South River officials on Monday voted down an ordinance that called for a 50 percent electrical rate increase for borough residents.
The ordinance, which was up for introduction, split the Borough Council along party lines, with Republicans in favor and Democrats against. Democratic Mayor Robert Szegeti broke the 3-3 tie by voting against the ordinance.
“The point is that they were willing to go into this blindly,” Szegeti said of the Republicans. “We understand that there is an increase [needed]. We are not denying that fact.”
The borough made a bulk purchase of energy in May that will result in a rise in energy costs next year when the borough’s current bulk purchase contract ends.
The borough is one of eight municipalities in the state that belong to the Public Power Association of New Jersey. The collective works together to buy energy in bulk and then allocates the energy among the various municipalities, which by state law are the sole providers of the electric utility service to their residents.
Energy from the bulk purchase will be allocated in each of the eight towns starting Jan. 1, 2008, and run for the next 17 months.
South River’s current contract, which expires in December, protected the borough from a recent increase in energy costs, but the spike in costs was felt with this year’s purchase, according to Borough Business Administrator Andrew Salerno.
Szegeti said he believes the council should wait until it knows how much money is left in the electric utility surplus account before approving a rate increase.
“I don’t think we can intelligibly raise the rates [at this time],” Szegeti said. “There is no doubt that we will have to raise rates. No one disputes that, but we do not have all of the information.”
Szegeti said he and the other Democrats were accused of inflating the surplus years ago.
“The Republicans are being accused of it now,” Szegeti said. “They don’t have exact charges for the last quarter, which we will not get until the end of October, so that the auditor has the ability to put all of that together and get a calculated number.
“And … there will still be enough time to pass the increase with real numbers, not arbitrary numbers, as was being suggested,” Szegeti added.
Council President David Sliker, also a Democrat, said he could not vote for the 50 percent rate increase, even knowing that a hike of some sort is inevitable.
“Our bulk electric contract has expired and we went out twice for a new contract, and the new contract bulk rate has increased,” Sliker said. “However, we still do not know what the surplus rate is, and we don’t need [the rate increase] until February 2008. Therefore, it is just irresponsible to do any type of rate increase at this time, and if you do a rate increase, it should be introduced gradually over a period.”
Sliker agreed the council should wait until more is known about the surplus.
“A 50 percent increase … it’s a shocking number,” Sliker said. “It’s ludicrous. I don’t see how anybody can propose a 50 percent increase.”
The borough is also in the process of having a pilot program installed for the new remote electric-meter reading system. Sliker said he hopes the program will be in place by mid-October.
The council is going to come up with an alternative to the rate increase proposed this week, he said.
“We are going to work out something more responsible for the consumers and the residents,” Sliker said.
Republican Councilman Raymond Eppinger said the Democrats are avoiding the issue because of the upcoming election in November, when the mayor’s seat and two council posts are up. Eppinger is running for mayor against Szegeti.
“What the mayor and Mr. Sliker are doing is the worst form of politics,” Eppinger said. “They are absolutely misleading the people for pure political gain.”
The proposed increase that the Democrats voted down was less of an increase than what the electric rate increase will ultimately have to be, Eppinger said.
“What the mayor and Mr. Sliker are not telling everybody is that we know how much more electric is going to cost, and that alone is more than 50 percent,” Eppinger said. “… The only issue that remains is based on how much surplus is generated in the ordinance to produce enough surplus in 2008 to make transfers into the current fund.”
The auditor and Salerno previously laid out various ways in which the council could move forward with the increased rates, and this one was the best, Eppinger said.
“They can’t support it because it would take political guts and they don’t have any,” Eppinger said. “The lack of leadership from the mayor and the council president should frighten every taxpayer and electric ratepayer in the borough, because every day we delay this is going to cost us even more in the future.”
Salerno said the average price of a kilowatt hour paid by residents is currently 11.73 cents. By next year it will be 11.84 cents per kilowatt hour.
“It is built into the revenue that the borough generates from the utility,” Salerno said. “It is not just for the purchase of energy. You have to run and operate the utility.”
The wholesale cost of the energy is not the only thing funded by the ratepayers, Salerno noted, saying that operating the utility includes costs associated with employees, equipment, professional services and materials.
“The ordinance was an attempt to raise the rates based upon current financial information,” Salerno said. “There will be a rate increase and it is going to be substantial. It will just be more exact when the numbers are finalized.”
“The debate is not about the increase and the cost of electricity,” Salerno added. “The debate is how much does the borough want to [continue] the past practice of dedicating surplus of the utility to the current fund. The council people who introduced or supported the … the ordinance are basically saying that they want to continue the practice.”
The surplus represents a significant portion of current revenues to the borough, Salerno said. The town has a market competitive contract for the next 17 months and will be going back to the market next spring. Contract periods are shorter due to an increase in risks for long-term purchases to both the purchaser and supplier, Salerno said.
“The market place is very dynamic and changed a lot,” Salerno said. “More so than it used to be.”