Higher electric costs require $250,000 adjustment to Fort Smith city budget

Extreme winter weather in February is still causing Fort Smith a headache. The Fort Smith Board of Directors approved an ordinance Tuesday (Nov. 2) to increase the Water and Sewer Operating Fund by $250,000 for the year in order to pay utility bills that have increased because of the extreme cold.

The approved 2021 budget for water treatment, which was approved Dec. 15, 2021, included necessary funds to pay the projected costs for electricity and natural gas for the water treatment plants. Utilities expenditures was budgeted at $710,000.

“The week of February 14, 2021, this region experienced record low temperatures for a sustained period. Due to the increased demand on the electrical grid and on power generation, electrical providers paid a premium for purchase of electricity and fuel for generation of electricity. As the electrical companies are working to recuperate the additional cost associated with these purchases, they have increased either their rates or implemented an energy cost recovery fee. These fees are having a significant impact on our utility bills,” Utilities Director Lance McAvoy said in a memo explaining the need for more funds.

The city’s Arkansas Valley Electric Cooperative (AVEC) bill has more than doubled over the last several months, McAvoy said. AVEC provides all the electricity for the Lee Creek Treatment Plant. In September 2020, the AVEC bill for Lee Creek Treatment Plant was $39,012.66. The September 2021 bill was $65,605.62. In April, the electric bill for the plant was 110.6% higher than in 2020. In May it was 161.8% higher than in May 2020. In June, the bill was up 51% from the same time last year, and July and August bills were 37.3% and 88% higher respectively from the same months in 2020.

“When we called them, they initially told us our usage had increased. But we track that. We know we used the same amount of electricity as last year. They then told us it was energy cost recovery,” McAvoy said.

He said OG&E bills also have increased but not to the extent AVEC bills have. This is because OG&E produces much of the electricity it provides, and it has opted to recoup its loss over the next eight to 10 years. AVEC is an electric cooperative and buys most of its electricity. It also has opted to recoup its losses over eight to 10 months.

“They are doing this because in case they have a similar situation this year, they want to have enough money to be able to purchase electricity and keep the power on for their customers,” Mc Avoy said.

In order to be able to pay the utility bills for water treatment for the remainder of the year, the utility department needs $250,000 from the unobligated fund balance of the Water and Sewer Fund, he said. This will bring the budget for utilities expenditures up to $960,000. The board approved the increase unanimously with a vote of six for and zero against, though Director Kevin Settle said he voted for the increase reluctantly. Director Lavon Morton was absent from the meeting.

“We would never do this to our customers if we had unforeseen expenses in water and sewer. We couldn’t expect to recoup our losses that quickly,” Settle said.

City Administrator Carl Geffken said AVEC’s energy cost recovery charges were approved by the Arkansas Public Service Commission. Residents with AVEC have also seen their electric bills increase because of the cost recovery.