On paper, Hamilton is considering increasing residential electric rates 2 percent each year over five years, starting with a $3.48-per-year increase in 2019.
But Jim Logan, Hamilton’s executive director of infrastructure, hopes that through cutting costs, the city’s electric rates may actually be lower at the end of the five years than they are now. He said that could be accomplished partly by selling off decades-long electricity-purchase contracts the city signed because it needed the energy — before several large manufacturers, including Champion Paper and Mohawk Fine Papers, closed their doors in Hamilton early this decade.
In fact, residential electric rates would be 12 percent lower today “if we still had the major industrial users,” Logan told the Journal-News this week. So rather than being $122.91 per month for a typical user now, they would be about $108 per month, or about $177 less per year.
As Logan looks at Hamilton’s six-part utility bills — for electric, natural gas, water, sewer, stormwater, plus trash & recycling — he sees two particular areas he’d like rates to be lower: electric and processing of sewage.
According to a Hamilton survey of what households in other area communities pay for their utilities, the city’s electric users pay 29 percent more than Duke Energy customers, and 45 percent more than Duke Energy customers who use the “customer choice” option and buy electricity from alternate suppliers.
For sewage processing, a typical Hamilton household pays $40.62 per month, which is 12.8 percent more than the average of $36 paid in other area communities.
Hamilton’s sewer rates are higher than other communities — although Logan said other cities will catch up — because in 2007 the Ohio Environmental Protection Agency took an enforcement action that required the city to prevent releases of raw or partially-treated sewage into the environment.
“It took about $33 million to get that corrected,” Logan said. “We took the hit (in past years) because we think it sets us up for future success later. Other communities are going through this now, and starting to take on this challenge.”
So Hamilton’s pollution fixes already are reflected in its current sewer rates — as long as the OEPA gives its approval to what was done.
“It’s been with OEPA since 2014, and we’re still waiting for their approval,” Logan said. “But we believe we’ve satisfied every single piece of that decree, and we’re just waiting for final approval.”
The city still needs to upgrade its sewage treatment plant in the Lindenwald area, and before doing that is evaluating whether it can process sewage more cheaply or in other ways that can drive down customers’ rates, such as recovering biogases, which can be purified to become natural gas, or used to generate electricity.
Other city utility charges
For natural gas customers, Hamilton’s bill for a typical household through November was $43.74 per month — with rates paid by Duke customers 78 percent higher than that, or 65 percent higher for customers who use “customer choice” to buy from other natural-gas suppliers through Duke. Hamilton’s typical household bill rises today, Dec. 1, to $45.68 per month, under a previously approved rate hike.
The lower natural-gas rates are happening because Hamilton entered a favorable five-year contract, whose first year is just ending, to buy gas at low rates.
Meanwhile, Hamilton’s award-winning tap water, costing $26.73 monthly for an average household, is lower than area competitors’ average of $32. Under a previously approved rate increase, Hamilton’s water rate will climb Jan. 1 to $28.10 for a typical household.
Hamilton’s storm-water charge, which is based on the amount of surfaces on a home’s property where water doesn’t soak into the ground, such as roofs and driveways, has been $3.60 per month since a utility for rain-water collection was established in 2001. But Hamilton has been facing some major flooding issues, such as at Main Street and Lawn Avenue, and Tabor Lane on the city’s West Side, where a family in a floating minivan had to be rescued.
To solve such problems, Hamilton City Council in coming weeks will consider raising that by 70 cents per month each of the next two years — a 19 percent increase, followed by a 16 percent hike.
“That 70-cent increase would position us to be very proactive about solving these problems that we know exist today,” Logan said. “And it all goes toward capital.”
The increase also will help pay for storm-water issues that were fixed as part of the South Hamilton Crossing highway project.
For the last part of city utility bills, Hamilton’s trash & recycling arrangement with Rumpke, households now pay $16.85 per month, higher than the $12 per month that people in other area communities pay. That rate will increase 30 cents per month on Jan. 1 under the contract, which ends in December of 2019.
During a recent city council finance committee meeting, Second Ward resident Bob Harris cautioned city leaders that while individual increases to various utilities may seem small, together they add up.
“As I’m sitting here, I’m hearing, ‘We need to add a dollar here, we need to add $1.34 here, and then the next year we have to add this amount of money,’” Harris said. “We have to be cognizant of the fact that people’s wages are not going up. And so, that’s going to put a strain on Hamilton, and the people who live in it.”
Could be worse
The outlook for electric rates could be much worse, Logan recently said at the same finance committee meeting, and repeated in an interview with the Journal-News.
“Last year, when we were looking at our cost of service, just to provide service to the city, we were looking at 6 percent increases for five years,” he said in the interview. “That was totally unacceptable. And I knew we just could not ask our residents or businesses to pay 6 percent, five years straight.”
So Logan and other city utility administrators found methods to save more than $10 million per year across all utilities — most involving electricity. The biggest was a $4.1 million savings from a bond refinancing for electric, water and sewers.
The city also did not renew its Efficiency Smart program that helps residents and businesses become more energy efficient, saving $800,000, and divested from one long-term purchase of 7 megawatts of electricity, saving $500,000 per year.
