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Electric fund faces pressure: rate design, PCA increases and payment-fee tradeoffs
Summary
Electric staff said hedging and changes to the PCA will be used to meet a 1.0 debt-coverage covenant; council debated whether the town should absorb credit-card fees (costly to the town) or pass them to customers (costly to customers) and opted to require customers to pay card fees for now.
John, the electric director, told council the utility's primary objective is "keeping the power on" while meeting a state-mandated 1.0 coverage between revenues and purchase-power costs. He said the town has increased hedging to stabilize costs and that recent market volatility drove a shortfall that will appear in PCA calculations.
Finance staff presented two payment models for customer credit-card payments: absorb merchant fees (staff estimated roughly $250,000/year in processing costs under one utilization scenario) or pass fees to customers at the merchant's rate (staff quoted 3.95% or $2.50 minimum). Council discussed the tradeoffs — convenience and faster collections versus the town subsidizing card users — and directed staff to keep the current practice of passing the merchant fee to customers rather than the town absorbing it.
"Our number one priority is keeping the power on," John said, noting the town has worked to hedge a larger share of its purchase obligations. The council asked staff to bring clearer options for how much of any PCA under-recovery the town could offset and over what time frame.
