As a public power utility, the City of Tipp City operates a not-for-profit electric utility. Most of the Utilities Department's expenses are fixed costs, meaning the expenses don't change much based on a customer's usage. The City's electric rates are based on a Cost of Service Study that examines all of the expenses to provide the electrical needs of our community. The expenses include, but are not limited to, power supply contracts, transmission and capacity obligations, the cost of infrastructure such as electric poles, lines, and transformers, and finally, the cost to ensure our staff and equipment are available and equipped to respond to electrical issues anywhere in the city at a moment's notice, 24-hours a day, 7 days a week, 365 days a year. The rates that are charged to customers are designed for full-service requirement customers (a customer that purchases all of their energy needs from the City). In this way, the City ensures that our expenses are equitably collected from each customer based on their use of the electric system. The Cost of Service Study is the best way to ensure that the customer charges are fair and equitable.
When a customer installs rooftop solar, they become a partial-service requirement customer. This means that the customer does not purchase all of their energy needs from the City because they are offsetting some or all of their energy needs with their own generating system. The customer relies on the City to provide all of their electric service at any given time. The customer also depends upon the City's electric distribution system in order to receive a credit for their excess generation.
The Monthly Customer Charge is necessary to recover the unavoidable fixed expenses mentioned above that are incurred by the City. Again, these costs include system maintenance, transformers, debt service, capital improvements, power supply, transmission, capacity, buildings, equipment, and labor.