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Bay City to draw $8.1M from electric reserves; rate study to assess future increases
Summary
City staff told the Bay City Commission the electric utility budget rises from about $48M to $53M in the proposed plan, in part because the city would use roughly $8.1M of fund balance to pay for capital projects; a rate study was announced to analyze any customer impacts.
Mr. Martini told the Bay City Commission on May 18 that the electric utility’s proposed budget increases from roughly $48 million last year to about $53 million this year, a figure that includes a planned use of approximately $8.1 million in fund balance.
The presentation, which covered purchase-power costs, staffing and capital projects, emphasized that the $53 million figure reflects both operating revenues and reserve use; ‘‘the 53 million that includes over $8 million use of fund balance,’’ Mr. Martini said. He added that cash collections after excluding reserve draws are closer to $45 million.
Why it matters: staff said the city is deliberately using reserves to fund one‑time capital work rather than bond financing, which is intended to limit near‑term impacts on customer rates. Mr. Martini said a rate‑analysis study is being planned ‘‘to determine whether there will be a rate increase’’ and to set the size and timing of any change.
Key budget drivers: staff identified purchased power and operating supplies as major expense lines (operating supplies rose in the proposal) and cited a 6% increase in personnel costs tied to bargaining agreements and a net 1.25 full‑time equivalent positions budgeted for the electric department. Staff also listed capital line items including peaking plant work ($215,000), overhead and underground conductors ($1.88 million), substation construction (~$1.7 million) and system planning ($364,000).
Purchased‑power and legal context: commissioners asked about how recent regional power‑plant developments are affecting costs. Staff (Adam) explained that the city buys power through the Michigan Public Power Agency (MPPA), which allocates costs among members. He said there are lawsuits and legal proceedings in multiple states about how certain plants’ costs should be shared and that ‘‘the calculation process’’ and any resulting reimbursements are still pending judicial review.
What’s next: the staff‑commission exchange ended with a commitment to a formal rate study and further detail on capital timing. The commission did not vote on electric rates at the meeting; staff said rate recommendations will be returned in a later budget session.
