The St. James Utility Board is considering a city rate increase for electricity service. Representatives from Toth and Associates, whom the city commissioned to conduct a utility cost of service rate study, presented their findings on Sept. 1 to the St. James Utility Board. Utility Board members moved to hold a public hearing on the issue at 6 p.m. on Sept. 29 at the City Council Chambers to hear feedback from residents before recommending that the council adopt the rate increases provided by Toth and Associates.

The potential electricity rate hike aims to increase revenue brought in by St. James Municipal Utilities in order to keep the department operating in the black, while continuing to purchase electricity for the city, pay for operating costs and monthly debt payments, and maintain cash reserves of around $1 million.

According to the study by Toth and Associates, if the city does not start charging more for electricity, the electric fund would have a $1 million net-negative balance by the end of FY 2028, which would increase to a negative balance of $5 million by the end of fiscal year 2031.

Craig Woycheese, director of utility rates at Toth and Associates, said that the cost to provide electricity, like many other goods and services, has gone up and that raising rates will help the city keep up with that inflation.

“Utilities are generally lagging compared to other inflation. All groceries have gone up, all other costs of goods have gone up, and utilities tend to be on the back end of the inflationary side, and people are already irritated,” Woycheese said.

The Toth and Associates study found that, at the current rate, it costs the city more to serve customers with electricity than the amount that can be recovered through customers’ electricity bills. Currently, it costs St. James $2.8 million a year to serve residential customers with electricity, $2.7 million of which is recovered through customer bill payments. The gap is even worse for serving small and large commercial and industrial customers. Service for industrial-class customers has the largest gap between cost and returned revenue, at just 88 percent of costs recovered for the service.

One goal of the rate increase is to close the gap between what it costs to serve customers and the amount that can be recouped from billing. The proposed rate increase aims to close the gap for each class of customer rather than raising prices for every class by the same amount.

The rate increase would also help pay down a $3.2 million bond that the city plans to issue in order to help make improvements to the electrical infrastructure, which City Administrator Leeann Demouche said is being necessitated by growth around St. James.

“Because they’re forecasting so much growth in that Phelps Substation, they’re afraid that it’s going to get overloaded, so it needs to be upgraded,” DeMouche said, adding that only two percent of the electricity rate increase will go toward paying down the bond. The other 98 percent is meant to help increase cash flow for the utility.

Toth and Associates proposed two solutions to the St. James Utility Board. The “one-step plan” would implement a sizable one-time hike in electricity costs, whereas a “three-step plan” would spread the cost increase over three years with smaller increases, but ultimately cost consumers more once fully implemented.

Under the one-step plan, the city would implement a one-time rate increase of an average 27.29 percent across all classes of customers in fiscal year 2027, which would increase yearly revenue for the electricity fund by slightly more than $1.5 million. Under the plan, rate increases would differ depending on the class of customer. Residential customers would see the smallest rate increase at a flat 23 percent. Industrial class customers would see the largest at 35.5 percent.

The three-step plan would stagger the rate increase over a three-year period.  In year one rates would go up by 12.25 percent, then 10 percent in year two and 7.94 percent in year three. Under the three-step plan, the total rate increase would be 33.27 percent, which would bring in an additional $1,945,086 in yearly revenue. Under the three-step plan, rates for residential customers would increase to a cumulative 28.8 percent after three years. For industrial class customers, that rate would be 41.1 percent.

DeMouche said that the electric utility’s cash flow has been on the decline, necessitating the proposed rate increase, but that other utilities like natural gas and wastewater are operating well and generating revenue.

According to DeMouche the water utility is also struggling to generate revenue and has operated at a deficit for the past three years.

At the upcoming Sept. 29 public hearing, both members of the Utility Board and Toth and Associates will be present to hear public feedback and answer questions about the proposed measures. Following the public hearing, the Utility Board will vote at its Oct. 6 meeting on whether or not to recommend a rate increase to the St. James City Council, which could pass a potential rate increase at its Oct. 13 city council meeting.

If a rate increase is passed, it will go into effect for November meter readings, meaning that higher electricity rates would show up on customers’ December bills.