BY GABE LICHT
DELANO, MN Per the recommendation of an auditor, the Delano Water, Light, and Power Commission had planned to raise Delano Municipal Utilities’ electric rates by 2 percent each year for three years in an effort to build up four months of operating costs in reserves.
After two years of increases, the commission voted Monday evening not to raise electric or water rates in 2018.
“It’s pretty straightforward,” Chair Jonathan Ness said. “ . . . We started the year in the electric fund with $1 million. We ended with $1.9 million, thanks in part to conservative budgeting. We had a goal of hitting four months of cash reserve. We thought it would take a couple years. We’re probably like one month away from getting there.”
Ness explained that the commission deviated from the plan for three years of increases because DMU was developing reserves faster than anticipated.
Finance Director Chris Hart explained after the meeting one factor that contributed to the utility building more in cash reserves than initially expected.
“The largest contributing factor to that was the water fund being able to repay a loan that they had with the electric fund in 2010 and 2011,” Hart said. “ . . . During 2017, the remaining balance was slightly more than $160,000. Because of building permits for the new intermediate school, they were able to repay that full balance ahead of the payment schedule that had been set up . . . It helped improve the ratio pretty significantly, by about a half point.”
While rates will not change in 2018, the structure of electric rates will change.
“We are reallocating the way things are done,” Hart said after the meeting. “We are increasing the base charges and demand charges, but lowering the kilowatt charges so the net effect is there is no increase in electric.”
“The overall intention is to have no rate increase for either electric or water but, at the same time, follow the recommendations of the rate study done at the end of 2016, that said we needed to have more of our fixed costs covered by the components . . . such as the customer charge,” he added.
Hart said that neighboring utilities have higher base charges than DMU.
“It’s making a move to be more in line with what they’re doing from a financial standpoint,” Hart said.
However, DMU does not want to be like other utilities in all aspects.
“Other utilities very close to Delano have eight to 12 months of reserves in the bank,” Commissioner Adam Steffl said during the meeting.
“The ratepayers’ money is sucked up in the bank,” Ness said, before adding, “We were probably too aggressive at two months of reserves.”
After months of planning, the commission approved the utility’s budget.
The electric budget of $5,832,076 is $20,062 less than the 2017 electric budget. The water budget of $1,151,130 is $70,313 less than the 2017 water budget.
For budgeting purposes, a 3 percent increase in salaries was used. That increase was developed from a 2 percent cost of living increase currently reported by the federal government and a 1 percent step increase, and is in line with the City of Delano salary increases.
Another factor in the budget is transmission costs, which were projected to rise significantly in 2017, but have not realized those projections. For 2018, the utility projected the same amount as the 2017 budget.
Odds and ends
In other business, the commission:
• approved the purchase of a 2018 Transit 150 Cargo Van and a 2018 single rear-wheel truck from the State of Minnesota Purchase Program. With $32,500 in combined trade-in value for existing vehicles, the utility will pay $26,504 for both new vehicles. These purchases are in line with the utility’s practice of trading in vehicles every three to four years, when they still have value, to maintain an updated fleet of vehicles.
• approved CliftonLarsonAllen as the utility’s independent auditor for fiscal year 2017, at a cost of $15,950, an increase of $50. The City of Delano also utilizes CliftonLarsonAllen.