FORT SMITH -- During a meeting Tuesday evening, city directors adjusted the city's Water and Sewer Operating Fund adding $250,000 for utilities in fiscal 2021.
Utility Director Lance McAvoy said while the city has tightened its budget and been strategic in planning, the "snowmageddon and sub-freezing temperatures" in February caused electrical and gas rates to increase for both producers and purchasers.
McAvoy said the Arkansas Valley Electric Co-Op, which supplies the electricity for the Lee Creek Water Treatment Plant, has added an energy cost recovery plan to recoup costs over eight to 12 months. He said the Oklahoma Gas and Electric power station, which supplies electricity for the Lake Fort Smith Water Treatment Plant and the majority of the city's wastewater treatment plants, has a plan to recoup costs over eight to 10 years.
Arkansas Valley purchases most of its electricity, while Oklahoma Gas and Electric produces its own, McAvoy said, and explained that's why the operating fund adjustment would effect the Water Department more.
"To finish out paying our electrical bills for the rest of the year, the staff is requesting a $250,000 adjustment to the budget for this year. We are hoping that eight to 10-month period will end, and that our projections for 2022 will be much more close than what 2021 ended up being," he said.
Kevin Settle, an at-large director, called it a massive increase, and asked why Arkansas Valley wasn't asked to attend a study session so the directors could question the planned recovery time.
"Can you imagine if we did that to the public today? If we said 'Hey, we've got sewer pump houses that are down $10 million and we need to recoup it. We need to make everybody raise rates over the course of the next 12 months.' Do you think it would be fair to them? No. We don't. We do it the right way. I think this is the wrong way."
McAvoy said the city received no notification before Arkansas Valley increased rates.
"We just noticed that the bills were going up when we got ready to pay, and our budget was depleted. Their concern as a co-op -- because again, they don't produce, they have to purchase -- is if next year they experience something similar do they have the cash reserves to purchase electricity again to keep people's lights and heat on? So that is their business model."
"For OG&E, I know they spent in that one week an amount on natural gas equal to the entire year's budget, and that's what they're recouping over the period of time," City Administrator Carl Geffken said. "We're not happy with it."
Geffken also noted the state Public Service Commission approved both rate increases.