Democracy on the Front Lines
City Administrator’s Blog
Walter Denton
March 20, 2007
Back in January, I wrote a blog about how the City was responding to the recent electric rate increases and a perceived revenue “windfall” from our Utility Tax. After conducting more research, we have determined there will be no revenue windfall and no increases Utility Tax payments by residents. In fact, there may actually be a decrease in Utility Tax revenue.
Allow me to explain. The Utility Tax is a tariff that is calculated on usage per kilowatt hour and has no relation to the rate. Therefore, Ameren’s rate increase has no effect on our Utility Tax revenues because it is tied to usage and not the price. This would confirm our recent Utility Tax collections in January that were not noticeably different from December’s.
The rate increase may actually have a negative impact on our revenue. Higher electric rates may encourage residents to adopt significant conservation measures, which would decrease their usage and lower our Utility Tax revenues.
While we do not expect to receive more Utility Tax revenue, our electric bill has increased just like everyone else. And just like everyone else, we will have to find money in our budget to pay for the increased costs.
It is likely that the state legislature will do something to provide relief on the rate increases, but it is unclear what that will be. Regardless, it appears there will be no Utility Tax “windfall” and we will not have to do anything to adjust the tax.
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