AUB Board Acts on Rate Increase Proposals
Media Contact:
Wayne Scarbrough
(423) 745-4501 ext. 6002
wscarbrough@aub.org
September 21, 2018
ATHENS, Tenn. – Directors at Athens Utilities Board (AUB) are considering three rate moves for the local utility going into the final quarter of the year.
First, TVA is enacting a wholesale rate increase on AUB, as it has annually for the past several years. The move will result in an overall 1.5 percent increase at retail and will be effective October 1.
The AUB board passed the first reading of a resolution on the TVA increase yesterday at a called board meeting following a monthly budget and finance committee meeting. A second reading of the TVA rate resolution is set for the utility’s September 25 board meeting.
The TVA wholesale increase will raise power costs for AUB by some $906,000 annually.
About 83 cents out of every dollar that AUB’s power division collects goes to TVA for wholesale power that is then distributed by AUB to the local utility’s 13,250 power customers.
The other two rate actions being considered by AUB directors come in the form of a local power rate increase of just under one percent and, for AUB’s natural gas division, a tiered base rate increase that will take place over the course of 18 months.
Both of the AUB local rate actions, if approved, will be effective November 1, a month after the TVA rate increase takes effect.
The power rate increases will add about $3.00 to the average residential bill. Part of this would be an additional fifteen cents on the residential customer availability fee, going from $15.68 to $15.83 per month.
Natural gas customers, most of whom use gas instead of electricity for heating in the winter, on average will see about a two dollar increase in their bill this winter, depending on the depth and duration of cold periods.
“I’ll speak to the AUB rate actions first, starting with power,” said AUB’s Wayne Scarbrough.
“When we speak of a ‘local’ rate increase versus a TVA rate increase, we are talking about the resulting additional revenue staying at AUB for operating the division,” Scarbrough said.
The last local AUB power rate increase was in 2007 and for natural gas rates it was 2006.
“That’s a long time to hold fast on local rates,” he said.
“When TVA raises AUB’s wholesale rate for power the resulting additional revenue doesn’t stay at AUB for operations, it passes through to TVA to pay for that electric power,” Scarbrough said.
AUB General Manager Eric Newberry said that TVA has raised AUB’s wholesale rate seven times since 2008, increasing the local utility’s wholesale rate by some 40 percent.
“We’ve done well to hold off local rate increases in the face of that wholesale history,” Newberry said.
“Nobody wants to pay more for any commodity, ever. We understand that. And we are proud to have operated in a way that has avoided local rate actions for a decade even as our wholesale costs have risen in many categories,” he said.
Newberry said AUB achieved that by keeping annual operating costs in check, training and retaining a top-notch workforce, and properly maintaining the millions of dollars of physical assets the utility stewards for the community. Assets such as the power grid, treatment plants, and water, wastewater and gas systems that cover much of McMinn County.
“Over the decade since our last local rate increase, our operating costs have risen. That’s no surprise to anyone,” Newberry said. “Just as at home, most things cost AUB more today than they did 10 years ago.
“Construction equipment, all of the materials and devices that make up the utility distribution systems, work trucks, paying our people, business insurance, healthcare and everything else that goes into operating a utility,” he said.
As with power, market-force increases in operating costs over a decade are what drives the need for an increase in the base rate for AUB natural gas, the first increase since 2006, Newberry said.
AUB’s current base rate for gas is $0.3848 per therm of gas used. A therm is a heating unit equivalent to 100,000 Btus.
Under the plan for natural gas, AUB gas rates will begin a paced, incremental increase beginning November 1 with a step up of 1.25 cents per therm every six months for the next 18 months.
As of May 2020, the rate will have increased in total by five cents per therm, to $0.4348.
Newberry said that the increase is needed to ensure that the utility’s net revenues do not continue to decline to the point where cash savings are needed merely to operate the gas division.
“While we have cash on hand to purchase gas in volume, to react to maintenance or emergency repairs, and to equip the division, our trend in net revenue is negative year over year as a result of those ever rising operating costs while holding rates at 2006 levels,” he said.
AUB has strategically used cash in recent years instead of taking on debt to fund important projects such as a large distribution line to the interstate industrial park and to install a natural gas gate station on the north side of AUB’s service area that increases reliability to customers and prepares for growth.
“We will continue to manage and operate the community’s utility as we have. We run lean while ensuring that we keep a motivated workforce that is well trained, well equipped, and fairly compensated for the excellent work they do,” Newberry said.
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