Power To The People. Electric Keeps Qtown Taxes Low

The Free Press    April 3, 2008

Electric Rates for Dummies quiz, circa 1990: The Smith family set its thermostat at 72 degrees, and used 1000 kilowatt hours of electricity last month. Their rate was five cents per kilowatt hour. How much was their electric bill? Answer - $50. It was easy back then.

Electric Rates for Dummies quiz, circa 2008: The Smith family had to turn down the thermostat to 63 degrees because of the cost of electricity. They used only 800 kilowatt hours, but the rate was indecipherable because it involved generation charges, transmission charges, distribution charges, transition charges, and a customer charge. How much was their electric bill? Answer - almost as much as their mortgage (which, fortunately, was not subprime, and hadn't skyrocketed like that electric bill).

Electric Rates for Dummies quiz, circa January 1, 2010: The Smith family (which lives anywhere but Quakertown), shut off its electric heat today because government deregulation of the utility companies officially took effect, and PP&L followed through on its announcement, made four years ago, and raised rates 35-70 percent. How long can the Smith family survive? Answer - not as long as a family living in Quakertown.

When Walt Whitman wrote "I Sing the Body Electric", he never imagined that the song would become more like "Help!". Electric deregulation was supposed to lead to increased competition, and lower prices. But we ended up singing "Victims of Deception". And with final deregulation coming January 1, 2010, PP&L has warned of unprecedented rate increases, which will dramatically affect the lives of the poor, and those on fixed incomes. But not in Quakertown.

The electric industry is complex, and only getting worse. Borough Council has taken a great deal of criticism for mishandling the 2005 contract with AMP of Ohio, giving residents the false impression that rates were locked in for three years. Former Manager David Woglom, and former Council President Dennis Hallman, apparently never understood that AMP could increase the charges if costs increased. But with a very hard lesson learned, and a new administrative team of Manager Scott McElree, President Jim Roberts, and the now-indispensable expert consultant, the borough has negotiated a new five-year contract that should make local residents much better off than their neighbors.

The worst of it is this year. QT has already announced that rates will increase about 25 percent in 2008, which is inevitable, and unavoidable, in an energy world where oil prices are topping $100 a barrel. But the good news is that, barring a catastrophe of biblical proportions, QT rates should only increase about eight percent combined for 2009-2012, an average of two percent per year. If you can get over the 2008 hump, you will avoid the sticker-shock awaiting non-residents from 2010 on.

The electric situation in Qtown is unlike any other municipality around here, and rather unique in the entire state. The tale starts in 1896, when a very foresighted council decided to get involved in the new-fangled electric business, constructing a generation plant that served area residents and businesses using transmission lines strung by the borough. A larger plant was built in 1917, which operated until 1970, when it finally made more sense to buy wholesale power from the big companies, and pass the savings on to the residents.

And while some folks complain that the town is unnecessarily "making a profit", they don't realize that this "profit" is what has kept municipal taxes among the lowest in Bucks County. In 2007, over $3 million in QT electric "profit" went back into the town's general fund, instead of going to PP&L shareholders throughout the country. As a result, an average rowhome here paid only $19.50 in borough property tax. And even most higher-end homes paid less than $60. Richland residents, who also have an extremely low tax rate, but no electric income, still pay about 65 percent more, and folks in Perkasie ante up more than three times QT's rates.

But is it fair that electric users, in essence, subsidize homeowners using natural gas, propane, or oil? Wouldn't it be more equitable if electric rates, which affect people in differing amounts, were lower, and real estate taxes, which are relatively uniform, were higher? Not in Quakertown. The borough is blessed with 10 churches, a large school system, hospitals, expansive parks, fire companies, and cemeteries. There is a municipal pool, library, borough hall, YMCA, and an American Legion post. All wonderful components of the town. And all tax exempt.

In fact, an enormous 22 percent of the borough's total assessed value is exempt. Forty-five parcels of land and buildings, with assessed values totaling in excess of $23 million, pay no municipal taxes. An average of over a half-million dollars each. Then there are the 3000 parcels that do pay taxes. Their total assessed value is about $80.5 million, or less than $27,000 each. Every homeowner and business owner in Quakertown is subsidizing the town's tax-exempts to a far greater extent than the low-consumption electric users are supporting the bigger ones.

For example, two of the top three electric users are non-profits. Raising property tax lets them off scot-free, forcing everyone else to make up the loss. And the more that real estate taxes are increased, the greater the disparity. Increasing electric rates assures that they pay their share.

Roberts and McElree stress that the key to lower electric bills is conservation. Turn back thermostats, use energy-efficient appliances and bulbs, and shut off unnecessary lights. And the borough is doing its part by going back to the future, and using some of that 1896 foresight. McElree is exploring a power-generating partnership with AMP that could significantly reduce rates for decades. There wouldn't be any facilities built here, but the town would invest money that becomes available between now and 2015 as the current sewer bonds are paid off.

The results would not be seen until perhaps 2020, but our future generations will benefit greatly. Borough residents will never be like the Smiths - at the mercy of unregulated power companies. What happens in QT stays in QT.