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Madison directs staff to pursue front-loaded electric rate increases to cover $16 million in utility work
Summary
After a consultant warned of rising power-supply and capital costs, the Madison City Commission voted to direct staff to prepare a rate ordinance following a front-loaded option that begins with larger increases in 2025 to shore up reserves and cover projected debt service.
Madison City Commissioners voted to direct staff to prepare a multi-year electric rate ordinance based on a consultant’s front-loaded recommendation, aiming to cover rising power-supply costs, operating expenses and roughly $16 million in planned capital improvements.
Blair Medsker of DGR, the city’s rate consultant, told the commission that power-supply costs will climb after recent and planned Western Area Power Administration (WAPA) rate increases. "Western Area Power Administration implemented a rate increase last year, and they've got two more planned in '25 and '26," Medsker said. He said the city faces roughly $16,000,000 in projects over the next five years — including substation and transmission-line work — and that the study models showed the utility needs revenue to meet debt-service coverage and reasonable reserves.
Medsker presented two options. The commission approved direction to staff to pursue "Option 1," a more front-loaded series of increases intended to address needs sooner: approximately a 9% increase in 2025, followed by an 8% increase in 2026, and smaller increases thereafter. Medsker said that approach reduces cumulative pain later compared with a shallower initial increase that pushes larger hikes into future years.
Commissioners asked about the utility transfer to the general fund (noted in the presentation as about 6.5% of revenues) and the potential impact on customers. Members expressed reluctance about rate increases but said delaying would make larger hikes necessary later. One commissioner framed the choice as accepting higher near-term increases in exchange for smaller long-term cumulative increases.
The motion directed staff to draft a rate resolution reflecting Option 1 and return it for formal action at a later meeting; staff said they expected to bring a resolution back at a December meeting with rates effective in 2025. Medsker and staff noted that the final numbers will be refined after the 2023 financial audit is complete and after engagement with the city's financial advisers.
Next steps: staff will prepare the formal rate ordinance and public communications, and the commission will consider the ordinance in a future meeting.
