Cities could feel the heat from 18 percent power
rate hike
Jun 7 - McClatchy-Tribune Regional News - Dave Forster and Harry Minium
and Richard Quinn The Virginian-Pilot, Norfolk, Va.
The five cities in South Hampton Roads will see their collective electric
bills increase by nearly $15 million per year if Dominion Virginia Power
receives the full 18 percent rate increase it has asked the state to
approve.
Only Portsmouth has set aside money for the expected increase, which was
announced May 6, too late for most cities to react. A week later, Virginia
Beach, Chesapeake and Portsmouth approved their budgets.
Betty J. Burrell, Portsmouth's chief financial officer, said the city
inserted a last-minute provision in its budget anticipating a 15 percent
increase.
If the rate increase is approved, several local city councils may have to
revise their budgets this summer. It has already been a difficult budget
year for most cities because of a stagnating economy, rising fuel costs and
rising real estate taxes.
"It's not something anyone is looking forward to," Norfolk Mayor Paul Fraim
said.
The rate increase, to be debated at a State Corporation Commission public
hearing on June 24, would go into effect on July 1. That's the beginning of
the new fiscal year for local cities.
The increase was requested to compensate for increasing fuel costs. With the
price of oil having nearly doubled in the past year, and the cost of coal
nearly doubling in the past six months, Fraim said he understands why the
power company is seeking more money.
He's just not sure how his city will pay for the higher rates.
Virginia Beach, the state's largest city, would have to pay approximately $5
million more per year. Norfolk ($4.4 million), Chesapeake ($2.8 million),
Suffolk ($1.5 million) and Portsmouth ($1 million) would also face
increases, according to figures provided by Dominion Virginia Power. Suffolk
officials said they think increases would be closer to $800,000.
Fraim opposed a real estate tax rate reduction in Norfolk in part because of
the expected jump in energy costs. The city will begin the fiscal year with
a $500,000 surplus, which Fraim expects to be quickly eaten away by the
rising energy costs.
The city has a $4 million economic downturn reserve it could draw on to pay
the remainder of rate increase. Before that happens, Norfolk likely will
attempt to pay its bills by making further cuts in its budget and possibly
extending a six-month hiring freeze.
Virginia Beach assistant budget director David Bradley said that a hiring
freeze expected to end in September might be extended and discretionary
spending might be reduced.
"We will review this, as well as other issues," including the overall
economy, he said.
The Virginia Beach City Council on Tuesday heard a proposal to issue $10
million in debt -- split between the city and the school division -- to
finance new energy-saving programs. They would include replacing outdated
lighting and modernizing heating and cooling systems.
Dave Hansen, the city's finance chief, said the projects -- "energy
performance contracts" -- pay for themselves over time by generating savings
on bills. The contracts also come with guarantees of cost savings. If the
savings don't happen, he said, the company that signed the contract pays the
difference. "Maybe we haven't been doing things as efficiently as we could,"
Hansen said. "Now the costs of energy will force us to do that."
The Norfolk school system made a similar pitch to its City Council last
year, but the city significantly reduced the program after citing concerns
about the city's debt limit. Hansen said Virginia Beach can afford to take
on the debt because it would be paid for by the savings, not by the general
fund.
Beach council members could make a decision by summer's end.
Chesapeake and Suffolk are both working to identify areas of potential
savings.
The Suffolk school system recently began restricting community athletic
organizations from using lighting on its athletic fields. Teams can still
use the fields, but not the lights.
James Thorsen Jr., executive director of facilities and planning for the
school system, said school employees are being asked to use "common sense"
to save energy. "If you're not using the room, turn the light off," he said.
Fraim long ago recommended that Norfolk hire an "energy czar," someone to
monitor the city's energy consumption across the board. He said the recent
increase in oil prices makes his proposal even more urgent.
"What's happening to energy prices is scary," he said.
Staff writers Mike Saewitz and Jen McCaffery contributed to this story.
Harry Minium, (757) 446-2371, harry.minium@pilotonline.com |