COVINGTON — The city of Covington will not delay an electric rate increase for a local industry.
SGD North America, located on Technology Drive, requested that a rate hike be delayed through December 2015. SGD has been on the economic development rate for 18 years. The city abolished the special economic development rate in 2011 and phased in the industries affected to an industrial rate that is fully effective next year. The industrial rate average is 7.29 cents per kWh, said City Manager Leigh Anne Knight.
SGD’s rate has increased in stages from 4.21 cents per kWh in early 2012 to the current 6.03 cents per kWh, and is slated for another increase, according to a document submitted from the company to the city.
SGD reports it spent more than $1 million on electricity in 2012 and more than $400,000 through April of this year.
The industry asked to remain at the current rate of 6.03 cents, saying the increases are “not a sustainable cost model for SGD.”
SGD has been in Covington for more than 15 years and more than 10 years ago established a decoration facility in Sparta. This year, sales growth is expected to reach $75 million, with a goal of reaching $100 million in 2015. “Our previous cost structure is essential to deliver this sales growth,” according to the industry’s proposal to the city.
SGD is planning to rebuild its glass furnace in 2015 and may expand manufacturing capacity through the addition of a fifth manufacturing line, according to the proposal.
“By agreeing to this commitment, the city would bridge the period before a major furnace rebuild/expansion, allowing us to present a reasonable cost structure to our parent company and preserve our future sales growth objectives,” the proposal states.
But Assistant City Attorney Frank Turner Jr. said Georgia law does not allow rate discrimination within a rate class, whether residential, commercial or industrial. Incentives can be offered initially based on factors like whether a company is an employment driver, he said. Turner cautioned the council against giving SGD a rate that is not afforded to other industries because it could be interpreted as preferential treatment and violate the law.
“Plus we’re not being fair to our stakeholders if we’re selling electricity below cost. We just can’t do that. I think legally we can’t and morally we can’t,” said Councilman Chris Smith.
Knight said the city offers on a case-by-case basis incentives to industries based on factors such as jobs created. Existing industries that expand can also get discounts on additional loads.