Spring City council to adopt three-year power-rate formula after public hearing

Spring City held a public hearing on proposed changes to the city's electric rate structure and the operating budget, during which council members and staff described a consultant-designed monthly power cost adjustment model and modest, phased rate increases beginning July 1.

Councilmember Ken Crowe, describing the proposal developed with Utility Financial Solutions, said the city contracted the firm in August 2024 and has used a power cost adjustment (PCA) formula so staff can make monthly adjustments when wholesale costs change. "We had to draw from funds nearly $400,000 to cover that over the course of 3 years," Crowe said, summarizing the financial impact the city faced when wholesale prices spiked in 2020'22.

The resolution before the council (identified in discussion as 2025-04) would formalize two main elements: a monitoring method to track monthly power costs and staff authority to apply a PCA so the city does not periodically operate "underwater." Crowe said the council plans to adopt the PCA mechanism for a three-year period, with council and mayor oversight of staff'reported monthly results.

Under the proposed changes, the city would raise the base service rate by $1 for in-city customers and $2 for out-of-city customers effective July 1. Energy charges would increase by about a quarter of a penny per kilowatt-hour in the first year. Crowe described a second and third small, phased increase in later years meant to gradually recoup earlier losses without imposing a single large jump: "So far, we were originally $400,000 down, and we're now averaging just about, 340,000 down. So we've carefully adjusted about 60,000 back to recoup that, but not have it be in a way that's so catastrophic like before," he said.

City staff explained the PCA uses a rolling average of recent wholesale costs (the consultant'recommended approach) and gives staff about two months to collect cost data before adjusting retail charges. Crowe said the model is intended to both smooth spikes and allow rates to decline when purchase costs fall: "We're gonna do a 6 month rolling average. So not only does it go up very slowly, it comes back down... This mechanism allows us to bring it back down and stay with inflation," he said.

A resident of Spring City who spoke during public comment described a demand-response approach used in a larger city, where advance notice asked residents to defer high-energy uses during critical hours. "They gave us notice ahead of time... they would say, OK. On this day, between these hours, hold up on laundry, hold up on vacuum," the resident said. Council members and staff responded that Spring City's usage patterns differ from more commercial cities and that the city has not yet needed rolling curtailment programs.

Council staff and a finance staff member (identified in the hearing as Dave Hoffman) were present to answer detailed budget questions; staff characterized the general fund as balanced in accordance with city requirements and said the operating budget will take effect July 1. Staff described the PCA proposal as a tool to avoid future multi-year deficits in the electric fund rather than a replacement for the annual budgeting process.

At the hearing's close, councilmembers moved to adjourn the public hearing on the budget and the power-rate proposal; the motion carried. Councilmembers indicated formal adoption of the resolution will occur during the regular meeting agenda.

The council emphasized oversight: the PCA will be reviewed monthly by staff with a council member and the mayor, and the three-year duration provides a defined review period before further action.