Richland rate payers can expect their electric bills to go up in January by at least 8.9 percent for homeowners and up to 20 percent for some commercial and industrial power customers.
The city council learned Tuesday that various factors are driving the need to increase rates, but most of the increase is because of unavoidable costs from the Bonneville Power Administration.
Bob Hammond, director of Richland Energy Services, said the "cost of services" analysis completed in May by FCS Group showed retail energy rates have to go up an average of 14 percent so the city's electrical utility can meet expenses while continuing to deliver power to customers.
But the increases will vary according to customer classes and the demand.
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Hammond said terms of a new power agreement with BPA are prompting the increase.
That agreement has a tiered rate structure, which triggers a higher cost of wholesale power when the amount delivered exceeds a set amount.
As a result of the two-tiered rate system and the expected growth in energy demand in Richland, Hammond is expecting a 21 percent increase in wholesale power costs from 2011 to 2013.
Hammond said residential rates were projected at 12 percent, while large industrial customers would face even higher energy bills if the city wasn't willing to shift money on the short-term to whittle down the charges.
A final decision won't be made until the fall, after Richland's Utility Advisory Committee meets in August and gives its recommendation to the council.
Hammond has proposed there be a 20 percent cap on rate increases, which would apply to small businesses, small industrial enterprises and any other category where the potential increase could exceed 20 percent.
Without the cap, security lighting would increase 28 percent, small general service energy costs would go up by 23 percent and small industrial power consumers would experience a 33 percent higher bill.
But the biggest hit would be for street lighting, where costs would almost double with a 45 percent jump.
Hammond said the "cost of service" analysis indicated there would be an $8.75 million revenue deficit without a rate increase.
The municipal utility provides about $35 million a year in retail power.
Hammond noted that Richland utility charges, which were set in 2004, are out of alignment with BPA's two-tiered rate structure.
But even with an increase of up to 20 percent, with the cap imposed, Richland's utility still would have lowest electrical rates in the region, Hammond said.
The council will begin considering a proposed rate schedule in September, and a pubic hearing with possible adoption likely would occur in October, Hammond said.