Brigham City adopts power rate stabilization policy to buffer wholesale price swings

Brigham City council on Jan. 16 approved a policy that formalizes how the city will build and use a power rate stabilization fund intended to blunt sudden swings in wholesale electricity costs.

The council approved the policy after a presentation by the citys financial staff explaining the funds target level and automatic trigger conditions. The policy sets the target at roughly 120 days of operating cash for the power utility, which the presentation calculated at about $5.6 million for the current fiscal year. Under the policy, if the fund reaches or exceeds its target during the annual budget process, the citys power-purchase adjustment (PPAC) will not be charged to customers unless the council takes formal action to continue it.

City officials said the policy also specifies automatic reactivation criteria: the PPAC would be reinstated if wholesale power costs deviate upward by 5 percent over the prior period for two consecutive billing cycles and the stabilization fund falls below 50 percent of its target. Until those thresholds are hit, the council retains the authority to add or remove the PPAC by formal vote.

Why it matters: the policy is designed to prevent a repeat of abrupt rate spikes that earlier depleted the utilitys reserves and required emergency rate increases. Council members and staff spent substantial time discussing how the fund would be funded, the timing of any PPAC changes, and the limits on midyear actions.

Details from the presentation: staff said the $5.6 million figure was derived by dividing the power departments prior-year operating costs by 365 and multiplying by 120 days. The policy allows the fund to be supported by multiple revenue sources, including excess operating revenue and one-time transfers the council authorizes; it also clarifies that money collected through the PPAC is retained in the utility fund.

Council oversight and timing: staff emphasized the legal requirement that any deliberations about reapplying or changing the PPAC occur in an open meeting. Councilmembers asked whether the PPAC could be suspended midyear and requested staff run scenarios showing the funds sensitivity if the PPAC were set to zero before the budget process. Staff said they will return with those numbers on request.

Background: Brigham City introduced the PPAC and began building the stabilization fund after wholesale market volatility sharply increased the citys power costs in prior years. The council and staff noted that a funded stabilization account supported the citys credit rating when the city recently issued bonds.

The vote: the council approved the policy by voice vote following a motion and second.