PUC

studies

budget

Final 2002

budget to be

approved in

December

By RON LARSEN

Journal Staff Writer

NEW ULM -- For four hours Tuesday, Utilities Director Robert Stevenson and his staff guided public utilities commissioners through a 90-page, $30.6 million budget for 2002 which will be ready for their final approval at the commission's December meeting.

To meet the revenue budget, Stevenson told the commissioners he would have water and wastewater treatment rate increases to help those divisions meet their budget projections ready for their approval at the November meeting.

While not officially set as yet, the increases being considered are across-the-board increases of 4 percent in water rates and 10 percent for wastewater treatment customers.

Commission President Rick Jensen asked Stevenson to give the 10 percent increase "serious thought because, while residential customers may not notice the increase, it's pretty hefty for industrial customers."

While promising to consider a possible two-tier approach, Stevenson at meeting's end said he was "still of a mind that the 10 percent across the board was the best approach."

This would be the first increase in wastewater treatment rates since 1999. The rates had been increased yearly between 1997 and 1999. The water rates were last increased in April 2000.

In each case, the rate increases are designed to help the two divisions meet net income goals of at least 5 percent so that utility reserves can be built up for future capital spending.

Stevenson told the commissioners that several large capital expenditures are looming large on the horizon as a part of the utilities department's five-year capital spending plan.

A big unknown exists in the wastewater division, Stevenson explained, because "we don't know how much it is going to cost" to develop a process for reducing the amount of phosphorus to one part per million or less.

He assured the commission that a study was being made to determine what sort of process would be required to remove phosphorus.

"There are two types of processes that could be used if it is determined they can get us down to the standard," City Manager Brian Gramentz explained. "One is much more expensive than the other; that's why we need to study this."

Another capital unknown at the moment is a possible gas pipeline project, allowing New Ulm to take natural gas from a pipeline which Hutchinson plans to build from Fairmont to Hutchinson.

New Ulm presently buys its gas from Northern Natural Gas, but the contract is coming up for renewal soon.

"With gas prices where they're at right now, the project is iffy right now, but we don't have to commit for almost a year," Stevenson said.

Daniel Sonnek, head of engineering, added, "We're pretty fortunate actually that Hutch came along because it gives us an option we didn't have."

Stevenson said it was impossible at this point to estimate with any accuracy how much building a pipeline to connect with the Hutchinson pipeline would cost.

"But we want to be ready if the deal develops," he added.

Commissioners also had questions about the natural gas division budget which projects a net income of $295,794 for 2002 which is less than the 2001 budget figure of $312,846. The division is projected to earn over $1 million.

Commissioner James Hogan wondered if "we are locked into expensive gas when the price is now low on the market."

Stevenson admitted that the utility was locked into higher priced gas but said it should even out in the long-run.

Natural Gas Manager Charlie Schmitz told Hogan the utility was locked into $5 per 1000 cubic feet gas while the market is ranging between $2.80 and $3.10.

In addition to projecting revenues of $30.6 million, the budget calls for operating expenses totaling $29.3 million, with a 4-percent return of $1,280,409.