Huntingburg Council rejects gas rate increase, seeks more balanced approach

The Huntingburg City Council voted down a proposed gas rate increase ordinance, directing financial advisors to develop a more balanced approach that shifts costs toward base charges rather than usage rates.

During a public hearing on Tuesday, council members expressed concerns about the impact of the initially proposed 27 percent rate increase on residents, particularly those with fixed incomes.

“We don’t want to put such a burden on people,” Councilman Jeff Bounds said about a potential increase. “Some people are already at that limit. And so we have to be really mindful of that as we’re coming up with these numbers.”

Here is a story on the proposed increases from last month.

The rejected ordinance would have been the first significant base rate adjustment for the city’s gas utility in about 12 years, according to financial advisor Buzz Krohn. While there was a minor modification in 2022 when the utility receipts tax was eliminated, resulting in a 1.2 percent rate reduction, the base rates were established in December 2013.

Krohn explains that the gas utility faces financial challenges. Operating expenses were about $4 million in the test year ending May 31, 2024, and projected operating expenses are $4.4 million going forward.

“Last year, we were upside down about $335,000. And over the past three years, we had a decrease in cash of over $800,000,” Krohn said.

The council’s discussion focuses on better balancing base charges and usage rates. Bounds expressed concern that too much of the utility’s revenue depends on weather-driven gas usage.

“It feels like right now a large amount of our revenue is based on the weather, which doesn’t feel like a smart business point,” Bounds said, adding that the utility has fixed costs whether people use the gas or not.

Council members agreed that the current base charge of $7.40 is too low to cover the fixed costs of maintaining the gas system. The proposed ordinance would have increased it to $10.40, a 29% increase on the base charge.

“The base charge is what we think is important,” said Councilman Steve McPherron. “We know that we can’t cover the operating costs of the utility with the base charge. You just can’t do it. But I think a higher percentage of reality [sic] needs to be put on the base charges.”

Mayor Neil Elkins told the council that they had considered increasing the base charge to $14 without affecting the rate charge.

Councilwoman Pam Bolte asked about the impact of increasing the base charge to around $12 for residential customers, which would allow for a smaller increase in the usage rate. This approach would provide more consistent revenue for the utility while potentially reducing the overall percentage increase on gas from the proposed 27% to around 18%.

“There should be a certain amount of cost for that meter hanging on your house,” McPherron said, pointing to the fixed costs of providing these assets for customers. “Availability cost. It’s no different than anything else.”

Krohn made a few suggestions to reduce the utility’s state mandated revenue requirements, including removing a $50,000 provision for repaying an electric utility loan and reducing the materials and supplies budget by $150,000. He also said they could reduce the increased price on usage and present a new ordinance for consideration.

During the public hearing, resident Janet Schnell spoke to the council about the impact on vulnerable populations.

“As a homeowner, we’ve already seen all the prices going up for our food. Everything continues to go up and our income isn’t going up,” Schnell said. “Your decision is really going to weigh heavy upon our older group and people with fixed income.”

She supported a more gradual approach to rate increases.

“I think it’s a little bit easier to make changes over a gradual period compared to a larger chunk,” Schnell said.

After discussion, the council unanimously voted to reject the proposed ordinance and directed Krohn and City Attorney Phil Schneider to develop a revised proposal with a higher base charge and lower usage rates.

According to Krohn, even with the proposed changes, Huntingburg’s gas rates would remain competitive compared to other utilities in the region. According to comparisons presented at the meeting, Centerpoint Energy, which serves over 100 communities throughout Indiana, and several other regional gas providers charge higher rates than Huntingburg proposes.

The council will consider a revised ordinance at a future meeting.