Kokomo Tribune; Kokomo, Indiana

March 5, 2013

Peru council approves rate increase

Controversial ordinance revamped after public outcry

By Carson Gerber
Tribune staff writer

— PERU — Peru City Council unanimously approved an ordinance Monday that increases electricity rates for city and county residents and lowers rates for large power-consuming facilities served by Peru Utilities.

Residents will see a 3.3 percent increase in electricity rates while rates will decrease 7.5 percent for large facilities like Armour-Eckrich Meats, Square D Co. and the Miami Correctional Facility.

Electricity rates also will increase 19 percent for city streetlights, 5 percent for commercial buildings and 7 percent for traffic lights.

The new electricity rates are based on a recent cost-of-service study commissioned by the city. The city hasn’t commissioned such a study in 20 years.

Indianapolis-based Umbaugh & Associates Certified Public Accountants completed the 70-page study in September.

Council originally considered the rate changes in December but tabled the ordinance after council members criticized it for raising rates on residents and for increasing the city’s electricity bill by $25,000 a year.

Peru Utilities General Manager Roger Merriman said in December the new rates don’t produce more money for the utility but only redistribute costs to more fairly reflect how different customer classes use electricity.

“The point is that there are some customers who are paying a lot more than they should, and there are some customers who are paying less than they should,” he said. “This is all about fairness. We’re just presenting the study and saying what the true costs are for customers.”

In December, council formed a three-member committee to look into how to best implement the new rates.

The amended ordinance passed Monday phases in the rate changes over two years, instead of taking full effect upon passing. The rates will now be cut in half the first two years and be fully implemented the third year.

Peru Mayor Jim Walker said phasing in the electric rates will help the city prepare for a larger utility bill. He said the city is working with Peru Utilities to find ways to reduce its electricity consumption.

Walker said the city has already installed power-saving LED lights in all the traffic signals and is currently changing the street lights as well.

Even with a bigger utility bill, Walker said the increased rates won’t have a significant impact on the city’s budget.

“It’s nothing that’s going to cause anybody pain,” he said Tuesday.

Residents who use 1,000 kilowatts of electricity a month will see an increase of about $4 on their bill, Merriman said.

The last rate hike for Peru Utility customers came in 2007, and it increased electricity prices 9 percent across the board for all Peru Utility customers.

Although rates will increase for residents and the city, Merriman said the 7.5 percent decrease on large facilities will serve as an economic development tool in the area.

He said 11 facilities qualify for the lowered electricity rate. Those facilities currently pay a total of $5.8 million for power. The new rate would lower that by $443,000.

“A side benefit of this study is that it helps existing companies’ bottom line and makes Peru more attractive to future business,” he said, noting Armour-Eckrich Meats alone will save $250,000 a year on its utility bill.

Walker said the lower rates will “make Peru a better place to do business,” but noted the real aim of the study was to make sure every customer was paying the proper price for electricity.

“I hate to see the cost go up on anybody, but I think everybody will agree that business and residents should all be paying their fair share,” he said. “It’s all about people paying the fair amount.”

Merriman agreed, adding customers can now know they’re paying the proper rates.

“They can know they’re not subsidizing another customer or being subsidized by other customers,” he said.

Merriman said the utility brings in $21.5 million annually from electricity payments. The company services 95 square miles in Miami County, including parts of Grissom Aeroplex.

Carson Gerber is a Kokomo Tribune reporter. He may be reached at 765-854-6739, or by email at carson.gerber@kokomotribune.com.

For more on this story and other local news, subscribe to The Kokomo Tribune eEdition, or our print edition