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Delano water, electric rates to increase in 2016
Dec. 28, 2015

By Gabe Licht

DELANO, MN – For the first time since 2009, Delano electric rates will increase 5 percent Jan. 1, as will the city’s water rates, which haven’t increased since 2012.

The Delano Water, Light, and Power Commission approved both increases, as well as the budget, by a 4-0 vote – with commissioner Derek Schansberg absent – during its Dec. 21 meeting.

“We haven’t raised electric rates in six years,” Delano Municipal Utilities Interim General Manager Paul Twite said. “They actually dropped 5 percent in 2011.”

“This would be bringing us back to 2009 rates,” DMU Finance Director Chris Hart added.

Monthly residential water rates will increase from $9.26 to $9.73, while monthly residential electric rates will increase from $5.42 to $5.69. Water permit fees will also increase 5 percent.

Commission chair Jonathan Ness said after the meeting that rising costs are responsible for the electric rate increase.

“The biggest thing is the cost of power continues to rise as we move forward,” Ness said. “As well as, over the last five years, we’ve had inflation on everything we need to buy and salaries. Over the years, we’ve been able to offset those costs. We’re at the point where we realize we need to raise rates to cover those rising costs.”

Ness noted that other electricity providers have been raising their rates on an annual basis.

While water rates have not increased in four years, Ness indicated that they likely should have, had it not been for an over-collection of water permit fees.

“Over the years, we’ve realized we’ve collected too much in water permit fees,” Ness said after the meeting. “For every lot, there is a trunk fee . . . Developers had already paid the trunk fee. When the home was built, we collected again in some cases.

“It’s a key driver to why we have not had to raise water rates,” Ness continued. “If you go back and look at our meeting minutes on water rates, it’s always the permit fees that saved the day. It wasn’t all supposed to come in. If you didn’t have that, we would’ve absolutely had to raise rates.”

During a special meeting, Ness said the over-collected amount is estimated to be between $175,000 and $300,000 since 2009.

Auditors from CliftonLarsonAllen will work with Hart and commissioner Betsy Stolfa to review who paid what and when. Those numbers will be reviewed during the commission’s Thursday, Jan. 21, meeting.

While water trunk fees were over-collected since 2009, Hart indicated they were under-collected from 2005 to 2008.

“If we go back further and find we didn’t charge them trunk fees, could we subtract that?” Hart asked. “Anything from 2005 to 2008 with no water trunk fee charged, we’d have the right to bill them.”

“I think it’s a reasonable question,” attorney Mark Johnson said.

Hart said the amount that went unbilled was $57,000, and Johnson said that amount should be documented.

“We need to figure out how to communicate this, how to fund it, and who to issue the refunds to,” Ness said.

There was some discussion regarding whether the builder should receive the refund or the home buyer, since the cost of the permit was likely passed on to that individual.

“If there’s an overpayment, you refund the person who made the overpayment,” Johnson said. “. . . Anytime you put more than one party on a check, you’re going to have more challenges.”

Stolfa, the city liaison on the commission, agreed with Johnson.

“I’d like to not be in the middle of disputes,” Stolfa said. “We should try to minimize the number of dominos falling our way . . . If you signed a check and it was drawn on your bank account, we’ll pay you back.”

For homeowners who believe they were overcharged, Johnson believes they may have recourse with the builder.

He recommended having the builder sign an indemnity to communicate, “We’re trusting you have the authority to accept this and no one else does.”

Johnson said he would work to draft an indemnity.

Ness said he would ask former DMU General Manager Hal Becker for any insight he may have on the issue. He also noted that DMU and the city have worked together to address the issue and would continue to do so.

During the regular meeting, the commission approved the water budget, at which time Ness raised the possibility of raising the water rate 10 percent.

“We have a big financial commitment we need to meet,” Ness said.

“My humble opinion is to stay consistent and re-evaluate it in five or six months,” Hart said.

With the increase expected to raise about $52,000, Ness said waiting until June would cost the utility about $25,000 in potential revenue.

“I have a hard time seeing us getting to June and not needing an increase,” Ness said.

Regardless, the commission voted 4-0 to approve the budget with a 5 percent rate increase, while making note of $65,000 in permit fees due for the Parkview Hills Fifth Addition, along with other future permits.

“We budget pretty low on permits,” Stolfa said.

Odds and ends
In other business, the commission:

• approved CliftonLarsonAllen as the utility’s auditors, at a cost of $15,900.

• learned that residential electric customers would be receiving a $7 credit on their bill, for an average credit of $55 year-to-date.

• learned that electric revenue was $174,000 under budget year-to-date, due largely to an average power cost adjustment of .65 cents, compared to a budgeted power cost adjustment of .2 cents. Hart said he had increased the budgeted power cost adjustment to .6 cents for 2016, and the commission decided to revisit the power cost adjustment on a monthly basis beginning in 2016. The electric budget, with those updated numbers, was also approved.

• approved a 1.5 percent salary increase for DMU employees, and noted that employees do not pay for benefits, despite a 10 percent increase in the cost.

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