Residential electric customers will see an increase of $1 to $2 per month from action taken Monday night by Dowagiac City Council.

Council amended the electric rate ordinance to accommodate state-required energy optimization programs, or EOPs.

In October 2008, Michigan mandated that each electric utility throughout the state must plan and improve energy efficiency for all customer bases and gave regulatory authority to the Michigan Public Service Commission.

Each utility was required to develop an energy reduction program, document results and place a surcharge on utility rates to pay for the program.

Dowagiac approved numerous projects to achieve this goal, including the free CFL light bulb program, the old refrigerator removal program and numerous rebates to major energy savings programs at Borgess-Lee Memorial Hospital and city industries.

EOP began with a requirement electric utilities spend at least .75 percent of total revenues on energy reduction programs and have been slowly ratcheting that number up until it reached at least 2 percent at the end of 2012.

“The current city rate for residential meters is $.001 per kilowatt hours and generates $65,000 annually,” City Manager Kevin Anderson said. “We are now at the point where approximately $125,000 per year must be spent on energy optimization programs, so there will be a shortfall between the rate charged for energy optimization and the required spending for energy optimization of approximately $60,000.”

In August 2009, when City Council discussed how to pay for this state-mandated program, the consensus was that a separate rate for energy optimization be established and clearly delineated on customer bills, with the goal of periodically adjusting the rate to cover the actual cost of the energy optimization program.