7.5 Percent Rate Increase Proposed; Average Residential Bill Will Increase $4.92 Per Month;
BED Residential Rates Projected to Be 11.5 Percent Lower than Vermont Average;
BED Total Rates Will Continue to Be Lower than the Vermont and New England Averages;
Rate Increase Necessary Partly as Result of Significant Pandemic Impacts;
New Energy Assistance Program Will Mitigate Rate Increase for Low-Income Customers
Vermont Business Magazine Burlington Electric Department (BED), a not-for-profit public power utility serving the City of Burlington, today announced to the community that it is proposing a 7.5 percent electricity rate increase that, if approved by the Public Utility Commission (PUC), would take effect later this year. The increase follows an exceptional 12-year period during which BED bucked industry trends and inflationary pressures through strong financial management and multiple cost-reduction efforts.
Even after the rate increase, BED’s total rates will remain low compared to Vermont and New England averages:
- Residential rates. The proposed residential rate is projected to remain approximately 11.5 percent below the average Vermont residential rate, and lower than the average residential rate of every other New England state. The average residential bill will increase by $4.92 per month, and a new BED energy assistance program will mitigate the impact of the rate increase for low-income customers during fiscal year 2022 (FY22).
- Commercial rates. For the bulk of BED’s commercial customers (those on the small general service rate), the average bill increase will be $6.60 per month. BED’s commercial and industrial rates will be slightly higher than the Vermont average, but well below the New England average.
- Total rates. While BED’s total rates – residential, commercial, and industrial – were higher than the Vermont utility average following our last rate case in 2009, by holding rates steady for 12 years, BED’s total rates dropped below the Vermont average and will continue to be lower than that average upon implementation of our proposed new rate.
The increase is being driven primarily by the global COVID-19 pandemic, which has caused several negative financial impacts on BED. Due to those financial effects, BED projects that it will begin FY22 with approximately $5 million less cash-on-hand than otherwise would have been the case. Pandemic effects have included:
- Lower sales to customers;
- Higher arrearages due to customers being behind on bills; and
- Decreased customer capital project contributions as capital projects and supply chains were disrupted.
“We understand that the global pandemic has been challenging for our community, creating economic hardship for many of our customers,” said Darren Springer, General Manager of BED. “The pandemic also negatively affected BED such that filing a rate case is necessary. To support our customers, we currently are offering several relief programs, including suspending disconnections for non-payment, waiving late fees, and providing extended budget billing plans. BED also is continuing to advocate for arrearage assistance programs for our customers. In addition, to help offset the rate increase for low-income customers, we will for the first time be offering a monthly bill credit program for customers who are enrolled in the state’s fuel assistance program. Our Burlington Electric team is incredibly proud of the value we have delivered for our community over the last 12 years without a rate increase and looks forward to continuing to work hard to keep future rate adjustments low, while providing the exceptional customer care and reliable renewable energy our community expects and deserves.”
“For decades, BED and our Commission have endeavored to reflect the goals of our community in providing safe, reliable, affordable, and environmentally sound energy,” stated Gabrielle Stebbins, Chair of the Burlington Electric Commission. “As a public power municipal utility, we operate as a not-for-profit organization, always striving to keep rates as low as we can. After an unprecedented 12-year run without a rate increase and following severe impacts from COVID-19, a change in rates is necessary to continue to reflect our community goals.”
Pandemic adverse impacts and increased transmission costs contribute to rate case
The BED team has worked hard to cut or defer expenses wherever possible, and moderate controllable cost increases over the last several years. The average growth rate in controllable costs between FY07 and FY16 was 5.84 percent, but following implementation of cost-cutting steps, the average growth rate has been reduced to 3.55 percent for the period since FY16. Despite our success with controllable costs, adverse effects on BED from the pandemic, increased transmission costs, and delayed customer projects that would have added sales revenue have contributed to the need for a rate case. Specific factors leading to the rate case include:
- Decrease in sales revenues by $2.1 million since the start of the pandemic; as a public power utility, BED was not eligible for certain pandemic relief programs, such as the Paycheck Protection Program, which would have replaced some of BED’s lost revenues.
