The news that the Marquette Board of Light and Power is asking for a rate increase is, at first glance, unwelcome news to residents and businesses receiving their electricity from the BLP.
If this rate increase is approved, it will only be the second such hike in the last 30 years. That is part of the problem. If the BLP had implemented smaller raises on an annual basis, we would not be dealing with this significant increase now. We have been very fortunate to go as long as we have without a rate increase.
As a business, the Mining Journal is not excited about having to pay more for our power, but we also understand the need for dependable power and reliable service in case of a power outage. We appreciate the fact that we went more than 20 years without an increase in basic rates. We realize that there have been adjustments to the fuel surcharge, which can vary, but the basic power rate has only been increased once during that time.
Residential customers using 500 kilowatts of power in a month will realize an estimated increase of about $4 per month during the first year of the increase, while their bill will rise a total of about $13 per month by the end of the third year. For residents, this appears to be a reasonable request. Because businesses use much more energy than residential homes, the cost will be much more significant for the businesses to absorb.
The Marquette Area Public Schools estimates an annual increase in power costs of $113,000 over the proposed three-year increase. Northern Michigan University officials estimate their increase will cost around $620,000. The city of Marquette estimates an increase in their rates will cost an additional $100,000 during the first year.
The city commission is correct in doing their homework before approving the rate hike. The impact on businesses is going to be significant and that impact has to be considered before approving the increase. But businesses served by the BLP have had a great deal on electricity over the past 30 years, owing to the BLP's status as a publicly owned utility rather than a privately held business.
A recent story in The Mining Journal showed 500 kilowatt-hours of electricity in Marquette for BLP residential customers costs $42.70. The same amount of power would cost more than $104 from UPPCO. Rates for the Alger Delta Electric Cooperative fall in between, but are closer to UPPCO rates than BLP rates.
We believe the BLP has shown good businesses practices by reducing their expenses through staffing and benefit changes for their employees. In 1986, the BLP had 103 staff members. As of 2013, that number has been reduced to 78. BLP?management has also passed along a 20 percent increase in employee contributions toward health insurance. They've also showed good business sense by modifying their health care plan to keep business local by encouraging employees to use Marquette General Hospital as the primary health care provider. The BLP has also re-engineered equipment, making it cheaper to operate, which ultimately lowers their overall expenses. They have been good about negotiating long term coal contracts to save ratepayers on the price of coal to run the plant. These kinds of things need to be considered when reviewing the approval of this increase request. These are the type of cost saving measures we expect to see from a business requesting a price increase.
Most businesses, if they're being honest, would have to admit they've been fortunate to pay lower rates for electricity from the BLP over the past decades. We don't expect those same businesses to welcome this increase with open arms, but we do hope that everyone realizes the need for improvements to the infrastructure at the BLP plant, which will requirefunds from rate increases.
While, in principle, we support the BLP request, in reality, we are not looking forward to the impact on our expenses. But we know we need to be able to rely on a solid source of power in the future.
We hope the city commission will consider all of the facts related to this rate request and continue talks with the BLP. We think they can reach a solution that will work toward guaranteeing the long-term future of the BLP and dependable electricity for its customers, while considering the impact the rate increases will have on businesses.