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Willmar Utilities rates likely going up

Tribune file photo John Harren, Willmar Municipal Utilities general manager, said the proposed water rate hike would be the first time rates for water or electricity have been increased since 2015.

WILLMAR — The new year will likely bring higher bills for Willmar Municipal Utilities customers as the Municipal Utilities Commission recommended approval of a rate hike for water and the introduction of a city franchise fee at their Monday meeting, following a public hearing.

If approved by the Willmar City Council, the new rates will be effective starting Jan. 1, 2018. Customers will start seeing the increase on their February bills.

The proposed increase would have water rates going up 5 percent for 2018 and 5 percent for 2019 for all customers.

The franchise fee, which will be a new line item on the utilities bill, will be used to pay the utilities' annual intergovernmental transfer (or payment in lieu of taxes) to the city, along with the costs associated with wastewater billing and the city's streetlights, estimated at $3 million, as reported at Monday's utilities commission meeting.

Each customer's franchise fee will be figured by multiplying their monthly energy use by the franchise fee rate.

"The amount they pay will depend on their kilowatt usage each month," said John Harren, Willmar Municipal Utilities general manager. If a customer uses more or less power, each month, their franchise fee will increase or decrease as well.

The rate to determine the franchise fee will be calculated at the beginning of each year and stay the same for the entire year, Harren said. The formula will take the total amount of electricity sold by the utilities and divide it by the intergovernmental transfer fee (or payment in lieu of taxes), the wastewater billing and the city street lighting, which are all paid for by the utilities. This number will then be used to calculate the customer's monthly franchise fee.

Since there is still a month and a half left in 2017, the franchise fee rate for 2018 is to be determined.

Each year the rate will be recalculated. Harren said the rate could change depending on the amount of power the utilities sell or how much the utilities has to pay the city for the intergovernmental transfer fee, wastewater billing and city street lighting.

Currently, Willmar Municipal Utilities pays the yearly franchise fee by taking the money out of the electric revenue collected through rates. The new line item would charge customers separately for the franchise fee, while keeping rates at the current level. This allows the revenue raised by rates to go entirely toward the utilities' operations, maintenance and capital needs.

This will be the first time since 2015 rates for water or electricity have risen, despite a rate study completed by Dave Berg Consulting in 2014 showing a need for rate hikes annually. The study concluded there needed to be a 3 percent increase in electric rates, each year, from 2016 through 2018, along with a 10 percent increase in water rates for 2017 and 2018.

Deciding to implement the city franchise fee allowed the utilities to recommend only a 5 percent increase in water rates for the next two years, along with not having to raise the electric rates.

Willmar's electric rates, at 10.3 cents per kilowatt, continue to be in the middle of the pack among Minnesota cities which have municipal power companies, according to a chart created by utilities' staff. For water, even with the rate hike next year, Willmar's rates are still in the bottom quarter among similarly sized municipalities, utilities' staff reported.

Before voting on the proposed rate increase and franchise fee, the city council will need to hold a public meeting. Harren said the utilities commission is requesting the council consider picking a date for a public hearing during their upcoming council meeting Nov. 20.