In Depth: Residents Protest Electric Rates, Council Proposes Resolution Amending Rates

Over 50 residents attended Monday’s council agenda meeting to protest a spike in electric bills from May to June, forcing the meeting to be moved from council chambers to the auditorium. Council had forewarning of citizen unrest and had already prepared a preliminary resolution adjusting electric rates.

Ellwood City Power and Light

The Ellwood City Borough has a municipal-operated electric company, Ellwood City’s Power and Light. The borough purchases power from the American Municipal Power Supply [AMP] at a current rate of $.08529 per kilowatt and resells it to Ellwood citizens for a profit.

Funds are subsequently transferred from the Electric Fund to the General Fund to finance all borough departments. According to numbers given by Borough Manager Bob Villella, $1,450,000 were transferred in 2015 out of a General Fund operating budget of 3.3 million or approximately 44 percent.

This is used as an alternative revenue source instead of taxes. Borough taxes are currently at 7.75 mills after having been raised from 6.75 last year.

Adjustments to electric rates are applied through a formula called Purchase Power Adjustment which appears on bills as Rate Adjustment. The current ordinance can be read here.

Ellwood City is one of 35 municipalities in Pennsylvania that use municipally-owned electric as a revenue source. Wampum and New Wilmington are the only other municipalities in Lawrence County that use this system. In Ellwood City, this source of revenue goes back several decades, although a specific year was not given at the meeting.

In addition to information given at the meeting, the Ellwood City budgets for 2015 and 2016 are available on the borough’s website. The revenue breakdown for 2016 shows 42.69 percent from taxes, 30.08 percent from transfers from other funds and the remainder from six smaller sources.

The 2016 borough expenses by department list the police department as 40.63 percent, public works as 24.96 and the remainder divided between five other departments. These seven services are all funded partially by the Electric Fund.

According to Borough Solicitor Ed Leymarie, under Pennsylvania law, municipalities that control their electric are allowed to require all residents to purchase power from the government utility.

He added that switching to a pure tax system would have the advantage of being tax deductible but the burden would fall on fewer residents because renters typically pay utilities but not property taxes.

July’s Electric Billing

Numerous residents protested massive spikes in their bills. One resident said her bill went from $207 to $431. Another resident said her bill increased even though she had been in California for 24 days in June.

Council responded the increase may be attributed to an increase in transmission charges which are controlled by an organization called Pennsylvania-Jersey-Maryland. AMP predicts these charges will lower but couldn’t say when or by how much.

Villella said the borough is investigating individual electric bills to see if there were mistakes.

“We know some bills are extremely high,” council president Connie MacDonald said. “But we don’t know why.”

MacDonald reminded residents that council, as citizens of Ellwood City, also pay Ellwood electric bills.

Resident Concerns

• Lee Ann Houk said the office hours at the Electric Department are horrible and that only 10 days to pay a bill before utilities are terminated is a terrible policy. She also said that her business is in Franklin Township because electric rates are too high to operate a business in Ellwood.
• Linda Cole has difficulty renting property because prospective tenants are frightened off by the electric rates.
• Joe Carofino repeated comments he made at a public hearing on zoning with the belief that a zoning revamp will hurt businesses in the borough. He stated the borough should focus on incentives, including reduced electric rates, for businesses.
• Rochelle Spagnolo, owner of Konsignment Konnection on Fifth Street, said she meets many customers who are struggling to pay their electric bill, let alone further provide for their families. “I moved here because I really believe in Ellwood,” Spagnolo said. She also said the electric bills have insufficient explanations, specifically mentioning a lack of a graph and the mysterious way Rate Adjustment works. “The bills are so shady. They don’t show why what is what. You just have to bend over and take it.”
•  Another resident said he put his house up for sale because the electric rates are too high to remain in Ellwood, and he is considering leaving the Ellwood City School District. EllwoodCity.org reminds this Wolverine that Wayne Township, Perry Township, Ellport Borough and Wampum Borough are all in Ellwood City School District.
• Another resident who recently moved from Franklin Township said she never got her bill, just a notice of termination. When she tried to communicate with the Electric Department, she was told she’d receive a late fee.
• Former council member Ralph Chiappetta mentioned a device that could monitor the energy use of a piece of equipment such as an air conditioner and inquired if the borough still had that tool available to residents. Nobody on council knew what it was.
• Dan Hink said it appeared that somewhere along the line from AMP purchasing electric to the borough selling it to customers, there had to be an inefficiency in order for rates to be so high. He also suggested the borough forewarn residents of when Rate Adjustment will inflate bills.
• Bill Grossman agreed with other visitors that the bills were vague, especially in terms of Rate Adjustment. “Customers come first in any company except Ellwood electric,” he said.
• Lisa Guerrera said her bill was $150 more this month and that she believes Ellwood residents should have a choice in their electric provider. She said she filed a complaint with the Pennsylvania Attorney General. However, as stated above by Solicitor Leymarie, what Ellwood does is legal.

Response to Customer Service Complaints

Manager Villella voiced concern over the costumer service complaints.

“Our method of communication with costumers is insufficient and should be changed,” he said. “We are currently looking for a software company to change our bills to be more descriptive.”

Villella added that he will speak with the Electric Department regarding costumer service concerns.

The borough has also adopted a two-stage payment plan to assist residents in paying bills they cannot afford. However, this was met by further criticism from visitors as 1) some residents believe there is a possibility their bills are in error and 2) two weeks is still less time then a typical Electric Company permits.

In addition, President MacDonald, who used to work in the utility industry, offered to sit down with any resident and explain their bill.

Response to Electric Rates

Ellwood City Council prepared a resolution altering the electric ordinance. This will possibly be voted on at Monday’s meeting.

The table below highlights some of the proposed rate changes.

kWh= kilowatt hours. KVA=  1,000 volt amps. Numerical value = dollar amount. Further definitions can be found in the ordinance.

In addition, the formula for Purchased Power Adjustment (PPA), which appears on bills as Rate Adjustment (RA), has been modified so that the base purchase power (B), a variable which lowers the total Rate Adjustment, has been increased from .06235 kWh to .08931.

The changes appear to have been made to create more even bills for residents throughout the year and decrease the variability of Rate Adjustment.