A state-mandated energy act forced Hillsdale City Council to approve the Board of Public Utilities’ recommendation to increase Hillsdale’s energy rates on Jan. 20. Passed by a 6-1 vote, the resolution allows Hillsdale to comply with Michigan Public Act 295, which requires the city to raise $240,000 for its 2014 funding.
“It had to be done,” Councilman Patrick Flannery said. “If the council can ever avoid increases, we will, but this was state-mandated.”
Although BPU Director Rick Rose recommended council increase the rates, he did so unwillingly and doubts the act’s sustainability.
“It makes me feel like we’re trapped,” Rose said. “I don’t know how long this act will be beneficial for savings. That’s $240,00 we have to grab out of the local economy and shift to the program. I hate seeing a quarter of a million dollars taken from the community.”
Despite the futility of rejecting the rate increase, council members were reluctant to pass the resolution.
Councilman Adam Stockford was the only member to vote against the resolution, but he said it was a “symbolic vote.”
“It was meant to generalize everyone’s apprehension,” Stockford said. “My voting against it didn’t make a bit of difference, but fundamentally, someone need to vote no. BPU didn’t even want to do it, so let’s not have a unanimous vote.”
The rate increase is a result of the 2008 Clean, Renewable, and Efficiency Energy Act (Michigan Public Act 295), which aimed to promote the use of clean, renewable energy in Michigan. It also specified that the legislation’s implementation should be cost-effective.
In 2009, Hillsdale was required to fund the program using .75 percent of its annual revenue and reduce its annual retail sales by .5 percent. This was only the beginning of a graduated rate, which since has increased to 2 percent of revenue and 1 percent of annual energy sales.
For the first three years, BPU fulfilled the law’s requirements in-house under the Michigan Public Service Commission, but beginning in 2012, it chose to outsource the work to Efficiency United—a state program many small municipalities use to help them comply with the act.
“The law became too cumbersome,” Rose said. “There were a lot of details that made it difficult to ensure that we were completely complying, so we joined Efficiency United.”
Until now, energy rates were set at a price that would generate the necessary funds to comply, but with the rate increased to 2 percent, Hillsdale would still be short $69,091 in 2014.
In order to cover this deficit, Rose recommended an energy rate increase which will raise the charges by $0.00231 per kilowatt-hour for residential customers, $8.21 per month for business and commercial, and $166.25 per month for industrial.
Rose plans to write a letter to the state legislature warning of the harm any future increases could have on Hillsdale and other small municipalities.
“We need to get our legislators thinking about the consequences of any further incursions into municipal utilities,” Rose said.
