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PUC: Water, sanitary sewer rates to increase

NEW ULM — Water and sanitary sewer rates and expected to increase over the next few years based on rate study recommendation.

The New Ulm Public Utilities Commission (PUC) received a presentation and report on the New Ulm Public Utilities water and wastewater cost of service and rate design study. The study was prepared by Short Elliott Hendrickson Inc. (SEH). Karen Cavett from SEH gave the presentation.

The current water rates have been in effect since January 1, 2014, and the current wastewater rates have been in effect since February 1, 2013. Last year, the commissioners accepted a proposal from SEH to complete a cost of service and rate study for water and wastewater services.

The reason for the study is to review and analyze the current rates for the water and wastewater utilities and make recommendations for modifying rates based on the cost of service allocation and the revenue requirements of the utility.

The study provided recommendations to the utility for the implementation of rates to meet the needs of each system over five years and maintain operational stability and adequate cash flows.

The changes recommended to water and sewer are dependent on the type of customers. In New Ulm, the utility customers are divided into five categories: residential, small commercial, large commercial, municipal and industrial. SEH did recommend removing the municipal classification and reclassifying municipal properties as small or large commercial users.

For water usage, there are commodity charges divided into two tiers. These tiers are based on metered water use.

Cavett explained these two tiers were established to encourage water conservation. The rate per unit of water increase as consumption increases. For residential customers, the first tier is for customers using up to 5,000 gallons a month, the second tier is above 5,000 gallons a month. The average water consumption for residential customers is 3,910 gallons per month. For small commercial customers 9,000 gallons, a month is the dividing point between the two tiers. For large commercial, it is 100,000 gallons a month and industrial it is 556,000 gallons a month.

Sanitary sewer rates have a base rate and commodity charge, but with tiers. Residential, municipal and commercial properties have a base rate, plus measured monthly sewage flow. The industrial properties also have extra concentration charges for biological chemical oxygen demand (BOD), total suspended solids (TSS) and phosphorus.

Cavett said these extra industrial charges are necessary to cover the cost of nutrient removal. The industrial properties are looking at an increase in charges, but this is simple to cover the cost.

SEH’s recommendation was to increase the base rate for water and sewer in phases over four years.

“We wanted to minimize the annual impact through a phased approach,” Cavett said.

The highest increase would be seen in the base fee based on meter size. The commodity saw a smaller increase.

The current base rate for water is $10.10. The proposal would be to increase the base rate to $18 over four-year years with a $2 increase each year starting in 2022. The commodity charge for water would not see as significant of a change. The current commodity charge for residential water is $3.78 per 1,000 gallons for customers under 5,000 gallons a month and $4.73 per 1,000 gallons for customers over 5,000 gallons a month. SEH is only recommending a two-cent increase for both tiers over the next four years.

This two-cent commodity increase would be the same for small commercial customers. Large commercial properties would see a six-cent increase. Industrial customers would see a 10 or 11 cents increase.

The sanitary sewer rates would see a base fee increase from $6.75 to $10 a month. This change would be implemented in 2022. Cavett said the change could not be phased over four years without revenues dropping below expenditures.

Monthly commodity charges for non-industrial property are $4.22 and $1.72 a month for industrial customers. SEH recommended this remain unchanged through 2025. Industrial loading charges would increase per pound of BOD, TSS or phosphorus. By 2025, BOD would increase one cent per pound; TSS would increase six cents per pound and $1.07 per pound of phosphorus.

Cavett said nutrient removal cost was the highest area of increase, but the increase was phased through 2025.

Based on the data, the average residential water user would see an $8 increased in their monthly bill. Around 56% of sing-family residential users in New Ulm use 5,000 gallons of water a month and pay $29. By 2025, the monthly fee would be $37. For this average user, sewer rates would increase from $27.85 to $31.10.

Compared to other local communities, New Ulm’s water and sewer rates would fall in the middle. Hutchinson on average would pay less than New Ulm for these services, but Mankato, Marshal and St. James would pay more.

Cavett said in general, the communities with higher water and utility rates are undergoing a capital improvement project.

Based on the increases to industrial, PUC commissioner Sean Fingland asked if Public Utilities was in contact with city industries. He said some industrial customers have started the budgeting process and this was important information.

Utilities Director Kris Manderfeld said these recommended rates have not been approved yet, but Utilities will have a meeting with industrial customers to discuss rates for the next year.

The intent is to bring the first phase of the rate increases to the PUC commission at a future commission meeting. Manderfeld said the PUC would only be considering the first phases of increase. The plan is to review the impact on the budget each year before approving the additional phases.

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