Rate plan approved for city utilities

Sturgis City Commission this month reapproved rates for electric, water and wastewater service. 
The electric rates are for billings that begin Oct. 1, 2025, Oct.1, 2026, and Oct. 1, 2027. 
Water and wastewater are for billings beginning Oct. 1, 2025, and Oct. 1, 2026.
Review of the utility rates is conducted as part of the city’s annual budget process. 
City manager Andrew Kuk said the city has been working for several years with Utility Financial Solutions of Holland for several years to assist with utility financial management and rate design in all three of the city’s utility funds.
The enterprise funds should be self-sustaining, meeting key financial targets for operating income, cash reserves and debt coverage, Kuk said. 

Electric 
The upcoming budget year is the second year of the rate track approved by the city commission in 2024. Chris Lund of UFS designed rate schedules for the remaining period through September 2027 to streamline the rate-making process and reduce annual consulting fees, Kuk said. 
Each year on the rate schedule is designed to achieve the targeted revenue increase while progressing individual rate classes to align better with cost of service rates determined in 2023. 
To help recover fixed costs of the city’s electric distribution system, the rate design includes adjustments to the demand and service charges combined with changes in the per-kilowatt hour energy expense. 
The demand charge component is charged on a per-kilowatt (kW) basis and measures the maximum amount of power (kilowatts) used by the customer in a 15-minute period during the billing cycle. According to UFS, that rate design component more accurately recovers the fixed costs of the city’s electric distribution system. 
The per kilowatt hour (kWh) energy charge measures the total energy used by the customer during the billing period. 
The 12-month rolling average power cost adjustment factor (PCAF) tracks the difference between actual cost of power and what was collected in the rates. The current monthly PCAF adjustment is a charge of $0.09533 per kilowatt hour. Changes to PCAF have a more significant effect on customers with higher energy use. 
The proposed rate schedule also includes increased surcharges for the Energy Waste Reduction Program, which provides rebates for energy savings initiatives. The program has been in place since 2008 and is mandated by the state of Michigan under Public Act 342. The incentives are funded by surcharges placed on municipal electric bills to fund the programs and their administration. 
Through an RFP process, Franklin Energy was awarded the third-party administration of the program on behalf of participating members. Current estimates provided by MPPA to fund the program are set at $30,000 per month. Surcharges included in the budget are designed to recover those expenses. 
Also added to the rate schedule this year is the $1.25 fee per-meter per-month for the low-income energy assistance program fund. Previously, the city could select an opt-out of Public Act 95, which limited the season for disconnecting service for nonpayment. That option is no longer available. In early 2025, the city commission approved participating with the state’s program to meet requirements of the law. 

Water and wastewater 
In 2024, long-term financial projection studies were conducted in the water and wastewater utilities, resulting in a commission-approved three-year rate schedule. 
The coming budget year is the second year of the rate schedule approved by the city commission. The schedules were designed for a 2.0 percent increase in wastewater and 6.9 percent increase in water each year. 
The monthly impact on water for a residential user is $1.75 to $5.25 per month depending upon the meter size and use level. The monthly impact on wastewater for a residential user is 79 cents to $2.19 per month depending on the same factors.