The Pursuit Of Electrical Self-Reliance
We are now well into the fall, which means two important things: I usually have a good idea if my fantasy football team will make the playoffs (unlikely due to injuries), and the first draft of the new borough budget has been revealed.
The good news on the budget is that it looks very likely that taxes and electric rates will not be increasing. Spending looks to remain flat across the borough into 2021. This past year has been a budgeting challenge as the pandemic has ebbed and flowed through our community. Thankfully, financially, we have been able to keep most line items within the budget. However, there is one line item that will continue to be a challenge for years to come…the cost of buying electric.
Let me start with the reality that our residential rates are competitive with PECO and PPL. If you look at just the electric rate, it will appear that Lansdale Electric customers pay significantly more. However, if you add in all the fees from PPL and PECO into one single number, we are within a cent or two of their costs. Of course, the difference is that when you pay Lansdale Electric, your money goes back into the community; whereas when you pay PECO and PPL, that money goes toward corporate profits.
Lansdale maintains these competitive rates through our purchase power agreement with NextEra, which provides power to a consortium of municipal power providers. Last year we were able to renegotiate our contract to bring down the electric rate — and only the electric rate — bringing in a decent amount of savings over the next several years. Additionally, we were able to cut language from the contract limiting the amount of power we can create on our own. Naturally, this renegotiation extended our contract with NextEra for the next 10 years.
TL;DR: Lansdale Electric has competitive rates when making apples to apples comparisons and provides financial support to the community. We renegotiated our power agreement and cost per megawatt went down.
As I was reviewing the first draft of the budget for 2021, I noticed that our total cost for purchasing power had increased by 13% year over year — or around $650,000. Upon further review, it became clear that while our cost per megawatt/kilowatt went down YoY, electric transfer fees and other ancillary fees more than made up that short fall resulting in the most we have paid for electric (in totality) since 2018.
This is a trend that is expected to continue well into the remainder of our contract with NextEra. While we fight for the very-best rates we can achieve, ultimately, we have very little control over the fees that NextEra tacks onto delivering us power. We must find a way to generate more power locally so that we can cut down the total cost of power to the borough and gain maximum control over our budget expenditures allowing us to invest more in ourselves.
Let me be clear, the solution is not getting rid of the electric department. It provides our community an immense amount of flexibility and stability both financially and managerially. However, we need to move swiftly into a world where we are in full control of our electric power supply. Lansdale, for decades, generated our own power. So, this is not a new concept. However, unlike in the past, we can build a power generation system that is focused on green power and stays within our budget.
Thankfully, over the last few months we have begun the process of meeting with consultants who might be able to help us generate more local power giving us more control over our total electric costs. This process is only in the beginning stages, but it is one that I fervently believe in and believe will play an important part in the future infrastructure expansion of our community. The more self-reliant we can become the more we can put back into our own community which only helps us grow long into the future.