WILLMAR -- The federal government has rejected Willmar Municipal Utilities' application for interest-free financing for a wind energy project, but the Utilities Commission could still consider a wind project using conventional financing.
Utilities general manager Mike Nitchals told the commission Monday that the U.S. Department of the Treasury did not approve Willmar's application for $5.6 million in interest-free financing for two wind turbines.
Willmar was among more than 700 applicants seeking $500 million in Clean Renewable Energy Bonds issued through the Treasury Department.
Willmar's application was made through the Midwest Consortium of Municipal Utilities.
A Treasury Department letter to Midwest Consortium said smaller loan requests were approved first until the $500 million allocation was reached. Nitchals said the largest application to be approved was about $3 million compared with Willmar's larger project.
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The number of initial applications indicates there was an expression of strong interest in the financing program, Nitchals said.
"It shows the demand for funding, which means demand for these projects is definitely real and it should serve as a message of some kind of indication to Congress that they consider extending this program,'' said Nitchals.
Meanwhile, Nitchals said Jon Folkedahl of Folkedahl Consulting of Willmar continues to prepare plans and specification for requests for proposals from contractors interested in providing wind turbines to Willmar.
The commission in September voted to seek bids from contractors for a wind turbine project.
Folkedahl studied the feasibility of a local wind project and recommended two sites: one near Ridgewater College and one near Willmar Senior High School.
The study recommended two turbines at each site and that the college site be developed first, but no decision has been made.
The study estimated the turbine project could provide 3 percent of the city's energy needs.
The study by Folkedahl indicated that debt payments would cost less with interest-free financing compared with conventional financing.
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Nitchals said the utilities could still look at the use of conventional financing.
Nitchals said the utilities would like to discuss a possible wind project bond issue with the city and the city's financial consultant. All of the utilities' debt is issued by the city, he said.
In other business, the commission received a report on water cost-of-service analysis and rate study from Burns and McDonnell of Kansas City, Mo.
The study recommends water rates be increased to raise overall water division revenue by 8.5 percent.
The study recommends new rates go into effect January 2007.
The study said water rates were last increased in 1998. Since that time, operating costs have increased due to inflation along with increased costs due to governmental regulations, and major capital improvements are being planned to maintain the water system in good working order, the study said.
The study said the rate for an average residential water customer who uses from 800 to 1,000 cubic feed of water per month would see a 50-cent increase from $15.70 to $16.20 per month.
The water division contributes about 10 percent, or $2 million, to the utilities' overall revenue, according to Nitchals.
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He recommended the commission receive the rate study as information and wait until next year to begin the process of raising water rates, as well as raising rates for electricity and district heating divisions.
