The city of Aspen’s programs to encourage energy efficiency by charging large users higher rates may be working too well, leading to lower-than-projected electricity sales and a revenue shortfall.
Utilities department officials told Aspen City Council in a work session Monday that electric energy usage has been declining approximately 1.3 percent annually since 2008, even while the number of electric accounts has gone up about 2 percent a year.
The city utility has a tiered pricing system, where accounts that use more electricity pay more — sometimes as much as four times more than base-tier rates.
“Recent data shows that more of the conservation is occurring for those customers who have higher usage in the higher priced tiers, thereby disproportionately affecting revenue,” says a memo from utilities operations manager Lee Ledesma.
“The rates themselves are sending a message,” said Phil Overeynder, former utilities director who now works with the department part time.
Electric utility revenues for 2012 were off budgeted projections by 5 percent, or $370,000, according to Ledesma’s memo, which called the shortfall “significant.” The city had estimated about two years ago that consumption overall would decrease 1 percent a year.
“ ... [I]t is apparent that the unexpected levels of conservation in the upper tier usage requires a reevaluation of the rate system,” the memo says. No specific rate adjustments have been proposed, but “a thorough analysis of economic and consumption trends” will be presented this summer.
“The effect or future rate adjustments should be minimal compared to the benefits from reduced usage,” the memo says, adding that customers who undertake efficiency upgrades can still expect lower bills, even after any additional hikes.
Ledesma noted that all the efficiency work has created jobs in the areas of weatherproofing, energy audits and the installation of upgraded equipment. The economic activity has been aided in part by a local program through Colorado Mountain College — known as the “Building Performance Institute” — that trains people in the energy efficiency field.
Prior to Ledesma’s presentation on Monday, council heard from Jeff Rice, the city’s utilities efficiency manager, who detailed the community’s work through the last seven years to bring down the energy consumption of buildings. Ledesma credited Rice’s work and similar efforts through other utility providers and the Community Office for Resource Efficiency, with the decrease in consumption.
Aspen Mayor Mick Ireland said the issue is “a good problem to have,” and thanked Rice and CORE for their efforts. He also said the tiered rates are accomplishing their goals.
In 2011, the city approved a new rate structure that reflects the actual “cost of service” of delivering power. The new scheme will raise rates gradually over the next 10 years. The city could possibly accelerate that transition to make up the efficiency revenue shortfalls, Ledesma said.