LINCOLN – After two years with no rate adjustment, the Lincoln Electric System Administrative Board Oct. 21, 2016, approved an increase to retail electric rates. Residential customers will see an average rate adjustment of 3.5 percent, while the system average adjustment will be 3 percent, effective Jan. 1, 2017. LES’ rate philosophy is to equitably allocate costs to customers with the goal of maintaining rates for each class within 5 percent of the cost to serve the customer class.
This means that while the system average rate adjustment is 3 percent, individual rate classes will see adjustments both above and below the average. Even with the proposed adjustment, LES electric rates are projected to remain among the lowest in the country.
According to Laura Kapustka, LES vice president of Financial Services & chief financial officer, the rate adjustment primarily is due to increases in net power costs, which are related to decreased wholesale market revenues, driven by low natural gas prices. Power costs are typically the single largest driver of rates.
LES recently refinanced approximately $120 million in revenue bonds, which resulted in a net present value savings of about $19 million. This refunding, combined with internal cost management measures, helped to significantly lower the rate adjustment.
LES also continues its restructuring of electric rates to properly allocate the fixed charges and variable energy charges associated with supplying power to customers.
As part of this process, LES is proposing to segment the facilities charge for the residential rate class into three levels based on average monthly electric usage. This allocation provides a more equitable distribution of fixed facility-rated costs between high- and low-use customers, Kapustka said.
LES residential customers using 1,000 kilowatt-hours pay $94, which is 29 percent less than a national electric rate study average of $132. LES industrial customers using 1,000 kilowatts and 400,000 kWh pay $29,969, which is 22 percent less than the national electric rate study average of $38,537.
Kapustka noted that LES requested customer input throughout the budget and rates process and held a public meeting Oct. 6, 2016.
With the approval of the LES Administrative Board, the proposed budget and rate adjustment will be considered by the Lincoln City Council at a public hearing Nov. 21, 2016. The City Council is scheduled to take action on the 2017 LES budget and rate adjustment in December 2016.
Additional information, including a 2017 budget and rates presentation, is available on LES.com.