Greenville Utilites Proposed Budget Could Result in Rate Hikes

Key Components:
 Expenditure reductions cut $10.9 million from 09-10 budget plan;
combined total of $15.4 million cut from FY 08-09 and FY 09-10 budgets
 No rate adjustment in water
 No rate adjustment in gas
 4.9% adjustment in sewer, effective July 1
 Continuing to absorb 4% wholesale electric increase; pass through 2.8% adjustment to customers October 1 to recover a portion of our increased costs
 Personnel cap: equivalent of 8% reduction in force for FY 08-09 and FY 09-10
 No cost of living increase for employees
 Merit increases deferred

5-4-09

Greenville Utilities FY 2009-10 Budget

Talking Points:

• GUC is a not-for-profit, community-owned utility. Our mission is to enhance the quality of life for those we serve by providing safe, reliable utility services at the lowest reasonable cost, with exceptional customer service. Because GUC is a not-for-profit service organization, we do everything within our power to minimize the impact of cost increases to our customers.

• This year has been particularly challenging. Just like organizations all across the country, Greenville Utilities is dealing with increased costs and a national economic downturn. Not only are we in a time when we’re seeing less revenue, we’re also seeing an increase in the cost of doing business.

• While cost containment measures have always been the rule at GUC, the current economic situation has called for a higher-level response. As a result, in January 2009, we implemented a cost management strategy that cut approximately $4.5 million from current (FY 2008-09) expenditures, and reduced the FY 2009-10 budget plan by nearly $10.9 million. That is a two-year budget reduction of approximately $15.4 million.

• Several projects have been delayed, and overtime has been reduced through shift work and scheduling changes. There have been reductions in contract services, vehicle/equipment purchases and travel and training. The FY 2009-10 budget does not include a cost-of-living increase for employees, and merit increases have been deferred. In addition, a cap on personnel has resulted in the equivalent of an 8% reduction in force for FY 2008-09 and FY 2009-10.

Water:

• Although an increase had been forecast for water, previous actions and the economy have mitigated the need to adjust water rates in the upcoming budget. Water rates will remain stable in FY 2009-10.

• GUC’s water rates are below the median (midpoint) when compared with the current rates of 33 other regional providers. The median monthly bill for 6,000 gallons of water is $24.03. A GUC water customer would pay $23.49.

Natural Gas:
• No gas rate adjustments are included in the upcoming budget. In fact, GUC has reduced natural gas rates for its customers five times in recent months for a total decrease of about 41% or $36.26/month based on average residential usage.

• GUC’s natural gas rates are competitive and slightly above the median when compared with 11 other regional providers. The median monthly bill for 50 ccf is $74.49. A GUC natural gas customer would pay $75.45.

Electric:
• Greenville Utilities buys electric power on behalf of its customers. The price we pay for that power increased 4%, effective February 1, 2009. As the result of the increase, we’re paying $503,000 more per month for the wholesale power we distribute to our customers. As of June 30, 2009, which is the end of our fiscal year, the increase will have cost us an additional $2.5 million.

• GUC’s cost-cutting strategy provided for absorbing the entire 4% increase through the end of the fiscal year (June 30, 2009). We are pleased to report that we will continue to absorb the increase through the end of September, at a total cost to GUC of over
$4 million ($4,024,000). However, continuing to absorb the entire increase in the long-term would negatively impact the financial integrity of the electric fund.

• Therefore, effective October 1, we plan to pass through a portion of the increase (2.8%) to our customers. This is strictly to recover a portion of our increased costs. GUC doesn’t keep any of the money. In fact, even with the retail increase, GUC will continue to absorb an additional $2 million during FY 2009-10 ($1.5 million for July, Aug and Sept. + $500,000 for Oct. – June)

• The adjustment has been timed to avoid the higher summer usage months (July, August, September), and minimize the impact to customers as much as possible.

• Currently, GUC’s residential electric customers (with load management) pay $121.31 for 1,000 kWh of electricity during the summer billing months of April through November. With the increase, these same customers would pay $124.98 for 1,000 kWh. The increase would mean an additional $3.67/month.

• For the winter billing months of December through March, residential customers (with load management) currently pay $110.74 for 1,000 kWh of electricity. With the increase, the same customers would pay $114.12 for 1,000 kWh. The increase would mean an additional $3.38/month from December through March.

