Nixa to curb electricity discounts

Doug Colvin: The city cannot sustain the current cost of customer discounts.

Last edited 1:25 p.m., Nov. 29, 2018

Officials with the city of Nixa say they can no longer afford to offer a steep discount to electricity customers.

Starting in 2019, the average residential customer’s discount will drop to 7 percent from 12 percent. The city has aimed to protect customers from large rate increases during the past 10 years as energy prices have increased, but now, officials say money reserves are too low to continue doing so, according to a news release.

“We’ve essentially been giving a discount as if power was cheaper than it actually is,” Nixa Utilities Director Doug Colvin said in the release. “We can’t sustain the cushion we are currently providing to our customers from the costs we pay for energy.”

Nixa spokesman Drew Douglas provided documentation showing that as of Dec. 31, 2017, the city’s surplus reserve balance was $1.4 million after accounting for $3.4 million in operating reserves and other expenses. Douglas said the operating reserves "are designed to give us about a three-month bumper." Comparatively, the surplus reserve balance was $1.5 million for the year ended Dec. 31, 2016, and $4.7 million at the end of 2012.

The utility purchases 80 percent of its energy from City Utilities of Springfield, 10 percent from the Nixa solar farm and 10 percent from Southwest Power Administration generated from the Table Rock Lake Dam. Nixa previously purchased 90 percent of its energy from CU before the 72-acre, 7.9-megawatt solar farm — said to be the largest in the state — went live in November 2017.

Nixa’s costs for the energy fluctuates based on peak use, and the utility also pays for the transmission of the power, according to the release. Nixa Utilities charges residential customers 13 cents per kilowatt-hour the first 1,000 kWh and another 12 cents per kWh in excess of the 1,000 kWh, according to its website.

Nixa City Council in 2013 chose to subsidize a 13 percent increase in costs from CU. In each of the past two years, it has cost the city more than $2 million to pay for increases on behalf of its electricity customers.

“We knew we would be upside-down in 2017,” Colvin said in the release. “You can only pay $2 million a year for a few years before you start to run out of money. Eventually, you have to pass the full cost along to the customer or get a new contract where you buy energy at a lower cost.”  

Nixa Utilities plans to negotiate a less expensive contract with CU in early 2019.

“For now, we have to stop subsidizing $2 million a year on behalf of our customers. Even if we cut down to giving away say, $1.3 million a year, that will give us more time before we run out of reserves,” Colvin added.

Nixa Utilities also is planning to adjust its billing formula after a city-identified misstep several years ago.

In 2006, CU began issuing a fuel-cost adjustment to Nixa, and at the time, customers paid the majority of the extra charge that came with that. The fuel-cost adjustment a few years ago was changed to a credit, essentially giving a discount to customers, according to the release.

“This, coupled with the continually rising energy supply cost over the past several years, without raising our customer rates, has accelerated the situation we are in today,” Colvin said in the release. “We should have changed our rate formula, so we weren’t giving away a double discount, but we didn’t. We’ve been selling energy for cheaper than it costs us to buy energy and maintain the system.”

During its upcoming meetings, Nixa City Council is slated to discuss the creation of an energy cost adjustment to reflect the actual cost of energy purchased by the utility.

“Our goal is to keep electric bills from increasing more than 5 percent, and ideally, when we renegotiate our energy purchase contracts, there will be enough savings to prevent any further increases for several years,” Colvin said in the release. “Keeping rates low is a top priority.”