Willmar's Utilities Commission sets 2014 budget of $30.1 million
WILLMAR — The Willmar Municipal Utilities Commission has approved the 2014 budget for the electric, water, and heating divisions of $30,182,100, up from $29,681,619 in 2013.
Commissioners approved the budget Monday, pending the outcome of labor negotiations with unionized employees.
Finance Director Tim Hunstad said the budget does not include an increase in labor costs because the utility does not yet have a negotiated agreement with the union.
Commission President Steve Salzer said the commission would approve the budget and then review it after negotiations are completed.
Utility General Manager Wesley Hompe said for every 1 percent of increase, the direct cost is about $35,000. Hompe noted that any increases resulting from labor negotiations are not yet in the budget, and said adjustments would be added later.
Hompe said commission and union representatives will hold a negotiations session this morning.
The utility’s biggest cost item is purchased power, estimated at $15,188,411, up from $14,565,830 in 2013. Purchased power accounts for almost 50 percent of the utility’s cost. Hompe said any change in the power cost structure has a greater effect on the budget than any other single line item in the entire budget.
In an interview, Hompe said the utility has focused on controlling the cost of power, whether purchased or locally generated.
“That is the biggest line item, so that’s the one that we have to concentrate on the most,’’ he said.
The budget includes the intergovernmental transfer to the city of Willmar of $2,075,396 in 2014 as a payment in lieu of property taxes, up from $1,995,573 in 2013.
Hompe said retained earnings — the income remaining after payment of the intergovernmental transfer is made — total $448,989, down from $1,022,941 in 2013. Hompe said retained earnings are budgeted at a relatively low rate, but he hopes revenue projections are incorrect.
Hompe said the utility may be undershooting revenue projections a little bit, based on a report last week that the value of 2013 local construction projects is nearly triple the value of 2012.
“I hope that’s true,’’ said Hompe. “I’d rather be conservative than overshoot and spend money we do not have.’’
Hompe said the utility will work on a cost-of-service study next year. A consultant will compare revenue collected for provided services with the utility’s cost of providing those services.
“We want to make sure we have a sustainable rate for the long term,’’ he said.
2014 improvement projects
The 2014 capital improvement program is estimated at $4,053,424 and covers proposed projects in the areas of power production, electric distribution, water and heating, and general, administrative and meters.
In the power production area, the budget proposes spending a total of $1,197,500 for the Priam substation, reconstruction of the wooden cooling tower, a project to control coal area runoff and a diesel generator relocation project.
Hunstad said the cooling tower project and the coal area runoff control project will be put on hold until after the utility completes a study of local power generation resources. Those projects are tied closely to whether or not the utility continues to use coal to generate power locally.
Hompe said the utility hopes to begin the local generation resource study relatively soon and have results by the end of next summer.
A consultant will be selected to study the local power plant, wind turbines and diesel generation resources; look at the existing market for other power resources; determine Willmar’s cost of producing power compared with the market; and study the benefits of local power generation resources.
The study will also look at work needed and the proposed cost of bringing Willmar’s generating units into compliance with existing and proposed Environmental Protection Agency air pollution rules.
“We want to make sure we have a really clear picture of not only what our local generation situation is, but also take into account any real projections of EPA’s treatment of our fuels,’’ he said.