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Power department outlines rate plan to cover rising costs and capital needs
Summary
Interim energy director Tad Small and business manager Charlie Little told council FY27 proposes modest rate increases, relies on a rate‑stabilization fund to weather UMPA market uncertainty, and funds Gillespie substation and other capital projects to improve reliability.
Interim Energy Director Tad Small presented Provo Power’s FY2027 budget framing reliability, safety and stewardship as the department’s priorities and outlined a five‑year capital program that includes the Gillespie substation replacement and Draper work. Small said the department’s rate stabilization fund and fund balance remain healthy and that the utility aims to keep reliability metrics favorable.
Charlie Little summarized the department’s financial outlook, saying the FY27 plan anticipates roughly $3.3 million more revenue than last year after implementing a phased rate strategy that spreads recovery of prior cost increases over two years. Little explained that the joint action power agency (UMPA) now treats market sales unpredictably — pricing decisions occur close to delivery — so staff kept power‑purchase assumptions flat and preserved rate stabilizers in case market sales fall short.
The proposed rate changes would leave residential class unchanged this cycle while increasing small commercial roughly 4%, large commercial roughly 7% and an industrial (BYU) class approximately 10% (the presentation said BYU’s average monthly impact would be significant at that percentage). Little said future class distribution will be guided by a planned cost‑of‑service study with a consultant, and he emphasized the department’s preference to spread increases among classes only after analysis.
Councilors asked about the primary cost drivers; staff pointed to UMPA purchases (about two‑thirds of operating costs), rising equipment and transformer prices that lengthen project lead times, and increased chargebacks for administrative services. Little said the utility has budgeted operating deficits conservatively and that moderate increases over multiple years would be needed if underlying power costs continue rising.
The council did not adopt proposed rate changes at the meeting; staff will return with the consultant’s cost‑of‑service recommendations and final rate designs before formal adoption.
