Aldermen Oppose Rate Increase For Electricity

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WATER VALLEY – A proposed five percent rate increase for customers who receive electricity from the Water Valley Electric Department was rejected by aldermen during the monthly meeting on Feb. 6. Electric department superintendent Brandon Richardson requested the increase, citing a recommendation from a Tennessee Valley Authority (TVA) consultant who crunched the numbers for the city-owned electric department. Richardson explained the increase would support the continued high maintenance costs the electric industry is experiencing, as well as fund maintenance and repairs on the main substation.

Richardson also provided a dire warning about the condition of the city’s electric grid and inventory of backup transformers. An 18-year employee of the department, the superintendent explained he has been concerned about the backup inventory of transformers for years. He also noted that the pressure switch that failed on the main transformer in the city’s substation in January, 2022, and led to a city-wide power outage has not been replaced. Richardson also said utility pole replacements are made when they are rotten, most of the distribution lines were installed in the 1960s, and the department needs to spend $125,000 on the main transformer for maintenance.

“It is a very old system and it needs some assistance,” Richardson stressed about the electric grid in the city.

Multiple aldermen noted the request for a rate increase comes too soon after last October’s 4.5 percent increase for electricity.

“It seems like we are raising electricity rates every year, I just don’t see it,” Ward Two Alderman Freddie Folson said.

Electric department business manager Crystal Floyd reminded aldermen that the earlier rate increase was mandated by TVA, the federally owned electric utility corporation that sells electricity to the city.

“October was different, it was just a flow through,” Floyd said.

“It was still a flow through to customers,” Ward One Alderman Ron Hart said about the increased cost to electric department customers.

Richardson also explained that the main transformer in the city’s primary substation would cost upwards of a million dollars to replace if it fails.

“That one piece of equipment that powers the entire town,” he said.

“Do we still have the substation fund?” Hart asked.

“We have money in there,” Richardson answered.

“And that money is designated for the substation, right?” Hart asked.

“Yes, but we have to use that money for operating a lot of times because our funds are very low,” Floyd answered.

Floyd added that the substation fund is down to around $400,000.

“That is basically all the money that we have,” she added.

Floyd also said the department has to dip into the substation fund to help pay the monthly bill to TVA for electricity the city purchases and resells.

“A lot of times when it is time for the TVA bill to be paid, I have to take money out of that and put it in the operating fund so the bill can be paid. It has dwindled and dwindled,” Floyd continued.

Transformers

Richardson also presented a quote totaling $229,910 to purchase 60 backup transformers. He told alderpersons he is waiting for quotes from two additional companies to present to city officials before a decision is made.

Input during the meeting included buying smaller quantities of transformers at a time.

“We can’t buy 60,” Floyd agreed. “We are going to have to buy five or six at a time.”
Richardson noted one drawback, a lengthy delay before the transformers are delivered.

“The lead time on these transformers, if we ordered them tomorrow, is 60 weeks,” Richardson explained.

Richardson also explained that part of the city is powered by older 2,400 kw transformers that are not used by neighboring departments.

“On the 2,400 side, we have 200 cans (transformers) in the air,” Richardson said. “If we get a storm on that side of town, no other power company around us runs 2,400 primary voltage anymore. You can’t call your neighboring power company and borrow a transformer because they don’t have that voltage. If something happens, say a tornado went up that side of town, we know a 60-week lead time on 2,400 transformers is a possibility.

“So those are the ones I would start buying,” Hart suggested. “Because we could get help with the 7,600 side.”

The 7,600 side is the standard transformer voltage that is used in the remainder of the city and by surrounding electric departments.

Hart also asked about the electric department’s outstanding debt.

“The only note we have is for the metering system, everything else is paid for,” Floyd answered.

Floyd was referencing the 2022 purchase of approximately 1,800 residential meters and 202 commercial and industrial electric meters at a cost of $469,758 as all customers received new smart meters.

Hart noted that with the department’s low debt, borrowing money could be a possibility to make repairs and purchase transformers.

“There are other ways of doing it, especially if you have only one note at the bank,” he explained about the option to borrow money.

“I am not for a five percent hike right now. I know the other (rate increase) was a pass-through and we didn’t get it,” Hart continued. “But the people who are paying for it felt it in their pocket. The people who are on a fixed income felt it in their pocket. They are just now getting adjusted to the pass-through. That was just October, I am not ready to hit them another lick right now. That is just me, but I am one vote.”

Mayor Pro Temp Herbie Rogers then asked if there was a motion to approve the rate hike.

“Is anyone for it?” Rogers asked. “It fails for lack of a motion,” he said after a pause.

Conversation on the topic as aldermen said they will revisit the request in June for possible implementation in October.