The increases are a result of the city having more power than it can use, a depressed wholesale market in which to sell off excess power, and increasing environmental regulations, he said.
“You hate to tell folks things are going up, but I think it would be realistic for them to expect 4 percent raises over the next five years,” Tumlin said. “Whether or not that will pass City Council every December or the (city-owned utility, Marietta Power and Water) I don’t know, but that 4 percent has got to come from somewhere.”
The city has a safety net that extends until 2018 in the form of municipal competitive trust credits, said Bob Lewis, Marietta Power’s general manager.
“Originally bond reserve funds that Marietta took out were required to pay as part of the original financing of the power plants, and these are all coming back to Marietta to be used as an offset of the power cost,” Lewis said.
Those credits average about $10 million a year, but that revenue ends in 2018.
At that time, if the city has not taken any action, such as increasing rates or selling off some of its power, it would require a 20 percent electric rate increase to balance the budget, Tumlin said.
“If we went up 20 percent in one year, that would be devastating to our community,” Tumlin said. “But if we’re consistent, give people notice, are forthright, that’s all I think we can ask. I mean, I hate it. I’m going to pay it myself. My business is going to pay it.”
The city is looking at other options, such as finding a profitable way to sell off its excess energy. One proposal is to opt out of its contract with the Southeastern Power Administration.
“We think we can save about $3.5 million a year if we opt out of that contract, but that’s one of those things that’s forever and ever,” Lewis said. “You’re either out or in, and once you’re out, you’re out altogether.”
Lewis is also studying the idea of selling off 20 of the 53 megawatts the city owns in the two original nuclear reactors at Plant Vogtle. Exactly what amount that would bring is unknown and would have to be studied, Lewis said.
There are a number of reasons why Marietta Power is in the position that it is. In addition to the federal regulations and depressed wholesale energy market, the city has razed its high density federal housing projects, which used large quantities of electricity, Lewis said. Development meant to replace it has been put on hold due to the recession.
“There’s been some 1700, 1800 units that have been torn down in Marietta over the last four or five years, and none of those places have been rebuilt,” Lewis said.
Tumlin said a council vote to raise rates would take place in December.