Springfield City Utilities customers will start paying more money for power each month.
City Utilities plans to roll out its first electric rate increases in a decade, which will go into effect incrementally over the next three years, pending an approval from the Springfield City Council.
The increase was driven by inflation’s impact on CU's operating costs, as well as its need to “focus on infrastructure and reliability,” according to CU Director of Rates and Fuels Austin Beshears.
If passed, electric rates in Springfield will increase by 4.8-percent, 4-percent and 3.9-percent in 2024, 2025, and 2026, respectively, in April of each year, resulting in a nearly $15 per month increase for an average residential customer.
On Aug. 17, the Board of Public Utilities approved the rate increase, alongside the fiscal year 2024-2028 operating plan and the 2024 operating budget. It will go before the City Council as a first reading bill on Sept. 5, and will be voted on at a later meeting.
Inflation-driven increase will fund maintenance
The last City Utilities electric rate increase was approved in 2013, with the final rate hike of that package taking effect in 2016. Since that last increase, inflation has exceeded 20-percent.
CU determined another increase was needed in 2020, but waited due to the economic uncertainty posed by the COVID-19 pandemic. Additionally, electric sales to other markets during “Winter Storm Uri” in 2021 allowed CU to further delay rate increases.
However, in order to meet the requirements of their upcoming operating plan, an increase became necessary. Inflation has been the primary driver of the need for an increase, between rising costs to generate and transmit power, CU’s investment in critical infrastructure and facilities maintenance.
“It's more economic, really in the long run for the utility as opposed to fixing infrastructure that’s failing,” Beshear said.
Major projects and expenditures on the horizon include the replacement of distribution transformers, substation transformers and switchgears, the prices of which have all increased substantially in recent years.
Details of the increases
The increases will amount to monthly rate hikes of $4.99 per month in 2024, $4.96 in 2025 and $4.79 in 2026, totaling an additional $14.74 per month with the final increase, based on a 900 kilowatt-hour monthly bill, the average for all CU residential customers.
Compared to 13 other cities around the U.S., Springfield has the lowest electric rates, and is projected to have the second lowest rate in April 2026 — assuming their rates will increase with inflation. Using similar assumptions, Springfield’s electric rates are expected to remain below state and national averages.
The rate increases and the overall change in the design of electric rates was guided by a set of board-approved rate policy standards and a cost service analysis, in which consultants looked at CU’s customer usage and financial data.
In addition to rate increases, CU plans to begin the process of eliminating the “winter declining block,” at the recommendation of the consultant, according to Beshears. The winter declining block lowers rates between October and May after customers use more than 900 kilowatt-hours in a given month. Due to increased capacity requirements of the Southwest Power Pool and higher electricity use peaks during the winter months, a slow shift away from that has become necessary.
“We just felt it was prudent at this time to begin working away from that current design,” Beshears said.
Additionally, changes are being made to better reflect the increased differential in electric rates from primary service customers — nonresidential customers who have their own transformers — and secondary service customers, which make up the majority of CU customers.
