BWL raises service fees by 233% for some businesses. Here's why

LANSING — Michelle McKnight opened her Lansing salon in fall the 2020. Despite the challenges of opening a small business during the pandemic, she's had success and would like to expand her shop in an adjacent space.

She said she can't afford to do that because of substantial increases in service fees on her Lansing Board of Water & Light electric bill.

McKnight rents space in Potter's Mill, a building at 701 E. South St. on the Red Cedar River that houses about 20 small businesses run by "creators, artists, and makers," according to the Potter's Mill website.

McKnight owns Head Space Beauty Lounge and is among a group of business owners who said they were caught off guard by a spike in service fees that accompanied a planned 9% hike in electric costs over two years

She was paying a $36 a month in service fees for 1,000 square-foot space, plus whatever electricity she used. When BWL's board OK'd two years worth of rate hikes that will be complete Nov. 1, the city-owned utility also "reclassified" some businesses to a different service fee. For McKnight, that meant a more than 233% increase in her monthly service from $36 to $120. On an annual basis, that raised her service fee from $432 to $1,440.

Her building uses a three-phase power, more common in industrial and commercial buildings than the single-phase power typically used in homes and businesses. It comes with more reliable power and a significantly higher service fee.

Her plans to lease an adjacent 450-square-foot space to expand her studio would double that service fee to $2,880.

"Nothing has changed with our service," she said. "For me as a business owner, I’m going to employ one more person and take more risk with expanding. But I can’t make money if I’m paying an extra $200 a month in service fees."

Potter's Mill has about 20 units. BWL spokesperson Amy Adamy said each unit in that building is facing the same situation. For that building alone, it would mean a service fee increase to BWL of more than $20,100 a year.

Adamy said the utility consolidated its electric services into new commercial tiers last year during a broader rate increase. At Potter's Mill, it meant that units went into the "midsize commercial" category, with a higher service fee, going from $36 a month to $120 a month, Adamy said.

She said 2,820 customers went from an old Rate 3 category to the midsize commercial tier.

"The impact would vary based on their individual usage pattern," Adamy said in a statement. "The estimated revenue from the Rate 3 customers who moved to the Midsize Commercial Rate for the first year was estimated to be $2.2 million, which was necessary to reflect the actual cost of service more accurately for that class of customers."

Adamy said the utility held public hearings in September before the rate changes and the categories were part of the hearings.

McKnight said BWL officials have contacted her since the State Journal began reporting on her concerns.

"I asked what is covered under the umbrella of a service fee and how our services have changed in cost in the last five years," McKnight said. "I was told a supervisor would be calling me back to answer that question."

Tracey Spaulding, a co-owner of Lansing Studio in Potter's Mill, said she too is seeing high bills, and rents two suites in the building with McKnight.

"We have two units in the building, when the switchover happened we reached out to BWL, the resounding answer is there is nothing we can do for you," Spaulding said.

U.S. Rep. Elissa Slotkin will be hosting a Friday roundtable discussion to talk about “junk fees” including McKnight’s complaints.

McKnight said it would cost her around $5,000 to have an electrician upgrade her current unit and another $5,000 for the one she wants to expand into, costs she says her salon couldn't afford without passing on significant increases to customers.

Spaulding said the Lansing Studio offers space for photographers and events. They aim to keep prices affordable.

"We have two units in the building, when the switchover happened we reached out to BWL, the resounding answer is there is nothing we can do for you," Spaulding said. "We can jack up the rates and make it unaffordable or I could fold."

Contact Mike Ellis at mellis@lsj.com or 517-267-0415

This article originally appeared on Lansing State Journal: BWL raises fees by 233% for some businesses. Here's why