The Utility Commission unanimously approved a plan Thursday to decrease customer bills by approximately 5.8 percent by June 2020.
Though not yet final, the decision is the culmination of a long road, according to Owensboro Municipal Utilities General Manager Kevin Frizzell.
The commission approved a 4 percent base rate increase during Thursday’s board meeting, after presenting a financial analysis and cost of service study. Frizzell said that increase will be implemented in two steps — June 2019 and June 2020. There are no more projected base rate increases in the five-year forecast.
Frizzell admits this is a difficult and somewhat confusing situation. While the commission approved a base rate increase, it also approved energy cost adjustment (ECA) and environmental cost control adjustment (ECCA) decreases, mainly stemming from the closing of Elmer Smith Station.
ECA cover costs of power plant fuel and maintenance at Elmer Smith as well as power purchased for backup to that plant. The ECCA covers the cost of environmental compliance at Elmer Smith.
The base rate increase will be more than offset by ECA and ECCA rate decreases, Frizell said.
In order to maintain OMU’s debt service ratio, the utility must pay off some of its bonds early — $19 million worth to be exact. The commission approved $3.5 million to be paid off in fiscal year 2019 and $15.5 million in 2020.
According to Frizzell, this will reduce the utility’s debt service over the next nine years, saving customers $22.2 million because of the avoided interest on the debt.
For average OMU customers, this decision means about a $2.86 monthly bill decrease in the first year and a $7.27 decrease by the second year.
While this is approved by the utility commission, it must also be approved by the Owensboro City Commission. The plan will go for a first and second reading on April 16 and May 7. If passed, the plan would be effective June 1.