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Energy Department proposes modest rate increase, seeks $3M more revenue amid major substation projects
Summary
Provo Power presented FY2026 budget projections and asked the council to note a proposed small rate increase (approx. 3%) to cover higher purchased power costs from UMPA and to preserve a targeted fund balance while the utility spends on major substation replacements and other CIP.
Provo Power staff briefed the council April 8 on the utility’s FY2026 budget outlook and a proposed modest rate increase to cover higher purchased‑power costs and to sustain a healthy fund balance ahead of large capital investments.
Scott Bunker (Energy presenter) said Utah Municipal Power Agency (UMPA) projected a roughly 4% increase in wholesale power costs for Provo’s power purchase agreement. Provo Power managers proposed a smaller customer rate increase — staff indicated planning for roughly a 2–3% retail rate adjustment, with staff modeling showing approximately a 3% overall increase — and said they expect to use operating efficiencies and other income streams to limit the immediate rate impact on average customers. The Energy Department estimated it needs approximately $3 million additional revenue over FY2025 levels to meet operating and capital commitments in FY2026.
Bunker and an Energy Department staff member identified major capital work for the coming year: equipment deliveries and installation for a Gillespie‑area substation and work on the Draper and Towner substations. Bunker said the utility has invested roughly $60 million in CIP over the last decade and that FY2026 will include significant expenditures as new transformers and transmission upgrades arrive. The utility is also studying replacement of aging transformers (bids for one unit came in significantly higher than expected) and said maintaining a healthy cash reserve supports the city’s AA bond rating and lowers borrowing costs.
On sustainability, staff highlighted a diversified resource mix that has shifted away from coal and toward solar, hydro and the BYU cogeneration resource; the department reported year‑end carbon reductions and continued work on programs such as shared solar, the city’s “Nature Shade” tree program and rebates for heat pumps. Bunker noted that the utility’s fund balance stood at about $41 million and that planned CIP spending in FY2026 would draw on reserves; staff set a target minimum balance of approximately $25 million and said the proposed rate path is intended to maintain reserves while paying for major substation work.
Councilors asked for a breakdown of how the fund balance will be used for next year’s projects; staff said they would provide a detailed schedule. No formal vote on rates occurred at the work session; staff will return with a specific rate ordinance once the board and council have reviewed the draft.
