SUMMERSIDE – Facing a $2.5 million deficit, staff at Summerside’s municipal services department want council to increase power rates by 2.2 per cent on March 1.
Municipal Works director Greg Gaudet said the 2.2 per cent hike translates into $60,000 that the city can put towards its operating deficit.
Mayor Basil Stewart raised the issue of the Harmonized Sales Tax that comes into effect on April and will increase power rates a further nine per cent. He said with the city’s proposed hike, customers are looking at the possibility of an 11.2 per cent increase in their rates on April 1.
The recommendation also brings the city in line with a 2.2 per cent increase in rates by the Maritime Electric Company, which provides electricity to Islanders outside of Summerside. Figuring into the recommendation are 600 to 700 residences within city limits not presently serviced by the city utility, but by Maritime Electric. Efforts to secure those customers from Maritime Electric have so far failed.
Stewart suggested the city keep its rates below Maritime Electric’s.
“If we’re going to have some kind of incentive to attract business, to attract development, or attract whatever, we should lower our electrical rates,” Stewart said. “Plus if the other customers on Maritime Electric, they would push that much harder to become part of the city system because their bills are going to be higher with Maritime Electric than with ours.
“Is this a lever for us or a way to attract development?”
Gaudet said the city has incentives in place for some new businesses that meet certain requirements and those incentives will not change.
But Stewart said it would be a stronger incentive if rates were lowered across the board.
The mayor said he knows it would result in a loss of revenue, but believes new development acquired through the reduction in rates could offset any potential losses.
“We have an asset here that we control,” Stewart said. “If we can keep our electrical rates a little lower, I think it would be an attraction for development.”
Councillor Jeff Sullivan said he would not be supporting any increase in electrical rates.
Through the entirety of my time on council, and for a very long time preceding my election to council, I was of the feeling that this is an asset that we can take advantage of,” Sullivan said. “I’ve long seen lower electricity rates as being a very effective growth strategy. I have never, ever been a fan of the automatic increases which follow Maritime Electric. I think the automatic increase that occurred in 2010 (14 per cent) was excessive and ill-advised and particularly, with the introduction of the HST on April 1, I wish to make note that I am not supporting anything but a complete freeze on electric rates.”
Councillor Cory Thomas said he is in favour of keeping rates low, but added if there is revenue lost by not increasing power charges, any shortfall will have to be made up somewhere else in the city’s general budget.
Thomas said he is certainly not opposed to reviewing the city’s general
revenue fund, but added it is something council needs to consider as budget deliberations take place.
All of council agreed that it is time for the city to play “hard ball” in bringing the 600-700 customers being serviced by Maritime Electric under the city’s umbrella.
Council advised Gordon MacFarlane, the acting CAO, to discuss with the city’s auditors, to negotiate with Maritime Electric and the province to buy back these customers.
Council was of the opinion that this plan would at least give the city a point to begin serious negotiations with Maritime Electric.
The 2.2 per cent increase was part of the three phase plan by the province. The first phase of that agreement involved a 14 per cent increase in power rates and then a freeze for the next two years. That time frame ends March 1, when the agreement called for a 2.5 increase this year. That was later reduced to 2.2.
The city is faced with that deadline, but council was unanimous that they need to discuss the issue during budget deliberations. The budget will not be ready until the end of March.
One plan the city is looking at is the implementation of the March 1, 2.2 per cent increase and then, through budget deliberations, find a means of eliminating that hike by identifying other areas of the budget that could make up the shortfall.
If that can be accomplished, all city residents including the 600-700 customers not being serviced by the Summerside Electric Utility would receive a 2.2 per cent rebate on their power bills.