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| How are rates calculated?
Rates are calculated based on the costs to serve a particular customer class, such as residential, commercial or industrial. Now our rates are based on costs that we estimate are required to provide safe and reliable service. These costs are allocated to the different classes based on their share of the costs. The major costs that are included in this allocation process are: - Operations and Maintenance: O&M is the ongoing daily activities of the company, including employee salaries.
- Repayment of borrowed money: A portion of our assets (generators, wires, pipelines, water treatment facilities) are funded through bonds. We need to calculate repayment of that money along with the associated interest expense.
- Cost Adjustments: The price to purchase natural gas and electricity is a significant portion of our expenses. For electric service, fuel, such as natural gas, is used for generation. Overall, cost adjustments comprise approximately 45 percent to 50 percent of our expenses. The costs we pay suppliers are directly passed along to the customer. We do not profit from increases to cost adjustments.
- Payment in lieu of taxes (PILT): As a non-profit entity, we are not required to pay taxes to the cities in which we operate – Colorado Springs, Manitou Springs and Green Mountain Falls. As a community partner, however, we support our economy with a PILT, which totals the same amount we would have paid in taxes if we were a privately-held company.
How often do rates change?
Base rates, which relate to expected fuel costs and the actual operation and maintenance of the services we provide, can increase or decrease on an annual basis. Changes to base rates typically reflect an increase or decrease in capital spending for infrastructure projects, such as installing new pipes/lines, replacing old equipment and improving safety measures to ensure reliability. Electric cost adjustments (ECA) and gas cost adjustments (GCA) are listed on your bill. In your base rates, we project what the costs for electric generation fuel and gas purchased are. However, wholesale costs fluctuate and cost adjustments capture the difference between what we project and what we actually pay. We do not make a profit on fuel and gas. We pass the costs on to customers dollar for dollar. ECA and GCA can change as frequently as monthly based on market prices, Nevertheless, the adjustment effective Aug. 1 is the last adjustment expected for our customers in 2005. Are rate changes a result of poor planning?
We plan for system growth and maintenance for up to 40 years in advance in order to prevent drastic rate changes. In the last five years, the typical residential utility bill has increased 36 percent. Nearly 70 percent of that total increase is the direct result of increases in coal, natural gas and wholesale electric costs. Does the public have a say in decisions to change rates?
Yes. We encourage you to attend City Council and Utilities Board meetings. Why don't all customers pay the same rates?
Rates are based on our cost to provide service to each customer class. The cost to serve different customer classes – residential, commercial and industrial – varies significantly. Each customer class uses the service differently, and some customers require more equipment, such as poles, transformers and pipelines, resulting in higher rates. What is Springs Utilities doing to help customers? |
