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Public Utilities engineer explains utilities pricing

At Hot Topics breakfast

February 9, 2013
By Josh Moniz - Staff Writer , The Journal

NEW ULM Representatives of the New Ulm Public Utilities (NUPU) received tough grilling Tuesday from New Ulm's major commercial and industrial businesses while they outlined their ongoing efforts to stabilize and reduce New Ulm's utility costs at the New Ulm Chamber of Commerce's "Hot Topics" breakfast.

NUPU Engineer Pat Wrase led the presentation, outlining how NUPU provides services for electricity, natural gas, water and wastewater for its customers. More specifically, he said the NUPU has 7,036 electrical customers, including 53 large commercial and 9 industrial customers.

Wrase said NUPU current utilities pricing is due to the decision of the Long-Term Power Committee, which was formed in 2005 to address highly fluctuating and expensive utility prices from NUPU purchasing most of its power on the open market. He said the response was a 20-year contract with Heartland Consumer Power District for energy prices that were much less expensive at the time, locking in a stable price that was lower than high-market price months but sometimes higher than the few low-market price months.

At this time, Heartland accounts for 69 percent of NUPU's power, with purchase in the MISO Market for excess energy needs accounting for 26 percent, Internal Generation from NUPU accounting for 4 percent and WAPA Supply energy accounting for 1 percent.

Wrase explained that there were several factors that have gone into making NUPU having moderate to high utilities rates compared to other regional cities, and that there is hope for reduced, competitive pricing in the future.

He said there are several utility pricing factors that may have occurred due to New Ulm's big businesses not being aware of certain situations. He said the large commercial and industrial customers had their infrastructure built to handle their highest possible power demands, so the rates were based around higher power usage. He said customers in these classes using power at less than 50 percent of their load capacity would actually experience worse rates than those running near full capacity, where they could shave a few cents off their per kilowatt hour prices. In addressing a question, Wrase explained that customers that made serious energy efficient improvements to gain NUPU's lower rate offerings but ended up with higher bills had been bumped down into a lower customer category, where there comparatively high load was not as competitively priced. He said these customers simply had to contact the NUPU about their situation, since the City of New Ulm had authorized allowing these customers to be priced at the higher customer class with the reduced rate benefits.

Wrase addressed the larger-scale issue that the NUPU rates were down from the high price experienced during the market volatility purchases in 2006. Comparatively, industrial customers paid 0.10266 per kilowatt hour in April of 2006 compared to 0.07262 per kilowatt hour in April of 2012. For the same months, large commercial customers paid 0.12459 per kilowatt hour in 2006 compared to 0.09042 per kilowatt hour in 2012.

However, he said NUPU remained higher compared to similar utilities in the region because Heartland had an unplanned rate increase of 14 percent in 2011 and 10 percent in 2012. He said Heartland had shown NUPU only a few percent rate increase for those years when it had signed up. He said the higher increase was due to Heartland building new facilities prior to the recession to attract more customers, letting it maintain or lower its rates. However, the recession had dropped the bottom out of the electric market and prevented the new customers from joining, resulting in a one-time debt service cost for Heartland in those years. He said the current rebound of the market will bring in those expected customers and have those facilities pay off for Heartland, meaning NUPU could have increasing competitive or reduced rates into the next few years as originally planned. He said Heartland has as 0 percent increase for 2013 and only a 4 percent increase for 2014.

An Owatonna-sponsored rate study of southern Minnesota utilities showed NUPU in the middle of the pack with commercial customers and the highest of the survey in industrial customers, at roughly 10 percent above the average. In a NUPU study of comparative Heartland customers within 35 miles, New Ulm rated better than almost all customers except for ones capable of buying a higher amount of energy from WAPA, which New Ulm does not have to capacity to do.

Wrase also mentioned that New Ulm had consistently had very competitive gas and water rates, though he said these rates can be highly variable depending on how a city has access to them.

Finally, Wrase also noted New Ulm was not able to put occasional excess funds towards reducing rates for a year because it put a substantial amount towards reserves and improvements in its redundant electrical infrastructure, which is somewhat more expense but only averages 9 minutes without power during power failures compared to hours or days in other major cities.

Josh Moniz can be e-mailed at jmoniz@nujournal.com.

 
 

 

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