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Willmar council backs 5.35 percent electric rate increase

WILLMAR -- The Willmar City Council has approved an overall municipal utility electric rate increase of 5.35 percent.

In an ordinance adopted unanimously by the council Monday night, the increase will become effective for billings sent on or after April 1 for residential, commercial and industrial customers of the city-owned utility.

City Administrator Michael Schmit said council approval of an ordinance is required to increase rates. The council held a public hearing on the proposed rate increase and no one from the public appeared to speak for or against it.

The public was equally silent when the Municipal Utilities Commission held a hearing Feb. 9 on the rate hike. The commission voted to support the increase after a consultant's study in January recommended the rate hike.

A residential customer using 250 kilowatts of electricity per month would see the bill increase from $27.43 to $28.95 per month, according to information provided at the Feb. 9 meeting. Electric rates were last increased in 2007.

Utility General Manager Bruce Gomm told the council the rate increase was generally due to the increasing cost of power supply, mainly the increasing cost of energy.

He said power supply costs have temporarily stabilized because energy consumption has been leveling off after increasing about 2 percent nationwide.

"We're hoping those prices will stabilize for longer than they have in the past, but most utilities have been faced with looking at rate increases almost on an annual basis,'' Gomm said.

In responding to council members' questions, Gomm said the utility is extremely concerned about the effect the rate increase will have on those living on fixed incomes. He said the utility trimmed the water department budget to avoid a water rate increase.

"We knew that we were looking at pretty much an unavoidable electric rate increase and that the citizens will be affected by a sewer rate increase,'' he said. "We worked hard to try to control those costs and expenses to ensure that our residents do not face a huge rate increase.''

He said part of the rate increase will pay for financing construction of the utility's two wind turbines. He said reserve funds paid for about one-third of the cost.

Gomm said the increase should be sufficient to eliminate the energy acquisition adjustment, which the utility imposes to cover power supply costs that exceed local rates.

Willmar's power supply costs have been increasing for the past three years, from an average of $36.31 per megawatt hour in 2006 to $38.56 per megawatt hour in 2007 to $43.83 per megawatt hour in 2008, according to Chris Carlson, utility power supply broker.

One reason for the increase in 2008 is that Willmar had to buy higher cost power on the open market because the utility's largest supplier, the Coal Creek Station power plant in North Dakota, was shut down for maintenance for an unanticipated 95 days between February and June.

Coal Creek provides 30 megawatts per hour -- about half of Willmar's needs. Willmar, and other utilities that rely on Coal Creek, had thought the plant would be down for about 30 days.

Willmar's own power plant was also down for part of the period for routine maintenance, Carlson said in an interview earlier Monday. She said Willmar had to buy power on the market for 70 to 80 days during the Coal Creek outage.