Lawrence County Advocate

LUS Board Approves Rate Increase

The Lawrenceburg Utility System Board of Directors approved an electric rate increase last month that will go into effect in May.

The rate increase is in response to what have been monthly reports of skyrocketing materials costs for LUS, particularly on the electrical side.

Rate consultant Chris Mitchell was asked to study LUS’s rates in light of what has continued to be growing costs as a way to measure LUS’s ability to properly maintain its system. Mitchell made a presentation of his rate study at the Jan. 24 LUS board meeting.

“I’m not here to fix a problem, I’m here to keep you doing what you’ve been doing,” said Mitchell, who provides services to approximatley 100 power systems.

Inflation is the key contributor to the need for a rate increase, with the cost of transformers and other materials up to 50 percent higher than just a few years ago.

“These are things that are not within your control,” Mithell said. “This is pre-emptive of the cost that is coming. You have a choice, but my suggestion is going to be to prevent you from being stressd in the future.”

The LUS board voted to implement the second of two options provided, a two percent increase to the customer fees charged each month by LUS for electric service.

The rate increase will be applied to residential, and commercial but will not impact large industrial.

The average impact on the customers affected will be approximately $2.75 per bill per month and the additional revenues generated for LUS is estimated at $983,777 annually.

The first option Mitchell presented to the LUS board would have been a 1 percent rate increase that would have an average impact of $1.38 per bill per month and provide LUS with $492,092 additional revenues annually.

The difference, Mitchell said, is keeping up with the wave of inflationary costs or getting ahead of it.

“Who knows about the national economy?” Mitchell said. “I don’t know if there is going to be a hard or soft landing. I don’t know what’s going to happen. Your industry will be different than the national. In your industry you are still purchasing things without date or price certain. The economy isn’t stable.”

Mitchell went on to explain that in most industries economically they can be unstable for six, nine, 12 months out. For the electric industry, however, there can be unceratainty as long as three years out.

“I can see a time over this horizon where we are going to see rate increases every single year,” Mitchell predicted. “Those who do not for whatever reason they will start cutting tree trimming, they start cutting raises, start losing employees and become a training ground for others. What I encourage is to be in front of this wave and not delay.”

LUS board member Jamie Sevier noted that prices for materials are not going down, adding that the systems that don’t adjust their rates properly will be starving themselves.

Board member Michael Crane asked about LUS’s captial plan and how the needs are determined.

Pusser said LUS management sets a goal of approximatley $4 million per year for capital projects as part of an overall 10-year plan. Each year they look at the projects on the 10-year plan and determine which are most necessary and fit within the $4 million budget.

Pusser noted, however, that as inflation rises the amount of operations and maintenance and capital projects LUS can complete with that $4 million continues to go down as inflation either rises or stays high.

“What I think we can realistically do to keep our system where it needs to be is $40 million over 10 years,” Pusser said.

In repitition of what he has been saying for some time now, Pusser highlighted just how much inflation has hit the power industry.

“If we had a new industry come in four years ago and you set two tranformers it was $60,000, but when we set two transformers today it’s $172,000,” Pusser explained.

Pusser went on to say that he believes the $4 million per year toward capital projects should be what is needed to keep the system updated for approximately four more years, then it may need to be re-evaluated.

“We’re in really good shape electric-wise,” Pusser said. “We’ve done a really good job in maintaining that capital spend and capital build out, keeping our facilities where they need to be.”

On that note, Mitchell said, “Systems that neglected and didn’t maintain and they get hit by the wave of inflation, it’s breathtaking what they are having to do, 6-7 percent increases and they can’t keep up with it.”

Ultimately, Mitchell said, the choice between the 1 percent and 2 percent rate adjustments was the choice between keeping up with inflation or staying ahead of it.

Once Mitchell had completed his presentation, the board discussed which of the options to consider.

Crane said he believed the 2 percent increase was the best option now, noting that if the inflation is better than expected down the road it would delay the need for another increase.

Board member Shane Hughes agreed, making the motion to move forward with the 2 percent increase and having it go into effect in May.

The board approved the rate adjustment unanimously.