Verbal Blakey, of BHMG Engineers, Inc., discussed the city’s electric rate structure on Sept. 1 with the Cuba Board of Aldermen.

She began by providing a short overview of her company’s collaborative efforts with Cuba. Over the past 15 to 20 years, they have engaged in various projects with the city, including electric system consulting and work on electric rates.

“We did a rate study about three or four years ago, and none of the recommendations were adopted, and you haven’t changed your rates in, I think, over 15 years,” Blakey said. “The good news is your rate structure has an adjustment for the cost of wholesale power. So as that changes, your electric rates fluctuate and change with it. Had that not been in place, we (would’ve) had this conversation probably many, many years ago.”

Blakey said prices, benefits, and salaries have drastically inflated over the last 20 years, with almost no rate increase in the same time frame to cover the city’s expenses.

“We’re at a position now where your fund doesn’t have enough to cover the next month’s electric bill,” Blakey said. “When we talk about electric reserves, the rule of thumb is that you want 50-100 percent of your annual expenses in reserves.”

She explained that the reserve percentage is somewhat broad. Essentially, the smaller the system, the closer it should be to 100 percent of expenses in reserves.

If a storm knocks out the power, Cuba residents will want it back quickly, which could result in costly material and paid overtime expenses. The Federal Emergency Management Agency (FEMA) is not necessarily reliable in such situations. The city will only receive funds if the area is declared a disaster zone. Consequently, it is likely that the city will be approved for only a portion of the expenses incurred after a considerable time.

Blakey has been working with the city for a few months, trying to come up with a way to mitigate the problem. Initially, they considered implementing the rate suggestions from the previous rate study. However, they came to the conclusion that it was outdated.

Looking at just the expenses that are a result from having an electric department, paying employees is a fixed expense, no matter how much electricity is used.

“There are going to be expenses no matter how much people use,” Blakey said. “You still have to spend the base amount of money. That needs to be recovered by a fixed charge.”

Blakey suggested a flat customer charge.

“If you don’t have one of those, then you have a renewable customer whose bill is 10 percent of someone else’s that they’re not giving, they’re not contributing enough to their fixed costs, that they’re costing the system,” Blakey said. “Because of that, the structure needs to be focused on an adequate customer charge, and then an energy charge and then you have some customers in the industrial that need a demand charge.”

Cuba had what Blakey described as blocked energy charges. For residential services, the rate is $0.272667 per kilowatt-hour (kWh) for the first 30 kWh with a minimum of $8.18, and $0.1145 per kWh for the next 170 kWh and so on. Blakey suggests that the city avoid making drastic changes to the rate structure, as it could disproportionately affect different residents, leading to varying increases in their energy bills.

BHMG Engineers, Inc. recommended charging per kilowatt-hour for possibly the first two rate blocks, but at least the first block. She also suggested a flat customer charge. With knowledge of other systems similar to Cuba’s, she said that it will need to be at least $20 per month.

“So it’s not a $20 per month increase. It’s a $15.25 a month increase because you already have some of that baked in that I’m going to eliminate to make things simpler,” Blakey said. “You can absolutely say every residential customer in the city of Cuba will be paying $15.25 a month more (for their electric).”

A recommendation was added to do the same for commercial customers, but they would incur an additional cost of approximately $45. Additionally, she suggested reasonable customer charges should be set for large commercial and industrial customers who do not currently have an imputed customer charge.

A $20 customer charge is estimated to increase the city’s revenue by $300,000 a year to help cover the average $500,000-$600,000 wholesale power bill that the city gets each month.

“So you need to look at what does it take for Cuba to pay the bills, and what is fair and equitable for Cuba’s customers,” Blakey said. “You guys are doing a great job of trying to manage the costs, but the costs are what the costs are. And so the only way you can increase margin is you raise revenue or you lower expenses, and I don’t know how you could lower expenses any more than you have.”

A motion to modify the rate structure to charge $20 for residential customers, $50 for commercial customers, $150 for large commercial customers, and $250 for industrial customers was approved with a 6-0 vote.

In other business, only one bid for tree trimming was submitted, and it was by Brown’s Tree & Bucket Service.

Public Works Supervisor Michael Montgomery spoke on behalf of the electric department. He said that they do tree trimming, but contract some of it out to keep up with projects and maintenance.

“The budget used to be $100,000 a year, and we cut the tree trimming budget by $40,000 because we picked up some of the tree trimming ourselves,” Montgomery said.

Currently, a budget of $60,000 has been allocated, but the electric department intends to limit its spending to no more than $15,000 per quarter.

Hourly prices were presented at $65 per hour for a foreman and lead man, $55 per hour for a laborer, $35 per hour for a bucket truck, $35 per hour for a track machine or loader, $30 per hour for a dump truck or dump trailer, $20 per hour for a side-by-side or four-wheeler, $20 per hour for a jet boat and $25 per hour for a forestry saw, mulcher or mower.

It is time-and-a-half for over 40 hours worked, or from 5 p.m. to 7 a.m., and double time for Sundays and holidays.

A motion to accept the bid was approved by a 6-0 vote.