CU customers brace for rate increases

CU officials say that the price of coal – used to run all power plants in Springfield – and the cost of shipping the coal are both on the rise.

According to Bill Burks, CU associate general manager for operations, coal prices are up about $1 per ton to $8 a ton. Considering CU buys approximately 1.7 million tons of coal per year, the increase will cost about $2 million per year.

Additionally, Burlington Northern Santa Fe Railways, which ships the coal from the mines to the power plants, increased its shipping rates by approximately $5 per ton to $19.50 a ton and added an 11.5 percent fuel surcharge for the diesel fuel used to run the trains.

The added fees will cost CU between $14 million and $15 million more annually.

“The average customer bill would go up 8 (percent) to 12 percent beginning in March, which would be reflected on the bill starting in April on the electric portion only,” Burks said.

Burks said that the number is just an estimate right now, because the new rates – which are based on a formula – would not be presented to the CU board until March, meaning actual rate increases could be higher or lower. Price adjustments are made every six months, so once the new electric rates are in place, they will be in effect until October.

Burlington Northern spokes-person Pat Hiatte said the transportation rate increase is just a correction of an ongoing trend.

“Over the last several years, railroads have been hauling more coal and getting paid less, in constant dollar terms,” he said. “We found ourselves in a position where rate levels did not reflect the value of service and were not sufficient to justify continued investment in the infrastructure needed to move coal, as well as all of the other things that move by rail.”

Burks said predicting what the rates will do in the next year – or even between now and the rate change in April – is almost impossible.

“That’s why we look at this on a six-month window, because costs change,” he said. “It’s so dependant on the weather, on external forces. The hurricanes in the Gulf of Mexico really hurt us in terms of shutting down supply. If the winter turns really cold, and we have 60 days of bitter cold and the demand for natural gas goes up, I’ll bet you a quarter that natural gas prices will continue to climb, because supply and demand does work.”

David Cantrell, vice president of Cantrell-Barnes Printing Inc., said his company will feel the effects of the increase.

“There are some things that we’ll be looking into to conserve energy,” he said. “But we are looking at an increase overall, and it will affect our bottom line probably between 5 (percent) and 10 percent on a monthly basis.”

Expansion plans

The increased rates also have an effect on CU’s efforts to get approval for a second coal-burning station at the southwest power plant. Burks said the issue, which failed on the ballot in August 2004, continues to be examined.

“We’ve gone back and we’re looking all the options over again,” he said. “We’re re-pricing not only the price of building a Southwest 2, but the entire package. We’re meeting with natural gas suppliers and taking another hard look at building a natural gas plant. We’re looking at the entire picture for energy needs in the future.”

The idea of another coal-burning plant has many in the city fired up.

“CU officials have said (increased fuel costs) could result in up to a 12 percent rate increase for customers this coming spring,” said Springfield mayoral candidate Mike Schilling in a news release. “But it could be more, too, and it would certainly call into question the wisdom of immediately resurrecting the expensive coal-fired power plant proposal. We need to adopt energy conservation measures and talk more seriously about cleaner alternative energy options before taking on a costly project to burn more coal.”

The environmental issue is one of Schilling’s campaign platforms.

Burks said the increased rates are something that utility companies across the country are dealing with.

“We’ve been the beneficiaries of very low energy prices in this country, and particularly in the Midwest, for many years,” he said.

“It would be great if the world we lived in were a static world but it isn’t. We’re doing everything we can to hold our rates stable for our customers, and we hate to see (rates go up), but we don’t have any other options at this stage.”