MMU rate increases recommended for 2014

MARSHALL – Members of the Marshall Municipal Utilities Commission Finance Committee will recommend that water and electrical rates go up, after reviewing rate studies at a work session Wednesday morning. Committee members voted to recommend a 15 percent water rate increase for 2014, with another increase to come in 2015. Committee members also voted to recommend an average electric rate increase of 5.9 percent in 2014.

The committee can make recommendations to the MMU Commission, but any action on those recommendations will come later, after a public hearing, said MMU General Manager Brad Roos.

“The largest impact in the water rate study is going to be the new source of water,” that will be brought into Marshall, Roos said. MMU is planning a pipeline that will bring in water from a new well field in Sandnes Township in Yellow Medicine County. Roos said the project is currently in the design phase, and construction is planned to begin in 2014.

However, along with an increased city water supply, the project will also carry a large capital cost for MMU. Roos said MMU also needs to plan for projects to repair or replace existing water mains. All of those costs will affect future water rates for Marshall residents and businesses.

Members of the finance committee and the MMU Commission discussed two utility rate studies, one for water and one for electrical service. Rate analyst Keith Wilkins presented the studies to committee members.

Wilkins said the rate studies estimated expenses for MMU from 2014 through 2016 and tried to determine how that should affect rates among the different classes of water and electrical customers. He said MMU operates on a cash-flow basis, where MMU needs enough revenue coming in to cover operations and maintenance, debt service and capital expenses while still maintaining reserves.

The water study proposed a 21.5 percent overall increase in water rate revenue over the next three years. However, the impact to individual customers would vary based on the type of customer and amount of water used. Under the proposal, a residential customer using 6,000 gallons of water a month would have a monthly bill of $35.83 in 2014, compared to $29.36 in 2013.

Committee and MMU Commission members were concerned about having a sharp increase in water rates but acknowledged that MMU needed to pay for capital projects.

“The bulk of this increase is bringing another water source in,” said Bill Ziegenhagen. That additional water supply would be important for any future industrial growth, he said.

Ziegenhagen said he had also researched other Minnesota cities’ water and sewer rates. The city of Roseville recently saw its water rates go up by about 30 percent, he said. Wilkins said utility rates are increasing in other cities, as well.

Roos said the water rate increases could be broken down into smaller increments. If the committee decided to go with that option, he recommended a two-step process. For example, a 15 percent rate increase in 2014 could be followed by an 8.5 percent increase in 2015.

Committee members voted to recommend water rate increases take a two-step approach and that the first step be a 15 percent increase.

The electric rate study proposed a smaller rate increase and generated a little less discussion. Committee members voted to recommend electric rates increase an average of 5.9 percent for the next three years.

Roos stressed that the committee’s recommendations will need approval from the full MMU Commission before they become official. Part of that process will include a public hearing at the commission’s Oct. 23 meeting.

If rate increases are approved, they will take effect starting Feb. 1.