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RATE REDUCTION EYED: Shiras shutdown, switch to MEC led to savings, cost-of-service study indicates

Marquette Board of Light and Power Executive Director Tom Carpenter stands inside the Shiras Steam Plant. The switch from the Shiras Steam Plant to the Marquette Energy Center has reduced costs for the MBLP due to the greater operational flexibility of the MEC, officials said. A cost-of-service study has indicated the rates could be reduced later this year. (Journal file photo)

MARQUETTE — The Marquette Board of Light and Power’s ratepayers may see a reduction in rates later this year.

The Marquette Board of Light and Power Board of Directors discussed a cost-of-service study during its Tuesday evening meeting. No vote was taken on the matter.

Officials from Utility Financial Solutions presented the results of the cost-of-service study to the board at the meeting, telling MBLP officials that the utility could reduce ratepayer costs by an average of 3.7%.

The rate reduction is anticipated to go into effect Oct. 1, MBLP Executive Director Tom Carpenter said.

“Cost-of-service studies are important to our operations so that we know that we are charging customers appropriate rates to cover our expenses,” Carpenter said. “We are a not-for-profit utility that operates on a cost-to-serve basis. In this case, we have found ways to operate more efficiently, which will allow us to pass those savings back to our customers.”

The main reason this rate reduction is possible is due to a shift in the way the utility operates, he said.

“The most significant factor that has allowed us to reduce rates is the change in operations from the Shiras Steam Plant to the Marquette Energy Center. By taking advantage of the flexible operating characteristics of the MEC, we are able to dispatch our resources against the MISO market in a way that provides a high level of reliability with a lower power supply cost,” he said. “These savings have been and will continue to be passed directly back to customers.”

The typical customer bill will vary depending on usage and customer class, but the average rate reduction will be 3.7%, he said.

“We periodically have a consultant perform a cost-of-service study to ensure that we are charging customers appropriate rates that allow us to collect adequate revenue to fund our expenses,” Carpenter said. “The consultant will use customer data along with our short- and long-term budget plans to develop rates for each rate class that ensure customers are paying their fair share for the cost of running the system.”

The last rate change was in 2016.

Cost-of-service studies are done every three to five years or when there is a “significant change to operations that would require a change to revenue requirements,” Carpenter noted.

Per the city charter, city electric rates are set by MBLP and confirmed by the Marquette City Commission.

“Our board will do its due diligence to see that the recommended rate reduction is appropriate and will take action on that to set the rates charged by the MBLP,” Carpenter added.

Jackie Jahfetson can be reached at 906-228-2500, ext. 248. Her email address is jjahfetson@miningjournal.net.

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