The Hagerstown Light Department purchases electricity wholesale and distributes it to its customers.
The cost of power purchased by the city will increase from $11.4 million in fiscal year 2002-03 to $14.6 million in fiscal year 2003-04, according to city documents.
Officials said the average residential customer still will be paying less after the rate hike than they were in 1991, before the city was allowed to shop around for electricity suppliers.
As a result of deregulation, the city is allowed to bid electric suppliers and contract with the company that costs the least.
In 1991, the average residential customer using 700 kilowatt hours of electricity a month paid $53.69, which is about 23 percent more than the new average of $43.60, Spiker said.
"It's still substantially cheaper," Councilman Lewis C. Metzner said.
The City of Hagerstown currently contracts with Allegheny Energy for electricity, but that contract expires on June 30.
Dominion Energy Management of Richmond, Va. will take over after that under a three-year contract with the city.
The city, which contracted with Allegheny Energy since 1972, dropped the Hagerstown-based company in November.
Dominion Energy offered a lower price, officials have said.
Also, Allegheny Energy would not agree to a performance bond, Mayor William M. Breichner has said.
A performance bond is a letter of credit from a financial institution stating the company promises to pay a set amount if it could not provide electricity to the city under the terms of the agreement.
The city asked Allegheny Energy to put up a $6 million bond for the first year of the contract, $4 million for the second year and $2 million for the third, officials have said.