PUC looking at preliminary budget for 2002Revenues projected at $30.6 million

By RON LARSEN

Journal Staff Writer

NEW ULM--The Public Utilities Commission will be considering next month approval of a 2002 preliminary public utilities budget which anticipates revenues totaling $30.6 million.

After deducting operating expenses and making other adjustments, the budget anticipates a net income of $1,280,409, representing a 4.2 percent return.

The net income for all divisions is less than a percentage point below what the utilities department had set as a goal for each division.

"In designing our budget for 2002," Utilities Director Robert Stevenson said in his cover letter to commissioners, "we have established two general guidelines. One is that net income should be 5 percent of gross revenue for each fund (division). The other is that each fund should contribute a positive cash flow."

Of the five divisions, two exceed the first goal. The electric division's net income is 5.8 percent of anticipated revenues totaling $16,290,274, and the district energy division (steam) is expected to have a return of 11.5 percent on revenues totaling $694,520.

The water division falls just short of that goal with net income at 4.6 percent of gross revenues totaling $2,377,338. Natural gas revenues are expected to total $7,624,502, with a 3.8 percent positive cash flow.

For the third consecutive year, the wastewater division will experience a negative cash flow, with expenses exceeding revenues by $150,039.

With the exception of the district energy division, division revenues are expected to exceed the previous year's budgeted total.

Stevenson said the steam division has been investing heavily in new customer connections and rebate programs designed to help customers better utilize the division's product.

"At this time there are not many prospective new steam customers in the city," Stevenson said, "but capital spending requirements will remain high due to some necessary replacements of sections of steam mains."

The gas division also has been investing steadily in replacing mains and service piping, he noted.

"That activity will be complete in another year or so," he said. "At that time, we should see our capital spending levels drop from current levels."

Stevenson directed the commission's attention to a potential pipeline project "looming in the near future that may have strategic significance."

Stevenson was referring to the proposed Hutchinson pipeline from Fairmont to Hutchinson.

"This pipeline, in which we have been invited to participate, could provide savings enough to pay for the investment in about 10 years. At this time we are unsure of the project costs or our costs to buy in."

Stevenson said it appeared the Hutchinson Utilities Commission was prepared to go it alone on the project at the beginning because HUC believes it can justify the cost for the city's own use.

"We understand that their intent is to proceed alone until they can offer a firm proposal to New Ulm later," Stevenson said. It cost as much as $2 million to build a branch line into New Ulm.

The utilities department will be proposing a 2 percent rate increase in water rates "across all classes to cover inflationary increases in operating expenses, primarily energy costs for pumping."

An additional 2 percent increase may be recommended to cover the loss of revenue because the city will no longer make hydrant rental payments to the water division.

The commissioners will get their first thorough look at the preliminary budget at 4 p.m. Tuesday, Nov. 13, and if needed, they'll have another chance at 4 p.m. Tuesday, Nov. 27, prior to the PUC's November meeting.