STARKVILLE – Starkville Utilities hopes to implement incremental electric rate increases, raising the base customer rate by about $2 annually over the next three years.
Edward Kemp, general manager for the utility, said the proposed plan would generate an additional $650,000 a year that will help fund capital improvements.
Even with the rate increases, however, Kemp said the electric department’s Fiscal Year 2027 budget will include a $375,000 shortfall.
“The story on this is really the increased (operation and maintenance costs),” he told the board of aldermen Friday during a work session at City Hall. “I know everyone has seen that and felt that whether it be doing maintenance on your vehicle or buying groceries at the store or doing any type of construction. We’ve certainly seen it in the electric department as well.”
Kemp said the proposed rate increases would be the first implemented by Starkville Utilities in a decade, though wholesale price hikes from Tennessee Valley Authority were passed onto utility customers in 2023 and 2024. Those increases ranged between 4.5 to 5%, he said.
The proposed rate structure, which the board of aldermen will consider during its Tuesday meeting, would see a 2% increase annually each November from 2026 to 2028, raising the monthly base customer charge from $17.03 to $19.03 in the first year. For a customer using 1,000 kilowatt-hours of electricity a month, that translates to an increase in the average monthly bill from $119.75 to $121.85 in the first year.
Kemp said even though Starkville Utilities has one of the lowest operating and maintenance costs per customer among other utilities in the TVA territory, it has still seen that metric increase by more than 75% over the last decade. Additionally, he said prices for frequently used materials have risen across the board since 2022, with increases ranging from 25% to 70%.
“There’s been really no difference in how we’re maintaining and operating the system, but it’s going up, and then our net income … is going down, even into the negative,” Kemp said.
Kemp said the rate increase proposal would set the utility up well to execute its updated five-year capital improvement plan. He said the system has been depreciating faster than the utility has been reinvesting in it since 2022.
“That’s probably OK for a year or two, but long term that’s going to cause you some problems,” he said. “… That is very much so what we’re seeing on the water and sewer side. We’ve been running into the red for a long period of time, and now we’re having to play a huge catch-up game on that.”
The city has been working to improve its wastewater treatment plant after a 2024 report found the plant needed $43.8 million worth of facility upgrades. The report recommended about $15.5 million worth of those needed improvements needed to be done sooner rather than later, including replacing six aerators that failed in 2019 and installing new headworks to allow for future capacity growth.
Ward 1 Alderwoman Kim Moreland expressed support for the increase, noting it should have been considered before 2022, when the system’s depreciation outpaced investment.
“Luckily we are in the position where we can act on the front end, not like what we had to do with water and sewer when it just got to where we didn’t have a choice,” Moreland said. “This is us being somewhat proactive.”
Kemp said over the next five years, the utility aims to prioritize its pole replacement plan, replacing aging large equipment, replacing street lighting with LED fixtures and making continued investments in smart grid technology. Additionally, the plan calls for investments in substations, including the Northeast Substation, which is the old one without proper voltage regulation.
Noting the $375,000 shortfall, Ward 2 Alderwoman and budget chair Sandra Sistrunk said it is not sustainable for the utility to continue filling the gap by drawing from its cash reserves, which Kemp said currently sits at about $7 million, just below the rule-of-thumb benchmark of roughly two months’ worth of power costs.
“Without the rate increase, … you’d be taking a million or so out of your ending cash reserves, which just hastens the using up all of the cash reserves that you’ve built up,” Sistrunk said. “It is simply not sustainable.
“I like the incremental approach,” she added. “I think it does give people a chance to build it into their budget and that sort of thing. I’m a little bit afraid that it might not be quite enough, but we will accept your guidance on that.”
McRae is a general assignment and education reporter for The Dispatch.