peak usage times and you decide to do it during off-peak times, you can save a lot of money,” Bailey said. “This rate will probably be required by TVA within the next two years.
“The automated metering system will also allow customer pre-payment of electricity. The system will be able to give usage updates to customers and can predict how much longer they have before another payment is needed.”
He said the new metering system will take a few years to complete but will ultimately save the electric system money by offsetting meter-reading costs and truck expense.
Published in The Messenger 3.22.11