- Disruption of capital projects and supply chain that have impacted labor cost allocations and reduced customer capital contributions by approximately $1.5 million; and
- Significant increase in both the total number of customers who have fallen behind on paying their utility bills and the amount of money owed on those bills, exceeding any state and federal assistance.
12 years of steady rates made possible by strong financial management and cost-reduction efforts
BED was able to avoid rate cases during this extraordinary 12-year period through strong financial management and determined efforts to reduce costs. These efforts included:
- BED reorganization and buyout in 2015 reduced number of employees from 133 to 120 and was projected to reduce costs by $1.1 million annually (today BED has 118 full-time positions);
- Improvements to BED’s and the City’s credit ratings, with savings of nearly $7 million (net present value as of City fiscal health report 2019) for BED customers through reduced interest rates;
- Five-year contract extension with Sheffield Wind Farm in August 2019, providing a better price and contributing to significantly reduced power supply costs;
- Focus on participating in renewable energy credit markets that have provided between $7-12 million in additional annual revenue during that period to help keep rates low;
- Addition of over 50,000 MWh-equivalents of strategic electrification measures that will offset load declines, reduce rate pressure over the long-term, and displace more than 25,000 tons of carbon dioxide emissions in support of the City’s goal to reach Net Zero Energy by 2030; and
- Institution of stringent expenditure controls during the pandemic to defer and cut expenses and projects during FY20 and FY21 to mitigate financial impacts.
Including the proposed rate change, BED’s total rates remain well below what they would have been had they just kept pace with the rate of inflation between 2010 and 2021.
Pandemic relief and support for customers
To help our customers handle pandemic-related challenges, BED currently is offering several relief programs and taking steps to secure additional arrearage assistance, including:
- Suspending disconnections for non-payment;
- Waiving late fees;
- Providing extended budget billing plans;
- Advocating for and implementing State of Vermont financial assistance programs, such as:
- Vermont COVID-19 Arrearage Assistance Program (VCAAP) – advocating for and implementing an expected second round of funding to help our customers with their electric bill arrearages beyond the nearly $350,000 we helped customers access during the first round; and
- Vermont Emergency Rental Assistance Program (VERAP) – implementing the utility component of this recently created program that helps renters dealing with financial challenges related to the COVID-19 pandemic;
- Providing additional arrearage assistance and pandemic relief to customers through City of Burlington ARPA federal funds recommended in the Chief Administrative Officer’s FY22 Budget Memorandum; and
- Continuing to assist customers with important Net Zero Energy incentives through our Green Stimulus program, which helps customers switch to technologies, such as cold climate heat pumps, electric vehicles, electric bikes, and more.
Additionally, for FY22, BED is proposing to help low-income customers through a new energy assistance program designed to mitigate the effects of the proposed rate change. Eligibility requirements include being enrolled in the state fuel assistance program, which supports customers with incomes at or below 185 percent of federal poverty levels. This proposed BED energy assistance program is projected to help more than 1,300 qualified residential BED customers. While the proposed energy assistance program is a temporary relief measure, BED is exploring a permanent low-income rate with an FY23 implementation goal.
Opportunities for Public Comment
The Burlington community will have many opportunities to comment on the proposed rate case, including during the following meetings:
- Wednesday, May 19 – the Burlington Electric Commission will vote on BED’s 7.5 percent rate increase proposal at its meeting scheduled for 5:30pm;
- Thursday, May 20 – Burlington Board of Finance BED Budget Presentation; and
- Monday, May 24 – Burlington Board of Finance and City Council.
Further, after BED files its rate case with the PUC on or about June 15, members of the Burlington community will have the opportunity to provide comment at public hearings and through written testimony during the PUC’s thorough rate review process, which is expected to span many months. The rates charged to customers of Vermont public utilities must be reviewed and will be approved only if the PUC determines that the proposed rates are just and reasonable. Prior to a final decision from the PUC and in accordance with PUC rules, BED will add a 7.5 percent rate surcharge on customer bills beginning in August 2021. This surcharge will continue until the rate case is finalized, at which time BED will adjust customer bills based on the outcome of the rate case. The public can learn more about PUC rate case procedures from this document.
Source: 5.18.2021 Burlington Electric Department (BED) Burlington, Vermont burlingtonelectric.com