Hurricane staff propose Power Cost Adjustment and rate redesign; council presses for consumer protections

Hurricane City utility staff on Monday detailed a five‑year cost‑of‑service study and a proposed rate redesign that would introduce a Power Cost Adjustment, or PCA, to pass through wholesale energy costs while shifting certain revenue from the power charge into the base rate. The council and staff framed the change as a way to stabilize utility finances while smoothing short‑term market volatility.

The Power director told the council the PCA would ‘‘function as, almost a pass‑through cost for power,’’ calculated monthly as a 12‑month rolling average and shown on customer statements as a single line item that could be either a charge or a credit. Staff said the redesign aims to remain roughly revenue neutral by lowering the power charge while slightly increasing base rates to make up lost cost‑of‑service revenue.

The proposal is tied to market changes the city faces: staff said Hurricane participates in a UAMs group that will use EDAM (an extended day‑ahead market), which requires selling into and buying from a centralized pool and creates new long/short exposure that a PCA can isolate from the base rate. To reduce near‑term volatility, staff also reported they committed to block purchases covering upcoming peak months at rates below current spot prices.

Council members pressed for clarity on the consumer impacts. One council member said she had been a long‑time PCA opponent but had moved closer to supporting it after hearing staff’s rationale; she warned that neighboring cities’ published rates can look high even when customers receive monthly credits. The City manager said he was ‘‘a little torn’’ but appreciated that a revenue‑neutral approach and a stronger reserve position could shield the city from spikes in wholesale prices.

Members emphasized protection for residents on fixed incomes. A council member asked whether the city could combine the PCA with annualization or billing‑smoothing programs; staff noted those programs have limits and, when handled manually, can lead people to underestimate true seasonal usage. Staff recommended robust public outreach — open houses, neighborhood meetings and detailed bill comparisons — to avoid surprises when the PCA first appears on statements.

Staff described internal financial safeguards: the city intends to maintain a depreciation fund at about 38% of depreciable assets, a contingency equal to 1% of budgeted revenue and an operating reserve target roughly equal to 10 months of operations and power costs; the cash‑reserves policy requires action if funds drop below targets or are forecast to do so for 12 months. Staff also said AMI metering is already being rolled out and could support future rate options such as time‑of‑use pricing.

No formal decision was taken. Staff said the PCA could be implemented on a trial basis and reversed if outcomes were problematic, but reversing would require reworking the accounting and rate schedule. Next steps staff outlined include bill comparisons in the upcoming slideshow presentation to council, finalizing billing system changes to add the PCA line, and a public education campaign ahead of any implementation.