AMES — Residents could see a 2.5% increase in electric rates after the City Council directed staff to prepare for the change Sept. 22. The council has not voted to approve it.
The proposed increase comes as Ames weighs repairs to its aging municipal power plant and future energy costs. Based on the average monthly electricity use of an Ames household and the current rate per kilowatt-hour, a 2.5% increase would add an estimated $20 to $40 to a monthly bill.
“Is a ratepayer going to need to pay a little bit more money for electricity? Yes,” Ames Mayor John Haila said.
Haila urged residents to compare the city-owned utility’s rates with those of other electricity providers.
“I would encourage people to look at what their cost per kilowatt-hour is, compare theirs to a private electricity provider, and then I think they would appreciate how much less money they’re paying for their electricity from the electric utility owned by city versus a private entity,” Haila said.
The rate discussion is tied to a larger decision about Ames’ power supply. One of the city’s two boilers dates to around 1960, while the other dates to the mid-1980s.
“They [two existing boilers] both have essentially outlived their life expectancy,” Haila said.
Keeping the plant running has already required costly repairs.
“We have seen change orders over the years that have been millions of dollars to go in and just fix some of the piping,” Haila said. “It’s very labor-intensive. The materials are very expensive.”
Now the city must weigh further renovations against building a new thermal energy plant. Haila put the most recent estimate for a new plant at approximately $190 million. He said utility revenue would support the project’s debt payments, with the city backing the debt if the utility could not make them.
“The debt service will be paid by revenue generated from electricity sales,” Haila said. “So that’s why we talk about, is it a 1.5% or 2.5% increase in utility rates, is to help service that debt.”
Renovating the existing plant presents a different cost: major work could take equipment offline, reduce Ames’ generating capacity and force the city to buy more electricity from the regional grid.
“There’s multiple factors that enter into it,” Haila said. “One is in order to do a, let’s say, a significant renovation to the power plant would mean that there would be a temporary partial loss of production capabilities during rebuilding of the plants and boilers.”
Whether a new plant would eventually lower electric bills remains unclear. When asked about its effect on residents’ costs, Haila said he could not make that determination at this stage and would rely on city staff’s analysis.
The city is also considering reliability, sustainability, its climate goals and the connection between its power and resource recovery operations as it evaluates its options.
For now, the 2.5% rate increase remains in preparation. Customers’ rates will not change unless the council takes final action.
“Staff and council take very seriously any kind of rate increases as well as any kind of property tax increases, because we want to be good fiscal stewards on behalf of our community,” Haila said.