NLR to present electric-rate plans

Reallocating charges, adjusting cost formula among changes

The North Little Rock City Council will have a special presentation and public hearing on a restructuring of city Electric Department rates at 5:30 p.m. today at City Hall before the council’s regular meeting.

Proposed changes in how rates are charged to North Little Rock Electric customers, particularly small businesses, are to be phased in over a three-year period, according to legislation that will go before the council.

A second public hearing is set for the next City Council meeting, April 23, before a vote is taken on the ordinance.

The Electric Department hired a consultant to analyze the utility’s rates and costs, leading staff members to develop a list of changes to request from the council.

The North Little Rock Electric Department has about 38,000 customers in the city and part of neighboring Sherwood.

The recommendations will cover a new way to allocate costs among customers and within utility rate structures, eliminating some categories, avoiding utility debt and basing rates charged on known historical data instead of estimates of future power costs, utility attorney Jason Carter said.

“On average, most customers will see very little change in their total bill, but some will,” said Carter, who will present the recommendations to the council today. “What’s being proposed is an increase in the fixed rate over the next three years.”

“It’s different for everyone,” Carter said when asked whether monthly bills would go up or down for the average customer.

“An average customer is usually figured as using around 1,000 kilowatt hours of electricity,” he said. “Our customers are often more at around 900 kilowatt hours. We are anticipating customers in that range, by the end of the three years, their monthly bill may change by a dollar.”

Carter is the former North Little Rock city attorney who served as interim manager of the municipal utility for more than two years, until early 2015, while remaining in his elected city attorney position. He left his city job in November for private practice and now represents the Electric Department as its attorney.

Carter said in a written analysis that the rate study showed “some customer classes are subsidizing others.”

He noted customers who are charged a special rate for using electric water heaters, which most customers don’t have, and small businesses that are termed as “small general service customers.”

“Those are two classes that appeared to be undercharged, if you will,” Carter said. “The rate study also showed that the fixed monthly customer charge does not recoup the Electric Department’s fixed cost. Rather, fixed costs are being recovered through [electricity] sales.”

Charging the special electric water heater rate, Carter said, “is odd and hard to police.”

“We want to eliminate that,” he said.

Another change is to eliminate what the utility calls its “declining block rate.” That is when a customer pays a lesser rate for using more electricity, an outdated practice that discourages the conservation of energy, Carter said in an interview.

“From an environmental standpoint, many people don’t like that type of structuring anymore,” Carter said. “It inspires people to over-consume. It removes the incentive to conserve.”

Changing the calculation for the recovery of wholesale power costs will make rates more reliable, Carter said.

“The current method requires a calculation of past power costs and an estimation of future power costs,” he said.

The proposed ordinance would change the formula to replace estimations with known historical data.

“We will not be using an estimated cost of power in the future,” he said. “We had too many things estimated in our calculations. We need to use hard, fixed numbers when we calculate the power cost adjustment. It’s really not much of a change in that vein.”

The changes would also result in a net increase in the utility’s revenue to avoid debt, Carter said, and would fully cover depreciation and planned capital projects without the utility needing to borrow money.