Generation charge
A look at the diesels generators at the Progress Drive Generation Station near the industrial park in Shelby. Shelby City Council’s Utilities and Streets Committee at its March 11 meeting discussed a proposed reduction of the generation charge.
 

SHELBY — Electric consumers in Shelby could be in line for a bit of a price break.

Information and feedback presented at the most recent meeting of Shelby City Council’s Utilities and Streets Committee is setting the stage for a proposed reduction of the generation charge.
 
Following remarks by Shelby Municipal Utilities Director John Ensman, legislation is being prepared for Shelby City Council to consider.
 
In comments to the committee and in a written report, Ensman reported that:

* An annual review is indicating the cost of service for the operation and maintenance of the generating units is lower than the current collection.
 
* In reviewing the generation collections compared to the expenses to operate and maintain the generating units, there appears to be room to reduce the current generation rate.
 
* A lower rate would reduce the collections to bring the needed revenues to operate and maintain the generators more in line with the expenses.
 
The current generation rate of $0.0045 last was adjusted in June 2020, he noted.
 
“Generation rate is one of the components in the energy charge on the electric bill that influences the cost per (kilowatt-hour) kWh,” Ensman detailed. “The rate is designed to cover the expenses for the operation and maintenance of the diesel generators.”
 
These include labor and associated cost, diesel fuel, testing, EPA permits, maintenance and repairs and more, he reported.
 
From January 2020-May 2020, a generation rate of $0.0055 brought in revenue of $213,607.65 based on 38,837,755 kilowatts of electricity sold. From June-December 2020, the generation rate of $0.0045 brought in revenue of $250,814.50 based on 55,736,556 kilowatt-hours. In all, $464,422.15 was collected in 2020.
 
At the March 11 committee meeting, Ensman presented options for a further reduction based on examples of various proposed generation rates between $0.0035 and $0.0040. 

A proposed $0.0035 rate, for example, would lead to a projected $336,750 in revenue while a generation rate of $0.0040 would mean $384,858 in projected revenue among the scenarios presented to the committee. Keeping the current generation rate of $0.0045 would lead to projected collections of $432,965 based on 96,214,411 kilowatts sold in a year. 
 
“If the committee desires to entertain a proposed rate reduction, a recommended rate collection would be to cover approximately or at least 90% of the appropriations for the operations and maintenance minus purchase power,” Ensman said, adding that 90 percent represents a typical year.
 
“We have room to move…” he said of the options for a generation rate reduction. “We can be a little more aggressive. We can be more conservative with this.”

In comments at the meeting, committee Chairman and City Councilman Nathan Martin expressed support for the option calling for a proposed generation rate reduction from $0.0045 to $0.0040. That would result in an estimated reduction in projected annual collections of $48,107 when using the average annual kilowatts sold of about 96.2 million, according to data presented.
 
“I just don’t want to take big swings and then have to possibly deal with it later…,” Martin said, if the numbers change involving kilowatts.

Martin plans to sponsor the legislation for the reduction of the generation charge to $0.0040.
 
Ensman detailed that at $0.0040 “the estimated annual savings per 1,000-kilowatt-hours at a residential rate of 50 cents a month is about $6 a year” and that Shelby has about 4,200 residential customers.
 
“If you look at it on the high end of this, the estimated annual savings for a light industrial customer using 450,000-kilowatt-hours at the industrial rate is about $225 savings per month x 12 months is about $2,700 they would be saving,” he added.
 
A kilowatt is 1,000 watts of electricity consumed over a one-hour period or 100 watts of electricity consumed continuously over 10 hours, Ensman reported by email after the meeting.

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