Electric rates are increasing 5.5 percent for Detroit Lakes residents, effective Jan. 1.
Maintenance needs, state mandated energy conservation programs and the need to maintain reserves are the reasons for the increase.
One reason is that federally subsidized hydropower from the Missouri River is increasing 13.8 percent, which constitutes 35 percent of the city's power supply.
Conservation improvement projects that are required by state law are a large portion of the rate increase.
"We are, as a utility, being mandated by the state of Minnesota to try to reduce our consumption by 1.5 percent each year," Public Utilities Supervisor Curt Punt explained.
It basically means the state takes an average of a couple years and figures how much the city has used in kilowatt-hours of electricity those years. For example, Punt said, maybe 1.5 percent of the kilowatts used is 1 million kwh, so the city has to cut 1 million kilowatts a year used.
"'So, we want to see that you (the city) provide enough programs to your customers for them to be able to reduce their load 1 million kwh in 2010.'
"It gets a little crazy if you stop and think about it. If you have no growth whatsoever, in a certain time, you wouldn't have a utility anymore. You'd have no customers."
The only way to have people conserve energy is to either charge so much people can't afford to use electricity, or to give them incentive plans like changing to energy efficient light bulbs, energy efficient appliances with rebates or different air conditioning controls.
"We, especially as a city-owned utility, are really concerned about trying to drive up prices to force people to conserve," Punt said. "So, we definitely try to come up with enough programs and incentives."
Offering those incentives, he said, is becoming a huge cost for the city. People have to spend money upfront to make these changes, and in return, the city has to spend money for these rebate programs so they can meet the state conservation requirements.
"Hopefully those incentives pay off in the long run, but we have to pay those up front. Otherwise, why would people do it?"
Punt said many people have the misconception that wind energy is much cheaper, but that isn't so. There needs to be a reliable baseline source, and therefore utilities are paying for two energy sources now.
Not only is there maintenance of the wind tower, and "if you only want electric about 40 percent of the time when the wind blows, that's great, but somebody has to supply the other 60 percent."
The city does use a portion of wind energy as well, which is also required of producers.
One last reason for the rise in electric fees is that the utility is required to keep a certain amount of money in reserves -- to cover bonds and for emergency uses.
"You can't insure an electric utility system," Punt said. "We can insure substations and generation plants, but distribution systems you basically can't insure."
For example, in the 1995 windstorm, the city had over $1 million worth of damages.
"So, a little bit of it's for this and a little bit's for that," he said of the rate increase.
There is good news though. After a couple more years of rate increases, Punt said it will level off and there will be a few years where there won't be increases.
Rate increases are as follows:
Residential electric rates will increase to $12 per month service charge, 9.2 cents per kwh (kilowatt hour) on all kwh July through September, 8.8 cents per hwh for the first 1,000 kwh October through June and 6.6 cents kwh on every kwh after the first 1,000 on those same nine months.
Seasonal cottage residents -- those who live in the residence six months or less in a one-year period -- will pay a $115 per year service charge, 9.2 cents per kwh for May through September and 8.8 cents per kwh for October through April.
Large commercial service will increase to $43 per month service charge, $13.75 per kwh July through September, $12.25 per kwh for October through June for all KW Demand, and 3.45 cents per kwh for all kwh per months. There is a minimum $125 per month charge.
Off-peak heat customers will pay a $5 per month service charge, 9.2 cents per kwh July through September and 4.2 cents per kwh for October through June.