Rates up for

gas, electricity

PUC recalculates

2000 fuel costs

By KREMENA TODOROVA

Journal Staff Writer

NEW ULM -- An average residential electric bill in New Ulm will jump 4 percent, and a typical gas bill 25 to 30 percent, for the remainder of this year, public utility officials reported Tuesday night.

According to Public Utilities Director Bob Stevenson, the increase comes as a result of revised fuel cost projections for 2000, fueled by rising natural gas prices.

"We are currently experiencing a situation with natural gas prices that was not anticipated in the 2000 budget," Stevenson told a regular Public Utilities Commission meeting. "Now we need to respond to these rising costs by adjusting the electric fuel cost adjuster [at] mid-year. Such adjustment is necessary to maintain our net income close to our budgeted amount."

The electric fuel cost adjuster reflects fuel costs, and it is part of a formula used to calculate the price a customer pays for electricity. Since 1999, the PUC has calculated this adjuster annually, basing it on a "forward look" at expected fuel prices for the budget year. In contrast, a similar gas adjuster is calculated every month due to the higher volatility of gas prices.

The once-a-year method of calculation normally works well, providing "a measure of rate stability" and "reducing labor," Stevenson said.

But in the current "price-gouging" market, using early-year calculations would result in a $400,000 budget shortfall.

"In view of our bond issues, we simply can't afford not to raise the price," Stevenson said.

The formula of calculating electricity and gas rates will remain unchanged. The costs will be adjusted back down if the market sees another significant change, Stevenson said.

In comparison, large commercial customers will see a 5 percent increase in their electric costs.

"The amounts we are recommending will not quite recoup our higher costs during 2000," Stevenson also said. "But the rate language allows a true-up in the adjuster for 2001 for anything we undercollect in 2000."

In other developments, the PUC:

* Voted to request proposals for a study on the feasibility of increasing the use of coal for electricity generation, to respond to rising gas prices.

The study, which could cost as much as $30,000, would help determine if gas price trends justify an increase in coal use. It would impact budget plans for 2001.

Increased coal use could generate "potential annual savings" of $1 million, Stevenson said.

"These fuel savings would be reduced some by increased maintenance, fuel handling costs and ash disposal costs, but expect the savings will be significant."

* Discussed the need to develop a policy for "emergency load shedding," in case of a peaktime equipment failure and/or an electricity price spike.