Traverse City Record-Eagle

March 25, 2014

Senior electrical rate discount threatened by new study

Traverse City Record-Eagle

---- — TRAVERSE CITY — A new rate study for Traverse City Light & Power recommends the city utility raise rates paid by seniors and trim costs for most large commercial and industrial customers.

The study compiled by Utility Financial Solutions of Holland looks at the cost to serve more than 18 different rate classes used by the city-owned utility. Utility board members would have to raise the rate they charge those age 62 and over by 31 percent to cover the utility’s cost to provide power, according to the study.

General residential customers receive a subsidy equal to about 10 percent, while large commercial and industrial customers overpay by about 3.5 percent, the study indicated.

“We are going to use this cost-of-service study to go into rate design and we have some rebuilding and re-balancing to do,” said Tim Arends, TCL&P’s executive director. “The goal is to use small changes over time to get the rates in balance so you don’t have one class subsidizing the other.”

Arends said he doesn’t see the senior discount going away, but he’s also not sure why it exists other than “it’s just a popular thing to offer discounts to seniors.”

The utility board will review the rate and cost-of-service studies today at 5:15 p.m. in the Governmental Center. Should board members have an interest in balancing the rate classes, Arends said he would create scenarios for board members to consider at a future meeting. His goal would be to implement the initial rate adjustments of no more than plus or minus two percent by July 1.

Customers would see charges go up by no more than 3.5 percent or drop by more than 0.5 percent, when combined with a previously adopted 1.5 percent rate increase that goes into effect July 1.

Pat McGuire, Light & Power board chairman, said he believes all of his board members are ready for some changes to be made.

“Personally, I don’t know if we should be in the business of subsidizing one group over another,” McGuire said. “We could have a group of people who are not making a lot of money ... and should they be subsidizing seniors?

“Just because someone is a senior doesn’t mean they are poor,” McGuire said. “This gets into a value judgement that I don’t know if the utility board should be making.”