Provo City

FAQ's


  1. How long has it been since the last time we raised the power rates?
    2. The last time the Energy Department raised power rates was 22 years ago in July of 1988, although in 1994, the electric rates were adjusted by the Municipal Council through a revenue neutral adjustment to better reflect the cost of service and new rate structures.  This means that some customers rates increased while another group of customers rates decreased.
  2. How did we go so long without raising power rates?
    3. The city has enjoyed stable wholesale rates for electricity through its variety of resources. The majority of our resources are coal fired plants. The coal costs have been very stable over the years with very little change in our fixed costs. The second largest resource is from hydro electricity generated at federally owned dams like Flaming Gorge and Glen Canyon. In addition to these resources, a rate stabilization fund was established to set aside funds when there were surpluses in power costs. In time of deficits these funds were used to offset the costs. Now the rate stabilization fund is low and cannot sustain the increases in power costs.
  3. What are the Energy Departments' sources of (a) revenues and (b) expenses?
    4. (3a) The Energy Department gets operating revenues from the following areas:
    1. Commercial Sales
    2. Residential Sales
    3. Industrial Sales
    4. Other Miscellaneous Sales

    (3b) The following pie chart shows the expenses of the department:
  4. How have the Energy Departments costs increased over the years?
    5. There are four main reasons for the need of a rate increase. First, the cost of power has increased by over 15% in the past three years. The Utility receives its power from a joint action agency known as UMPA. The cost for generation and transmission has increased significantly over the past three years due to environmental controls and regulation and reduced revenues from the surplus sales in a depressed energy market. Although the cost of power resources has increased, UMPA still provides a very low wholesale cost to its members. About 70% of the retail price for electricity comes from the generation costs.

    Second, is the need to increase the capital improvement and replacement programs. The system and infrastructure must be kept in a good, operable condition. Last year, the Utility used fund balance to cover the cost of system improvement. This coming year, the Utility has urgent capital improvements needs and does not have funding for these projects. The Utility is currently upgrading its transmission system in the middle of town and improving a new substation to handle future growth.

    Third, the debt service payment for Hunter 1, our coal fired power plant, is going up. Bonds were issued in 1980 for the construction and ownership of the power plant. The annual payment increases by an additional $500,000 in the coming year, about a 1% rate increase.

    Fourth, other operating costs continue to increase and cause the cost of doing business to go up. In the coming year, the Utility again will reduce its operating costs overall. However, it continues to cover the inflationary and added costs for maintaining and operating the utility. The cost of doing business has increased over the past 22 years even though we have not changed the size of staffing and continue to make operational improvement where possible. We compare and benchmark our operations with other utilities with very favorable margins that demonstrate our operating efficiency and utility effectiveness.
  5. Will a rate increase benefit the city?
    6. The city has a “General Fund” that pays for governmental services, such as fire, police, library, swimming pools, and parks. The general fund gets monies from a variety of sources included sales tax, property tax and a transfer from “enterprise” funds (the city utilities) by an annual transfer of 10%. The 10% transfer from the enterprise fund is a benefit to all of the citizens for their ownership in these enterprise operations. The transfer is an “in-lieu-of” property tax and benefit established by prior administration and typical in the municipal power business. Currently, the general fund is undergoing a shortfall, but the purpose of raising the utility rates is not to solve the general fund problems. The administration has made the necessary cuts to the general fund to bring the budget into balance without an additional contribution from these enterprise funds.
  6. How does this relate to iProvo?
    7. Since iProvo or the telecom project was sold to Broadweave (now Veracity Networks) in 2008, no city or utility funds have gone towards the operation of the fiber optic network. Under the current arrangement, Veracity Networks continues to make monthly payments to the City for the purchase of the asset which payments are used to pay down the city’s debt for the telecom project. Originally the purpose of the project was to improve connectivity and communications between city facilities, electrical substations, and other critical city buildings. Starting in 1999, the first phase of the project enhanced services and streamlined the operations of the city. Then, in 2004, the City issued Sales Tax Revenue Bonds to raise an additional $39 million for the construction of a city-wide network for residential purposes. For a few years, the city-wide network generated enough revenue to cover its operating costs and some of its debt service. However, the shortfall was made up through loans from the Energy Department. Eventually the City elected to sell the asset to a private company and the buyer agreed to pay the bonds over the next 22 years and an additional amount that was applied to some of the other outstanding debt. The debt that was not included in the sale price was written down using the utility’s cash reserve. As part of the transaction, however, the city retained assets and rights that continue to benefit the city.
  7. How much will rates increase?
    8. A consulting firm was hired to conduct a Cost of Service and Rate Design Study. Using budget numbers and forecasts based on 2009, the consultant found that in order to maintain appropriate reserves, a rate increase of 17% would be necessary. The original proposal called for a 9% rate increase for the first year and smaller increments in the coming years, although new forecasted numbers and revised budget estimates call for the first rate increase to be closer to 11%. The staff continues to look at this and will keep the public and council posted as to any new developments. However the expectation to meet the operating costs call for an 11% rate hike to go in effect June 1, 2010 with an additional increase of 6% in the coming year.
  8. How much will that that cost the average home?
    9. Based on the average residential user on the Provo system (about 700 kWh of energy per month), the monthly bill will go up about $5.00 per month.
  9. If the rates increase that much, how will we compare to other cities?
    10. Provo will still be the lower cost electric provider for comparable utilities in the state. We strive to provide a reliable and safe source of electricity at a competitive rate.
  10. What will happen if we don't have a rate increase?
    11. If the rate increase is not approved, the Energy Department would have to consider cutting more operating expenses, reduce services or programs and use fund balances. All of these and more would be discussed and a new plan of action would have to be developed.
  11. What is the Urgency, if any, of doing this now rather than in a few months or next year?
    12. The city has tried to defer a rate increase for many years and the need is critical. Delaying a rate increase will simply cause the need for a higher rate hike in the future. In the future the utility plans to ask for smaller and more moderate increases as needed. The days of many years without a rate increase are behind us as the utility faces more environmental regulations. Renewable resources and other energy alternatives are also going to come at a higher cost.
  12. What is the process, who will decide and how can the public give input?
    13. The Municipal Council is the governing body for the utility. There will be a public meeting to consider the rate increase on May 18th, 2010. Prior to that hearing, the public can share comments, suggestions, and support or opposition through a variety of options. There will be neighborhood and public meetings to educate the consumers and receive input. The public can submit comments directly to comments@provo.utah.gov or mail them to:
    Provo City Power
    Attn: Kathryn Linford
    251 West 800 North
    Provo, Utah 84601
  13. Will this be the only increase for several years and what is the long-term plan?
    14. The cost for power will continue to increase in the coming years due to stricter environmental controls and regulations, fuel sources and scarcity of resources. The utility plans to ask for more moderate or smaller increases more frequently than before as deemed necessary.
  14. What if we can't afford the rate increase? How can we save through energy conservation?
    15. There are some options available to help with payment assistance such as: setting up the utility account with budget billing, setting up a state assisted H.E.A.T Program, and more. For these options and other information you can call our customer service call center at 801-852-6000. In addition to these options, energy conservation is another way to reduce the monthly utility bills and help the environment. By implementing energy conservation programs and practices, the consumer can lower its costs. Many of these energy conservation ideas are available by visiting our website at www.provo.org or the Department of Energy’s website at www.energysavers.gov.