PUC responds to electric rate increase question
New Ulm Public Utilities recently received a question from one of its customers:
“I read in the paper a couple weeks ago about the study of allocation of electric rate increase amongst different classes of customers. What I didn’t see mention was any effort to PREVENT a rate increase … or LOWER rates. Since our rates are already so high, can you advise on initiatives to control and lower them?”
Electric service rates are based on a set of complex calculations of cost of service in each electric customer category. The basis for electric rates and the associated factors are outlined below.
Electricity is usually sold by energy, measured in kilowatt-hours (kWh), and demand, measured in kilowatts (kW). New Ulm Public Utilities buys power in bulk from suppliers. Bulk electricity is a block of electricity that is sold based on an energy rate and a demand rate. The demand on an electric system is the maximum rate of electricity consumption. As an example, the energy used for a light bulb may be 16 watts. The demand at any point in time would be the sum of all light bulbs and other energy-consuming devices turned on simultaneously. The demand rate for New Ulm Public Utilities is based on the maximum consumption within a 15-minute period.
New Ulm Public Utilities agreed to purchase electricity from a new supplier in 2010. Since the agreement was reached, the supplier has increased the energy rate by 28 percent and the demand rate by 41 percent, based on a recent analysis. Since 2012, New Ulm Public Utilities has held rates flat, absorbing the supplier rate increases.
Absorbing the rate increase is no longer a viable option while maintaining the health of the electric utility. Utilities require long-term, incremental investments in assets in order to continue to operate reliably and effectively. While the perception may be that rates are too high, a recent survey of electric rates in nearby communities reveals that most of our rates are below similarly sized electric utilities and the large regional electric utility in our state.
New Ulm’s electric rates are expected to increase starting in April 2019 as shown in the following table. The Customer Charge listed in the table above is a fixed monthly rate that covers the cost of the meter, meter reading function, utility billing and administrative overhead.
Energy Rate per kWh Demand Rate per kW Monthly Customer Charge
Current Proposed Current Proposed Current Proposed
Residential $0.1112 $0.1124 N/A $7 $9
Commercial $0.0996 $0.1040 N/A $14 $16
Commercial no change no change $8 $8.60 $25 $30
Industrial no change no change $12 $12.10 $30 $50
Residential rates are expected to increase by $012 per kWh with an increase in the Customer Charge of $2 per month.
Small Commercial rates are expected to increase by $044 per kWh with an increase in the Customer Charge of $2 per month.
Large Commercial rates are not expected to increase for energy. The demand charge is expected to increase by $0.60 per kW with an increase in the Customer Charge of $5 per month.
Industrial rates are not expected to increase for energy. The demand charge is expected to increase by $0.10 per kW with an increase in the Customer Charge of $20 per month.
New Ulm Public Utilities has been successful in preventing electric rate increases for the past six years during which time our basic cost for energy from our supplier has increased by 28 percent and the demand charge has increased by 41 percent. We will continue to pursue effective and reliable operation of the electric system while continuing to identify opportunities to stabilize rates.