The appearance was brought up by Alderman Jerry Mizell at Monday’s Metropolis City Council meeting.
Mayor Billy McDaniel noted it was the first time this summer the Purchase Power Agreement (PPA) has appeared in the electric portion of customers’ utility bills.
PPA is a fluctuating adjustment calculated each month in accordance with an ordinance passed by the city council and can only include the excess cost of purchased power. It is based on what the cost of power is. The formula for that calculation has been used since 2006. At its Nov. 26, 2012, meeting, the council unanimously adopted an ordinance that lowered the PPA from between 1.72 to 5.37 cents per kilowatt hour a month to between 0 and 2.8 cents per kilowatt hour over the next 12 months.
Drawing a line on a piece of paper Monday, city attorney Rick Abell once again explained how PPA works.
“This line is the average cost of power. We’ve set ours at 7.2 cents per kilowatt. When a three-month average of our cost gets above this line, that’s when the PPA kicks in,” he said. “The PPA is the difference in that three-month average and this base line. If it drops down below, we don’t have a PPA. If it stays even, we don’t have a PPA. But when it comes up, we have a PPA,” he said. “The hot months, that’s your peak power, that’s the most expensive power that we buy. Our power rates do fluctuate that we buy. (The PPA) doesn’t take any action on the part of the mayor or the council or anybody else — it’s automatic, it’s built in to the rate structure.”
McDaniel said Monday that while the PPA was not on his own bill this cycle, he has seen a $129 electric bill with a PPA of $2.63 — a low cost to the consumer compared to sometimes over $40 in the past, he noted.
McDaniel reminded council members Monday that during the passage of the November 2012 ordinance, it was emphasized several times “that probably nine to 10 months out of the every year, you would never ever have a PPA. But in the hot weather in the summer time, there would be a chance that you would have it two months, or if it’s extremely hot three months. More than likely, unless it does cool off into the 80s you’ll experience one this month, possibly next month and even possibly September if it stays in the 90s.”