BIPCo, too, looks at revenue shortfalls and rate increases

Thu, 06/04/2020 - 5:45pm
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The Block Island Utility District, doing business as the Block Island Power Company filed a request with the R.I. Public Utilities Commission on Monday June 1, for a change in its Standard Offer and Transmission rates. (PUC Docket 4690.)

The Standard Offer and Transmission rates are just two of many components of BIPCo’s overall electric charges and are based on the company’s best guess as to what their sales will be for the coming year. Since they are estimates, they are subject to an annual reconciliation in which any underage or overage for the past year is rolled into the rate for the coming year. While a portion of the rates is what is termed “pass through” there are some fixed costs in the mix that are unavoidable.

At this point in time, BIPCo, like every other business on Block Island, is set for a summer in which business is not as usual. Like other businesses, the boom in sales over the summer months drives most of their revenues and cash flow for the year.

Based on their experience in May, in which delivery of power was down 23 percent from last year, the company is projecting losses for the next three months, and has decided not to wait until next April to recoup those.

BIPCo is forecasting a potential shortfall of approximately $213,039 if the rates are not adjusted. At the Board of Commissioners meeting on May 16, BIPCo President Jeffery Wright suggested implementing the rate increase on August 1, but the Commissioners felt that would put the burden on residential ratepayers and they requested that Wright re-work the numbers to see what the impact would be if the rates were to go into effect on July 1.

Wright, who admitted, “None of us has a crystal ball,” has consulted with some of the largest electric customers on the island, including the sewer and water departments, the National Hotel, some of the marinas, and the Block Island Grocery, which also runs the Seaside Market and the grocery store at the Boat Basin. He also consulted with the Tourism Council.

Mary Jane Balser, who is on the Board of Commissioners, and who is also a co-owner of MACLAC Enterprises, which runs the BIG, the Seaside Market, and the grocery at the Boat Basin, has said she has no plans to open either the Seaside or the Boat Basin locations this summer.

While residential home rentals may hold fairly solid, given the lift of the 14 day quarantine rule for out of state visitors, hotels, restaurants and stores may be looking at a 50 percent decline in business. This will be a major driver for the water and sewer departments, as they mainly serve the downtown area where those businesses are located.

All in all, BIPCo is projecting revenue decreases of 30 percent for June, 20 percent for July, and 18 percent for August and September. The 23 percent drop for May is based on actual numbers.

When Dave Bebyn, CPA, who provides accounting services for BIPCo, put the forecast numbers into his financial model, the result was a proposed rate increase of 2.2 cents per kwh, if it were to go into effect on July 1. For the average customer that uses 500 kwh per month, the impact will be $11 per month. If the rate change were to go into effect on Aug. 1, consumers would have to paid $13.25 more per month.

The Board of Commissioners met on Friday, May 29, by Zoom, and again, briefly on Saturday, after Wright revised his initial projection for June losses from 40 percent down to 30 percent.

In discussing their experiences with the current situation, Balser said: “I want to point out that Memorial Day weekend was down 50 percent. Most places are not opening until right before July fourth.” She added that the recent bad weather was also a factor. “There’s a double whammy here.”

Board of Commissioners Chair Barbara MacMullan, manager of the Block Island Washington Trust branch, said: “I think it is correct to say June is off as much as May. We have yet to open a single seasonal worker [bank] account.” Taking a conservative view, she said “I would rather over charge now than undercharge and go back [to the PUC] again.”

Commissioner Everett Shorey wanted to emphasize that reconciling these rates was required by law.

The process of approving or disapproving the rate change will take 30 days, and the public will be given the opportunity to weigh in, although, the PUC has not yet set a procedural schedule.