• Greenville Utilities is not alone. Utilities in surrounding cities and towns are facing similar situations and many have already implemented electric rate increases as well.

• Even with the increase, GUC’s electric rates are competitive and below the median of $131.90 (summer) and $123.18 (winter) when compared with the current rates of 14 other regional providers.

• When GUC is faced with an increase in wholesale electric rates, we don’t pass it on to customers automatically. First, GUC tries to absorb as much as possible. By absorbing increased costs, GUC is left with less money to spend on infrastructure, system improvements, new initiatives, programs, etc. In the past, these increased costs have been offset by growth, efficiencies, technologies and managing expenditures.

• We had stable electric rates for more than a decade (1991-2002). However, our costs to purchase power increased by 6% ($6 million) during that time. Since 2002, we’ve absorbed nearly $5.7 million in wholesale electric cost increases. That’s $5.7 million we’ve saved our customers in potential cost increases.

• In the electric fund alone, since 2002 we’ve absorbed nearly $7.7 million in increased costs for poles, transformers, wire, vehicles, etc., all of which have an impact on our bottom line.

Sewer:
• GUC sewer rates have not kept up with the increasing cost of providing services and system capital needs. Rising costs of fuel, energy, supplies, materials and insurance have impacted our costs significantly. Stricter environmental regulations have also increased costs.
• In the last five years, unfunded regulatory mandates have increased GUC’s wastewater treatment costs by $2.4 million/year.
• Sewer’s five-year capital plan includes approximately $59.5 million in capital needs; many of those projects are related to reliability or regulatory compliance.

• To have a balanced budget and to meet current and future environmental requirements as well as long-term costs for system expansion, we will adjust sewer rates 4.9%, effective July 1, 2009.

• The impact of the increase will be $1.37/month for a residential customer using 6,000 gallons of water per month. This customer currently pays $28.19 for sewer, and with the increase, the same customer will pay $29.56/month after the increase.

• Even with the increase, GUC’s sewer rates are competitive, and below the $32.37/mo. median for 6,000 gallons when compared with current rates of 32 other regional providers.

Simple Ways to Offset the Increases
We encourage customers to actively pursue ways to lower their electric/water usage and costs.
The total impact of both the electric and sewer increases will be less than $5.00/month for the typical residential customer, or a total of $60/year. These (or any) rate increases do not automatically mean you have to accept an actual increase in your overall utility bill. Most families/homes unknowingly waste 20% or more of their energy/water dollars each month.
This occurs by unnecessary use of electric, water and gas. Here are some simple ways to reduce this waste which will in turn reduce your utility bill and more than offset an increase of $5.00/month.

• Start with the biggest energy user in your home – heating and air conditioning. Lowering your thermostat setting by one degree in winter or raising the setting one degree in summer easily saves over $5.00 per month. Better yet, on a day-to-day basis turn your air conditioner off when the home is unoccupied. This can save half or more on your cooling costs. It does not cost more to re-cool the home when you return.

• If you are someone who does not change your furnace filters regularly, changing your filter monthly can yield an additional 10% to 20 % saving in heating and cooling costs. At this point you have more than compensated for a $5.00/month increase and even have a few extra dollars to spare.

• Lower the thermostat setting on your water heater to 115 or 120. If it was set at 130 to 140 you can save $10.00 to $15.00 each month.

• Saving on hot water use (showering, bathing, clothes washing, etc.) can yield a triple savings on your utility bill. When you reduce your hot water use you save on the water bill itself, and you also save on the dollars it costs to heat that water and on top of all that, you save on the sewer costs.

• Take short 5 to 7 minute showers, wash clothes in cold water and check your home for water leaks. Take shorter showers. If you take 15-20 minute showers, try taking 8-10 minute showers. With a 3 person family this can save over $10.00 each month.

Our Energy Services Office provides a number of programs to assist customers in keeping utility bills as low as possible. Call Energy Services at 551-1525.

We also encourage customers to become a Beat-the-Peak volunteer. You can help us save power costs and receive an annual credit of up to $70 on your bill as a Beat-the-Peak participant. Please call 551-1583 for information or visit our website, www.guc.com.