After discussion at the last City Council meeting, the City is pursuing an ordinance to increase electric rates by 3 percent beginning in April.
City officials say this is unavoidable if they want to prevent a major increase down the road.
"We usually stay below what most of the towns around us do," said City Administrator Jeff Davis. "Everybody's is going up with fuel costs going up – it's the cost of doing business. What we're trying to do is project rising costs across the board and incrementally raise them so it won't be a painful increase."
Davis said at the meeting last week that the three percent increase will help fund debt services for utilities, as the $6.7 million bond issue from 2010 to purchase and renovate the Phelps substation did not require a tax increase.
Last year, the city showed of a loss of approximately $118,000 in its utilities reserve account. Without the increase, that number could be as much as $120,000.
Davis said reserves should not be used for that purpose.
"In some areas we're pretty healthy on our reserves, but at the same time, we own a lot of assets," Davis said. "We own five substations, four of which are active substations, and 52 miles of power lines.
"If a tornado hits, our goal is to get power back and restored as quickly as possible," he continued. "That's going to take some serious cash. Overhead power lines are uninsured, so that would come out of pocket. We need reserves to cover that."
In addition to the 52 miles of power lines, the city also owns approximately 38 miles of sewer line, 45 miles of gas line, three water towers and four wells.
Davis said utilities such as water, gas and electric operate autonomously as enterprise funds, but you can borrow from one to cover a shortage in another with approval from the City Council.
"You can borrow from one fund to pay for another, but you have to pay them back, otherwise you are operating at a continual loss," Davis said. "If you keep cutting into one of the enterprise's reserves, then you have to raise
rates to replenish the funds. We expect each of the utilities to pay for themselves."
The City has not increased its electric rates since October 2009. If approved, the 3 percent increase will take effect in
April and will be reflected on the June bill.
"It's a tight economy, so that's why we're trying to be cautious and raise them as
we need them,"Davis said.
As for comparison, in December of 2012, a 500-kilowatt customers in St. James paid a $55.80 electric bill, whereas Rolla customers paid $56.50 and Sullivan customers paid $60.35.
Salem and Cuba customers paid lower bills, at $45.40 and $53.90 respectively.