UPDATE : City to pay nearly $2.2M more due to rising TVA costs in upcoming year
Published 11:52 pm Thursday, April 21, 2022
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**Note – a calculation error has been discovered by the City lowering the initial story’s amount from $3.5 to $2.2 million.
Elizabethton Electric customers will see a rate increase due to an estimated $2.2 million in increased costs from TVA.
City Manager Daniel Estes shared that information as the Elizabethton City Council began its fiscal year 2022-2023 budget workshops on Thursday.
In FY21-22, the city purchased nearly $42.6 million in electricity from TVA to resell to local customers. Estes said the upcoming year costs are projected at $46 million.
“There was an adjustment two years ago which was revenue neutral,” said Estes. “We have not raised rates to customers to gain more revenue in over four years.”
The initial increase during Thursday’s workshop was $3.5 million. However, on Friday morning the Estes reached out to the Star to correct a “calculation error” in that number.
“The result of this is we expect an increase of $2,178,000, all of which is caused by an increase in fuel charges from TVA. As you know, fuel costs have gone up across the nation, and as TVA’s fuel costs to generate power rise, that increase is passed on to Elizabethton Electric’s customers. Elizabethton Electric receives no financial benefit from the fuel cost adjustment.”
More than $2 million in capital projects are included for the electric system in the new budget.
In review of the sanitation fund, Estes and Finance Director Preston Cobb pointed out an increase of $62,306 in supplies and materials. The largest part of that increase came from the increase in cost of gas and diesel.
“We see the market for gas going no higher than $4.50 and diesel at $5.00 a gallon,” Estes said. “$50,000 of this increase comes from fuel.”
Cobb said that across the board, the budget includes $514,049 for the increase in fuel.
While discussing the sanitation and water funds, Estes shared an update on talks with the county commission regarding a request for $2.6 million from the over $7 million the county received from TDEC (Tennessee Department of Environment and Conservation).
The city is requesting the funds to help offset the cost of upgrading meters across the water system. The city serves both city and county residents, and Estes said the $2.6 million represents the 35% of the system’s residents outside city limits.
“I shared with them that we were willing to cover the match portion of 20% required for the TDEC money with no local funding coming from the county,” said Estes. “There are also some customers on Laurels Road that have no water and I offered to provide the work to get the water lines to those customers if they would buy the material needed to get the lines ran which would save them anywhere from $250,000 to $300,000.”
If the commission doesn’t approve the funding, city officials have said the costs likely would be passed along to customers as rate increases.
The next budget workshop for the council will be at 4:30 p.m. on Tuesday, April 26. There are other workshops scheduled to address other city departments as well as the general fund and outside agencies.
City Council will approve the full budget before the new fiscal year begins July 1, 2022.