As utility companies across the Midwest brace for the threat of surging rate increases as a result of Cap and Trade legislation, Rolla Municipal Utilities’ acting general manager on Monday said he does not foresee an electrical rate increase for local customers in the coming year.

Acting RMU General Manager Rodney Bourne told Board of Public Works members that RMU electricity supplier, the Missouri Public Energy Pool (MoPEP), was anticipating a reduction in the charges it pays for electricity and therefore he did not see an increase for RMU’s 2010 fiscal year, which begins Oct. 1.

Bourne made the statement as the board reviewed a preliminary budget for 2010.

“Barring any sort of environmental legislation, I don’t foresee a rate increase for next year,” Bourne said referring to possible Cap and Trade legislation, the much-debated tax that is expected on coal-generated electricity.

“It’ll take years to phase it (the legislation) in,” Bourne said. “(But) if it happens, and we need to revise our budget, we will.”

Bourne said the reduction in energy costs results from a new contract signed with the Nebraska City 2 generating plant brought online last month, in which MoPEP has an interest.

“Essentially, we are replacing an old contract for 55 megawatts with a new contract.”

Bourne said other plants, including Iatan 2 and Plumb Point 1, which will come online next year, also will replace older more costly generating contracts that could result in a further reduction in those rates.

Still, Bourne urged RMU customers to communicate with their state and federal representatives opposition to Cap and Trade legislation.

“The Cap and Trade legislation essentially seeks to tax the Midwest. We’re energy producers here. It’s legislation that is meant to help the coasts,” Bourne said.

The Cap and Trade idea, allows the government to set a limit or cap on the amount of a pollutant that can be emitted. Companies or other groups are issued emission permits and are required to hold an equivalent number of allowances (or credits) which represent the right to emit a specific amount.

The total amount of allowances and credits cannot exceed the cap, limiting total emissions to that level.

Companies that need to increase their emission allowance must buy credits from those who pollute less. The transfer of allowances is referred to as a trade.

In effect, the buyer is paying a charge for polluting, while the seller is being rewarded for having reduced emissions by more than was needed. Thus, in theory, those who can easily reduce emissions most cheaply will do so, achieving the pollution reduction at the lowest possible cost to society.

Board of Public Works President Dr. James Stoffer said the scenario for Cap and Trade could see Midwest utility customers seeing much higher rates.

“We’re not talking just doubling of rates,” Stoffer said. “(If Cap and Trade passes) We’ll see tripling and quadrupling of rates.”

Despite the reduction in rates RMU will pay for energy, Bourne said customers should not expect a reduction in electrical rates.

“We’ve got some capital expenditures that will be coming up next year, specifically the start of the lease-purchase agreement,” he said, on which the utility will pay in excess of $1 million during fiscal year 2010. The utility is in the process of purchasing a substation from AmerenUE and making improvements on that substation. Cost of that deal is in excess of $15 million.

For years, the utility has been leasing the substation, at a cost greater than it would have been over years to purchase it outright. Last year, the City Council approved the lease-purchase agreement.

Also, Bourne said the utility is in the final year of its purchase agreement for the city’s backup generators, on which it still owes $590,000.

In presenting the preliminary budget for 2010, Bourne said current figures still represent a budget deficit of $367,479, with $255,210 for the Electrical Department and another $112,269 in the Water Department. However, he assured board members the budget would be balanced when it is presented at the Aug. 4 meeting. Because of scheduling conflicts, the board will not meet in July. It will, however, plan to present a final budget to the Rolla City Council at the Aug. 17 meeting.