Beginning on March 1, Clearwater Gas System will increase single-family residential rates by a fixed $2 a month and decrease commercial rates by 4 cents per therm used, the first rate change since 2014.
Residential customers will see another $2 monthly hike in March 2022 to achieve a phased-in $4 total increase.
The Clearwater City Council approved the rate adjustments on Thursday. The change will be revenue neutral to the system, but it is intended to correct an imbalance where commercial customers are “effectively subsidizing residential,” said finance director Jay Ravins.
Commercial costs represent 28 percent of the gas system’s total cost of service but account for 52 percent of revenues, according a preliminary rate study completed in December. Conversely, residential makes up 72 percent of the total costs but brings in 48 percent of the system’s revenues.
Gas System executive director Chuck Warrington told the City Council that publicly owned utilities have traditionally put more burden on commercial customers, but “that doesn’t mean that it shouldn’t shift.”
The residential rate increase will impact 24,270 of the system’s 28,773 total gas and propane customers in Pinellas and Pasco counties, according to Warrington.
The rate study determined current rates were sufficient to meet operating capital and debt needs for the next five years while maintaining reserve levels and providing return on investment to taxpayers, Ravins said.
The system brought in $45.7 million in revenue in 2019, netting $8.5 million in income, according to data provided by the city. It returned a dividend of $4.2 million to the city in June.
But the system also seeks to expand its customer base. The rate study factored in the gas system’s forecast to add 1,200 customers per year.