View All Posts

Apr 05

April 5, 2019

Posted on April 5, 2019 at 3:29 PM by Jasper Kruggel

I hope everyone has enjoyed this warmer weather and has survived the most recent flood event.  One thing that impresses me with this community is how well they handle situations like flooding and roads closing.  It speaks volumes for the community’s ability to adapt.  For this blog I will be going into the details about our electric rates and how we determine what the rates are annual.  As always, I can most easily be reached at jkruggel@cityoflesueur.com or by phone at 507-593-8312; now onto City business.

Electric Utility

As are you are likely aware, the City of Le Sueur has an electric utility that provides electricity to not only residents in Le Sueur, but we also have some rural customers.  The Minnesota Public Utilities Commission manages electric service territories; here is a map of our service territory:

pic1

Rate History

Below you will see a series of graphs showing electric rate histories for the City of Le Sueur back to 2001.  As you will notice, the average cost of service has increased by only 6.8% since 2007.  That is an average increase of 0.52% per year.  This is below the Consumer Price Index (CPI-U Midwest) which shows an inflationary increase of 21.9% from 2007 – 2019. 

pic2
pic4pic3

Rate Development

Each year, City Staff develops a proposal to City Council to set rates for the Electric Utility.  This process entails looking at internal costs, but also looks at electric costs regionally to ensure we are competitive as a utility.  Below are a table and a graph showing the results of that 2018-2019 electric utility rate survey.  Keep in mind that this is for residential services, but we also do a similar exercise for our commercial and industrial customers. 

pic5
pic6

Finding representative samples can be difficult, but in general, I define competitive as being lower than the Minnesota Valley Electric Cooperative.  We will continue to strive to remain competitive in the region.

Effective starting in 2019, City Council adopted a policy that helps staff set the base rates for electric kilowatt-hour (kWh) charges based on the wholesale rates we received from our electric cooperative, the Minnesota Municipal Power Agency (MMPA).  The breakdown of each service category and up-charge are defined below:

Large Industrial Time of Use Service

  • All categories shall be charged at 10% above MMPA rates
  • Service Charge is set annually by City Council
  • Franchise Fee is set annually by City Council

Large Industrial Service

  • All categories shall be charged at 10% above MMPA rates
  • Service Charge is set annually by City Council
  • Franchise Fee is set annually by City Council

Large General Service

  • All categories shall be charged at 10% above MMPA rates
  • Service Charge is set annually by City Council
  • Franchise Fee is set annually by City Council

General Commercial Service

  • All categories shall be charged at 110% above MMPA rates
  • Service Charge is set annually by City Council
  • Franchise Fee is set annually by City Council

Residential – All Purpose Service

  • All categories shall be charged at 100% above MMPA rates
  • Service Charge is set annually by City Council
  • Franchise Fee is set annually by City Council

Rural – All Purpose Service

  • All categories shall be charged at 125% above MMPA rates
  • Service Charge is set annually by City Council
  • Franchise Fee is set annually by City Council

One question that came up during the rate development process is how the overhead is determined.  Staff used the previous rates along with input from our Electric Division staff and City Council to develop the percentage overhead charges.  In general these are related to the quantity of power purchased by each category, and the infrastructure costs to get the power to each customer.

Overall Thoughts

The City of Le Sueur Electric Utility is a very well-established utility that has had very little fluctuation in rates over the past 10 years.  In the near future there may be efforts to convert overhead electric lines to underground services which may have an impact on rates.  The rate at which this conversion will be completed will be driven by City Council.  If you would like additional information on the City of Le Sueur’s Electric Utility, please feel free to reach out!  I can be reached at 507-593-8312 or by email at jkruggel@cityoflesueur.com.


Comments

You must log in before leaving your comment