Customers of the Anoka Municipal Utility should prepare for a rate increase that will start July 1.
The Anoka City Council Monday approved the first electric rate hike since 2009. The cost of electricity will go up 8.5 percent for residential customers in two phases between July 1 and Oct. 1.
In addition to Anoka, the utility also serves some customers in Andover, Champlin, Coon Rapids, Dayton and Ramsey.
While the full increase was slated to start July 1, at the request of Councilmember Jeff Weaver the council agreed to phase it in, with 60 percent starting next month and 40 percent in the fall.
Weaver said at least one group that owns a number of local businesses raised concerns about weathering the full rate increase just as the shops are starting to recover from both the recent recession and last year’s Main Street makeover.
“If we can reduce that increase even a little that would be helpful, so we can help some of these businesses who are just starting to recoup some of those losses from hard economic times,” said Weaver.
Councilmember Mark Freeburg was absent from Monday’s meeting.
According to Utilities Director Dan Voss, small commercial businesses will see an increase of 6 percent and there will be a 5 percent jump for large commercial enterprises.
“With this increase in rates we will still be 8 to 5 percent less than the competing utilities in he area,” he said.
According to Voss, in 2012 Anoka’s rate was 7 percent lower than Connexus Energy, and over the past four years electric rates have been 15 to 20 percent lower than the competitors. He translated that into a savings of $110 a year for the average residential customer.
The raise in the rates is needed to fund $6 to $8 million in capital costs coming up over the next few years.
When Great River Energy adds the 115kv line through Anoka in 2014, the city will need upgrade its power substation at the Enterprise Park, according to Voss.
Anoka is also planning to build a new substation to serve the developing area near the high school.
Mayor Phil Rice said there have been fluctuations in the cost for the local utility to buy power from the Minnesota Municipal Power Association. Anoka is one of 11 member cities of the municipal power wholesaler.
“It’s not all simply accounting,” Rice said. “We can’t predict the future and we don’t know where all of this is going.”
Both Rice and Weaver agreed the city shouldn’t have waited four years to have any sort of a rate increase.
“If we had made modest increases we probably would not be looking at a significant rate increase now,” Rice said.
Councilmember Steve Schmidt said the alternative to raising rates would be bonding to pay for those big projects needed to provide electricity service in the coming years.
He doesn’t like that alternative, because some of the utility’s customers are outside the city and do not pay taxes in Anoka.
“I don’t want to have this solely on the back of the taxpayer,” Schmidt said.
During the public hearing Anoka resident Russ Holmes questioned if the revenues from those rate increases would stay in the electric utility fund to pay for the upgrades and new substation.
City staff said that money will not be singled out, but instead will be used to pay back internal loans for the capital costs.
Typically the city does transfer revenues from the electric enterprise fund to the general fund. Last year $2 million was transferred in December for city operations and capital costs, said Finance Director Lori Yager.
The city has used electric revenues to expand its street repaving program for the last couple of years.
Yager said it is common for most municipalities to transfer 5 to 7 percent of gross revenues from enterprise funds to the general fund to support city operations and project costs. Last year’s revenues were $25 million.
She said the electric utility current has $13.6 million in cash and investments.
Mandy Moran Froemming is at firstname.lastname@example.org