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Stabilization fund abolished

Wednesday, April 23, 2014

Martinsville City Council on Tuesday abolished the city’s electric rate stabilization fund, which recently was depleted.

In a unanimous vote, the council directed City Manager Leon Towarnicki to send American Municipal Power (AMP), from which the city buys wholesale electricity, a letter notifying the organization of the decision.

In 2012, the council established the fund to keep electric rates constant as the city stabilized its costs for wholesale electricity through 2015, as well as to help pay Martinsville’s costs toward a discontinued power plant project.

Through the rate stabilization program, Martinsville has paid AMP $69.97 a megawatt hour for wholesale electricity, which is more than rates frequently charged in recent months for power on the wholesale market. The surplus money went into a trust fund to help pay off the power plant costs.

AMP quit developing the plant after expenses suddenly increased sharply.

In March, the council imposed on city electric department customers a rate hike of a little more than a half-cent a kilowatt hour. The increase, effective with bills issued May 1 and thereafter, will allow the city to pay an enormous wholesale electricity bill it received in January and offset anticipated future spikes in wholesale power prices, officials have said.

January’s bitter temperatures caused city customers to use more electricity than normal to heat their homes. The city had to buy the extra power on the wholesale market — instead of from AMP — at inflated prices due to heavy demand by many public and private utilities.

Demand was so great, city Utilities Director Dennis Bowles said, that on Jan. 7, costs for electricity on the wholesale market shot up to about $1,800 per megawatt hour.

At the same time, power production decreased after a nuclear power plant somewhere went offline unexpectedly, Bowles said. He did not elaborate.

As a result of the inflated prices, the city’s January wholesale electricity bill was about $1 million more than officials expected.

To help pay the bill, the city took $551,881 from the stabilization fund, which depleted it, a document shows.

Councilman Danny Turner surmised that the rate stabilization plan “failed miserably.”

Bowles and Vice Mayor Gene Teague disagreed.

The stabilization plan worked for 22 months, steadying the city’s power costs as well as city electric customers’ rates, according to Bowles.

Martinsville residents and businesses still pay less for electricity than American Electric Power (AEP) customers, Teague noted.

He said the city pays less for wholesale power now through AMP than if it had contracted to buy such electricity through AEP.

AEP is the parent firm of Appalachian Power, which sells electricity to Henry County’s homes and businesses.

More coverage of Tuesday’s council meeting will appear in the Martinsville Bulletin on Thursday.

 

 
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