Town Talk: You Ask, We Answer: Electric Rates

“Why are electric rates so high in New Ulm?

Electric rates are based on a complex set of calculations used to develop a cost of service in four separate rate classes: Residential, Small Commercial, Large Commercial and Industrial. Residential and Small Commercial rates do not include a demand charge, but do include an energy charge, a customer charge and an Energy Acquisition Adjustment charge. The Large Commercial and Industrial rates include an energy charge, a customer charge, a demand charge, and an Energy Acquisition Adjustment charge.

Since 2012, New Ulm Public Utilities has been successful in preventing an electric rate increase. A recent comparison of residential rates for New Ulm Public Utilities to the surrounding area indicates that the rates are lower in New Ulm. However, costs to provide electric service and maintain our electrical system have continued to increase over the same time period. Additionally, our wholesale electricity supplier has increased energy rates by 28% and demand rates by 41%. Because the New Ulm Public Utilities can offer our customers all of the services (i.e. electric, natural gas, water and wastewater), it has historically included all utilities on one bill to keep our utility billing costs low. Unlike other communities, their customers may see separate bills for water and sewer, electricity and gas. By using this low-cost strategy, it may create the perception that the electric utility costs are high in New Ulm when comparing your bill to your neighbors. while in many cases, the electric costs are lower than our near neighbors.

New Ulm Public Utilities recently completed a Cost of Service study. The study analyzed the cost to serve each rate class. Based on the study, increases have been proposed for some components of each rate class. The electric rates are proposed to increase as shown in the above table:

Energy Rate kWh Demand Rate  kW Customer Charge

From To From To From To

Residential $0.1112 $0.1124 Not Applicable NA  $7.00 $9.00

Small

Commercial $0.0996 $0.1040 Not Applicable  NA $14.00 $16.00

Large

Commercial No Change No Change $8.00 $8.60 $25.00 $30.00

Industrial No Change No Change $12.00 $12.10 $30.00 $50.00

As per the table:

Residential rates are expected to increase by 0.12 cents per kilowatt-hour (about a tenth of a penny) with an increase in the Customer Charge of $2.00 per month.

Small Commercial rates are expected to increase by 0.44 cents per kilowatt-hour (about a half of a penny) with an increase in the Customer Charge of $2.00 per month.

Large Commercial rates do not increase for energy. The demand charge increases by 60 cents per kW with an increase in the Customer Charge of $5.00 per month.

Industrial rates do not increase for energy. The demand charge increases by 10 cents per kW with an increase in the Customer Charge of $20.00 per month.

The Energy Acquisition Adjustment charge, for all rate classes, is proposed to increase from 1.256 cents to 1.517 cents per kilowatt-hour for an increase of 0.261 cents (about a quarter of a penny).

With the proposed rate increases, New Ulm Public Utilities is expected to remain competitive with our surrounding neighbors. The proposed electric rate increase is expected to be presented to the New Ulm Public Utilities Commission for consideration in January of 2019, with the proposed rates to be included on your April 2019 utility bills.

Editor’s Note: The City of New Ulm presents a weekly column highlighting activities in different departments in the city government. Once a month the city will answer questions from readers. Questions on New Ulm city issues can be sent to comments@ci.new-ulm.mn.us.

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