Tennessee Valley Authority approved a $10.7 billion budget for the 2016 fiscal year that requires improvements and capital projects aimed at reducing operating and maintenance costs and system improvements.

To achieve their goals, TVA also included a 1.5 percent retail rate increase, according to Oxford Electric Superintendent Rob Neely who announced the increase during this week’s Oxford Board of Aldermen meeting.

The increase means average residential users will see about a $1.50 monthly increase and commercial users, about a $2.50 average increase.

Neely said TVA didn’t want to do a large 8 or 9 percent increase like what happened several years ago.

“They are going to do it in small steps,” he told the aldermen. “I would expect us having this conversation again this time next year.”

TVA supplies the power to local power companies, like OED and North East Mississippi Power Electrical Association.

TVA President and CEO Bill Johnson said the small increase aligns with input from many TVA’s local power companies and industrial customers that smaller and more predicable rate adjustments are preferable to larger, unexpected ones.

“We are taking the long view and then putting near-term plans in place to get us there,” he said in a written statement. “The next effect of last year’s 1.5 percent increase was flat, on average, for Valley ratepayers due to TVA’s lower fuel costs and improved operating performance. Lower operating and maintenance costs, lower fuel costs and higher revenues have enabled us to fund some capital improvements without adding to long-term debt.

In other business, the board: — Read a resolution proclaiming Oxford as a Purple Heart City in honor of veterans who received the Purple Heart.

— Heard the second reading and held a public hearing on Noah’s Law which would outlaw the sale of caffeine powders and pills to minors. No one spoke at the hearing for or against the ordinance.

— Heard the first reading of amendments to the city’s Vehicle for Hire ordinance that would include golf carts.

— Heard the first reading of a proposed change to building permit fees.

— Discussed a 1.5 percent Tennessee Valley Authority power rate hike, which will be about a $1.50 a month raise for the average residential user. The Oxford Electric Department does not regulate the TVA rates.

— Appointed Tom Howorth to the Oxford Historic Preservation Commission.