Residents and businesses in Fayette could see an increase in the cost of electricity. The Fayette city council last week learned the results of an electric rate study at its regular meeting on Tuesday, October 11.

Craig Woycheese from Toth & Associates, the company hired by the city for the electric rate study, suggested an average rate increase of 6 percent. Residential customers would feel the brunt of that increase, with a rate hike of 10 percent. Commercial rates, which are already higher than residential rates, could go up by 3.2 percent.

Commercial customers’ higher rates effectively subsidize the electric service’s residential side.

The study was based on figures from 2020. As of this writing, Fayette currently has 1,006 residential and 162 commercial customers. During 2020, residential customers averaged 750-kilowatt hours per month. Commercial accounts averaged around 6,000-kilowatt hours per month.

“I’m recommending a 6-percent adjustment,” Mr. Woycheese told the council. “Basically, to get your margins back more stable with your updated budget figures. From a cost-of-service standpoint, it needs to be greatly more weighted on residential versus commercial service. The cost-service study bears it out that residential is subsidized quite a bit by the commercial class.”

Mr. Woycheese said that trying to lower the commercial subsidy is to safeguard the service financially should a large commercial customer, such as Central Methodist University, remove itself from the city service. “You would have a very magnified effect on your residential class,” he said. “You would have to replace [that commercial] revenue, plus what they subsidized.”

Mr. Woycheese noted that operating expenses are increasing by around $735,000. The proposed rate increase is expected to generate $160,000 per year, of which $111,000 would come from residential customers. The rate hike would keep margins positive.

Mr. Woycheese also suggested Fayette cut its five-tier rate system down to three tiers. He predicts the average monthly increase for residential consumers would be between $7 and $11, which would range between $84 to $132 per year. Much of the proposed rate increases would come to hikes in the minimum charge, which doesn’t affect actual usage.

“It’s been a rocky year with increases,” Mr. Woycheese said. “Everybody’s been having to go up quite a bit. The budgets are just getting out of control. It’s costly to buy transformers. The shortage of supplies has driven costs up. Pay is going up significantly. I’m seeing a lot of operating costs go up.”

Mr. Woycheese, who is also working with Howard Electric Cooperative in Fayette, said most co-ops in Missouri will see increases in excess of 10% in the coming years. “Everybody’s seeing the same issue from an operational cost standpoint,” he said.

The city maintains a cash balance of more than $4 million in its electric fund, which is used for system maintenance and pole replacements. “For a municipality of your size, you’ve managed your finances well,” Mr. Woycheese told the council.

Alderpersons took no action on the matter on Tuesday, but will revisit the proposed rate hikes in future meetings. “That leaves us with some thoughts,” said Mayor Jeremy Dawson. “I think it would be best for us to take two weeks to think about it and come up with questions and think of any other proposals. 

“It’s a lot of affected people. And, of course, we are affected as well,” said Mayor Dawson.