Finance Committee recommends date for electric rate hike hearing
WILLMAR -- The Finance Committee is recommending the City Council set July 5 as the date for a public hearing to consider a two-step electric rate increase for Willmar Municipal Utilities.
The committee heard Utility General Manager Bruce Gomm discuss the reasons for the increases and voted Monday af-ternoon to recommend the hearing date. The council will consider the recommendation on June 20.
City Ad-ministrator Michael Schmit said the utility commission held its public hearing Monday noon. Schmit said the council will be required to hold a hearing as well.
The commission voted to recommend a 7 percent increase effective in July for the remainder of 2010 and an increase of 7 percent effective Jan. 1, 2012.
Without the increases, Gomm said, the utility will face a 4.4 percent loss of $1,070,200 in retained earnings in 2011 and a 9.3 percent loss of $2.3 million in 2012. Gomm said staff met multiple times with the commission and planning committee to discuss the increase.
"We are very concerned about the rate increase. We know our consumers have been hit with a lot of increases. Recently we raised the water rates in 2010 and the city's sewer rates have been on an escalator the last couple of years for the new plant,'' Gomm said.
"We have taken a lot of steps to minimize the amount of the rate increase,'' Gomm continued. "The two rate increases still provide very marginal and even negative rates of return ... but our commission decided this is as high as they are willing to go. They thought long and hard about this. This is what we came up with.''
Compared with utilities in five other cities and with Kandiyohi Power Cooperative, Willmar's current rates are near the bottom of the pack. With the increase, Willmar will fall in the upper middle part, he said.
Each 7 percent increase equates to about $1.8 million, but $1.2 million comes off the top in an annual increase in transmission costs that began in 2010. It isn't a new charge that just suddenly appeared, but is a charge by the Midwest Independent System Operator that Willmar had been able to avoid up until 2010, Gomm said.
Midwest manages energy markets in parts of the United States including Minnesota.
Gomm said Willmar avoided it by having a transmission contract with Great River Energy. But GRE decided in late 2008 or early 2009 to move contracts into what would conform with Midwest contracts, he explained.
"So we had to negotiate to minimize the impact of that, but what resulted was an increase of $1.2 million in transmission charges. That's really the big hit to us,'' Gomm said.
The remainder covers increased power supply costs. He said GRE has an energy adjustment clause built into its contract with Willmar and GRE's costs have been escalating at 3.5 to 4 percent a year.
"That's the majority of our power, so we have been experiencing those increases since our last increase in 2009,'' Gomm said.
In other business, the committee recommended the council approve a proposal to install a recreational vehicle dump station at the Kandiyohi County Recycling Center, 1400 22nd St. S.W. The project was recommended by Public Works Director Holly Wilson.
The dump station will replace the dump station that had been located at the old wastewater treatment plant. The old plant was decommissioned and most of the structures removed after the new treatment plant located about five miles west of town began operation in September last year.
Schmit said the new plant has a dump station but it is not available after hours. The new dump station will be available 24 hours a day. He said Kandiyohi County has agreed to provide the site if the city pays the construction cost.
The preliminary cost is approximately $14,000. The money will be made available from a $476,000 line item in the 2011 municipal wastewater collections budget.
Originally the larger amount was designated for decommissioning the Ortenblad and Arby's wastewater lift stations. However, the city was able to finance the decommissioning in a loan from the Minnesota Public Facilities Authority.
Committee member Jim Dokken said the dump station will be a good deal.