HOISINGTON — Hoisington City Council members heard from the Kansas Municipal Energy Agency Regulatory and Rates Manager Darren Prince Monday night. The Council is always concerned with the electrical rates for businesses and residents of Hoisington. After implementing new base rates and power adjustment costs in 2022, the council asked for information about the impact of these changes.

According the report, actual revenue and expenses were reviewed from 2018 through 2022. In 2018, the utility showed a small net loss but in the following years the utility showed a net gain. A significant net gain of approximately $400,000 occurred in 2021 due to revenue received from market sales during Winter Storm Uri in February of that year, Prince said.

“At that time, your power plant started producing and we reimbursed Hoisington for the fuel costs.”

Due to escalating market power supply costs, in July 2022, a Power Consumption Adjustment (PCA) was implemented to recover power costs out of the control of the City. Additionally, the electric consumption rates were increased 6% and the meter charge was increased. The City’s PCA is a formula-based rate that is applied to the monthly customer bills and is based on the power supply costs over the previous 12-month period. A PCA calculated on a 12-month basis will take 12 months to recover any months with high energy prices. Unfortunately, the City experienced higher energy costs in 2022 so, due to the lag in the PCA, a rate increase was implemented also. In November of 2022, the electric base rates were increased another 5%. This rate increase went into effect January 2023.

“As is typical with all electric utilities, the largest and most volatile expenditure is the power supply cost,” Prince said. In 2018, Hoisington’s production expenses were $1.875 million but dropped to $1.43 million in 2019 due to the Mid-Kansas Electric Cooperative power supply contract ending and being replaced with a more economical one. In 2020, production expenses remained around $1.4 million and then decreased to $1.27 million in 2021. It increased again to $1.95 million in 2022 due to the higher market energy prices. Without the PCA revenue and rate increases, the utilities revenue would have been around $2.6 million, resulting in a $500,000 loss for the year.

A good metric to look at is days of cash on hand (DOCOH), Prince said.

“KMEA recommends having 180 DOCOH.” By the end of 2028, Hoisington is forecasted to have around 300 DOCOH as well as capital improvement funds and an emergency/depreciation fund, he said. Since the two rate increases are recovering more than the original PCA, he recommends “rebasing” the PCA, which means calculating what $/per kWh of power supply costs are covered by the utility’s base rates. KMEA suggested rebasing of the PCA at $0.065 per kilowatt-hour from the current $0.05437 per kilowatt-hour. The impact of this rebase equates to a 6% decrease for the Residential (700 kWh use) and Commercial lighting customers (1000 kWh use) and a 9% decrease for Commercial Demand customers (26,000 kWh use).