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Rate hike possible for Willmar utility customers in '09

WILLMAR -- The Willmar Municipal Utilities is looking at the possibility of increasing rates to cover a projected $2 million budget deficit next year.

Overall electric rates were last increased 5.8 percent in April 2007.

The possibility of a rate increase in 2009 was raised by Bruce Gomm, utility general manager, during discussion of the 2009 preliminary budget at the Municipal Utility Commission's regular meeting Monday.

"We looked at the cost of our power compared to what our budgeted amounts were, and this year in particular we had several unexpected power supply costs,'' he said.

The largest portion of the deficit will be the result of a projected $1 million increase in purchased power cost, according to Gomm. Purchased power cost has increased from $9.5 million in 2006 and $10.2 million in 2007 to an estimated $11.7 million in 2008. For 2009, purchased power cost is estimated at $12.6 million.

Gomm said the increase is a consequence of the current energy market.

He said energy as a whole has been going up, but Willmar's market has been greatly affected by monthly fuel cost adjustments of 12 percent to 25 percent that have been imposed by the city's major supplier, Great River Energy. Great River Energy provided about 74 percent of Willmar's power in 2007.

Gomm said GRE's contract allows it to pass along adjustments in its actual fuel cost. Those adjustments are made every month, based on GRE's costs of generating power at its Coal Creek plant in North Dakota.

Fuel costs have already been exceeding budget in 2008, partly as a result of a longer-than-expected 93-day maintenance overhaul this past summer at the Coal Creek plant, forcing Willmar to buy more power on the "volatile'' open market.

In addition, the Western Area Power Administration, which provided about 11 percent of Willmar's needs in 2007, is increasing its rates. WAPA primarily produces hydropower, but the amount has decreased and the supplier is also buying power on the "volatile'' open market, Gomm said.

Because purchase power costs were higher than budgeted in 2008, the utility imposed an energy adjustment clause from May through October. The additional amount showed up on monthly utility bills.

"The only way to make the bottom line work out'' was to impose the additional fee, which raised about $1.2 million this year, Gomm said.

The commission is expected to receive the final budget during the last meeting in December, said Gomm.

Approval of a rate increase would require public hearings and approval by the commission and the City Council, according to City Attorney Rich Ronning.