Moose Lake Star Gazette - Serving Carlton and Pine Counties Since 1895

By Lois E. Johnson
Moose Lake Star-Gazette 

Power rate increase of 25% proposed

 

September 14, 2017

courtesy Harlan Schmeling

The Moose Lake Water and Light Commission is purchasing this used generator and will be installing it in the power plant after two old generators are removed.

A proposal to increase the electrical power rates in the Moose Lake Water and Light Commission's service area by 25 percent was not met with approval by city officials at a meeting of the commission and the city council on Thursday, September 7.

"It is a rate correction," said Harlan Schmeling, superintendent of the commission.

"For the last 15 years we have not kept up with rate increases," said Mike Peterson, a member of both the commission and the city council. "We have not been increasing the rates like we should have been."

The commission representatives presented information that showed why the rate increase was needed. A major reason was that the cost of power purchased in 2017 and 2018 from Great River Energy has risen and the capacity credits have dropped. Rate increases have been held to a minimum in the past, and the council had requested that a proposed rate increase be delayed after the flood in 2012.

The new proposed rate would also cover future costs of new equipment and transmission lines, as well as bring the operating savings back to a reserve of 17 to 24 months as determined by the auditor, it stated in a handout.

"Currently we are operating in the red in each category of residential and commercial electrical use," said commission chair Curt Yort. "Rate studies in 2003 and 2016 both indicated that we will have problems."

In the information presented, it was shown Moose Lake's rates are below rates charged in other cities that have municipal power. The base rate charged in Moose Lake is $8.25, but would be raised to $10. That compares to $42 for Lake Country Power, $8 for Minnesota Power, $13 for Staples, $13.50 for Aitkin and $12.70 for Mora.

The average residential customers pay, based on 550 kilowatt of power usage, $58.60 a month. That would be increased to $72.12 a month under the new rate.

That compares to $109.98 for Lake Country Power, $90.50 for Minnesota Power, $115.10 for Shakopee, $81.03 for Staples, $64.50 for Aitkin and $68.78 for Mora.

The rate for commercial customers would be increased from the average monthly kilowatt rate of $16.25 to $18.25, and demand from $25.25 to $27.25.

Those rates compare with the Minnesota Power rate of $10.5, Litchfield $8.83, $20 in Virginia, and $45 in Aitkin.

"Our monthly rate would still be lower than our neighbors' rates," said Yort.

He added the state agencies pay for power under a separate contract. Meetings will be scheduled to discuss changes in the rates paid under the contract.

One big investment in increasing the capacity to generate power in Moose Lake is to purchase a new gas generator, it was said. Two old diesel generators will be removed from the power plant before the installation of the new generator. The project cost is $2.5 million.

That project is expected to be completed in 2018. The five-year plan also listed a new automatic meter reading system, regulators, an increase in operating expenses, digger truck, chipper, replacing reserve funds as recommended by the auditor, increasing operating funds, pole replacement, transformer replacement, project truck, Skidsteer, rebuilding the transmission line, digger/auger and possible new capacity. The total of all of the projects is $10,003,000.

A new labor contract will be negotiated in 2019 and health care insurance costs are projected to rise, it was said.

"All of this will put us $6 million in debt," said Yort. "By 2022, we'll be in the hole. We may need a new truck. Where are we going to get the money for that? We prefer not going in the hole. The rate change is large, but not unwarranted. We would still be lower than other cities."

City Administrator Tim Peterson pointed out the commission will see $500,000 in decreased expenses after the contract with the new power supplier takes effect in 2019.

"We know that there's $500,000 less in expenses if you have the capacity reserves," he said. "Take the loss for a couple of years and then slowly build it back up."

He added the reserves of 17 to 24 months to cover expenses might be too high, and that an eight or 10-year plan was more realistic than a five-year plan.

"It is important to note that there have been bad choices in the past," said Tim Peterson. "Now we need to forget those and figure it out. The point is to get there in a certain way."

Councilor Doug Juntunen suggested the rate increases be prorated as often as every six months instead of a one-time increase.

Mayor Ted Shaw suggested bonding for the new equipment.

"There is nothing wrong with bonding," he said. "There are a lot of people on fixed incomes in this city. That large rate increase will hit them pretty hard. What is your secondary plan?"

"That's a big amount, but it will stop the bleeding," said Mike Peterson.

Sally Iund of the commission said the commission plans to get a $1 million bond to cover the cost of purchasing the new generator within 30 days.

"We want to put ourselves in a stable financial position," said Yort.

"You are not taking into account $500,000 in savings in 2019," said Tim Peterson.

He added that a public hearing needs to be held.

"My only contention is to not raise the rates by 25 percent," said Mayor Shaw. "I believe in public hearings."

Iund said there would be a public information meeting, but no date has been set.

At the conclusion of the meeting, Yort said the commission members will discuss further options at its next meeting on Wednesday, September 20. Ideas are welcome.

If implemented, the rate increase would go into effect on January 1, 2018.

 

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