02/02/2017

BPU Board Adopts Electric Rate Adjustment

(KANSAS CITY, Kan.)The Board of Directors for the Kansas City Board of Public Utilities recently adopted a proposed adjustment to the electric base rate, as well as modifications to the environmental surcharge (ESC), to meet future revenue requirements for the utility. The modifications are necessary to maintain the integrity of the utility’s electric transmission, distribution, and production systems, and to meet growth needs in the community over the next five years. 

While increases will vary among customer groups based on costs of service and usage levels, the BPU Board finalized a recommended 4.0% overall annual increase in the electric base rates for 2017 beginning March 1, and 4.0% in 2018. These adjustments were based on future electric utility revenue requirements and a Cost of Service and Rate Report that is completed every three years by outside industry experts. Based on these adjustments, the average residential customer’s base rate will increase by approximately $5.14 a month in 2017, a little more than fifteen cents a day. In addition, the Board provided for a modification to the ESC allowing for a recovery of an additional .30 coverage, or 1.3 times the annual debt service on bonds associated with environmental capital projects. This ESC offset for environmental debt coverage will result in an increase of approximately $2.50 a month in the average residential customer’s bill.

A formal public hearing process was initiated in late 2016, and based on a Cost of Service Rate Study completed by Black and Veatch, BPU staff recommended several adjustments. The hearing process provided opportunities to discuss rate adjustments; environmental surcharges, billing processes, fuel cost procedures, and required capital improvement projects. Two formal public hearings were held on January 24 and January 25, 2017. Following this process, the Board of Director adopted the recommended rate adjustments at their regular Board meeting on February 1, 2017. 

The recent electric base rate and ESC adjustments were necessary for a variety of reasons, including among others:

  • BPU needs to invest more than $222 million in non-environmental capital improvements to maintain the integrity of the utility system. 
  • The utility hasn’t adjusted rates in three years, with the last increase in 2013, and rates are below the national average and that of surrounding utilities.
  • Postponing an adjustment would delay capital and aging infrastructure improvements needed to support new growth in our community and may cause delays or service disruptions in certain areas. 
  • Inflationary pressures on costs of outside services, materials, and labor continue to increase.
  • BPU has worked with an average of only 65 days of operating cash on hand over the last three years (with 90 days recommended to maintain solid credit ratings).

BPU remains one of the top-ranked publicly-owned utilities in the country, providing affordable and reliable energy for nearly 110 years. Today it services 65,000 electric customers, manages two active power stations, 29 substations, 3,000 miles of electric lines, 19,000 streetlights, and 9,000 traffic signal heads. 

The utility has taken concerted steps to control costs and streamline operations over time, without threatening service interruptions or future growth needs. The FY17 Budget recently adopted by the Board reduced spending by nearly 25 percent, and the previous budget reduced 30 full-time equivalent staff positions from prior years. In the last six years, BPU has decreased overall staff levels by 55 positions. It has also effectively managed a reduction of expenses, with Operating and Maintenance (O&M) expenses in 2016 only one percent higher than they were in 2010, and the same O&M budget level it had in 2012.

For more information about the utility or the rate hearing process, see related resources on BPU’s website at www.bpu.com.
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