WILLMAR -- An increase in electric rates could be on the horizon for Willmar Municipal Utilities customers.
The Municipal Utilities Commission on Monday approved a proposed overall rate increase 5.35 percent, but the increase requires approval of the City Council before it goes into effect.
The commission held a hearing at noon to take comments from the public about the rate increase, but no comments were received.
The commission forwarded its proposal to the council's Finance Committee, which voted Monday night to recommend the council introduce an electric rate ordinance on Feb. 17 and hold a public hearing on the new rate at the March 2 meeting.
The target date for the new rates to go into effect is April. Rates were last increased in 2007.
Speaking to the Finance Committee, Bruce Gomm, utility general manager, said the new rate was needed primarily to cover increased power supply costs that the utility has very little control over.
He said the increase is limited to the electric department. The rate does not affect the water and district heating departments, he said.
The water department was close to needing an increase, but the utility was aware residents were already being hit with a sewer rate increase.
"In the water department, we cut several budget items enough so that we could keep our head above water for 2009,'' he said. "We'll probably be looking for a rate increase in 2010 unless something drastic changes. We were able to prevent the water and heating district from any rate increase.''
Committee Chairman Denis Anderson asked what will happen to the energy acquisition adjustment.
Gomm said the adjustment is a tool used by the utility to cover power supply costs, such as higher fuel costs. He said the adjustment was part of the driving factor leading to the rate increase.
"We needed to implement that nine out of the 12 months in 2008 to be able to cover our costs. These new rates are designed to zero-out that process. It will go away until such time that the power supply costs increase enough'' that the adjustment would be needed, he said.
The effect of the increase may vary slightly for residential, commercial, large power and industrial users. The increase is expected to be sufficient through the year 2010.
Gomm said part of the increase will be used to pay for bonds to finance most of the two wind turbines being built near the Willmar High School. To keep debt service as low as possible, the commission used almost $3 million in reserves for the project, he said.
A residential customer using 250 kilowatts per month would see the bill increase from $27.43 to $28.95 per month. The bill for a customer using 500 kilowatts per month would increase from $46.85 to $48.90 per month. The bill for a customer using 1,000 kilowatts per month would increase from $85.70 to $88.80 per month.
For commercial customers, the cost of 500 kilowatts per month would increase from $51.10 to $53.80. The cost of 1,000 kilowatts would increase from $90.20 to $93.60, and the cost of 2,500 kilowatts would increase from $207.50 to $213 per month.