BY GABE LICHT
DELANO, MN Delano Municipal Utility customers will see a 2 percent increase in their electric bill in 2017.
The Delano Water, Light, and Power Commission voted for the change Dec. 19, after Missouri River Energy Services conducted a rate study and presented it with recommendations Dec. 12.
“The rate study showed we were covering our fixed costs with a larger portion of variable fees than almost all our peers,” DMU Finance Director Chris Hart said. “What our peers do is have a larger fixed cost and the variable cost just covers the cost of energy. They recommended we get in line with that by increasing the fixed cost and lowering the rate for usage.”
For residential customers, Missouri River Energy Services’ recommendation was to decrease the variable rate from 10.7 cents per kilowatt-hour to 10.3 cents per kilowatt-hour, while increasing the customer charge from $5.69 to $8.75.
“That change is intended to be net neutral,” commission chair Jonathan Ness said. “ . . . On top of that, we want to increase our rates 2 percent because we want to build the cash reserve.”
That will put the residential per kilowatt-hour rate at 10.51 cents.
Doing so will allow DMU to follow another recommendation.
“We have a goal to increase cash reserves to four months of operating expenses,” Ness said, referencing recommendations from Missouri River Energy Services and DMU’s auditors.
Currently, DMU has about two months worth of operating expenses in cash reserves, up from about a month’s worth at the beginning of 2016.
Even with a 2 percent rate increase, DMU’s electric rates will be lower than many of the rates evaluated in the study.
Estimates show a DMU customer using 750 kilowatt-hours per month will see an increase of about $1.64 to $83.86. In 2016, that same amount of electricity would have cost $83.77 in Glencoe, $86.95 in Anoka, $90.42 in Buffalo, $91.85 in Chaska, $101 for Wright-Hennepin customers, and $101.74 for Xcel Energy customers. Two communities with lower rates were Hutchinson ($71.90) and Litchfield ($73.22).
“The only utilities lower than us, Litchfield and Hutchinson, use hydro power from the Dakotas,” Ness said. “They have a longstanding contract to give them a competitive advantage.”
In addition to increasing electric rates 2 percent in 2017, the commission also voted to increase rates 2 percent in 2018 and 2019. The commission opted for three years of 2 percent increases rather than the recommendation of no increase in 2017 followed by two years of 3 percent increases.
During the Dec. 19 meeting, the commission also voted not to increase water rates.
In other business, the commission voted to increase DMU salary employees by the same percentage that Delano City Council approved for city employees, which amounted to 2 percent.