Officials worry about rising power costs

July 06, 2005|by GREGORY T. SIMMONS


As city officials get closer to settling a contract with the next electricity provider, concerns of higher costs are beginning to arise.

Hagerstown Light Department Manager Mike Spiker said Tuesday that natural gas prices have driven the cost of wholesale electric power up significantly since the last power contract was settled two years ago.

"Natural gas prices have just soared in the last two years," Spiker said. "I'm afraid (electric costs) could go higher."

If the current prices remain through October, residential City Light customers could see their bills rise as much as one-third this time next year, when the new contract takes effect, Spiker said.


City Light is in the midst of choosing its next wholesale power provider. Spiker said this is the most important contract for City Light because of its likely size - $80 million to $90 million for five years beginning next July - and its impact on City Light customers.

Friday is the deadline for companies to notify the city of their intent to bid on the contract, and July 29 is the bid submission deadline.

Spiker said he doesn't expect the contract to be signed until October, but officials will spend the next few months deciding which bid is the best for the city.

City Light has about 17,000 active customer accounts between residential and commercial electric users, about 15,000 of which are residential accounts, according to budget documents.

Because City Light does not produce its own electricity, it buys electricity from wholesale suppliers. Its current supplier is Dominion Energy Marketing, which provides wholesale power to the city at $44.43 per megawatt-hour.

That cost is passed on directly to City Light customers, Spiker said, and represents about two-thirds of a residential electric bill.

The average City Light residential customer's monthly bill is about $45, Spiker said, which represents a 700 kilowatt-hour bill. About $30 of that bill is the wholesale power pass-through rate.

If Spiker's current estimates hold true in October, when he expects the rate would be solidified, the average residential bill could increase another $15 a month, or $180 a year.

Spiker said it's still too early to tell if people should be changing their spending plans to prepare for higher prices because the final price will depend on market forces, which could drive the cost up or down.

City Light is bidding for the contract with three other towns: the Town of Front Royal, Va., the Thurmont (Md.) Municipal Light Co. and the Town of Williamsport.

City Light also recently filed a request with the Maryland Public Service Commission to increase its base rate, which is separate from the wholesale power price.

According to a Public Service Commission document, that base rate change would produce a 5.32 percent increase in revenues, or an additional $865,496.

Spiker said the effect on city electric customers won't be known until the Public Service Commission issues its opinion on the application, which could be as late as November.

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