TRAVERSE CITY — City electric customers can expect a small bump in their monthly utility bills if a proposed rate increase is adopted.
Board members for Traverse City Light & Power will consider making a 1.5 percent increase to customer’s base electric bill, but will offset two-thirds of the increase for the first year by tapping $1.2 million in reserve funds. The use of the reserve fund will delay the full impact of the rate increase for a year, said Tim Arends, executive director of TCL&P.
Board members will consider approving their budget and a capital improvement plan that includes upgrades to the Wayne Street transmission line when they meet Feb. 25 at 5:15 p.m. in the Governmental Center.
“We are sensitive to both the residential and business side of the rate issue and we want to ease into increases,” said Pat McGuire, utility board chairman. “There could be additional rate increases in the future but we want to hold the line as best we can.”
Utility staff recommended a 2 percent increase to begin July 1, but board members favored a smaller raise. They also favored tapping into $2 million in a trust fund that has accumulated from TCL&P’s interest in a downstate power plant. The money can only be used to offset the cost of power purchases.
“It’s just kind of sitting down in that account and we might as well use it,” McGuire said.
Use of the trust fund money will offset a rate increase that went into effect in October that increased the average residential customer bill by $11 per month and the average industrial bill by $3,461, Arends said. As a result the new increase initially will cost residential customers an additional 30 cents more each month and industrial customers about $40.
It’s the first increase to the base customer charge in eight years, Arends said.
Caps on rates and spending on new sub stations and other capital improvements significantly reduced the utility’s reserve fund of about $28 million that it held in 2008. Reserves will be down to about $15 million at the end of the next fiscal year, Arends said. The utility board’s policy is to keep a minimum cash reserve of $9.5 million and have about $5 million on hand for improvements and upgrades to the electrical system planned for the upcoming fiscal year.