“We filter things through, ‘Does it make us more reliable or more affordable?’” Logan said. “And if it doesn’t meet both of those objectives, we’re not going to engage in it.”
After the Great Recession hit in 2008, shuttering some major industries, the city has been holding some decades-long electric-purchase agreements that it no longer needs to provide power to those companies.
“Essentially, 2008 hits, we’re stuck with those contracts, the city has changed dramatically, and now it’s up to us to figure out how do we just re-balance what we have to support what we can, and also drive rates significantly lower for our residents and businesses,” Logan said. “We really want to attract residents and businesses, and keep them here, and give them the cheapest rates, with the most affordable power, we can.”
“I think a good example is last year we sold 7 megawatts of capacity of (American Municipal Power’s) Fremont Energy Center (in Fremont, Ohio). We sold that to Delaware Electric Municipal, all the way out in Delaware. And so we’re starting to make some progress on what I call right-sizing our portfolio, but it’s a very slow process.”
For the same reason, Hamilton wants to sell long-term power-purchase agreements for the Prairie State Energy Campus in Illinois, which says it is setting new standards for clean-coal production.
Such a sale is made more difficult because with such municipal-power-financed facilities, which take advantage of municipal tax-exempt financing, only other municipal power utilities can be buyers — leaving out the larger universe of non-municipal utilities such as Duke, or Dayton Power & Light.
City Manager Joshua Smith noted that with several large industries leaving during 2011 and 2012, including two paper companies, “it left the city in a long position on power, where we purchase or produce more power than we consume.”
“Due to our current arrangements, we are required to purchase power and then we promptly sell it back to the secondary market at a loss,” Smith added. “Our staff have been working very hard to divest of our excess power, so we can right-size our electric portfolio and stabilize or lower rates.”
Logan said: “What I’d like to get us back to is having some market exposure — not necessarily owning every generation asset to produce all the power we need, but actually opening us up so we have some market exposure.”
Electricity from coal
Smith noted the Prairie State facility is “the only coal-fired generation in our entire portfolio,” and said, “assuming the federal government continues to place environmental controls in place, other electric utilities will have upward pricing pressure, while our pricing should remain reliable and steady into the foreseeable future.”
Another way Hamilton can improve its electric rates, Logan and Smith noted, is by adding more businesses, such as the proposed Spooky Nook at Champion Mill gigantic indoor sports complex and convention center that will consume some of the electricity Hamilton currently must purchase.
“Just bringing Spooky Nook into town, they’ll be a Top 15 user of electric, and Top 5 in natural gas,” Logan said. “There’s incremental gains to be had, I think. We continue to work to add business to town, and we continue to try to divest. And somewhere over the next year or two, I think we’ll strike the right balance.”
Logan, who grew up in Fairfield, said he is sensitive to the problems high utility bills can cause, because he and his sisters sometimes did homework by candlelight when their family couldn’t pay for electricity.
“I’m not satisfied with where our bills are at,” Logan said. “We need to stay focused on reducing our costs as much as we can, not only to reduce our customers’ costs, but really, we always want to be good stewards of our customers’ money.”
Between divesting some power-purchasing agreements and adding large companies that need electricity, “Somewhere over the next year or two, I think we’ll strike the right balance,” he said.
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HAMILTON UTILITY RATES
Unlike many cities, Hamilton’s utility bills contain items for six services: Electricity, natural gas, water, sewer, storm-water, and trash & recycling. For those combined services, a Hamilton household that uses the average amount of each service pays $254.45 per month this year, $3.55 less than the $258 per month other area communities pay, but $12.45 per month more than electric- and natural-gas customers pay when they use “customer choice” options that let them buy power from alternate suppliers.
Next year, Hamilton’s combined utility rates are projected to rise 2.2 percent to $260.04.
Here are the various utility costs and how they compare:
• Electric: $122.91 per month in 2018; up to $123.19 in 2019 for a household using 800 kilowatt-hours per month. By comparison, Duke retail customers pay $95 per month, while Duke “customer choice” users pay $85 monthly, according to Hamilton utilities.
• Natural gas: The typical monthly household bill was $43.74 until Friday for a household using 6,300 cubic feet per month. That was lower than the $78 that Duke retail customers pay, and the $72 per month that Duke “customer choice” customers pay. Today, Dec. 1, a typical residential bill rose to $45.68, under a previously approved increase.
• Sewer: $40.62 per month in 2018, increasing on July 1 to $41.62 for a house using 700 cubic feet of water per month. By comparison, people in surrounding communities pay $36 monthly.
• Water: $26.73 per month in 2018, climbing to $28.10 starting Jan. 1 for a house using 700 cubic feet of water per month. For comparison, people in surrounding communities pay $32 monthly
• Stormwater: $3.60 per month in 2018, possibly rising to $4.30 per month for a typical-sized house that has 2,536 square feet of impervious surfaces on a property. That would be followed by another 70-cent increase a year later. In surrounding communities, households pay $5 monthly.
• Trash & Recycling: $16.85 per month in 2018, climbing Jan. 1 to $17.15 per month per household. People in other area communities pay $12 per month in a billing process that local governments sometimes subsidize.
Averages for other communities were researched by Hamilton and provided by the city.
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