Public hearing this month on two-step electric hike
WILLMAR -- The Willmar Municipal Utilities Commission has set a hearing June 13 to take public comment on a two-step electric rate increase of 7 percent in July for the remainder of 2011 and another 7 percent increase in 2012.
The commission voted during a special meeting Monday to set the hearing.
The two-step proposal is different from an increase of 6.5 percent each year over three years that the commission discussed May 23 but referred to the planning committee for discussion and recommendation.
The committee met over a week ago and recommended the revised proposal.
If the commission votes at the regular meeting next week to support the new rates, the proposal goes to the City Council's Finance Committee for consideration and recommendation to the council. The council would also hold a public hearing before the rates could go into effect.
Electric rates were last increased in 2009, said Bruce Gomm, utility general manager.
He said the consultants who performed the rate study indicated the utility would need to look at an increase likely by 2011, "so that's not out of line with what they were expecting already.''
Under the current rates, according to an analysis of the electric division's estimated operations, 2011 will end with a 4.4 percent loss of $1,070,200, which is based on estimated sales, 2 percent residential growth, and 2.5 percent commercial and industrial growth. In 2012, the analysis estimates a 9.3 percent loss of $2,309,600.
Under the proposed increase, 2011 will end with a 1.6 percent loss of $398,513, but 2012 will see a slight 0.2 percent gain of $54,195.
Gomm said the big issue is increasing costs of power supply and transmission. Gomm said the utility has been working hard to try to control expenses and minimize the effects of increases because the utility understands any kind of increase is always a challenge for customers.
But Gomm said the utility is at the point where finances are going negative. He noted the utility had additional expense in the first quarter of 2011 for buying natural gas to power the generator because the utility's coal supplier shipped unusable coal to Willmar.
Gomm said Larry Heinen, customer service supervisor, used data from the last rate study to put together the new rates.
Under the current rates, a residential customer using 500 kilowatts a month pays $48.90 per month. Under the increase for the remainder of 2011, the customer would pay $52.35 per month. In 2012, the rate would increase to $56.05 per month.
By comparison, a 500-kilowatt-per-month residential customer in Alexandria pays $48.80 and a customer in Moorhead and Hutchinson pays $50 per month. A 500-kilowatt-per-month residential customer of Kandiyohi Power Cooperative pays $81.50.
Heinen acknowledged that Willmar would be on the higher side compared with cities of similar size, but he said that's not to say that other cities wouldn't be considering increases as well.
Matt Schrupp, who works at Jennie-O Turkey Store, a major electric customer, said he reviewed the proposed rates with others at the company. Schrupp said he understands the need to increase rates and he expects the commission will receive some input from the company at the public hearing.
Schrupp said the increase will be significant to Jennie-O, but said he understands the cost of power is increasing and that a reliable source of energy is needed. He and Commissioner Dave Baker urged the utility to do what it can to keep costs as low as possible.
Gomm said the utility is using vehicles longer. Also, he said a couple of distribution projects that are necessary for ultimate reliability can be postponed after careful evaluation.
However, he said the utility is proceeding with plans for power plant improvements "because we see that as financially beneficial to the utility, and the power plant will save us money by being able to generate local energy without having transmission issues, plus the renewable part of that is important.''
Gomm said the utility is trying to balance all those things, "but with everything, we feel we can postpone or figure out a different way to do it, we're doing it.''