When Gainesville Regional Utilities purchased the biomass plant in 2017, the transaction crystallized a broader plan to reduce overall electric rates.
My team and I initiated the plan after my arrival three years ago and actually began reducing electric rates prior to the purchase. The graph accompanying this column, which we recently presented to the City Commission and Utility Advisory Board, illustrates the impact of those reductions.
The graph’s blue line illustrates how GRU lowered an average 1,000 kWh residential electric bill from $141 in fiscal year 2015 to $130 in fiscal year 2017. This reduction took on even greater importance following last year’s budget and rate meetings with the City Commission, during which we anticipated a steady increase in electric bills (see the green line) that peaked at $148 in fiscal year 2023, prior to the biomass buyout.
These higher projections are part of the upward rate pressures many utilities face. Like most businesses, the costs of maintaining current levels of service and reliability are increasing at about 3 percent each year. We face additional challenges such as the need to invest in customer-centric improvements like smart meters and the need to reinvest in our employees. At the same time, GRU experiences less than 1 percent revenue growth due to population trends and our commitment to conservation.
But here’s the silver lining. That orange line on our graph represents GRU’s current bill projections, and they’re much more favorable thanks to the three-year history of reductions we’ve achieved.
As you can see, bills for residential electric customers using 1,000 kWh per month plummeted from $141 to $121 in 2018. In the three years between 2015 and ’18, we’d become competitive with Florida’s other utilities, reducing residential electric rates an unprecedented 14 percent over that stretch.
So, as we continue budget meetings, it’s imperative to understand how far GRU has come and what lies ahead. As our orange line indicates, those upward rate pressures we projected before the buyout of the biomass plant haven’t gone away, and electric rates will need to increase to cover future costs.
Think of it like refinancing a home. Your monthly payment decreases, but expenses such as insurance, property taxes and maintenance may still increase; the two costs are independent of one another. At GRU, we’ve lowered our “mortgage” payment since taking over the biomass plant, yet the everyday costs associated with running our utility still increase. But in both cases, a lower monthly payment produces savings. As you can see from the graph, future increases are tacked onto a base of $121 rather than $132.
And the picture looks equally bright over the next six years. The $148 we projected in fiscal year 2023 now becomes $138, less than customers were paying in fiscal year 2015!
So as GRU and the City Commission work out the fiscal year 2019 budget this month, we are mindful of the challenges GRU faces, but optimistic that the past three years of historic rate reductions has put us in a much better position to handle them.
Ed Bielarski is general manager of Gainesville Regional Utilities.