Lincoln Electric System officials briefed the City Council on Monday on its budget, which includes the first rate increase in five years.
The 4.8% rate increase is part of a $330.7 million budget for 2023, which includes $275.5 million for operating expenses and a $55.3 million capital budget.
LES officials have said the residential rate increase would cost the average customer about $5 more a month.
Rate increases also are proposed for commercial and industrial users, varying from 3.9% to 6.1%, based on the cost to serve each customer class.
Any rate changes would go into effect Jan. 1.
Bud Synhorst, president and CEO of the Lincoln Independent Business Association, told the council his organization's members are concerned about a dividend LES pays to the city for its ownership of the utility, and removal a few years ago of the cap on that dividend.
The dividend has increased from $3.25 to $14.40 over the past decade, more than a 400% increase that costs his members thousands of dollars, Synhorst said. He asked that the council consider reducing the dividend or go back to capping the amount charged to customers.
LES officials said increasing operating costs at LES resulted in a $13.2 million deficit in the budget, requiring the rate increase both to pay the bills and maintain its current bond rating, which allows the utility to borrow money at lower rates.
The main increases come from rate increases in the costs of power and transmission, LPS officials said. The utility said its net power costs are up $3.5 million and transmission costs are up $9.6 million, but it has been able to offset those increases somewhat thanks to reductions in other operating expenses.
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LES officials also told the council about a resolution that would allow it to offer up to $300 million in bonds over the next two years without having to seek council approval.
LES officials said the resolution is mostly a convenience to make it easier for them to issue bonds if necessary, but there are no plans to do so in the next two years.
The LES board of directors approved the budget, including the rate increase and bond resolution. The council will vote on it at its Nov. 21 meeting.
In other action, the City Council approved a redevelopment agreement for a $22 million project to turn the Gold's Building in downtown Lincoln into a 104-room hotel with retail space on the first floor and 10,000 square feet of office space on the sixth floor.
The agreement authorizes using $4.2 million in tax-increment financing, which allows the future property taxes the redevelopment generates to pay for certain upfront costs.