Jamie Munks
The State Journal-Register
Springfield aldermen on Tuesday had mixed reactions to a rate restructuring that increases the fixed charge on City Water, Light and Power bills while dropping energy usage rates.
The proposal, rolled out last week by Mayor Jim Langfelder and CWLP chief utility engineer Doug Brown, will be up for a vote at next Tuesday’s city council meeting, despite at least one alderman contending it needs more consideration.
“I think this needs a whole bunch more study,” Ward 7 Ald. Joe McMenamin said, adding that there was not enough in-depth information for aldermen before Tuesday’s committee of the whole meeting and not enough public input throughout the formation of the new rate formula.
The new rates have been described as overall revenue-neutral for the city-owned utility. While many users, particularly those who use a lot of electricity, would generally see lower bills, customers who use lesser amounts likely would see small increases in their bills during the four-year phase-in. The first fixed-rate increase would take effect Jan. 1, with incremental hikes in 2017, 2018 and the final year, 2019.
The utility last week launched an online bill calculator that allows customers to input their CWLP account numbers and see what the new rates could do to their bills based on their past energy usage.
A public hearing will be held at next week’s council meeting before a possible vote.
There’s a time crunch in gaining approval to move forward with the plan if it’s going to be implemented the way the Langfelder administration has laid out. City officials targeted a possible council vote for the Oct. 6 meeting to come in advance of a mid-October bond-rating review with Moody’s Investor Services.
Refunding some of the electric fund’s outstanding debt, which could potentially save CWLP as much as $5 million annually, is another component of the proposed plan.
City officials hope a rate restructuring will be viewed favorably by credit-rating agencies, resulting in better interest rates by the time additional bonds are sold. The most favorable interest rates the utility can get will likely be before the holiday season, so the goal is for the bond sale to happen before mid-November.
Earlier this month, Moody’s decided against downgrading CWLP’s electric fund bond rating, but it changed the outlook from stable to negative based on the utility’s consistently weak financial position.
Brown warned aldermen that taking no action on the plan could create negative repercussions including a bond-rating downgrade and subsequent deterioration of utility infrastructure, longer and more frequent power outages and possible staffing cuts.
However, McMenamin and Ward 8 Ald. Kris Theilen questioned why a municipal utility tax that was presented under the previous administration a year ago as a possible solution to some of the utility’s financial woes wasn’t included in this proposed package of changes.
The municipal utility tax option would have seen the payments in lieu of taxes (PILOT) the utility makes to the city’s corporate fund retained by CWLP. In its place, a 2.76 percent municipal utility tax was pitched, which would have been funneled into the corporate fund to make up for the loss of the PILOT money.
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Joe McMenamin for Ward 7 