Colorado Springs, Colo., Utilities Firm Looks to Raise Rates 25 Percent

Source: Knight Ridder/Tribune Business News Publication date: 2001-02-28 Arrival time: 2001-03-01

Feb. 28--With electricity prices starting to rise nationally in concert with natural gas rates, Colorado Springs Utilities wants to raise customer electric costs by about 25 percent this spring -- the largest hike in recent memory. Officials of the city-owned utility will bring the price hike to the City Council at its April 10 meeting. If it is approved, residential customers will pay about $8 to $10 more each month.

Ann Nichols, finance and management services director for the utility, said a definite price-hike figure probably will be set within two weeks. Utility officials are looking at an increase from 15 percent to 25 percent, but she predicts it is likely to end up at the high end of the range.

In early January, the council agreed to increase gas costs for the third time in the past year, bringing the total rise to 49 percent since the start of 2000.

But if utility officials can correctly estimate the cost of buying electricity for the rest of 2001, April's increase will be the last electric hike for the next 12 months, Nichols said.

"If what we forecast is exactly what happens, then whatever we put in effect in April would stay in effect the whole year," she said.

The cost adjustment being used to figure the price hike is a new formula, Nichols said.

Previously, the utility would make annual adjustments in October based on revenue and expense information from the year before. But officials are now trying to incorporate the future costs of buying electricity.

This is being done because the market for electricity, long known for its stability, has turned unreliable.

In a stable market, small hikes like the 3.5 percent increase to consumers in October 2000 would suffice for the year after, Nichols said. But with costs escalating weekly, customer prices would have to increase every three months to keep up, she said.

So officials have opted to ask for a big pot of money from rate-payers now rather than a smaller extra amount every few months.

"What we've heard from customers is that they'd prefer a little more stability than a price increase every three months," Nichols said.

While this may create stability in Colorado Springs prices, though, no one is sure what will happen in the future with wholesale electricity prices.

Rates for coal, the fuel burned to create electricity, began rising around October when a shortage of natural gas shot that fuel's prices through the roof nationwide, said Greg Berwick, the utility's fuel supply manager.

The two are connected because utilities and industries that use natural gas and coal began to lay off the gas and burn more coal, Berwick said.

This did not create a coal shortage, but it did cause coal suppliers to bring in more workers and use more equipment to mine it, he said.

Berwick also said some of the national coal suppliers might have realized they could also benefit from rising fuel costs.

"I do believe that there is a little bit of that in there -- 'Well, hell, they're doing it, so why can't we?'" Berwick said.

Thus, coal prices have jumped about 25 percent since October -- to about $17 a ton from $13.75, he said. And if natural gas prices continue to rise, coal prices could do the same, he said.

In Colorado, the Springs is the fourth-cheapest among 23 municipalities in the average monthly electricity cost for a 2,000-square-foot home, according to an Internet study.

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(c) 2001, The Gazette, Colorado Springs, Colo. Distributed by Knight Ridder/Tribune Business News.

Publication date: 2001-02-28

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-- Martin Thompson (mthom1927@aol.com), March 01, 2001