LES board approves 10.1 percent hike

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By ALGIS J. LAUKAITIS / Lincoln Journal Star

The Lincoln Electric System Administrative Board voted Friday morning to recommend a systemwide 10.1 percent rate hike to the City Council.

If approved, it would be the second rate hike this year; a 5 percent rate hike took effect March 1.

Mayor Chris Beutler, who attended the meeting but did not  address the board, said later he was disappointed.

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Mayor Chris Beutler

Mayor Chris Beutler

“I thought they could hold it to a 7 or 8 percent increase and still protect their bond rating,” Beutler said in a brief interview after the unanimous vote.

Later in a statement, the mayor said he would seek opportunities to meet with LES board members, the city attorney and City Council members to “look at the options available to us to ease this burden on ratepayers.”

The City Council will hold a public hearing on the proposed increase Aug. 18. If approved, a typical residential customer would see an electric bill increase of $8.50 per month. The increase would take effect Sept. 1.

LES management said it needs to increase rates to cover a $9.3 million budget shortfall, due mostly to unexpected increases in fuel costs and wholesale power purchases.

The hike would also help the utility preserve its high rating with bond agencies. Such ratings help the utility get lower interest rates when it needs to borrow funds for capital improvement projects.

Administrator and CEO Terry Bundy warned that experts expect energy costs to continue to increase. And even with this increase, LES projects it will need another rate increase next year ranging from 1 percent to 4 percent.

“We know this increase will put more pressure on customers,” Bundy said in a news release. “LES is experiencing the same dramatic increases in our energy costs as our customers. We will continue to work with our customers during this time of rising costs.”

After the meeting, Bundy said he appreciated Beutler’s attending the meeting to hear the rate hike discussion firsthand. Beyond that, he had no comment.

Kathy Campbell, chairwoman of the utility’s budget and rates committee, said committee members will begin work soon on the 2009 budget. She urged board members, who serve on other committees, to take “very seriously” and “prudently” study comments made at Tuesday’s public hearing and in e-mails sent to LES by ratepayers.

In a related action, the board voted to add $100,000 annually to its Energy Assistance Program. Started in 2002, the program helps low-income customers who are having difficulty paying electric bills. The money goes directly to the Lincoln Action Program, which distributes the funds in $10 and $20 vouchers.

But because of the lateness of the budget year, LES will only boost the assistance fund by $33,000, bringing this year’s contribution total to $146,000.

Next year, about $215,000 will be available for low-income customers, said Todd Hall, vice president of consumer services. The fund’s current budget is $113,000.

Providing more money to the  assistance fund was a major change from the committees’ previous discussions, Campbell told the board.

Earlier this week, Beatty Brasch, executive director of the Center for People in Need, urged the utility to exempt low-income customers from the 10.1 percent rate hike.

Campbell said the committee discussed Brasch’s recommendation but decided to stick with the energy assistance fund instead of trying to start a new assistance program.

Brasch said she was delighted the board put more money into the assistance fund.

“I know that they did the best that they could,” Brasch said. “But as generous as they are, this will not begin to meet the problem because low-income people like everybody else have been hard hit by inflation and higher gas and food prices, and they have no discretionary money.”

LES board member Marilyn McNabb said she was pleased the budget and rates committee recommended to put more money into the assistance fund for low-income customers.

“It does make a huge difference,” McNabb said. “It’s taking a first step to address the situation. This is a great idea.”

As part of its proposed rate hike, LES plans to reduce its internal costs by $1.1 million for the remainder of the year, including $130,000 in labor costs, $250,000 in travel and training, and $720,000 in purchases and services.

Board member Richard Evnen told the board it may have to “turn over some stones” and make difficult decisions in the near future, possibly in the areas of staffing and compensation.

Evnen said he found it “remarkable” that organizations like the Lincoln Employers Coalition, who have opposed rate hikes in the past, have taken a neutral position this time. He said the level  of discussion between LES and such groups continues to improve.

LES also plans to use $1.5 million from its Rate Stabilization Fund, which would leave a year-end balance of $2.9 million.

The 10.1 percent rate hike, if approved by City Council, would cover the remaining $6.7 million shortfall.

Reach Algis J. Laukaitis at 473-7243 or alaukaitis@journalstar.com.