Willmar residents may soon pay more for electricity
The Willmar Municipal Utilities Commission may need to consider increasing electric rates because power supply costs and transmission costs continue to rise. The last time city electric rates were increased was in 2009.
The possibility of a rate in-crease was discussed Monday when the commission received a disappointing first-quarter fina-ncial summary for the period from January through March.
Electric division revenue during the period was up 0.86 percent from $5,622,132 in 2010 to $5,670,604 in 2011, but expenses jumped 14.36 percent from $4,682,766 last year to $5,355,305 in 2011. Operating income for the three-month period fell from $939,366 in 2010 to $315,299 in 2011.
As a result, electric division retained earnings fell from $501,463 in 2010 to a loss of $125,249 in 2011. The utility uses retained earnings -- the amount remaining after all revenue, expenses and intergovernmental transfer are calculated -- from the electric division and smaller water and heating divisions to pay for projects and other needs. Retained earnings are equivalent to the profit of a private business after all expenses are paid.
General Manager Bruce Gomm said the utility has been concerned for about a year about rising power supply and transmission costs. Gomm said it became apparent during the budgeting process that the utility would be unable to maintain a positive rate of return with the current rate structure.
He said the utility "took on a chunk of new charges'' last year when negotiations were completed after more than a year with Great River Energy, the city's main power supplier. Willmar's transmission charges had been "grandfathered'' into the previous GRE contract.
However, GRE is transitioning Willmar into the Midwest Independent System Operator, which monitors and operates the wholesale electric system in a multi-state area that includes Minnesota.
"We took on more charges that MISO system charges than we were paying before we settled that,'' said Gomm. "We've been continuing to watch that. We budgeted and we're operating as tight as we can to minimize those impacts to our customers, but it looks like it's inevitable.''
Commissioner Steve Salzer mentioned that he had watched a webinar last week sponsored by the American Public Power Association. The program was geared toward governing bodies and presented an overview of utility financial operations.
Among other issues, the presenters said many municipal utilities wait too long to pass along increased expenses, which places utilities in a poor financial situation.
Commission Vice President Dave Baker, presiding in the absence of president Doug Lindblad, asked commissioners and staff to bring forward any trends that they may be seeing from the previous year so that commissioners know exactly what they are facing.
"It's apparent we need to start looking into some possible price increases, and the commission has been holding off as long as we can. But now it's obvious we need to start looking at that to really protect the assets here of the utility,'' Baker said.
Another major reason for the first-quarter loss was an increase in the burning of natural gas in the power plant instead of coal during January and February because Willmar's Montana coal supplier shipped 13 railroad cars of frozen coal that the utility was unable to burn.
Gomm said the mine obviously loaded some very wet coal. He said some freezing occurs during the winter, but in this case all the coal was "pretty much completely frozen.'' He said a hired backhoe scooped coal out of two cars, but the coal came out in unusable large chunks.
Gomm said the utility returned 11 cars and prevailed on the mine to send 11 replacement cars free of charge. The coal was better but was still bad, he said.
Gomm said proposed power plant improvements will include new, enclosed coal unloading facilities that will enable the utility to switch suppliers "on the go.''