With a capacity crowd looking on, the Newark City Council voted unanimously to approve several revisions to the city’s electric rates. The new rates will go in effect on June 1, despite criticism that the city did not go far enough in seeking public participation in the rate overhaul.

Also apparent were long-standing town and gown tensions over a rate reduction for the University of Delaware.

Dennis McFarland, city finance director, prefaced the discussion by stating that the city had designed the new rate structure by establishing several policy objectives: be fair and reasonable to all classes of customers, recover costs and maintain the financial soundness of the electric utility, be competitive with the rates of Delmarva Power, encourage energy conservation among all customer classes, promote economic development within the city, and reduce the city’s financial sensitivity to variations in consumption levels. 

Greg Brown, with Black and Veatch, the consulting firm hired to perform the comprehensive rate study, outlined the process his company took to come up with the new amendments to the present electric code including a review of the types of users, the amount of power used, the seasonal increases and decreases in usage, and charges for the largest users.

Brown stated that the city would need $56 million in revenues to recover all costs, which translates to a $2.8 million or a 4.7 percent reduction in revenues at current rates. The new system will also not increase rates for calendar years 2012 to 2014. The year 2015 would see an increase of 5 percent.

McFarland told the council that though present rates are about 7 percent higher than Delmarva Power, most customers will not see an increase in their bills. He also said that upgrades in technology and routes will allow meter readers the ability to read over 90 percent of the meters each month, reducing incidents of estimated usage.

Residential customers will now see a $10 monthly charge on their bills, which will help recover fixed costs on maintaining equipment and will also stabilize variations in usage. A new seasonal rate system will be introduced which will charge higher rates in summer and lower rates in the winter months. The system is designed to encourage energy conservation during periods where it can be done, one example being air-conditioner use. The lower winter rates reflect the more limited opportunities to conserve power during periods of low temperatures and the fact that the city typically does not pay peak power rates in the winter. McFarland stated that holding down peak usage will reduce overall costs to Newark. Typically peak electric power demands come in the summer months when natural gas or other fuels are not used for heating.

The new rate structure for residential use is as follows: from April to September, 14.5 cents per kilowatt hour (kwh) for the first 250 kilowatt hours; 15.65 cents per kwh for the next 750 kwh; and17 cents for each kwh over 1,000 kwh. October through March, the rate will be 14.5 cents per kwh, no matter the amount of usage. All rates are based upon the city’s purchase cost for power of 9.33 cents per kwh.

The rate system will also apply to commercial and industrial businesses, who will have a monthly service charge plus usage costs based upon both seasonal rates and consumption.

The system will separate the University of Delaware into its own category, since it is the largest user of power in the area, using roughly one third of the total power generated. The study by Brown and Veatch shows that UD will pay roughly $1 million less than at current rates. Estimates, depending on the source, showed that UD was overcharged for electricity somewhere between $1.4 and $3 million per year.

Dow, formerly Rohm and Haas, will also receive a reduced rate as the second largest industrial user.

The new lower industrial and commercial rates are designed to attract new businesses and customers to Newark’s electrical utility.

Many Newark residents expressed outrage at the new structure and demanded that council table the vote until a town hall meeting could be organized to inform people of the changes. Several council members, including Jerry Clifton and David Athey, reminded the audience that several forums had been scheduled late last year and that the study had been mentioned at many council meetings. The newest councilman, Mark Morehead, stated that the Brown and Veatch study has been posted to the city’s website for quite some time. Councilman Ezra Temko said that the fixed rate being charged is not much different than former charges assessed.

Amy Roe, a long-time critic of Newark’s electrical utility, spoke of her dismay over the use of the electric service to reduce property taxes; the lack of choices in providing power such as use of solar, geothermal, and other alternative energy forms; and her worry over future bulk rate increases and how that will translate into a residential power bill.

State Representative John Kowalko, a Newark resident, urged caution in approving the new system, saying that what he termed as unfair higher summer rates will penalize low and fixed income customers. Kowalko expressed his disdain for the measure by saying, “Utility fee increases are the most regressive form of taxation.”

Dr. Willett Kempton, Professor of Marine Policy and Director of the Center for Carbon-free Power Integration at UD, suggested that a future amendment be placed that would reduce rates for owners of plug-in electric cars, hopefully prompting more people to purchase such vehicles. Kempton said that such a measure would put Newark on the forefront of reducing its carbon footprint.

Rick Armitage, Director of Government Relations for UD, read a prepared statement that acknowledged the rate disparity between residents and the institution. Armitage stated that the university is concerned about overpayments for service and getting a fair deal. He also said that UD is aware that many residents believe the school is not paying their fair share, when the study clearly shows they are.

Armitage, along with Mayor Vance Funk, echoed each other sentiments about creating a strong relationship between the municipality and the university. Funk reminded the audience that in 2015 UD will have the option to buy power from the city or from another source and that it is in the best interest of all to be good partners together.