Are Newnan Utilities rate hikes ahead?

By ALEX MCRAE
alex@newnan.com
Consultants working on behalf of Newnan Utilities predicted Wednesday that massive projected increases in fuel generation costs caused largely by new environmental regulations will likely result in future rate increases for customers of Newnan Utilities.
Projected increased energy costs and systemwide implementation of smart grid technology were two major items of discussion at the annual retreat of the Newnan, Water, Sewerage and Light Commission held Wednesday at the Newnan Utilities cabin off Roscoe Road.
John Hightower of West Monroe Partners made a presentation on possible implementation of smart grid technology. West Monroe Partners worked with Newnan Utilities for several months, observing existing systems and procedures.
Hightower began by giving an overview of Smart Utility High-Level Architecture. Items under this heading include home area networks, two-way voice and mobile data, substation and distribution communications, advanced metering infrastructure (AMI) and microwave/ fiber backhaul.
He explained several scenarios implementing different aspects of the smart grid program. He also explained that Newnan Utilities had already implemented some portions of the smart grid program. He presented two scenarios for discussion.
The first scenario was to “Execute advanced metering infrastructure (AMI), meter data management system (MDMS) and smart meters, which can be read and controlled remotely, over the next three years.

Scenario two was to “Execute enterprise asset management (EAM), conservation voltage reduction (CVR) and outage management systems (OMS) in the first two years and then execute AMI, MDMS and meters in years 3 to 5.”

Hightower presented a financial summary of each option showing cumulative costs and benefits over a 15-year period.

He explained factors affecting each item and then presented recommendations. Hightower noted that it is not always feasible for smaller utility systems such as Newnan Utilities to fully implement smart grid programs because of high initial cost that cannot be spread over a large customer base.

Hightower recommended that Newnan Utilities:

• Finalize ongoing projects that contribute to a smart grid program.

• Proceed with necessary analysis and scoping work required to implement an EAM system.

• Develop an integration system strategy that takes into consideration the requirements for integrating smart grid systems in a cost and resource efficient manner.

• Proceed with requirement definitions and implementation of a CVR system utilizing existing fiber communications assets independent of a final smart grid strategy.

In summary, Hightower recommended that Newnan Utiluties delay implementation of a smart grid unit until “Existing initiatives are complete and free up staff resources, and technology or economics bcome more favorable.

Stuart Jones, of the Municipal Electric Authority of Georgia, presented MEAG’s utility rate and system capacity growth projections for the next 10 years and compared MEAG systemwide projections to Newnan Utilities projections.

Jones’ presentation showed that Newnan Utilities’ capacity growth rate would be 1.9 percent over 10 years and the utility’s energy growth rate would be 2.5 percent over that period.

Jones also projected growth rates of fuel costs, including coal, natural gas and nuclear.

Steve Shurbutt and Brian Lawson of GDS Associates, Engineers and Consultants, made a presentation on future load and resource projections. The presentation included an update of key financial ratios, a 10-year cash flow forecast and future electric rate considerations. Newnan Utilities rated very favorably in its debt service coverage and total debt to net property, plant and equipment ratios.

Ten-year cash flow projections were within expectations given the current and future growth projections for Newnan Utilities’ service area.

An area of concern was a major projected increase in the cost of producing electricity created by implementation of stricter environmental standards mandated by the U.S. Environmental Protection Agency.

Under the projections, fuel costs for Newnan Utilities could more than double in the next three years. The increases are only projections and full cost of implementuing new environmental regulations is not yet fully known.

After presentations by outside consultants were completed, Finance Director Andy Sharp reported on current operations and addressed potential future increases in cost of power purchased by Newnan Utilities. Sharp said projections called for power costs to Newnan Utilities to increase by 5.4 percent to 10 percent over the next 10 years. He said that would require rate increases to Newnan Utilities customers in the range of 4 to 6 percent.

Sharp said the increase for an average NU customer would be $4 to $6 per month.

The financial projections presented will be among the data used to prepare rate schedules in the fall of 2012 for implementation in the 2013 budget.



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