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(File photo)

The Huntsville City Council will vote next week on a proposal to increase the residential and small commercial electric utility availability customer charge in two stages this year.

Huntsville Utilities CEO and President Jay Stowe said the not-for-profit wants to increase the residential electric availability charge by $2.50 per month, or from $8.88 to $11.38 beginning May 1. For small commercial customers, the monthly electric availability charge would jump from $11.39 to $12.98, a change of $1.59.

Jay Stowe. (File photo)

The utility company said it would also simplify the residential electric rate structure by moving away from its current two-tier approach to one consistent rate for electricity consumption. The move would be revenue neutral to Huntsville Utilities.

Starting Oct. 1, the residential electric availability charge would increase again from $11.38 to $13.78 per month, while small commercial would rise from $12.98 to $15.38.

"Most of our costs are fixed and we charge our customers on a variable rate," Stowe said. "We do everything we can to manage those costs to keep them as low as we can but periodically we have to re-evaluate what our rates are and we've determined this small, relatively reasonable increase is what can make sense. We're going to try to do that moving forward rather than larger increases."

Stowe presented the proposal Thursday night during a council work session at Huntsville City Hall. The council will decide next Thursday whether to approve the increases, which would generate more than $9.9 million for Huntsville Utilities' Electric Department.

There will be no effect this time on larger commercial or industrial electric customers. Stowe said the utility is seeing a 1.5 percent annual customer growth, but only a 0.5 percent usage growth.

"Our number of customers are increasing much more than our usage is," he said.

While the utility's costs continue to rise, Stowe said customer costs are staying relatively low. More people are changing their behavior to reduce energy with LED lighting, programmable thermostats, tankless electric water heating, off-the-grid solar production and high efficiency appliances.

Because system demand is collected within the energy rate for residential and small commercial customers, cost recovery suffers, Stowe said.

"It seems a little bit counter intuitive," he said. "We're encouraging people to use less and we're asking for a rate increase. What we're trying to do is bring in more of our revenue on a fixed basis that will allow us to encourage people using less of their energy because most of our cost actually is passed through from our customers to TVA."

TVA is the electricity provider for Huntsville Utilities. Stowe said the utility wants to continue to work with TVA and its customers to drive down energy use, which will save people and businesses more money in the long run.

The proposed increases this year are also the result of several significant Huntsville Utilities projects, such as automated distribution, outage management, transportation, general construction and advanced metering infrastructure. The utility is looking at more than $36 million in projected capital expenses over the next five years.

Stowe said they are in the process of installing the computer system for "smart" metering, which will cover water, gas and electric use.

"(Customers) will have more immediate information and data that comes back to them that tells them how much water, gas, and electricity they're using," Stowe said. "Studies across the country have shown that if people know what they are using on a daily basis, that they can lower their usage by as much as 8 percent. If you work hard at it and know immediately what the impact is, then it will help drive down people's costs even more."

The council raised several concerns about the proposed increases. Councilman Richard Showers said the hikes would have a negative impact on Huntsville's low- and fixed-income families.

Stowe said the process of rating rates "is complex" but not unfair if customers want to continue receiving efficient service while enjoying rates lower than many of Huntsville's peer cities.

"I was elected to represent the wishes of my constituents, and that's what I'm going to do on this," Showers told Stowe. "I have not had one call that was for this. They have all been opposed and have said to me, 'Please don't let this happen.'"

Stowe said they have several measures in place to help individuals and families who are struggling to pay their utility bills. The biggest initiative right now is the Huntsville Extreme Energy Makeovers project, which is funded by an $11.7 million TVA grant that performs whole-home energy retrofits for low-income customers.

Huntsville Utilities, which has a separate home energy audit program that helps residents save energy, also works with multiple agencies that assist customers who struggle to pay for their utility consumption.

"Your reply still does not touch those citizens who reside in my city that are unable to pay, that will not be able to pay, that can't stand any additional cost to live in our city," Showers said.

Councilman Mark Russell asked Stowe if there is a Plan B in place if the council does not approve the increases, which will affect all of Madison County. Stowe said no.

"Plan B would require significant changes in our capital and long-range planning," Stowe said. "I don't have that Plan B defined. I didn't spend time because I believe that we have been consistent whenever we come to you and we come to you with reasonable recommendations."

The last local electric increase took place in October 2011. Stowe said they expect to come back to the council about 18 months after October with a proposal for additional increases.

"When we do that, we expect it to be a much smaller increase and we think that instead of going five to seven to nine years between increases, we'll come more often but they'll be much smaller, much more manageable and easier for people to plan."